Economics, Politics, Quick Fix

Cities Are Weird And Minimum Wages Can Help

[6-minute read]

I don’t understand why people choose to go bankrupt living the most expensive cities, but I’m increasingly viewing this as a market failure and collective action problem to be fixed with intervention, not a failure of individual judgement.

There are many cities, like Brantford, Waterloo, or even Ottawa, where everything works properly. Rent isn’t really more expensive than suburban or rural areas. There’s public transit, which means you don’t necessarily need a car, if you choose where you live with enough care. There are plenty of jobs. Stuff happens.

But cities like Toronto, Vancouver, and San Francisco confuse the hell out of me. The cost of living is through the roof, but wages don’t even come close to following (the difference in salary between Toronto and Waterloo for someone with my qualifications is $5,000, which in no way would cover the yearly difference in living expenses). This is odd when talking about well-off tech workers, but becomes heartbreaking when talking about low-wage workers.

Toronto Skyline
Not pictured: Selling your organs to afford a one-bedroom condo. Image Credit: Abi K on Flickr

If people were perfectly rational and only cared about money (the mythical homo economicus), fewer people would move to cities, which would bid up wages (to increase the supply of workers) or drive down prices (because fewer people would be competing for the same apartments), which would make cities more affordable. But people do care about things other than money and the network effects of cities are hard to beat (put simply: the bigger the city, the more options for a not-boring life you have). So, people move – in droves – to the most expensive and dynamic cities and wages don’t go up (because the supply of workers never falls) and the cost of living does (because the number of people competing for housing does) and low wage workers get ground up.

It’s not that I don’t understand the network effects. It’s that I don’t understand why people get ground up instead of moving.

But the purpose of good economics is to deal with people as they are, not as they can be most conveniently modeled. And given this, I’ve begun to think about high minimum wages in cities as an intervention that fixes a market failure and collective action problem.

That is to say: people are bad at reading the market signal that they shouldn’t move to cities that they can’t afford. It’s the signal that’s supposed to say here be scarce goods, you might get screwed, but the siren song of cities seems to overpower it. This is a market failure in the technical sense because there exists a distribution of goods that could make people (economically) better off (fewer people living in big cities) without making anyone worse off (e.g. they could move to communities that are experiencing chronic shortages of labour and be basically guaranteed jobs that would pay the bills) that the market cannot seem to fix.

(That’s not to say that this is all the fault of the market. Restrictive zoning makes housing expensive and rent control makes it scarce.)

It’s a collective action problem because if everyone could credibly threaten to move, then they wouldn’t have to; the threat would be enough to increase wages. Unfortunately, everyone knows that anyone who leaves the city will be quickly replaced. Everyone would be better off if they could coordinate and make all potential movers promise not to move in until wages increase, but there’s no benefit to being the first person to leave or the first person to avoid moving [1] and there currently seems to be no good way for everyone to coordinate in making a threat.

When faced with the steady grinding down of young people, low wage workers, and everyone “just waiting for their big break“, we have two choices. We can do tut-tut at their inability to be “rational” (aka leave their friends, family, jobs, and aspirations to move somewhere else [2]), or we can try to better their situation.

If everyone was acting “rationally”, wages would be bid up. But we can accomplish the same thing by simple fiat. Governments can set a minimum wage or offer wage subsidies, after all.

I do genuinely worry that in some places, large increases in the minimum wage will lead to unemployment (we’ll figure out whether this is true over the next decade or so). I’m certainly worried that a minimum wage pegged to inflation will lead to massive problems the next time we have a recession [3].

So, I think we should fix zoning, certainly. And I think we need to fix how Ontario’s minimum wage functions in a recession so that it doesn’t destroy our whole economy during the next one. But at the same time, I think we need to explore differential minimum wages for our largest cities and the rest of the province/country. I mean this even in a world where the current minimum $14/hour wage isn’t rolled back. Would even $15/hour cut it in Toronto and Vancouver [4]?

If we can’t make a minimum wage work without increased unemployment, then maybe we’ll have to turn to wage subsidies. This is actually the method that “conservative” economist Scott Sumner favours [5].

What’s clear to me is that what we’re currently doing isn’t working.

I do believe in a right to shelter. Like anyone who shares this belief, I understand that “shelter” is a broad word, encompassing everything from a tarp to a mansion. Where a certain housing situation falls on this spectrum is the source of many a debate. Writing this is a repudiation of my earlier view, that living in an especially desirable city was a luxury not dissimilar from a mansion.

A couple of things changed my mind. First, I paid more attention to the experiences of my friends who might be priced out of the cities they grew up in and have grown to love. Second, I read the Ecomodernist Manifesto, with its calls for densification as the solution to environmental degradation and climate change. Densification cannot happen if many people are priced out of cities, which means figuring this out is actually existentially important.

The final piece of the puzzle was the mental shift whereby I started to view wages in cities – especially for low-wage earners – as a collective action problem and a market failure. As anyone on the centre-left can tell you, it’s the government’s job to fix those – ideally in a redistributive way.

Footnotes

[1] This is inductive up to the point where you have a critical mass; there’s no benefit until you’re the nth + 1 person, where n is the number of people necessary to create a scarcity of workers sufficient to begin bidding up wages. And all of the people who moved will see little benefit for their hassle, unless they’re willing to move back. ^

[2] For us nomadic North Americans, this can be confusing: “The gospel of ‘just pick up and leave’ is extremely foreign to your typical European — be they Serbian, French or Irish. Ditto with a Sudanese, Afghan or Japanese national. In Israel, it’s the kind of suggestion that ruins dinner parties… We non-indigenous love to move. We don’t just see it as just good economic policy, but as a virtue. We glorify the immigrant, we hug them at the airport when they arrive and we inherently mistrust anyone who dares to pine for what they left behind”. ^

[3] Basically, wages should fall in a recession, but they largely don’t, which means inflation is necessary to get wages back to a level where employment can recover; pegging the minimum wage to inflation means this can’t happen. Worse, if the rest of the country were to adopt sane monetary policy during the next bad recession, Ontario’s minimum wage could rise to the point where it would swallow large swathes of the economy. This would really confuse price signals and make some work economically unviable (to do in Ontario; it would surely still be done elsewhere). ^

[4] I think we may have to subsidize some new construction or portion of monthly rent so that all increased wages don’t get ploughed into to increased rents. If you have more money chasing the same number of rental units and everything else remains constant, you’ll see all gains in wages erased by increases in rents. Rent control is a very imperfect solution, because it changes new construction into units that can be bought outright, at market rates. This helps people who have saved up a lot of money outside of the city and what to move there, but is very bad for the people living there, grappling with rent so high that they can’t afford to save up a down payment. ^

[5] No seriously, this is what passes for conservative among economists these days; while we all stopped looking, they all became utilitarians who want to help impoverished people as much as possible. ^

Economics, Falsifiable, Politics

Franchise Economics: Why Tim Hortons Has Become A Flashpoint In The Minimum Wage Fight

Since the minimum wage increase took effect on January 1st, Tim Hortons has been in the news. Many local franchisees have been clawing back benefits, removing paid breaks, or otherwise taking measures to reduce the costs associated with an increased minimum wage.

TVO just put out a piece about this ongoing saga by the Christian socialist Michael Coren. It loudly declares that “Tim Hortons doesn’t deserve your sympathy“. Unfortunately, Mr. Coren is incorrect. Everyone involved here (Tim Hortons the corporation, Tim Hortons franchisees, and Tim Hortons workers) is caught between a rock and a hard place. They all deserve your sympathy.

This Tim Hortons could be literally anywhere in suburban or rural Canada. Image Credit: Marek Ślusarczyk via Wikipedia Commons

It is a truism that a minimum wage increase must result in either declining profits, cuts to other costs, or rising prices. While supporters of the minimum wage increase would love to see it all come out of profits, that isn’t reasonable.

Basic economics tell us that as we approach a perfect market, profits should fall to zero. The key assumptions underpinning this are global perfect information (so no one can have any innovations that allow them to do better than anyone else) and zero start-up costs (so anyone can enter any market at any time). Obviously, these assumptions aren’t true in reality, but when it comes to fast food, they’re fairly close to true.

