Monday, March 31, 2014

The TaskRabbit Economy

We are clearly entering an era when computational tools and digitization will change the nature of the workforce. Erik Brynjolfsson and Andrew McAfee attempt to address the issues associated with this new phase of industrialization in their recent book The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies.

"Now comes the second machine age. Computers and other digital advances are doing for mental power—the ability to use our brains to understand and shape our environments—what the steam engine and its descendents did for muscle power. They’re allowing us to blow past previous limitations and taking us into new territory."

Brynjolfsson and McAfee predict that technological progress will be "astonishing" and the results will be "profoundly beneficial" to humanity. However, progress will come at a price. Such a transformation will be profoundly disruptive in terms of the impact on individuals and the nature of the resulting workforce. However, they are optimistic:

"It’s important to discuss the likely negative consequences of the second machine age and start a dialogue about how to mitigate them—we are confident they are not insurmountable. But they won’t fix themselves, either."

An article in The Economist discussed the issue of displaced workers and provided this insight:

"A 2013 paper by Carl Benedikt Frey and Michael Osborne, of the University of Oxford, argued that jobs are at high risk of being automated in 47% of the occupational categories into which work is customarily sorted. That includes accountancy, legal work, technical writing and a lot of other white-collar occupations."

This chart was also included:

Brynjolfsson and McAfee are dubious about standard pronouncements about the inevitability of job creation. Pundits comfortably predict that because technology has generated new jobs to replace obsolete jobs in the past, it must necessarily do that into the indefinite future. To this notion the authors reply:

"Which history should we take guidance from: the two centuries ending in the 1990s, or the fifteen years since then? We can’t know for sure, but our reading of technology tells us that the power of exponential, digital, and combinatorial forces, as well as the dawning of machine intelligence and networked intelligence, presage even greater disruptions."

Nevertheless, the authors are excited about what is to come. They predict that innovative ideas and opportunities for new companies will explode in this "second machine age," offering new types of uses for labor.

"We can do more to invent technologies and business models that augment and amplify the unique capabilities of humans to create new sources of value, instead of automating the ones that already exist."

Examples of how this new age will use labor do not abound in their narrative, and one they do pinpoint as a valuable new trend is one that some might find troubling: crowdsourcing.

"This model is interesting because instead of using technology to automate a process, crowd sourcing makes it deliberately labor intensive. The labor is provided not by a preidentified group of employees, as is the case with most industrial processes, but instead by one or more people (often many more) not identified in advance, who choose to participate."

The authors tell of using this approach to obtain some of the charts used in their book.

"We found them by posting a request for help with the task to TaskRabbit, a company founded by software engineer Leah Busque in 2008. Busque got the idea for TaskRabbit after she ran out of dog food one night and realized that there was no quick and easy way for her to use the Internet to find (and pay) someone willing to pick some up for her."

One can assume that TaskRabbit posts jobs loftier than fetching dog food. Robert Kuttner wrote an article for The American Prospect titled The Task Rabbit Economy.

"Early this year, Patricia Marx wrote a witty New Yorker piece titled "Outsource Yourself" on her experience hiring a Task Rabbit to purchase and deliver hors d’oeuvres for her book group. When Marx fell behind in her reading, she hired a second Rabbit to summarize the book for her (Proust’s Remembrance of Things Past, no less) and to ghostwrite some clever comments. She then retained a third Rabbit to bake madeleines."

"Marx’s adventure reads like a cross between Woody Allen’s famous short story, "The Whore of Mensa" (in which a character hires a young Brandeis graduate to talk pseudo-intellectual to him), and a labor-market fantasy by Friedrich Hayek."

Kuttner fears that we will become a nation of "Rabbits."

"It’s the reserve army of the unemployed made flesh. What’s diabolically brilliant and emblematic about the company is that prospective errand-runners bid against one another for jobs. To get an assignment, an aspiring Rabbit offers to do the chore for less money than he or she thinks other prospective Rabbits are bidding. That’s what makes it a metaphor for the new economy, a dystopia where regular careers are vanishing, every worker is a freelancer, every labor transaction is a one-night stand, and we collude with one another to cut our wages."

It appears that this method of employment is also being utilized by businesses. Jeff Stibel, another enthusiast for the things to come, introduces us to "cloud labor."

"Crowdsourcing comes in all shapes and sizes online….Sometimes referred to as ‘cloud labor,’ these companies include Elance, oDesk, Guru, CloudCrowd, and Amazon’s Mechanical Turk….these companies are really just online matchmakers. They are powerful online alternatives to traditional outsourcing, with low transaction fees and the ability to hire workers for even the smallest of jobs. Cloud labor sites allow people to find work and employers to find cost-effective labor."

"Since 2007, oDesk has grown by more than 100 percent per year, reaching into over 40 countries….But this isn’t like Monster or CareerBuilder; on oDesk the jobs are single tasks. You might make a call, stuff a few envelopes for the holiday, or assist with a dinner reservation. For that work, you might receive $.25 or $100 and perhaps the opportunity to work again."

Whether TaskRabbit or oDesk, Kuttner has the correct perspective on these developments:

"In its technology, the Task Rabbit economy is very 21st-century, but it brings back the 19th, an era when most people who didn’t farm or own property were casual labor."

Brynjolfsson and McAfee prefer the term "peer economy" to capture the likes of TaskRabbit and oDesk. They seem to favor this employment trend because they expect "casual" labor to be the only kind that will be available to many people.

"Peer economy companies are examples of innovations that increase the value of human labor rather than reducing it. Because we believe that work is so important, we believe that policy makers should encourage such creations."

On the one hand they claim that our problems are best addressed by market-based solutions:

"The best solutions—probably, in fact, the only real solutions—to the labor force challenges that will arise in the future will come from markets and capitalism, and from the technology-enabled creations of innovators and entrepreneurs."

On the other hand, they suggest a number of ways to address the future jobs problem that are decidedly not market based. These suggestions were obtained by crowdsourcing and are not necessarily endorsed by the authors.

"Nurture or celebrate special categories of work to be done by humans only."

"Start a ‘made by humans’ labeling movement…."

"Ramp up hiring by the government via programs like the Depression-era Civilian Conservation Corps…."

The most intriguing suggestion of all is this one:

Provide vouchers for basic necessities like food, clothing, and housing, eliminating the extremes of poverty, but letting the market manage income above that level."

If this second machine age is going to be as disruptive as appears likely, the concepts of labor and workplace will undergo dramatic transformations. Society will have to deal with this. Guaranteeing a ‘living income" to all may be the only viable approach.


Jeff Stibel is the author of Breakpoint: Why the Web will Implode, Search will be Obsolete, and Everything Else you Need to Know about Technology is in Your Brain.

Wednesday, March 26, 2014

The Future of Innovation

Erik Brynjolfsson and Andrew McAfee provide a fascinating look at how innovation is evolving in their book The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. The second machine age refers to the ubiquitous computational devices, the big data sets, and the clever software that drives them. Of particular importance is the availability of networks through which these devices, and their human owners, can communicate and exchange ideas.

The authors suggest that the "second" machine age is inherently different from the first. They describe the last 200 hundred years as the first machine age; one that was dominated by a few key technology innovations. Included among those would be the steam engine, the internal combustion engine, electricity, and indoor plumbing.

Many economists make the analysis of past history to be the template for future innovation and economic growth. In this picture there are a few great technical advances that spawn numerous tweaks and applications, but eventually this advance slows to a crawl as new uses become of marginal importance. Supporters of this view believe we are in need of another "big thing" if economic growth is to take off again. The authors quote the economist Bob Gordon on the topic:

"The growth of productivity (output per hour) slowed markedly after 1970. While puzzling at the time, it seems increasingly clear that the one-time-only benefits of the Great Inventions and their spin-offs had occurred and could not happen again….All that remained after 1970 were second-round improvements…."

Note that in this view computers are not recognized as a "Great Invention" in terms of economic importance.

Brynjolfsson and McAfee prefer an alternate view of innovation which is referred to as "new growth theory." Inventions do not arise from nothing. The Latin base for the word means to come upon or to find. In this view, if innovation is stagnant then we are not discovering new ways of using existing knowledge either because we are not looking hard enough or are not looking effectively. The authors quote the economist Paul Romer as a supporter of this perspective:

"Economic growth occurs whenever people take resources and rearrange them in ways that make them more valuable….Every generation has perceived the limits to growth that finite resources and undesirable side effects would pose if no new….ideas were discovered. And every generation has underestimated the potential for finding new….ideas. We consistently fail to grasp how many ideas remain to be discovered….Possibilities do not merely add up; they multiply."

Brynjolfsson and McAfee see computers and digitized data and the possibilities for individuals to network and exchange thoughts as the engines which will allow increased invention. In fact, new ways will be devised to foster this collaboration and make it more efficient. These new approaches are referred to as meta-ideas. Again quoting Romer:

"Perhaps the most important ideas of all are meta-ideas—ideas about how to support the production and transmission of other ideas….There are….two safe predictions. First, the country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector. Second, new meta-ideas of this kind will be found."

Digitization and the internet have provided anyone who wishes it access to incredible amounts of knowledge. The authors refer to the act of deriving a new concept from this mass of information as "recombinant" innovation. What are needed are meta-ideas for how to extract useful information from this assemblage of knowledge.

The authors provide a few examples that illustrate where innovation is headed. The first involves a problem that NASA was trying to deal with: the forecasting of solar eruptions or solar particle events (SPEs). NASA concluded that within their expertise and resources they were not able to provide useful predictions, so they posted the problem as a challenge to the world by placing it on the website of Innocentive, "an online clearinghouse for scientific problems."

"Innocentive is ‘non credentialist’; people don’t have to be PhDs or work in labs to browse the problems, download data, or upload a solution. Anyone can work on problems from any discipline; physicists, for example, are not excluded from digging in on biology problems."

"As it turned out, the person with the insight and expertise needed to improve SPE prediction was not part of any recognizable astrophysics community. He was Bruce Cragin, a retired radio frequency engineer living in a small town in New Hampshire. Cragin said that ‘Though I hadn’t worked in the area of solar physics as such, I had thought a lot about the theory of magnetic reconnection.’….His recombination of theory and data earned him a thirty-thousand-dollar reward from the space agency."

Other organizations have followed NASA’s example and dumped unsolvable problems on Innocentive. Scholars who have studied the efficacy of this approach note success rates of up to thirty percent.

"They also found that people whose expertise was far away from the apparent domain of the problem were more likely to submit winning solutions. In other words, it seemed to actually help a solver to be ‘marginal’—to have education, training, and experience that were not obviously relevant for the problem."

The authors also describe another online enterprise called Kaggle that addresses non-scientific problems.

"Instead of scientific challenges, Kaggle specializes in data-intensive ones where the goal is to arrive at a better prediction than the submitting organization’s starting baseline prediction….In one case, Allstate submitted a dataset of vehicle characteristics and asked the Kaggle community to predict which of them would have later personal liability claims filed against them. The contest lasted approximately three months and drew in more than one hundred contestants. The winning prediction was more than 270 percent better than the insurance company’s baseline."

"Another interesting fact is that the majority of Kaggle contests are won by people who are marginal to the domain of the challenge….and so would not have been consulted as part of any traditional search for solutions."

Another example provided by the authors is Quirky, an online enterprise that attempts to both generate new ideas for products and decide the best way to bring them to market.

"Quirky seeks ideas for new consumer products from its crowd, and also relies on the crowd to vote on submissions, conduct research, suggest improvements, figure out how to name and brand the products, and drive sales. Quirky itself makes the final decisions about which products to launch and handles engineering, manufacturing and distribution. It keeps 70 percent of all revenue made through its website and distributes the remaining 30 percent to all crowd members involved in the development effort…."

These types of approaches fall under the generic categories of "crowdsourcing" or "open innovation." The examples the authors present are impressive, and the approaches to innovation are themselves innovative. We are living in exciting economic times and it will be interesting to see how this plays out.

Unfortunately, we have problems much bigger than coming up with the next gadget. If we are going to survive climate change associated with global warming, and going to learn enough about our own biology to repair the damages that keep appearing, we are going to need some big developments based on a lot of innovation. It is not clear that crowdsourcing or open innovation is an effective approach for these types of problems. However, if one can derive a new meta-idea on how to enhance innovation in these areas, that person would be greatly appreciated—and richly rewarded.

Sunday, March 23, 2014

Change in Human Brain Size, Natural Selection, and Evolution

A few years ago Kathleen McAuliffe wrote an interesting article for Discover Magazine: If Modern Humans Are So Smart, Why Are Our Brains Shrinking? She was startled to learn that over the past 20,000 years or so the human brain had actually decreased in size. 