It is relatively cheap to start a fast-food restaurant (compared to say opening a factory). The start-up costs for a McDonalds, KFC, or Wendy’s are $1,000,000 to $2.3 million, while a Subway costs about $100,000 to $250,000 to start. This means that whenever someone sees fast-food restaurants making large profits in an area, they can open their own and take a fraction of the business, driving everyone’s profits down.

They’re probably driven down much lower than you think. If you had to guess, what would you say the profit margins for a fast-food restaurant are? If you’re anything like people in this study, you probably think something like 35%. The actual answer is 6% [1].

In addition to telling me that the average fast food restaurant has a 6% profit margin, that link helpfully told me that 29% of operating expenses in a fast-food restaurant come from labour costs. Raising those labour costs by 20% by increasing wages 20% increases total costs by 6% [2]. The minimum wage isn’t making fast-food restaurant owners make do with a little less in the way of profits. It’s entirely wiping out profits.

Now maybe your response to that is “well my heart doesn’t really bleed for that big multinational losing its profits”. But that’s not how Tim Hortons works. Tim Hortons, like almost all fast-food restaurants is a franchise. Tim Hortons the corporation makes money by collecting fees and providing services to Tim Hortons the restaurants, which are owned by the mythical small business owners™ that everyone (even the proponents of the minimum wage increase) claim to care so much about.

Most of these owners aren’t scions of wealthy families, but are instead ordinary members of their communities who saw opening a Tim Hortons as an investment, a vocation, or as a way to give back. They need to eat as much as their workers.

Faced with rising labour costs and no real profit buffer to absorb them, these owners can only cut costs or raise prices.

Except they can’t raise prices.

That’s the rub of a franchise system. The corporate office wants everything to be the exact same at every store. They set prices and every store must follow them. But there’s divergent incentives here. Tim Hortons the corporation makes a profit by selling supplies to its franchises; critically, they make a profit on supplies whether those franchisees turn a profit or not. They really don’t want to raise prices, because raising prices will hurt their bottom line.

It’s well known that (in general) the more expensive something is, the less people want it. Raising prices will hurt the sales volume of Tim Hortons franchises, which will decrease the profits at corporate Tim Hortons. The minimum wage hike affects Tim Hortons the corporation very little. They might see slightly increased shipping costs, but their costs are far less dependent on Canadian minimum wage labour. Honestly, the minimum wage increase probably is a net good for Tim Hortons the corporation. More money in people’s pockets means more money spent on fast-food.

Tim Hortons the corporation probably won’t say it, because they don’t want to antagonize their franchisees, but this minimum wage hike is great for them.

So, Tim Hortons franchisees have to cut costs or run charities. Given that they are running restaurants and not charities, we can probably assume that they’re going to cut costs. Why does it have to be labour costs that get cut? Can’t they just get their supplies for cheaper?

Here the franchise system bites them again. If they were independent restaurateurs, they might be able to source cheaper ingredients, reduce the ply of the toilet paper in their bathrooms, etc. and get their profits back this way.

But they’re franchisees. Tim Hortons the corporation has a big list of everything you need to run a Tim Hortons and you are only allowed to buy it from them. They get to set the prices however they want. And what they want is to keep them steady.

The only cost that Tim Hortons the corporation doesn’t control is labour costs. So, this is what franchisees have to cut.

There are two ways to decrease your labour costs. You can “increase productivity”, or you can cut wages and benefits. “Increase productivity” is the clinical and uninformative way of saying “fire 20% of your workers and verbally abuse the others until they work faster” or “fire 20% of your workers and replace them with machines”. While increased productivity is generally desirable from an economics point of view, it is often more ambiguous from a moral point of view.

Given that the minimum wage was just raised and it is illegal to pay any less than it, Tim Hortons franchisees cannot cut wages. So, if they’re against firing their employees and want to keep making literally any money, they have to cut benefits.

This might make it seem like corporate Tim Hortons is the bad guy here. They aren’t. The executives at Tim Hortons labour under what is called a fiduciary duty. They have a legal obligation to protect shareholder interests from harm and to act for the good of the corporation, not their own private good or for their private moral beliefs. They are responding to the minimum wage hike the way the government has told them to respond [3].

Minimum wage jobs suck. For all that economists claim there is no moral judgement implied in a wage, that it merely shows the intersection of the amount of supply of a certain type of labour and the demand for that labour, it can be hard to believe that there is no moral dimension to this when people making one wage struggle to make ends meet, while those earning another can buy fancy cars they don’t even need.

It is popular to blame business owners and capitalists for the wages their workers make and to say that it shows how little they value their workers. I don’t think that’s merited here. Corporate Tim Hortons has crunched the numbers and decided that if they raise prices, fewer people will buy coffee, their profits will decrease, and they might be personally liable for breach of fiduciary duty. In the face of rising prices, franchisees try and do whatever they can to stay afloat. We can say that caring about profits more than the wages their workers make shows immense selfishness on the part of these franchisees, but it’s little different than the banal selfishness anyone shows when they care more about making money for themselves than making money and giving it away – or the selfishness we show when we want our coffee to be cheaper than it can be when made by someone earning a wage that can comfortably support a family.

Footnotes

[1] As long as there are other available investments approximately as risky as opening a fast-food restaurant that return at least 6%, profits shouldn’t drop any lower than that. In this way, inefficiencies in other sectors could stop fast food restaurants from behaving like they were in a perfectly free market even if they were. ^

[2] This calculation is flawed, in that there are probably other costs making up total labour costs (like benefits) beyond simple wage income. On the other hand, it isn’t just wages that are going up. Other increased costs probably balance out any inaccuracies, making the conclusions essentially correct. This is to say nothing for corporate taxes, which further reduce profits. ^

[3] We can’t blame fiduciary duty, because fiduciary duty is how investing at all can happen. You might not like investing, but without investing, saving for retirement or having a national pension plan is impossible. If your response to this is to say “well let’s just tear down capitalism and start over”, I’d like to remind you that people tried that and it led to a) famine, b) gulags, c) death squads, d) more famine, and e) persistent shortages of every consumer good imaginable, including food ^

Politics

Westminster is bestminster

[6-minute read]

I’ve been ranting to random people all week about how much I love the Westminster System of parliamentary government (most notably used in Canada, Australia, New Zealand, and the UK) and figured it was about time to write my rant down for broader consumption.

Here’s three reasons why the Westminster System is so much better than the abominable hodgepodge Americans call a government and all the other dysfunctional presidential republics the world over.

1. The head of state and head of government are separate

And more importantly, the head of state is a figurehead.

The president is an odd dual-role, both head of government (and therefore responsible for running the executive branch and implementing the policies of the government) and head of state (the face of the nation at home and abroad; the person who is supposed to serve as a symbol of national unity and moral authority). In Westminster democracies, these roles are split up. The Prime Minister serves as head of government and directs the executive branch, while the Queen (or her representative) serves as head of state [1]. Insofar as the government is personified in anyone, it is personified in a non-partisan person with a circumscribed role.

This is an excellent protection against populism. There is no one person who can gather the mob to them and offer the solutions to all problems, because the office of the head of state is explicitly anti-populist [2]. In Westminster governments, any attempt at crude populism on the part of the prime minister can be countered by messages of national unity from the head of state [3].

It’s also much easier to remove the head of government in the Westminster system. Unlike the president, the prime minister serves only while they have the confidence of parliament and their party. An unpopular prime minister can be easily replaced, as Australia seems happy to demonstrate over and over. A figure like Trump could not be prime minister if their parliamentarians did not like them.

This feature is at risk from open nominating contests and especially rules that don’t allow MPs to pick the interim leader during a leadership race. In this regard, Australia is doing a much better job at exemplifying the virtues of the Westminster system than Canada or the UK (where Corbyn’s vote share is all the more surprising for how much internal strife his election caused) [4].

2. Confidence

To the Commonwealth, one of the most confusing features of American democracy is its (semi-)regular government shut downs, like the one Trump had planned for September [5]. On the other side, Americans are baffled at the seemingly random elections that Commonwealth countries have.

Her Majesty’s Prime Minister governs only so long as they have the confidence of the house. A government is only sworn in after they can prove they have confidence (via a vote of all newly elected and returning MPs). When no party has an absolute majority, things can get tense – or can go right back to the polls. We’ve observed two tense confidence votes this year, one in BC, the other in the UK.

In both these cases, no party had a clear majority of seats in the house (in Canada, we call this a minority government). In both BC and the UK, confidence was secured when a large party enlisted the help of a smaller party to provide “confidence and supply”. In this situation, the small party will vote with the government on budgets and other confidence motions, but is otherwise free to vote however they want.

The first vote of confidence isn’t the only one a government is likely to face. If the opposition thinks the government is doing a poor job, they can launch a vote of no confidence. If the motion is passed by parliament, it is dissolved for an election.

But many bills are actually confidence motions in disguise. Budgets are the “supply” side of “confidence and supply”. Losing a budget vote – sometimes archaically called “failing to secure supply” – results in parliament being dissolved for an election. This is how Ontario’s last election was called. The governing party put forward a budget they were prepared to campaign on and the opposition voted it down.

This feature prevents government shutdowns. If the government can’t agree on a budget, it has to go to the people. If time is of the essence, the Queen or her representative may ask the party that torpedoed the budget to pass a non-partisan continuing funding resolution, good until just after the election to ensure the government continues to function (as happened in Australia in 1975).

By convention, votes on major legislative promises are also motions of confidence. This helps ensure that the priorities laid out during an election campaign don’t get dropped. In a minority government situation, the opposition must decide whether it is worth another election before vetoing any of the government’s key legislative proposals. Because of this, Commonwealth governments can be surprisingly functional even without a legislative majority.

Add all of this together and you get very accountable parties. Try and enact unpopular legislation with anything less than a majority government and you’ll probably find yourself shortly facing voters. On the flip side, obstruct popular legislation and you’ll also find yourself facing voters. Imagine how the last bit of Obama’s term would have been different if the GOP had to fight an election because of the government shutdown.

3. The upper house is totally different

Many Westminster countries have bicameral legislatures, with two chambers making up parliament (New Zealand is the notable exception here). In most Westminster system countries with two chambers, the relationship between the houses is different than that in America.

The two American chambers are essentially co-equal (although the senate gets to approve treaties and budgets must originate in the house). This is not so in the Westminster system. While both chambers have equal powers in many on paper (except that money bills must often originate in the lower chamber), in practice they are very different.

By convention (and occasionally legislation) the upper chamber has its power constrained. The actual restrictions vary from country to country, but in general they forbid rejecting bills for purely partisan reasons or they prevent the upper house from messing with the budget.

The goal of the upper house in the Westminster system is to take a longer view of legislation and protect the nation from short-sighted thinking. This role is more consultative than legislative; it’s not uncommon to see a bill vetoed once, then returned to the upper chamber and assented to (sometimes with token changes, sometimes even with no changes). The upper house isn’t there to ignore the will of the people (as embodied by the lower house), just to remind them to occasionally look longer term.

This sort of system helps prevent legislate gridlock. Since the upper house tends to serve longer terms (in Canada, senators are appointed for life, for example), there is often a different majority in the upper and lower chambers. If the upper chamber was free to veto anything they didn’t like (even if the reasons were purely partisan) then nothing would ever get done.

Taken together, these features of the Westminster system prevent legislative gridlock and produce legitimate outputs of the political process. This obviates populist “I’ll fix everything myself” leaders like Trump, who seem to be an almost inevitable outcome in a perpetually gridlocked and unnavigable system (i.e. the American government).

Insofar as the Westminster system has problems, they are mostly problems of implementation and several Westminster countries have demonstrated that fundamental reform of the system is possible within the system itself. New Zealand abolished the upper house of their parliament when it proved useless. Australia switched to an elected upper house and has come up with a set of constitutional rules that prevent this from causing gridlock (here I’m thinking of the double dissolution election and joint session permitted by Australian law in response to repeated legislative failures).

Among certain people in Canada, electoral and senate reform have become contentious topics. It’s my (unpopular in millennial circles) opinion that Canada has no need of electoral reform. Get a few beers in most proponents of electoral reform and you’ll quickly find that preventing all future Conservative majorities is a much more important goal for them than any abstract concept of “fairness”. I’m not of the opinion that we should change our electoral system just because a party we didn’t like won a majority government once in the last eight elections (or three times in the past ten elections and past fifteen elections).

Senate reform may have already been accomplished, with Prime Minister Trudeau’s move to appoint only non-partisan senators and dissolve the Liberal caucus in the senate. Time will tell if this new system survives his tenure as prime minister.

In one of the articles I linked above, Prof. Joseph Heath compares the utter futility Americans feel about changing their electoral system with the indifference most Canadians feel about changing theirs. In Canada, many proponents of electoral reform specifically wanted to avoid a plebiscite, because they understand that there currently exists no legitimacy crisis sufficient to overcome the status quo bias most people feel. Reform in Canada is certainly possible, but first the system needs to be broken. Right now, the Westminster system is working admirably.

Footnotes

[1] Israel took many cues from Westminster governments. Its president is non-partisan and ceremonial. If Canada was every forced to give up the monarchy, I’d find this sort of presidential system acceptable. ^

[2] It’s hard to tell which is less populist; the oldest representative of one of the few remaining aristocracies, or (like in Israel or the governor-generals of the former colonies), exceptional citizens chosen for their reliability and loyalty to the current political order. ^

[3] See Governor General David Johnston’s criticism of some of Steven Harper’s campaign rhetoric. ^

[4] I’ve of the opinion that Corbyn’s “popularity” is really indicative of PM Teresa May’s unpopularity bolstered by his ability to barely surpass incredibly low expectations. ^

[5] Since rescheduled to December, in light of Hurricane Harvey. ^

Economics, Politics

Why Don’t we Subsidize Higher Wages? Or: Public Policy is Expensive

[7 Minute Read]

Epistemic Status: Started as a reduction ad absurdum.

It used to be a common progressive grumbling point that the social safety net subsidized the low wages of McDonald’s and Walmart (and many less famous and less oft grumbled about enterprises). The logic went that employees at those companies just weren’t paid enough; they wouldn’t be able to survive – a necessary prerequisite to showing up at work – without government assistance. The obvious fix for this would be forcing these companies to pay their employees more – raising the minimum wage.

In my last piece on the minimum wage, I said the existing evidence pointed towards minimum wage hikes having few negative consequences. Recent evidence from Seattle suggests this may not be the case (although there are dueling studies, further complicated by accusations of academic misconduct against the scientists who found the hike had no effect). If my earlier prediction proves false, it will be because $15/hour is much higher – and a much larger percentage increase, then any of the past studies looked at.

If a $15/hour minimum wage “fails” [1] then we will face a choice. Do we give up on higher minimum wages? Do we accept higher unemployment (and all of its associated disconnection, wrenching poverty, and mental health costs)? Do we try something radically different?

Certainly, there exist other potential programs that we can use to accomplish some of the goals of a minimum wage increase if an increase itself proves untenable. A guaranteed basic income (GBI) [2], while expensive, would accomplish many of the same economic security goals as a higher minimum wage, but it wouldn’t fix the fact that some people see their wage as a reflection on their moral value, instead of a commentary on the supply and demand of various skills. This could become quite the sticking point; one reason that libertarians get behind a GBI is that it would allow us to abolish minimum wage laws.

Eliezer Yudkowsky (don’t groan, this really is relevant) has an interesting theory about the left. He thinks that the left doesn’t hate capitalism – they just hold it to the same ethical standards they hold people to. It might be people on the right who claim that corporations are people, but it’s the left who treat corporations like people.

If we accept Yudkowsky’s theory, there are a lot of people for whom paying someone $8/hour is an unacceptable slur on that person’s value as a human being [3]. This seems to match what I see from time to time on Facebook or in editorials. Here’s one out of Seattle; it ends with: “Finally, let’s be mindful that a minimum wage is about more than keeping the poor from starving. It’s also about attaching dignity to a person’s labor”.