"Over the past 20,000 years, the average volume of the human male brain has decreased from 1,500 cubic centimeters to 1,350 cc, losing a chunk the size of a tennis ball. The female brain has shrunk by about the same proportion."

Like most of us, she assumed that big brains were the indicator of our lofty intellects. Prior to that, the data demonstrated that the human brain had been growing ever larger. McAuliffe was surprised to learn that this remarkable conclusion was rather difficult to interpret, and most discussion was confined to a small group of paleontologists who were working in this area.

Brain size is known to be a function of an animal’s body mass. This follows from the assumption that the greater the body size, the more brain needed to control it. This ratio of brain volume to body mass is referred to as the encephalization quotient (EQ). Humans do have a significantly larger EQ than the other apes.

Human body mass has shrunk since the Stone Age, so some decrease in brain size might be expected. However, the data on humans since that period indicates that brain size has shrunk considerably faster than body mass. In fact, if EQ were a fundamental constant, then our bodies would have had to shrink to perhaps half our current size. The issue becomes more intriguing when one considers that this phenomenon has occurred all over the globe. John Hawks, one of the experts McAuliffe relied on for her article, provides this insight:

"The decline in body mass in human populations during the last 10,000 years has been estimated as less than 5 kg, or less than a 10 percent reduction in mass from a Late Upper Paleolithic mean of some 63 kg….A decline of 5 kg would predict a decrease in endocranial volume only around 22 ml. The observed decline in several regions (including Europe, China, Southern Africa, and Australia) is between 100 and 150 ml during the past 10,000 years. Therefore, the reduction in body mass would be expected to have decreased brain size by only one-fifth to one-seventh the observed decline."

Note that areas like Australia had little communication with other peoples over that period in history. It is not likely that mutations that could have affected brain size would have spread through Europe, China, Southern Africa, and Australia in such a uniform fashion. It seems something more fundamental is going on.

McAuliffe received several possible explanations for why the brain might be shrinking from experts she consulted. One is referred to glibly as the "idiocracy theory." The decline in brain size has been associated with increased population density and, presumably, increased social interdependence.

"The observation led the researchers to a radical conclusion: As complex societies emerged, the brain became smaller because people did not have to be as smart to stay alive….individuals who would not have been able to survive by their wits alone could scrape by with the help of others—supported, as it were, by the first social safety nets."

While natural selection in a "complex" society will likely enhance different characteristics than those in favor in a "simple" society, it is a bit of a stretch to assume complexity leads to diminished cognitive capabilities.

Another hypothesis is based on the fact that the brain consumes an enormous amount of energy given its small mass. About 20% of the energy our food provides is devoted to keeping the brain working. It could be that a smaller more efficient brain has been selected by nature. It would be a mistake to assume that the brain has only been changing in size while keeping all other parameters constant. There is no reason to assume that a new smaller brain is less capable than an old larger one.

The most intriguing suggestion is based on the fact that all of the animal species humans have domesticated developed a smaller brain than their wild counterparts.

"Some 30 animals have been domesticated….and in the process every one of them has lost brain volume—typically a 10 to 15 percent reduction compared with their wild progenitors. Domesticated animals also have more gracile builds, smaller teeth, flatter faces, a more striking range of coloration and hair types—and, in many breeds, floppy ears and curly tails. Except for those last two traits, the domesticated breeds sound a lot like us."

One of the explanations for this phenomenon is based the notion that domestication, or taming of animals, involves systematically breeding animals in which aggression is minimized. To support this view, an experimental result is described.

"In 1958 the Russian geneticist Dmitri Belyaev started raising silver foxes in captivity, initially selecting to breed only the animals that were the slowest to snarl when a human approached their cage. After about 12 generations, the animals evidenced the first appearance of physical traits associated with domestication, notably a white patch on the forehead. Their tameness increased over time, and a few generations later they were much more like domesticated dogs. They had developed smaller skeletons, white spots on their fur, floppy ears, and curlier tails; their craniums had also changed shape, resulting in less sexual dimorphism, and they had lower levels of aggression overall."

There is no superior species controlling the breeding of humans and "domesticating" us, so how is this relevant? It can be claimed that by imposing rules against aggression we are "domesticating" ourselves. The death penalty for those who commit crimes of aggression is one way of promoting a tamer society. The genes of an overly aggressive human need only be removed from the gene pool by making it unlikely they will be successfully reproduced. Death is unnecessary.

While circumstantial evidence supports this hypothesis, it fails to explicitly explain the connection between aggression and brain size. A possible explanation seems to depend on the fact that it is impossible for complex animals to be bred in such a way as to only affect a single property. Natural selection works on all properties at the same time. The experiment with the silver foxes arrived at a more docile animal, but one that seems to be more like a new species than a new version. And the change in shape of the cranium suggests changes in brain size as well.

What is striking about McAuliffe’s article and the issue of brain size reduction is the indication that animals, even humans—perhaps especially humans—are continuing to evolve; and the evolution can be quite rapid.

Perhaps the best example of quick adaption of a species to a changing environment involves a type of finch in the Galapagos Islands. This particular bird had evolved to feed off of a large sized nut and had a beak appropriate for that size. At some point a larger sized species of finch was introduced into the environment. This bigger bird was able to control access to the preferred nuts, leaving only smaller ones for the original finch to feed on. Unfortunately, their beaks were inefficient at opening these smaller nuts. What was observed to happen?

"Researchers from New Jersey's Princeton University have observed a species of finch in Ecuador's Galápagos Islands that evolved to have a smaller beak within a mere two decades."

"Surprisingly, most of the shift happened within just one generation, the scientists say."

Many animals can exist for very long times because they adapt to their environments. As long as their environments are stable, they are stable.

Humans, however, no longer adapt to their environment; rather they attempt to make their environment adapt to them. Humans alter their food supply, introduce unnatural chemicals into their bodies, pollute the air they breathe, shine intense forms of radiation on themselves, create ever changing social environments, and even change their mating habits. All this is done without a care for what the ramifications might be. Meanwhile, new diseases and types of malfunction emerge at near epidemic levels (autism, food allergies, diabetes, obesity, asthma, mental illness….).

Every variation we make to our environment and to our society alters the results of natural selection. There will be change, but we have no way of knowing where it will take us.

We are not who we were, and who we are, is not who we will be.