Dignity being on the line changes the minimum wage debate. People can squabble over the economic pie endlessly. But make it about dignity and workers can’t back down. Even if a higher minimum wage leads to price increases or lost jobs.

And the Seattle Times article I linked is far too sanguine about price increases [4]. It is correct when it points out that well-off people can eat price increases with nary a change in behaviour, but I don’t know how it can so calmly ignore how much of a struggle it is for low-income families to deal with price increases.

Of course, raising the minimum wage might give people some breathing room. But that breathing room is wasted if prices immediately increase to match the new incomes. Have you ever watched someone on a treadmill?

The real effect of increased prices will be felt by people living on fixed incomes. Price increases are especially rough on seniors, who often can’t work even if they wanted to. Although I suppose we could use inflation to deal with the truly scary unfunded pension liabilities that many governments now have to deal with.

Raising the minimum wage will have to result in higher prices if it doesn’t lead to improved productivity (and therefore laying off the least productive workers). Retailers can absorb wages up to about $11/hour and still turn a profit. Beyond that, they can only raise prices, raise productivity, or run a charity. They won’t do the third.

But look, steadily rising wages are nice. They’re an excellent anesthetic for discontent. They alleviate poverty. If it was worth the cost, the government could make the complaints of subsidization true by literally subsidizing wages.

For the government to carry out this subsidization in Ontario, the cost would be something like $9 billion dollars [5]. This is equivalent to about 6% of the current budget – a bit less than the amount Ontario pays to service its debt. It wouldn’t be impossible to raise revenue for this – a progressive 1-5% tax increase would cover it handily [6], with the median Ontario worker seeing about $10.00 come off each paycheque with the new taxes.

There would obviously need to be some pretty strict rules in place here. What company would chip in $13 or $14 when their worker would be paid the same if they instead chipped in $11.60 (the current minimum wage)? We might get around this by making subsidization depend on the number of workers you employ (although this will tend towards monopolization and give the big retail giants quite an advantage) or their low productivity (but this has terrible incentives).

We still don’t know if the minimum wage hike will result in lost jobs. It’s also an open question how much we should (at a policy level) be aiming for full employment. But raising the minimum wage is a massive, $9 billion undertaking. Who pays for it (and if it happens at all) is deeply tied into questions about fairness, dignity, good governance and regressiveness. The least regressive way to do it is probably via subsidies; unfortunately, subsidies are the most corruptible of all options.

I previously mentioned the guaranteed basic income. My crude calculations give a (no doubt slightly high) estimate of $37 billion [7] for a GBI in Ontario, much higher than I’ve seen in the estimates from proponents. I’m personally worried that a GBI would be absorbed into raised rents [8], another example of a treadmill effect.

Economics policy is difficult enough as a scientific discipline. But tied up in ancillary questions (like “what is fair?”) as it is, it is uniquely susceptible to corruption by what people wish, rather than what is true [9]. When it can’t be corrupted, it is often ignored. Public policy has a cost. Resources are still limited. For every dollar spent, there must be a dollar raised (if not now, then eventually).

When we focus only on what we feel is fair or justified and not on what is achievable, we aren’t doing anyone any favours. Raising the minimum wage to $15/hour might cause job losses or spiralling inflation, or it might require subsidies and tax raises. These aren’t the consequences of greedy corporations. They’re the predictable results of people making reasonable decisions in a massively complicated system.

Disturb it at your own peril.

Footnotes:

[1] Failure (to me) means increased unemployment. A decrease in labour force participation would probably represent a return to single income families, unless preceded by high unemployment of the sort that drives people to give up looking for work. There’s also the failure mode of “causes spiralling inflation”, but that seems more likely to end the whole experiment prematurely. ^

[2] Unanswered questions I still have about a guaranteed minimum income include: “how can we pay for?”, “are you sure it won’t cause massive inflation in rents?”, and “no seriously, just saying it was fine when the Fed did QE isn’t good enough! Why won’t all that money chasing the same desirable housing cause the housing to become more expensive?” ^

[3] It’s weird to see the left capitulating here and more or less agreeing that a person’s value is at all tied to their wage. I think it’s important to strongly reject all attempts to link the intrinsic human value of a person with their economic value. Economic value maps to supply and demand, not intrinsic worthiness, so it’s an inherently fragile thing to base any moral worth on. ^

[4] It also makes a horrendous false equivalence between worker pay and CEO pay. Walmart’s CEO makes $21.8 million. Walmart has 2.3 million “associates”. Let’s say they average 20 hours per week, 50 weeks per year, for 2.3 billion employee hours per year. Removing the CEO’s salary would free up enough cash to pay the workers one extra cent per hour ($10/year). CEO salaries are a very tiny drop in the bucket compared to total compensation for companies with huge workforces. ^

[5] 1.7 million people make less than $15/hour. Assume they all make $11.60/hour, that they all work 40 hour weeks, 50 weeks a year and we end up with $11.6 billion. Since all of these are overestimates, this gives us an upper bound. $9 billion is my guess at a more realistic number. ^

[6] Here’s my calculations, based on the really excellent Statistics Canada data available here. I’ve made some simplifying assumptions (e.g. that everyone in each bracket makes the exact centre value of the bracket, that higher taxes won’t make people look for more ways to avoid them), but this should be broadly accurate. If you want to play around with the workbook, leave a comment with your email address and I’ll send it your way.

Note that “Total Revenue”, “Total Tax”, and “Tax as percent of income” are calculated by adding the “Tax at Midpoint” value to the “Taxes For Entire Bracket” values for all previous brackets. This is how the taxman does it. ^

[7] Calculations:

Not pictured: any adjustment for the percent of people who are married. The simplest approach (50% of Ontarians are married and couples receive 30% less, so the cost should be 15% lower) brings the cost down to a “mere” $37 billion. This is the cost I quote above. ^

[8] Rent control is the only possible solution, but it might be worse than what it seeks to cure. The economist Assar Lindbeck claimed that “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” This was falsified by communist Vietnam, according to a speech by its onetime foreign minister: “The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy”. ^

[9] On all sides. For every Bernie bro convinced we need socialism right now, there’s someone who believes in the explicitly anti-empirical assertions of the Austrian School. ^

Model, Politics

To have lobbyists on your side

There is perennial debate in Canada about whether we should allow a “two-tiered” healthcare system. The debate is a bit confusing – by many measures we already have a two-tiered system, with private clinics and private insurance – but ultimately hinges on the ability of doctors to mix fees. Currently it is illegal for a doctor to charge anything on top of the provincially mandated fee structure. If the province is willing to pay $3,000 for a procedure, you cannot charge $5,000 and ask your patients (or their insurance) to make up the difference.

Supporters of a mixed system argue that it will alleviate wait times for everyone. Detractors argue that it will create a cumbersome, unfair system and paradoxically increase wait times. It’s enough to convince me that I don’t know what the fuck a two-tier healthcare system would have as its first order effects.

But I oppose it because I’m pretty sure I know what the second order effects would be.

It is a truth universally acknowledged that an industry, temporarily in possession of good fortune, must be in want of a really good lobbyist to make that possession permeant.

This is how we end up with incredibly detailed tax and regulatory law. There are a whole bunch of exceptions and special cases, vigourously lobbied for by special interest groups. These make us all a bit worse off, but each exception makes a certain person or small group of people very much better off. They care far more about preserving their loophole or unfair advantage than we do about getting rid of it, so each petty annoyance persists. Except, the annoyances aren’t so petty anymore when there are hundreds or thousands of them.

I dearly don’t want to add any more “petty” annoyances to healthcare.

As soon as we allow doctors to mix public funding with direct payments from patients or insurance, we’ll unleash a storm of lobbying. Everything from favourable tax treatment for clinics (we don’t charge HST on provincial care, it’s unfair to charge it on their added fees!) to tax breaks for insurance, to inflated fees for private clinics to handle some public cases will be on the table.

If the lobbyists do their job well, the private system will perch like a mosquito on the public system, sucking tax dollars from the public purse and using them to subsidize private care. This offends me on a visceral level, sure. But it’s also bad policy. Healthcare costs are already outpacing general inflation; we should not risk throwing fuel on that fire. We might end up with having the same sort of cost disease as America.

If we can keep healthcare relatively simple, we can keep it relatively cheap. One of the most pernicious things about cost disease is that it mainly affects things the government pays for. Because of this, the government has to collect more and more tax dollars just to provide the same level of service. As long as healthcare, education, and real estate are getting more expensive in real (inflation adjusted terms), we have to choose between raising taxes or making do with less service. When there are two systems, it’s clear that the users of the private system (and their lobbyists) would prefer decreased public services to increased taxes.

When there is only the public system, we force the lion’s share of those who plan to lobby for better care to lobby for better care in the public system [1]. This is true not just in healthcare; private schools are uncommon in most Canadian provinces. Want better school for your children? Try and improve the public schools.

There is always option to lobby for subsidies for private systems, but this has generally been unproductive when the public system is effective and entrenched. Two-tiered healthcare is back in the news because of a court case, not because any provincial government is committing political suicide by suggesting it. When it comes to schools, offering to subsidize private schools may have played a role in dooming John Tory’s bid for the premiership of Ontario in 2007.

I wonder if there isn’t some sort of critical mass thing that can happen. When the public system (be it healthcare, education, or anything else) is generally good, all but the wealthiest will use it. The few who use private systems won’t have the lobbying clout to bring about any specific advantages for their system, so there will be a stable equilibrium. Most people will use the public system and oppose changes to it, while the few who don’t won’t waste their time lobbying for changes (given the lack of any appetite for changes among the broader public).

If the public system gets substantially worse, those with the means to will leave the public system for the private. This would explain why generally liberal B.C. (with its decade of nasty labour disputes between the government and teachers) has much higher enrollment in private schools than in conservative and free-market-worshipping Alberta (which has poured decades of oil money largesse into its schools) [2].

Of course, the more people that use the private system, the more lobbying clout it gains. This model would predict that B.C. will begin to see substantial government concessions to private schools (although this could be confounded if the recent regime change proves durable). This model would also predict that if we open even a small crack in the unified public healthcare system, we’ll quickly see a private system emerge which will immediately lobby to be underwritten with public dollars.

From this point of view, one of the best things about public systems is that they force the best off to lobby for the worst off. Catch-all public systems yoke the interests of broad parts of society together, increasing access to important services.

If this model is true, then getting healthcare and education right are just the table stakes. It is vitally important that the provinces institute uniform rules and subsidies for embryo selection and future genetic engineering technologies. Because if they don’t, then in the words of Professor Jennifer Doudna, we will “transcribe our societies’ financial inequality into our genetic code”.

Both IVF and genetic screening are becoming easier and quicker. According to Gwern, it’s already likely a net positive to screen embryos for traits associated with higher later earnings (he lists seven currently screenable traits: IQ, height, BMI, and lack of diabetes, ADHD, bipolar disorder, and schizophrenia), with a net lifetime payoff estimated at $14,653 [3]. Unfortunately, this payoff is only available to parents who can afford the IVF and the screening.

Recently, Ontario began covering one round of IVF for couples unable to conceive. This specifically doesn’t include any genetic testing or pre-implantation diagnosis, which means that if we see a drop in heritable genetic diseases in the next generation, that drop will only be among the better off. Hell, even though Ontario already “covers” one round of IVF, they don’t cover any of the necessary fertility drugs, which means that IVF costs about $5,000 out of pocket. This is already outside the reach of many Ontarians.

Not a lot of people are running analyses like Gwern’s. Yet. We still have time to fix the coverage gap for IVF and put in place a publicly funded embryo selection program. If we wait too long here, we’ll be caught flat footed. The most effective way for rich people to get the reproductive services they will want wouldl be by lobbying for tax breaks and help for their private system, not for the improvement of a good-enough public system.

There’s a risk here of course. IVF isn’t particularly fun. It might be that the people with the longest time horizons (who are perhaps likely to be advantaged in other ways) will be the only ones who would use a public embryo selection system. This would have the effect of subsidizing embryo selection for whichever groups have the longest time horizons and the most ability to endure short-term discomfort for long term payoff.

But anything less than a public option on embryo selection makes entrenching social divides as genetic divides almost inevitable. We could ban all non-medical embryo selection, which, as Gwern points out, would just move it to China. Or Singapore [4]. Or even America. This would shrink the problem, in that fewer people would have access to embryo selection, but wouldn’t stop it altogether.

Embryo selection is just the beginning here too. Soon enough, we’ll see treatments for genetic diseases using CRISPR. Hot on the heels of that, we’ll see enhancements. Well, we ostensibly won’t in Canada, at least without some amendments to the Assisted Human Reproduction Act [5], which bans changes to the DNA of germline cells. I say “ostensibly” because it’s the height of naivety to assume that you can end demand simply by banning something, but then, that’s Canada for you.

The advent of CRISPR should usher in a sudden surge in genetically engineered humans. Parents will optimize for intelligence, height, and lower disease risk/load. It will be legal somewhere and therefore some Canadians will do it. If we have a legal, public system in Canada, then it will be available to anyone who wants it. If we don’t, then it will become very hard for the children of normal Canadians to compete with the children of our elites.

Throughout this post, I’ve assumed cost is no object. That’s probably a bad assumption. We’re talking about horrendously expensive voluntary medical procedures here. Gwern gives the cost of an IVF cycle with embryo selection at $22,000. There are 393,000 babies born in Canada every year. If this technology was both subsidized and adopted by 10% of all parents seeking to conceive, the total cost would be something like $864 million, or an increase in total healthcare spending of about 0.4%. Given that healthcare spending is allowed to grow by 3% per year, this would eat up more than 10% of the total yearly increase.

I’m not holding my breath for that sort of new spending on reproductive medicine. A more practical system would probably be a lottery, with enough spots for 1% of prospective parents. That has a more reasonable price tag of $86.4 million. While they’re at it, the government could start paying surrogates, egg donors, and sperm donors and institute a similar lottery there. I can dream about Canada having a functional fertility services industry, right?

A lottery isn’t my preferred solutions. Wealthy people who put their name in and aren’t drawn will still go elsewhere. But it could help with the lobbying problem. A lottery establishes a plausible path towards a broader system, which people would at least consider lobbying to expand. It won’t capture everyone. It might not even capture a majority. But if an expanded public system is the most palatable system politically, it might just win in the long run.

If you take just one thing from this post, I want it to be “it’s really important to have good public systems, so that lobbying effort is focused on improving those systems”. If you have room in your mind for another, it should be “having a public embryo selection and genetic engineering program in place is very important if we don’t want to social stratification to become much more permanent”.

Epistemic Status: Model

Footnotes

[1] In this post, I’m talking about industries where there is either a clear need to serve the public good, a market failure, or both. In these cases, “use markets to lower prices and increase services” is an unappealing alternative. ^

[2] This would also predict that America, with its cluster-fuck of a public school system would have generally higher rates of private schooling than neighbouring (and better performing on standardized tests) Canada. This is true – ten percent of American children are in private schools, compared to eight percent of Canadians. I think there is a smaller gap between the two then there otherwise might be, due to the extreme heterogeneity of American schooling. That is to say that Canadian public schools might be better than American public schools on average, but everything I’ve heard suggests that the standard deviation is much higher in America. Well off students going to good public schools may account for why America’s private school enrollment isn’t higher. ^

[3] This number will get higher and higher as we better understand the genetic determinants of IQ. ^

[4] Singapore has a history of hosting the biotech advances the west finds distasteful^

[5] This bill could perhaps be more truthfully be called the No Assisted Human Reproduction Act. In addition to banning germline genetic engineering, it also bans any paid surrogacy, egg donation, or sperm donation. This had the predictable effect of inconveniencing the wealthy not at all, while making it impossible for anyone else to find any surrogates, egg donors, or anonymous sperm donors. With a side-helping of encouraging surrogacy in countries where surrogates have the fewest legal protection (remember, my whole thesis here is that if you don’t give people a good pro-social option, they often optimize for maximum personal gain). ^

Economics, Politics

Whose Minimum Wage?

[Epistemic Status: I am not an economist, but…]

ETA (December 2017): Preliminary studies from Seattle make me much more pessimistic about the effects of the Ontario minimum wage hike. In addition, this post is lacking a discussion of “sticky wages” and how they may be a big problem with a minimum wage that is indexed to inflation. I’d like to write about that sometime in 2018. 