Wednesday, March 19, 2014

Capitalism without Capital: A Cambrian Moment

It has become clear that there is an economic revolution underway. Technology and innovation are creating new types of companies and services. It has been referred to as the second economy, the frontier economy, the digital economy, the knowledge economy, the zero-marginal-cost economy, and the second machine age, among others. Others have viewed developments more gloomily and used terms like the jobless economy, and the taskrabbit economy.

The defining characteristic of this new economy is that technology has provided the means whereby an idea for a product can lead to the formation of a company to implement that idea in a very short time and with almost no requirement for capital. Nathan Heller produced a fascinating look at this new entrepreneurial environment and the people who live in it in an article for The New Yorker: Bay Watched: How San Francisco’s new entrepreneurial culture is changing the country. Heller provides this insight provided by an entrepreneur named Naval Ravikant.

"Once, an entrepreneur would go to a venture capitalist for an initial five-million-dollar funding round—money that was necessary for hardware costs, software costs, marketing, distribution, customer service, sales, and so on. Now there are online alternatives. ‘In 2005, the whole thing exploded,’ Ravikant told me. ‘Hardware? No, now you just put it on Amazon or Rackspace. Software? It’s all open-source. Distribution? It’s the App Store, it’s Facebook. Customer service? It’s Twitter—just respond to your best customers on Twitter and Get Satisfaction. Sales and marketing? It’s Google AdWords, AdSense. So the cost to build and launch a product went from five million….and it’s now to fifty thousand.’ As a result, the number of companies skyrocketed, and so did the number of angels: suddenly, you didn’t need to be a venture-capital firm to afford early equity."

With startup costs so low it is quicker and easier to try out an idea to see if it works than it is to try and predict whether it will work or not.

This type of environment led The Economist to publish an extended article on startups titled A Cambrian Moment.

The reference is to a period in evolutionary history that began about 540 million years ago and is referred to as the Cambrian Explosion. Before that time only very simple life forms existed. It seems that nature had somehow managed to assemble the tools needed to create more complex life forms and spent millions of years experimenting. Most of these prototypes disappeared quickly. Only a relatively few anatomical forms survived to form the template for the animal kingdom that has persisted to this day. Nature continues to experiment with new species, but they mostly conform to the same anatomical types.

"One explanation for the Cambrian explosion of 540m years ago is that at that time the basic building blocks of life had just been perfected, allowing more complex organisms to be assembled more rapidly. Similarly, the basic building blocks for digital services and products—the ‘technologies of startup production’, in the words of Josh Lerner of Harvard Business School—have become so evolved, cheap and ubiquitous that they can be easily combined and recombined."

"Startups are best thought of as experiments….testing what can be automated in business and other walks of life. Some will work out, many will not. Hal Varian, Google’s chief economist, calls this "combinatorial innovation". In a way, these startups are doing what humans have always done: apply known techniques to new problems. The late Claude Lévi-Strauss, a French anthropologist, described the process as bricolage (tinkering)."

Jeremy Rifkin recognizes this new economy and suggests we spend less time documenting its existence and more time worrying about where it may be taking us. He produced an article for the New York Times: The Rise of Anti-Capitalism.

"We are beginning to witness a paradox at the heart of capitalism, one that has propelled it to greatness but is now threatening its future: The inherent dynamism of competitive markets is bringing costs so far down that many goods and services are becoming nearly free, abundant, and no longer subject to market forces. While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring those costs to near zero."

Rifkin points out that technology is creating what he refers to as "the internet of things."

"This new technology platform is beginning to connect everything and everyone. Today more than 11 billion sensors are attached to natural resources, production lines, the electricity grid, logistics networks and recycling flows, and implanted in homes, offices, stores and vehicles, feeding big data into the Internet of Things. By 2020, it is projected that at least 50 billion sensors will connect to it."

"People can connect to the network and use big data, analytics and algorithms to accelerate efficiency and lower the marginal cost of producing and sharing a wide range of products and services to near zero, just as they now do with information goods."

Rifkin seems to believe there is a positive nature to this development in that it will encourage social interaction and social inclusiveness—presumably by favoring shared usage of goods and services rather than private ownership.

"What makes the social commons more relevant today is that we are constructing an Internet of Things infrastructure that optimizes collaboration, universal access and inclusion, all of which are critical to the creation of social capital and the ushering in of a sharing economy. The Internet of Things is a game-changing platform that enables an emerging collaborative commons to flourish alongside the capitalist market."

"This collaborative rather than capitalistic approach is about shared access rather than private ownership. For example, 1.7 million people globally are members of car-sharing services. A recent survey found that the number of vehicles owned by car-sharing participants decreased by half after joining the service, with members preferring access over ownership. Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost. The sharing economy had projected revenues of $3.5 billion in 2013."

Rifkin provides this rather remarkable conclusion:

"As for the capitalist system, it is likely to remain with us far into the future, albeit in a more streamlined role, primarily as an aggregator of network services and solutions, allowing it to thrive as a powerful niche player in the coming era. We are, however, entering a world partly beyond markets, where we are learning how to live together in an increasingly interdependent, collaborative, global commons."

There are a number of ramifications associated with this picture of the economic future that Rifkin does not consider in this article.

Users of car sharing or ride-sharing services may gain value for themselves, but there is a cost to society. If people buy fewer cars there will be fewer manufacturing jobs and the price of cars will go up. If fewer people use public transit then service will be diminished and price will likely increase. Public transit is designed to ensure that the least of the citizens are able to get around at an affordable cost.

Much of this new economy seems designed to make life easier for people who have money to spend, while at the same time limiting opportunities for those who need stable employment in order to deliver a reliable income. The idea of an economy where individuals earn money by bidding on tasks and hoping to be low bidder brings to mind Victor Hugo’s Les Misérables. Everyone becomes a day laborer. That is no way to live.

We may not be supporting the social commons; we may be destroying it.

The Cambrian analogy seems appropriate. We are performing experiments and moving in unknown directions—perhaps even random directions. We are in the process of making enormous changes in our economy and in our society with little thought as to whether or not it is a good idea.

Stephen J. Gould wrote a Scientific American article entitled The Evolution of Life on Earth in which he describes some of the lessons learned from studying the record from the Cambrian Explosion.