There’s something missing from the discussion about the $15/hour minimum wage in Ontario, something basically every news organization has failed to pick up on. I’d have missed it too, except that a chance connection to a recent blog post I’d read sent me down the right rabbit hole. I’ve climbed out on the back of a mound of government statistics and I really want to share what I’ve found.

I

Reading through the coverage of the proposed $15/hour minimum wage, I was reminded that the Ontario minimum wage is currently indexed to inflation. Before #FightFor15 really took off, indexing the minimum wage to inflation was the standard progressive minimum wage platform (as evidenced by Obama calling for it in 2013). Ontario is actually aiming for the best of both worlds; the new $15/hour minimum wage will be indexed to inflation. The hope is that it will continue to have the same purchasing power long into the future.

In Canada, inflation is also called the “consumer price index” or CPI. The CPI is based on a standard basket of goods (i.e. a list that includes such things as “children’s sneakers” and “French fries, curly”), which Statistics Canada assesses the price of every few months. These prices are averaged, weighted, and compared to the previous year’s prices to get a single number. This number is periodically reset to 100 (most recently in 2002). The CPI for 2016 is 128.4; in 2016, it cost $128.40 to buy a basket of goods that cost $100.00 in 2002.

The problem with the CPI is that it’s just an average; when you look at what goes into it category by category, it becomes clear that “inflation” isn’t really a single number.

Here’s the last few years of the CPI, with some of the categories broken out:

Table Source: The Canadian Consumer Price Index Reference Paper > Summary Tables; click the table to view the data in Google Sheets.

Every row in this table that is shaded green has decreased in price since 2002. Rows that are shaded blue have increased in price, but have increased slower than the rate of inflation. Economists would say that they’ve increased in price in nominal (unadjusted for inflation) terms, but they’ve decreased in price in real (adjusted for inflation) terms. Real prices are important, because they show how prices are changing relative to other goods on the market. As the real value of goods and services change, so too does the fraction of each paycheque that people spend on them.

The red, yellow, and orange rows represent categories that have increased in price faster than the general rate of inflation. These categories of goods and services are becoming more expensive in both real and nominal terms.

There’s no other way to look at the CPI that shows variation as large as that between categories. When you break it down by major city, the CPI for 2016 varies from 120.7 (Victoria, BC) to 135.6 (Calgary, AB). When you break it down by province, you see basically the same thing, with the CPI varying from 122.4 in BC to 135.2 in Alberta.

Looking at this chart, you can see that electronics (“Home Entertainment”) have become 45% cheaper in nominal (unadjusted for inflation) terms and a whopping 58% cheaper in real (adjusted for inflation) terms. Basically, electronics have never been less expensive.

On the other hand, you have education, which has become 60.8% more expensive in nominal terms and 25% more expensive in real terms. It costing more and more to get an education, in a way that can’t just be explained by “inflation”.

Three of the four categories with the biggest increases in prices rely on the labour of responsible people. The fourth is tobacco; prices increases there are probably driven by increased taxation and its position is a bit of a red herring. It’s potentially worrying that the categories where things are getting cheaper (e.g. electronics, clothes) are in the industries that are most amenable to automation. This might imply that tasks that cannot be automated are doomed to become increasingly expensive [1].

II

I’m certainly not the first person to make the observation that “inflation” isn’t a single number. Economists have presumably known this forever, related as it is to the important economics concept of “cost disease“. More recently, you can see this point made from two different directions in Scott Alexander’s “Considerations on Cost Disease” (which tries to get to the bottom of the price increases in healthcare and education) and Andrew Potter’s “The age of anti-consumerism has passed” (which looks at the societal changes wrought by many consumer goods becoming much cheaper). As far as I know, no one has yet tied this observation to the discussion surrounding the new Ontario minimum wage.

Like I said above, the new minimum wage will still be indexed to inflation; the “$15/hour” minimum wage won’t stay at $15/hour. If inflation follows current trends (this is a terrible assumption but it’s all I’ve got), it will rise by about 1.5% per year. In 2020 it will be (again, bad extrapolation alert) $15.25 and in 2021 it will be $15.50.

Extrapolating backwards, the current Ontario minimum wage ($11.40/hour) was equivalent to $8.88/hour in 2002 (when the CPI was last reset). If instead of tracking inflation generally, the minimum wage had tracked electronics, it would be $4.84 today. If it tracked education, it would be $14.28. Next year, the minimum wage will be $14/hour (it will take until 2019 for the $15/hour wage to be fully phased in), which will make 2018 the first time that students working minimum wage are getting paychecks that will have increased as much as the cost of education.

This won’t last of course. The divergence in prices shows no signs of decreasing. The CPI will continue to climb upwards at a steady rate (the target is 2%, last year it only rose 1.4%), buoyed up by large increases in education costs (2.8% last year) and held down by steady decreases in the price of electronics (-1.6% last year). Imagine that the $15/hour minimum wage allows a student to pay a year’s tuition with a summer’s worth of work. If current trends continue, in 15 years, it would only cover 75% of tuition. Fifteen years after that it would cover about 60%.

III

There’s a funny thing about these numbers. The stuff that’s getting more expensive more quickly is largely stuff that younger people have to pay for. If you’re 50, have more or less raised your kids, and own a house, then you’re golden even if you’re working a minimum wage job (although by this point, you probably aren’t). Assuming your wage has increased with inflation over your working lifetime, a lot of the things you’re looking to buy (travel, electronics, medical devices) will be getting cheaper relative to what you make. Healthcare service costs (e.g. the cost of seeing a doctor) might be increasing for you in theory, but in practice OHIP has you covered for all your doctor’s visits [2].

It’s younger people who are really shafted. First, they’re more likely to be earning minimum wage, with nearly 60% of minimum wage earners in Canada in the 15 to 24 age bracket. Second, the sorts of things that younger people need or aspire to (education, childcare, home ownership) are big ticket items that are increasing in cost above the rate of inflation. Like with the tuition example above, childcare and home ownership are going to slip out of the grasp of young workers even if you index their wage to inflation.

I happen to like the idea of a $15/hour minimum wage. There’s a lot of disagreement among economists as to whether they’ll be ill effects, but this meta-analysis (complete with funnel plot!) has me more or less convinced that the economy will do just fine [3]. Given that Ontario will still have an economy post wage-hike, I think increasing the minimum wage will be good for workers.

But a minimum wage increase leaves the larger problem of differing rates of inflation unsolved. Even with a minimum wage indexed to inflation, we’re going to have people waking up twenty-five years from now, realizing that their minimum wage job doesn’t pay for university/food/utilities/childcare/transit the same way their parents’ minimum wage job did. This will be a problem.

I’m game to kick the can down the road for a bit if it means we can make the lives of minimum wage workers better right now. But until we’ve solved this problem for good, it will keep coming back [4].

Footnotes:

[1] I’m not sure this is exactly a bad thing, per se. Money is a means of signalling that you’d like your preferences satisfied. It becoming more expensive to pay actual humans to do things could mean that actual humans have so many good options that they’re only going to waste their time satisfying your preferences if you really make it worth their while. Looked at this way, this means we’re steadily freeing ourselves from work.