"Humans arose, rather, as a fortuitous and contingent outcome of thousands of linked events, any one of which could have occurred differently and sent history on an alternative pathway that would not have led to consciousness...only one member of our chordate phylum, the genus Pikaia, has been found among these earliest fossils. This small and simple swimming creature , showing its allegiance to us by possessing a notochord, or dorsal stiffening rod, is among the rarest fossils of the Burgess Shale, our best preserved Cambrian fauna....Moreover, we do not know why most of the early experiments died, while a few survived to become our modern recognized traits unite the victors and the radical alternative must be entertained that each early experiment received little more than the equivalent of a ticket in the largest lottery ever played out on our planet—and that each surviving lineage, including our own phylum of vertebrates, inhabits the earth today more by the luck of the draw than by any predictable struggle for existence."

If we are to model nature with a trial and error approach to our society, then we should remember that most of nature’s experiments end badly. Also, since we are astonishingly lucky to be here, we shouldn’t push our luck any further.

A little thought about where we should be heading seems appropriate.

Sunday, March 16, 2014

The Revolution of 1913: Federal Taxes

Isaac William Martin tells the tale of how the rich spent the twentieth century struggling to avoid sharing any of their wealth with their fellow citizens in his book Rich People’s Movements: Grassroots Campaigns to Untax the One Percent. He points out that the defining moment for the rich people’s campaigns occurred in 1913.

"The activists who campaigned to untax the rich in the twentieth-century United States told a common story about the origins of their crusades. It all started, they said, when a singular catastrophe befell the American polity in 1913. The story was handed down from generation to generation. Writing in 1938, J.A. ‘Pappy’ Arnold remembered it as ‘the greatest calamity in the evolution of government.’ In 1952, Frank Chodorov recalled it as ‘the revolution of 1913.’ In 1974, Robert Charlton published an article describing it as a ‘disaster’ that undermined the American republic. In 1989, Lewis Uhler characterized it as the beginning of big government in America, as the end of an era of freedom, and as the first step on the road to serfdom. In 1997, Larry Arnn and Grover Norquist portrayed it as a betrayal of the founding fathers and as the beginning of a new federal policy of ‘terror and torment’."

The catastrophe to which they referred was the insertion of a single sentence into the Constitution in the form of the Sixteenth Amendment.

"The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."

The income tax and the estate tax had been born and now the wealthy would face the prospect having their wealth fall into the hands of the undeserving masses. The initial concern was not that they would be burdened by large taxes, but that they would have to pay federal taxes at all.

Martin provides some interesting background on the condition of our nation at that time to explain why the income tax was required and how it came to be.

Income inequality in the years prior to World War I was thought to be greatest of any time in our history—before or since.

"….the limited available data suggest that the ownership of wealth on the eve of World War I was as unequal as it had ever been, and more unequal than it ever has been since,"

"….it is plain that what is now defined as absolute poverty in our official statistics was so widespread that it would have been seen as the normal condition of a majority of the population."

Prior to the federal income tax the existing taxes produced the perverse effect of falling most heavily on the poor. The main source of tax revenue for the federal government was tariffs and excise taxes on alcohol and tobacco. The distributors paid these duties and passed the cost on to the consumers. In yet another example of market failure, domestic competitors took the opportunity to charge the same high price for their products. As these products formed a larger component of low-income families’ expenses, the levy fell heaviest upon them.

State and local governments taxed wealth, but in practice, the taxes again fell most heavily on the poor.

"Most state and local governments supposedly taxed wealth, but in practice the general property tax was a tax on real estate only, because real estate was the only form of wealth that could not be hidden or carried over county lines when the assessor came calling. Almost no one reported their household effects to the tax assessor, and intangible wealth represented by stock and bond certificates generally escaped scot-free."

Even the real estate taxes were rigged to let the rich off easy. Absentee landlords could charge rents to poor city dwellers large enough to cover high urban property tax rates and earn a profit, while they built themselves mansions outside the city limit and used their resources to ensure that their property was taxed at the lower "rural" rate.

The system was so unfair that numerous groups found arguments in favor of a federal income tax. Laborers resented their low wages and the wealth of their employers. Unions saw the income tax as an issue that could be used to help in the organization of workers. Farmers paid a significant property tax, but the banks that held their mortgages paid none, and the railroads that charged them large fees to carry their produce to market managed to pay little if any. Prohibitionists were in favor because they wanted to eliminate the federal dependence on alcohol revenue. Women who demanded the right to vote wanted to be able to claim that they were tax payers so that they could protest over taxation without representation.

The wealthy found themselves in a precarious position. Martin tells us that it was actually the Republicans who gambled on a Constitutional amendment in order to fend off legislative actions that they feared they could not counter. The idea for the Sixteenth Amendment was said to belong to President William Howard Taft.

"Many Republicans in Congress voted for the amendment in hopes that the drive for ratification would fail and thereby kill the tax for good."

But the Sixteenth Amendment passed rather easily. It turned out that the pressure from organized special interest groups was more effective than the corruption that could be purchased with wealth. Rich people learned a lesson from this defeat.

Every revolution seems to incite a counterrevolution. In 1920, Warren G. Harding appointed the wealthy Andrew Mellon as secretary of the Treasury and the counterrevolution was begun.

"Mellon would remain secretary of the Treasury through twelve years and three presidencies. He would use his influence to push for the elimination of the estate tax….he would prove to be an influential ally and inspiration for rich men and women who protested against income taxes on the rich. As secretary he would encourage, advise, and support their protests."

"These activists protested against the progressive taxes on income and wealth. But in their organizational style, in their tactical choices, and even in their rhetoric, they copied the progressive social movements that put those taxes on the books."

More on Martin’s book can be found here. His description of the history of rich people’s movements culminates with the takeover of the Republican Party and its conversion to a political tool of the wealthy.

The federal income tax contributed to the winning of two world wars, survival of the Great Depression, and development of the strongest economy on earth. Apparently that is not good enough for some.

The rich shall always be among us—and they will be well organized.

Wednesday, March 12, 2014

Rich People’s Movements: Grassroots Campaigns to Untax the One Percent

Isaac William Martin has produced an illuminating study of how the rich have utilized the political and social methods of the poor and dispossessed in order to protect their wealth in his book Rich People’s Movements: Grassroots Campaigns to Untax the One Percent

Martin begins with a description of the Tea Party demonstrations that took place on tax day, April 15, 2010. Hundreds of thousands of people turned out to issue demands that were designed to assist the wealthy in becoming wealthier.

"….they united in expressing hostility toward the taxation of income and wealth. Spokespeople for the demonstrators demanded, among many other things, an end to progressive income tax rates, a permanent repeal of the estate tax, an extension of temporary income tax cuts for the richest Americans, and a constitutional amendment that would require a supermajority vote in Congress to increase any tax on anyone, for any purpose, ever. Protesters held up picket signs denouncing taxes and the redistribution of wealth. Many asserted that the government was redistributing resources from the rich to the poor, and objected that this was unfair to the rich."

Martin describes the media response to these demonstrations as misguided in concluding that this was something new in American politics. Rather, it was merely a culmination of a long campaign.

"….they [media commentators] agreed fundamentally that populist protests against progressive taxation are something new, and that their causes must also lie in some recent transformation of American society. This book will show that this common premise is mistaken. The Tea Party protests of 2010 were new only in the sense that they were the newest expression of an old tradition."

In fact, Martin tells us that the movement name had been used earlier in a different context.

"In September 4, 1962, hundreds of conservative activists crowded into the Wilshire Ebell Theater in Los Angeles for a protest meeting that they called the California T Party. These protestors were unusually well-heeled and unusually radical. They were there to support a constitutional amendment that would outlaw all federal taxation of income and inherited wealth, and would further require the federal government to sell off virtually all of its assets in order to pay for a massive, one-time transfer of wealth to the richest Americans."

This was not just a one-off event. It was hoped to be the kickoff to a powerful national movement.

"There were two more California T Parties that week, followed by a national gathering in Chicago two weeks later, at which activists from around the country met, sang protest songs, and attended workshops on grass roots organizing for income tax repeal."

This description of the Chicago event could have served to describe a meeting in support of the Civil Rights Movement, and makes Martin’s point that the wealthy had adopted the lessons learned from the social movements of the non-wealthy and applied them to their own goals.

The wealthy can anticipate many threats to their wealth, and their wealth provides with many options to protect it. Why would they feel compelled to organize themselves into a movement?

Martin suggests that the wealthy have a primal fear of democracy. Since they are wildly outnumbered, the non-wealthy could move against them and confiscate their wealth if they chose to. The passage of the sixteenth amendment allowing the federal government to levy an income tax came to be viewed as a "revolutionary" development, and the imposition of a progressive income tax was certainly considered a form of confiscation.

A trigger was needed to arouse the rich to the extent that they would band together in common purpose. The trigger that activated movements was a common threat that would apply to all of them. Martin refers to those as "policy threats."

"Scholars refer to a policy threat when the loss of economic or personal security is attributable to a real or anticipated change in public policy."

Such an example would be a threat to raise the estate tax rate or to lower the wealth threshold for the tax. Policy threats incite action because they potentially involve a large number of people, and the perceived enemy is easily recognizable as a specific politician, a specific political party, or the entire government itself.

Martin’s analysis found that the mobilization of the rich always involved a threat to increase their taxes. Such threats excite fear not only in those directly affected but also in those who fear they might be affected either now or in the future. It was often easy for the rich to find numerous allies with more modest incomes. The threat of changes to the estate tax, for example, was always troubling to small business people and even home owners in high property value regions.

Martin identifies five distinct rich people’s movements.

1924-1929: campaign to abolish estate tax and limit income surtax rate to 25%

1936-1957: campaign for constitutional amendment limiting tax level

1951-1964: campaign to repeal federal income taxes

1978-1989: campaign for tax limitation/balanced budget amendment

1993-2001: campaign to repeal the estate tax

One might look at these movement goals and think that the efforts were failures, but the net result was that much of their economic philosophy has been absorbed as gospel by the current version of the Republican Party.

"….with few exceptions its carriers were not intellectual system-builders, but instead activists and organizers who treated ideas as tools to win arguments. Thus the tradition came to include both utilitarian arguments that justified tax cuts for the rich as a way to stimulate investment, and rights-based arguments that implied a moral duty to cut taxes regardless of utilitarian considerations. It came to include the classical [neo] liberal idea that taxation of capital is bad because it distorts investment decisions, alongside the classical republican idea that it leads to tyranny. It came to include arguments that taxing the rich is bad because it generates too little revenue, and arguments that taxing the rich is bad because it generates too much revenue. Like other practical positions in American politics, the grass-roots libertarian tradition is not always logically coherent, but it is sociologically coherent: It is a real set of tactics and arguments suited to a particular position in social relations. The grass-roots libertarian position lives on today. Its features will look and sound familiar to any observer of American politics in the early twenty-first century."

There is little hope that the income tax can be repealed, but other strategies have worked to limit taxation and subdue government growth. Consider the movement for a balanced budget amendment. Who could be against balanced budgets? But with the impossibility of raising taxes to cover a shortfall, such an amendment or policy would lead to ever smaller government, and ever smaller need for tax revenue. It is a long term, but ever so effective way to protect the wealth of rich people.

The extreme radical right has also served the purpose of re-centering the political dialogue in our nation. The threat of extreme proposals and threats of constitutional conventions have led to numerous compromises that have effectively moved politics to the right. This has been supported by a media assessment that the "moderates" are those who are half way between the crazies on the right and the most radical on the left. However, there is no equivalent on the left to the radical right.

Martin describes the twentieth century activism by rich people as a single movement with several distinct upsurges in activity as opportunity for progress presented itself. The lesson rich peoples’ activists learned from the past century was that it was not efficient to bide one’s time and wait for allies to appear or propitious moments to arrive. The lesson they learned was that the most effective strategy for them was to take over a political party.

"Rich people’s movements have been thoroughly institutionalized and thereby tamed. Many former activists are now well entrenched in the Republican Party and its allied think tanks, and their tactics are now correspondingly oriented toward inside lobbying. Some movement goals remain unrealized only because they are nigh unachievable."

There will be pressure coming from several directions to increase government spending. If for no other reason, the aging of the population will demand it. This will ensure continued political conflict for the foreseeable future.

Martin closes with this conclusion:

"Rich people’s movements have a permanent place in the American political bestiary. As long as one of our great political parties is allied with the radical rich, it is safe to predict that rich people’s movements will continue to influence public policy in ways that preserve—and perhaps even increase—the extremes of inequality in America."

Saturday, March 8, 2014

Judicial Philosophies and Why We Need Term Limits

Jeremy Waldron provided an interesting discussion of the role of a judge in interpreting and evaluating legislation. His article, Unfettered Judge Posner, appeared in the New York Review of Books. This was prompted by the publication of a book by Richard A. Posner: Reflections on Judging.