On the other hand, this seems to apply mainly to responsible/competent/intelligent people and not everyone is responsible/competent/intelligent, so this could also imply that we have a looming crisis, with a huge number of people simply becoming economically unnecessary. This is really bad, because high-quality life should be possible for everyone, not just those who’ve lucked into economically valuable traits and under capitalism it is really hard to have a high-quality life if you aren’t economically valuable. ^

[2] For readers outside of Ontario, OHIP is the Ontario Health Insurance Plan. It covers all hospital and clinic care for all legal residents of Ontario, as well as dental and ophthalmological care for minors. OHIP is a non-actuarial insurance program; premiums come from provincial income tax and payroll tax revenues, as well as transfer payments of federal tax revenues. All Ontarians enrolled in OHIP (i.e. basically all of us) have a health card which allows us to access all covered services free of charge (beyond the taxes we’ve already paid) any time we want to. ^

[3] No effect on the unemployment rate does not mean no effect on the employment of individual people. A $15/hour minimum wage will probably tempt some people back into the labour force (I’m thinking here that this will mostly be women), while excluding others whose labour would not be valued that highly (unfortunately this will probably hit people with certain mental illnesses or disabilities the hardest). ^

[4] I think it’s especially pernicious how the difference in inflation rates between types of goods is kind of by default a source of inter-generational strife. First, it makes it more difficult for each succeeding generation to hit the same landmarks that defined adulthood and independence for the previous generation (e.g. home ownership, education, having children), with all the terrible think-pieces, conflict-ridden Thanksgiving dinners, and crushed dreams this implies. Second, it can pit the economic interests of generations against each other; healthcare for older people is subsidized by premiums from younger ones, while the increase in the cost of homes benefit existing players (who skew older) to the determinant of new market entrants (who skew younger). ^

Model, Politics, Quick Fix

Some thoughts on Canadian “family values” conservatives

I’d like to expand on one of the points I raised yesterday about Canadian social conservatives and the sorts of things they can expect from Andrew Scheer, because I think the Canadian approach to “family values” conservatism is desperately under-theorized.

Yesterday I claimed that the main way that Harper pushed so-called family values was through economic incentives to have a 1950s-style nuclear family. Both income splitting and the Universal Child Care Benefit were designed to make it more feasible to have a single income family.

This is a radically different tack than taken by American family values candidates, who primarily exercise their beliefs by banning sex education, fighting against gay marriage and adoption, and restricting access to abortion [1]. The American approach attempts to close off all alternatives but a heterosexual, monogamous, child-producing marriage. The Canadian approach is to bribe people into this (and to drop the heterosexual part).

The cynical explanation for the policies pushed by Harper is that they represent a tax break for the favoured constituencies of the Conservatives. But this strikes me both as deeply uncharitable and uncorroborated by statements made by members of the Conservative Party.

At the Conservative Leadership Convention, the party devoted as much time to thanking J.P. Veitch (Rona Ambrose’s fiancé) as they did to thanking Rona Ambrose. They thanked J.P. for putting Rona’s career aspirations above his own and for his tireless support of her in her role as interim party leader.

Can you imagine the Liberals taking the time to thank Sophie Grégoire Trudeau for her work supporting her husband? The liberal individualistic notion of liberation tends to gloss over and thereby systemically devalue the work that supportive spouses do. To liberals (even many socialist liberals), work is where people go for self-actualization. Self-actualization can’t exist in the home.

There are sound reasons for this emphasis. While the Conservative tax breaks are gender neutral (and apply even to gay marriages), no one believes that the majority of stay at home spouses will be men. There certainly won’t be no men staying home – I consider myself generally more likely to stay home with kids than any partner I’m plausibly going to have – but they’ll be a minority.

As a free choice, the home is a reasonable option for many people. But as a prescribed social role, being stay-at-home mothers made many women incredibly miserable. Emancipation through work as the default seems to me as a not-unreasonable reaction to this trauma. But conservatives have ideological reasons to oppose the social structures that make dual-income families possible.

In Rona Ambrose’s farewell speech, she clearly articulated the core disagreement between Canadian liberals and conservatives. “Liberals believe in government”, she said, “but we believe in people”. I’d rephrase this slightly – liberals believe in institutions, while conservatives believe in individuals.

Viewed through this lens, it makes sense that Conservatives wish to return child-rearing to the sphere of the domestic. Key policies planks of Canadian leftists – like all day Kindergarten and $15 a day daycare – instead seek to further remove child-rearing from individual parents and move it into a formalized institutional system.

Both of these approaches have their strengths and weaknesses. It is beginning to look like starting school early may lead to inattention and hyperactivity. If daycare is like school, then proposals like $15 a day daycare have the potential to be incredibly damaging. With income splitting and child tax benefits, we could be encouraging parents to delay formal schooling, thereby avoiding the negative consequences associated with an early school start.

On the other hand, it’s uncommon, even with income splitting and child tax benefits, for one spouse to have an income that could plausibly support their entire family. $15 dollar a day daycare would be a boon to low-income families that are caught in the dual-income trap.

There’s no prescription here. I think some parts of the family values platform threaten to turn back important progress. I think other parts hint at a potential for better outcomes than we currently have. I will point out that it seems almost as if Canadian conservatives listened to liberals who pointed out that if they really cared about reducing abortion rates, they’d cover prenatal healthcare, maternity leave, and make it less expensive to raise a child.

I’d much rather have a political conversation about the amount of tax benefits we should give to people with children than I would about women’s right to choose, so I can’t help but be thankful that the Canadian Overton window is what it is. With Andrew Scheer elected as conservative leader and signalling no intention to wade into the debate over abortion, I think we really can call the Overton Window settled in its current configuration [2]. This leaves all Canadians with a question. How much do you think the government should subsidize nuclear families?

I’m not yet sure of the answer myself.

Footnotes

[1] I want to be clear that I’m talking about execution here, not beliefs. Canadian social conservatives believe many of the same things as American so-cons and vote remarkably similarly to their American counterparts when they’re in opposition. The key difference is how they behave when they’re in power. Nine years of Conservative governments (four of which saw the Conservatives as the majority party) brought no change in the legal status of gay rights or abortion in Canada. That would be unprecedented in America.  ^

[2] On Facebook, I said: “If the trend is that Liberals/NDP push [our] social policies of choice and the Cons don’t roll them back, then we still win in the long run.” I stand by that statement. I would prefer that Conservatives were as enthusiastic about pushing for positive social change as I am. Given that I don’t live in that world, I’ll settle for one where conservative politicians don’t to push back.  ^

Politics

Five Things I Learned from the Conservative Leadership Race (that all Canadians should take note of)

Yesterday generic conservative Andrew Scheer was crowned leader of the Conservative Party of Canada in a nail-biting 14 ballot process. His margin of victory over the libertarian Maxime Bernier was less than 2%.

Reuters managed to get pretty much everything about this story subtly wrong, from the number of votes political observers expected – by the final week, most of us remembered that there were so many low support candidates that it would probably go to the very final ballot – to Scheer’s position in the party. Reuters has Scheer pegged as a social conservative, whereas people watching the race were much more likely to describe him as the compromise candidate.

The Conservative Leadership race was one of the high points of my engagement in Canadian politics. I haven’t been this engaged since the 2011 election (I was out of country for the 2015 election which limited my involvement to mailing in a ballot). Focusing so closely on this leadership race, I’ve was surprised (although I probably shouldn’t have been) by just how much politics goes on under the surface and just how little actually filters up through the media.

Sometimes the things that don’t filter up are silly. The media never really mentioned that Steven Blaney sent out an email with the subject line: “Should Allah kill all the Jews?”. This is understandable; Blaney never was a serious contender for the leadership and his ridiculous emails would have been a distraction. Many in the media also underestimated the number of votes for Erin O’Toole that would transfer to Andrew Scheer once O’Toole was eliminated. This was a harder mistake to make when you were getting emails from every candidate; from the emails that O’Toole and Scheer were sending me, it was obvious that their internal polling had picked up on this correlation. Paying attention to things like this are what let me correctly predict Andrew Scheer would win.

With this in mind, I’d like to report some the things I learned watching this race and this convention. These are things that may or may not be reported, but I think they are deeply important for understanding Canadian politics going forward.

1. No one knows what to do with ranked ballots

In my last post on the leadership, I guessed that the race would last a few ballots. This was a very silly prediction to make, because it was obvious who the first six candidates to be eliminated would be. It was also obvious that together they had less than 5% of the total support. For the convention to be over after that few ballots, the front runner would have to have more than 45% support. Polling clearly showed Bernier (the front-runner for most of the race) at only 30%, so there was no way that the thing could have been decided that quickly.

I wasn’t the only one who made this error. The Conservative Party forecasted we’d have final results around 6:00PM. Final results weren’t available until around 8:15PM. Some of this was attributable to a forty-five-minute delay caused by technical issues, but most of this was because the thing went to the very last ballot.