Waldron provides this view of the role of a judge as the one most commonly assumed by the public:

"I think that if you ask ordinary Americans what they want from their judges, most of them will say they want decisions according to law and they want respect for the Constitution. They want a judiciary that will issue objective judgments based on what the legal materials require, not decisions based on the individual judge’s own best estimate of how to solve social problems….the ordinary expectation is that the judge will put his own views to one side and, when cases come before him, apply the rules embodied in statutes, precedents, and constitutional provisions."

Richard A. Posner is currently a judge on the Seventh Circuit Court of Appeals. He would describe judges who claim to adhere to the above standard as "formalists." Posner favors a more active role for a judge than that described above—one in which the judge should accept responsibility for the consequences of his rulings.

"Posner calls such judges "formalists," and a large part of his book is devoted to the excoriation of formalism. What is formalism, exactly? Posner is rather casual about definitions. The formalist is someone who feels bound to interpret texts in a way that is ‘indifferent or nearly so to the consequences of his interpretations in the real world.’ The consequences may be bad, but the formalist judge can say ‘the law made me do it’.’

Posner seems to believe that there is formative role for judges to play in situations where legislators produce ineptly constructed statutes or where the inherent uncertainties of constitutional interpretation are significant.

"Posner thinks our legislative processes are so inept and ill-disciplined that the resultant measures are often ‘insolubly ambiguous.’ In these cases, he says, when the enactment is unclear, judges should seize the opportunity to apply their own beliefs about what makes things work well in society. Perhaps if some plausible purpose is discernible from an enactment that lacks clarity, then the judge should do what he can to further that purpose. But when the purpose is not discernible, says Posner, ‘then the judge is the legislator’ and we need an understanding of his role that permits and encourages him to take into account everything that a wise lawmaker would consider. He calls this ‘realistic’ adjudication—an echo of American legal realism from the 1920s and 1930s."

Today, most would be of the opinion that "separation of powers" demands that such considerations be left to legislators to sort out. On the other hand, it is fair to ask if Posner’s view is really that foreign to our nation’s traditions.

The theory of legal realism seems to have drawn much of its inspiration from the book of Oliver Wendell Holmes, Jr., The Common Law. Holmes’s book begins with this famous phrase:

"The life of the law has not been logic; it has been experience."

Holmes also believed that the purpose of law was the avoidance of undesirable social consequences. These views are consistent with the long tradition of common law.

The system of Common Law might be described as follows:

"A common law legal system is a system of law characterized by case law which is law developed by judges through decisions of courts and similar tribunals."

"A common law system is a legal system that gives great potential precedential weight to common law, on the principle that it is unfair to treat similar facts differently on different occasions. The body of precedent is called "common law" and it binds future decisions. In cases where the parties disagree on what the law is, a common law court looks to past precedential decisions of relevant courts. If a similar dispute has been resolved in the past, the court is usually bound to follow the reasoning used in the prior decision (this principle is known as stare decisis). If, however, the court finds that the current dispute is fundamentally distinct from all previous cases….judges have the authority and duty to make law by creating precedent."

Posner’s view seems to be informed by this common law tradition. What is of interest here is that common law was developed by the British over centuries and it became the starting point for all the English-dominated colonies that eventually became independent. This is the form of law that existed at the writing of our Constitution and would presumably have been assumed to continue by the writers of our Constitution. Posner’s perspective might seem strange today, but might have appeared quite reasonable in the eighteenth century.

If we are to fear that Posner’s activism would dangerously allow the personal opinions and biases of judges to enter into our legal proceedings, then it must be argued that our current system, dominated by the concept of "formalism," is inherently superior in the sense of shielding the citizenry from biased and perhaps arbitrary judicial decisions.

Waldron provides this description of the mode of operation of formalists:

"What formalists have in common is a conviction that they have to find some way of keeping faith with what has been enacted even in cases where the enactment is difficult or obscure or where the results of keeping faith lead to consequences that the judge—as a politician—would not necessarily welcome."

Formalists might be said to include originalists, textualists, and even those who adhere to the belief in a "living Constitution." The latter would address a given issue from the beginning as formalists but would be more willing to allow current factors and consequences to "extend" the Constitution as originally written.

Consider the case of the right to abortion. The term is not considered in the Constitution. Therefore any opinion must be based on some secondary consideration. The argument to uphold Roe v. Wade has at various times been identified with patient-physician confidentiality, personal liberty, and equal protection of the law. Those against it would claim that progressive (activist) justices decided the way they did just because that is what they wanted to do.

Those against legal abortion must have secondary bases upon which to justify their opposition. A visit to a page on the website of the Family Research Council that claimed to provide legal arguments against abortion revealed that there were none. The only claim was that some legal experts disagreed with the Supreme Court’s decision. It seems those (activist) justices who would rule against abortion can be described as doing it just because they want to.

The originalists and textualists (a variation on originalism) would claim to adhere strictly to the Constitution.

Clarence Thomas is described as the Justice most dedicated to the concept of originalism. To Thomas, originalism has a very specific meaning. He believes that the words in the Constitution must be interpreted in terms of the public understanding of the meaning at the time they were adopted. This may sound reasonable, but given that the wording of the Constitution was generally arrived at by negotiating differences of opinion—differences that remain in the historical record—how does one arrive at a definitive interpretation? Thomas assumes he is able to do that, and once he arrives at his determination he can overthrow centuries of precedents. Critics of this approach can claim that Thomas has conjured up an activist legal formalism that allows him to do just about anything he wants to do.

Antonin Scalia is identified as the most determined of the textualists. He believes that the only guide he has is the exact wording of laws and articles of the Constitution. Trying to infer intentions is of no interest to him—although he does drop into that mode when it is convenient. Scalia wrote the majority opinion in District of Columbia v. Heller which established (to a point) the right to bear arms as based on the Second Amendment. He used inferences about intentions to justify his opinion, and he also decided to interpret the constitution in such a way that might have left Prosner smiling (sardonically no doubt).

If the Constitution merely says that citizens have the right to bear arms how does a textualist come up with an opinion that also decides to limit that right. The weapons at issue to the founding fathers were the weapons of war. Wouldn’t a strict constructionist—and a sometimes strict originalist—have to conclude that citizens in the twentieth century should also have access to the weapons of war? Scalia chickened out and decided that the unrestricted right only applied to handguns, and only in the home. To do otherwise would have negated many existing regulations and declared unlawful the incarceration of an enormous numbers of criminals. Chaos would ensue.

Critics from both the left and right claimed that Scalia did what he did not based on principle, but based on the desire to accomplish what he set out to accomplish. In other words, he conjured up a legal argument that allowed him to do exactly what he wanted to do.

These considerations do not leave us feeling confident that the judicial activism that Posner recommends is desirable as a matter of course. However, we must also recognize that judicial bias and political intrusion is already so widespread that the concept of a consistent rule of law is at risk of becoming a joke.

How might one address this issue? Can we expect mere mortals to be able to suppress their emotions and biases concerning complex topics? That is probably impossible. Perhaps the next best thing is to come to a means of accommodating the inevitable human bias.

Federal judges and Supreme Court justices are nominated by the president. The president is elected (usually) by a majority of the citizens. That is as close as we get to a true reading of the opinions of the citizenry.

If the problem of judicial bias only becomes a concern when the bias is out of touch with the opinions of the majority, then allow the judicial ranks to become more consistent with current election results. The president should be given more influence over the judiciary. One way to do this is to impose term limits so the president can more frequently replace judges or choose to re-nominate existing ones. If political bias is unavoidable, why not make the political bias more current with political realities?

One doesn’t want the political bias to be too tightly coupled. Setting term limits of 16 years for federal and Supreme Court justices and staggering terms would seem to be a reasonable compromise.

This type of accommodation would enhance the political stakes involved in elections. But they are already high. A woman’s right to an abortion will be determined not by the Constitution, nor by any considerations of fundamental rights or justice. It will be determined by who gets elected president. So why not recognize that reality and let the battle take place in the open in the coming elections.

Tuesday, March 4, 2014

Evaluating Trade Agreements Realistically: NAFTA, KORUS, TTP, and TTIP

The United States seems to get blamed for everything. An article in The Economist frets because trade deals currently being negotiated may not come to pass because of a lack of enthusiasm and determination on the part of the US.

"….Congress is likely to block two big free-trade deals—one with Asia, the other with Europe—until after November’s mid-term elections, and possibly to scupper them altogether."

"For all its self-image as a place where doing business comes first, America has often found trade deals frightening. This is partly because its continent-spanning economy is more self-contained than many people realise: imports and exports of goods amount to 23% of GDP, compared with 26% for the EU or 46% for China, so the constituency for reducing tariffs and opening markets is relatively small."

And what is at stake in these proposed agreements?

"Peter Petri of the Peterson Institute, a think-tank, estimates the boost to global income from the Trans-Pacific Partnership (TPP) alone to be $295 billion a year, $78 billion of that accruing to the United States. The Transatlantic Trade and Investment Partnership (TTIP) is roughly as large. And the deals could generate big extra benefits by paving the way for more competition in services, the largest but least globally traded part of the economy."

Perhaps US legislators are dubious about free trade agreements (FTAs) because they rarely deliver what was promised and the US, as a nation, usually comes out a loser. Robert E. Scott presents possible explanations in an article for the Economic Policy Institute: The Trans-Pacific Partnership Could Be Much Worse Than the Over-Hyped Korea Deal.

Scott blames shoddy economics for much of the error in predicting trade outcomes. The U.S. International Trade Commission (USITC) and most economists focus on tariff reduction as the dominant feature of free trade. Perhaps this is because it is something they have a hope of measuring.

"The fundamental problem with the USITC model….is that it is designed to evaluate the effects of tariff changes on trade flows. The structure of this model reflects most economists’ view that tariff cuts are the most important policy changes in FTAs….but they cannot be used to predict the impacts of FTAs on offshoring, on foreign and domestic investment in factories making products for export to the United State and other countries, on other factors affecting trade, investment, and wages that are unrelated to tariff changes."

In a separate study of NAFTA, Scott pointed out that when NAFTA went into effect the trade balance with Mexico was very small, but by 2010 it had grown to a negative $97.2 billion. At the time it was predicted that lowering tariffs on goods would increase exports to Mexico and create about 200,000 new jobs in the US. What actually happened is that US manufacturers, and those of other countries, took advantage of cheap labor in Mexico and low tariffs on Mexico’s exports (thank you NAFTA) to move manufacturing operations to Mexico. The net result was a large flow of exports into the US and, by Scott’s estimate, the loss of 682,900 US jobs. It is difficult to believe that the US did not see this coming.

Other economists would argue with Scott’s numbers, but whatever the actual number lost, Scott provides a useful rule of thumb for evaluating trade agreements.

"When it comes to trade, the issue is simple: Increased exports support U.S. jobs and increased imports cost U.S. jobs….Thus, it is trade balances—the net of exports and imports—that determine the number of jobs created or displaced by trade agreements. Unless trade agreements promise to reduce our too-high trade deficit, they will not have a net positive effect on U.S. employment. Rather than reducing trade deficits, past trade agreements have actually been followed by larger trade deficits."

When it came to negotiating the U.S.-Korea Free Trade Agreement (KORUS), one might have expected that a wiser approach would be taken. Scott indicates that preliminary data suggests that the US has been had again.

"KORUS took effect March 15, 2012. In the year after the agreement took effect (April 2012 to March 2013), U.S. domestic exports to South Korea (of goods made in the United States) fell $3.5 billion, compared with the same period in the previous year, a decline of 8.3 percent. In the same 12-month period, imports from South Korea (which the administration consistently declines to discuss) increased $2.3 billion, an increase of 4.0 percent, and the bilateral U.S. trade deficit with South Korea increased $5.8 billion, a whopping 39.8 percent. Estimates for 2013 suggest no reversal in these trends…."

It was claimed that KORUS would support 70,000 new jobs through increased exports. Instead, exports have fallen, imports have risen, and Scott suggests we can expect to lose at least 40,000 jobs.

Free trade advocates such as The Economist claim that the world will be $600 billion poorer each year if the US does not complete the two deals being negotiated with European and Asian nations. Trade doesn’t make the world wealthier, it makes individuals wealthier. Trade is good at creating wealth, but poor at distributing it. The best way to distribute wealth is by creating jobs for those who do not have one. That must be our primary goal.

Scott’s advice is sound. You should never make a deal in which you expect to lose money.

And never enter into a deal where you can expect to be the only honest participant.
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