The intuition that the leadership race should be decided in a few rounds comes from party conventions that use delegates. The last two contested Canadian conventions with delegates both went to four ballots. But a mail in instant run-off system is very different from delegate convention. There is little opportunity to gather momentum and no opportunity for politicians to blink. In a delegate convention, Scheer could have panicked in the 11th round and conceded to Bernier in exchange for some cabinet position. The mail in ranked ballots gave him no such option.

Ranked ballots differ even more significantly from the American system of sequential primary elections. Primaries suffer from the standard problem of first past the post systems; you often only need a plurality to win. This benefits the front runner, especially when “the establishment” can’t coalesce around a single candidate. Ranked ballots give the establishment no choice but to eventually coalesce. If the Republican primary had been decided by mail-in ranked ballots, it seems very likely that Jeb Bush, Marco Rubio, or Ted Cruz would have won instead of Trump.

In addition to talking heads used to other systems, ranked ballots also present a challenge to pollsters, who are used to asking people merely for the name of the candidate they most support. Even the polls that asked for multiple preferences rarely asked for preferences beyond third place. This can fall apart at the end of the convention when votes may have been transferred four or five times (e.g. from Raitt, to Chong, to O’Toole, to Scheer) or have skipped over some of the preferences (e.g. votes from Chong supporters who put Raitt second, O’Toole third, and Scheer fourth and saw their votes ultimately transferred to Scheer).

Kevin O’Leary claimed in the live convention coverage that he and Bernier had polled all the way down to the 10th choice (at ruinous expense). If this is true (and with Kevin, who knows), it’s likely that some of the other top fundraisers did this as well. That’s why I highlighted candidate’s emails as a vital tool for understanding the race. From their exhortations, I could often get an idea of the information they were going on.

If public polling can’t adapt to ranked ballots, then it will probably become necessary (for anyone who wants to correctly predict an election outcome) to spend more time reading the messages campaigns send to supporters to try and indirectly get high quality proprietary polling numbers. Unfortunately, reading emails and trying to figure out the information that went into them is much more of a black art than polling and it’s much harder to justify the information that comes out of it.

2. Canadian Conservatives aren’t Republicans

In Rona Ambrose’s farewell speech, she presented a narrative of Conservatives as defenders of the rights of women and girls. She pointed out that that first woman to serve in a cabinet was a member of the Conservative Party. She pointed out that the first (and only) female prime minister of Canada was a Conservative. She also talked about her work at the UN pushing for an International Day of the Girl and her work pressuring the government to admit Yazidi refugees fleeing religious persecution and sexual slavery at the hands of ISIL. When she mentioned that she’d forced the government to admit more refugees, she was given a rousing round of applause.

The stigma that sexual assault survivors face and the disgustingly high rate of sexual assault cases that are labelled unfounded were the focus of one section of one of the campaign debates. Luckily, there was basically no debate among the candidates on this issue. All of them pledged to improve police education and work to reduce the “unfounded rate”.

If you follow American politics, you might be surprised by things like this from a conservative party.

Canada and America are geographically and culturally proximate. It’s easy to pretend that the differences between the two countries are largely cosmetic. But when you do, you’re liable to get bitten in the ass by the iceberg of hidden differences.

Canadian conservatism is different than American conservatism. In the Conservative Party of Canada, you’ll get more votes calling for a carbon tax than you will if you call for increased screening of immigrants. Can you imagine that being true in America?

I don’t mean to claim that xenophobia and racism don’t exist in the Conservative Party of Canada. Kellie Leitch did get 9% of the vote. But for now, the xenophobic wing of the party is perhaps the least powerful part of the Canadian conservative coalition.

3. Social Conservatism is (kind of) alive and well

Unlike the xenophobic candidates, who did much worse than anyone feared, the social conservative candidates ran significantly ahead of expectations. Pierre Lemieux and Brad Trost had combined polling numbers of 9.5% right before the election. In the first round of voting, many of us were surprised to see that their actual support was a combined 15.7%. When Trost was eliminated in the 11th ballot, he had 14.3% of the remaining support (evidence that almost all of Lemieux’s voters went to him).

A year ago, the Conservatives voted to remove any policy on the definition of marriage from their platform. Social conservatives were outraged but impotent. Their higher than expected support for Trost and Lemieux was their way of reminding the party that they exist.

Unfortunately for those members, social conservative policies are a delicate topic in Canadian politics. The Harper doctrine was to avoid the risky issues (like gay marriage and abortion) that risked undermining his chances of winning elections, while cautiously advancing policies that supported two-parent nuclear families (even the gay ones).

At the start of this leadership race, when Andrew Scheer was asked about his views on gay marriage, his answer was all pragmatism. While he is personally against gay marriage, he said “I don’t think you’d find any legitimate Conservative leadership aspirant who would revisit that issue”. His position on abortion is similar.

In his victory speech, Scheer obliquely referenced these views. “There’s… some issues that will divide our caucus and divide our movement and that [don’t] enjoy widespread support in the general public, but there are other areas… that the entire conservative movement can get behind.”

Taken together, all of this signals that the Harper doctrine is alive and well. Social conservatives won’t be getting action on abortion or gay marriage but they can expect Scheer to do his best to strengthen what they consider a traditional family structure. If Scheer is prime minister, expect to see policies like income splitting that blatantly favour married couples, especially couples where one parents stays home with children.

Bernier wasn’t willing to provide even this, which is probably why social conservatives broke for Scheer in the end, giving him the victory. Social conservatives ultimately didn’t get everything they wanted, but it seems like they managed to get the best of their realistic options.

4. Caucus Support

Had Bernier won, I think his leadership would have looked a lot like Jeremy Corbyn’s leadership of the UK Labour Party. Both men have excessive amounts of ideological purity and a limited amount of support among the MPs of their party. This has made trying to control his party difficult for Corbyn and I see no reason why Bernier would have had an easier time of it.

Andrew Scheer is much more in the mold of Teresa May or Steven Harper. He has very strong support in the caucus; he was second only to Erin O’Toole in endorsements and is so similar to O’Toole on most issues that he should have no problem picking up O’Toole’s support.

The line “there’s been a rising tide of anti-establishment sentiment in recent elections” has become cliché. Everyone has heard a dozen times about how Brexit, Trump, and the French election prove that people are fed up with the political establishment.

Well, just as Canada was supposedly immune to the “rising tide of illiberalism”, we appear to be immune (for now) to the “rising tide of anti-establishment sentiment”. Andrew Scheer was very much of the political establishment. None of his policies represent a break with the policies of the Harper years.

This bodes well for Scheer’s ability to actually get shit done (and therefore poorly for the Liberals). Scheer understands how parliament works. He understands how the conservative caucus thinks. He’s young and energetic. He will hit the ground running and won’t complain to the media in six months that the job was much harder than he thought it would be.

Some of the above would have been true for Leitch or Bernier. None of it would have been true for O’Leary. Only time will tell if is better to be effective at managing a political party than it is to be “not a politician” or to have a clear ideology.

5. The Conservative Party of Canada is still Harper’s party

Steven Harper has been almost entirely absent from Canadian politics since his election defeat in 2015. It’s a startling change for the man who was the Conservative Party of Canada. For all of his flaws (and he has many), Harper was an ambitious and driven leader who decided on a goal and then moved heaven and earth to make it happen. He engineered the merger between the Progressive Conservative Party of Canada and the Reform Party, won control of the resulting party, and then led it into five elections. In four of those elections, the party came out better than it went in.

In the Harper years, even cabinet seemed to be a mere extension of the Prime Minister’s will. The discipline with which cabinet ministers stuck to their script was occasionally farcical, like when Paul Calandra answered a question about Iraq with prepared remarks about an NDP fundraiser’s statements about Israel.

Maxime Bernier would have represented a break with the Harper legacy. He’s a committed libertarian with many policy proposals that differ from the sort of thing Harper would endorse, chief among them his pledge to scrap the Canada Health Act and end transfer payments to the provinces for healthcare.

Ideologically, Harper probably agrees with scrapping the CHA. But Harper was ever the ruthless pragmatist, always subordinating his personal ideology to the demands of getting elected. He wouldn’t have touched the widely popular CHA with a ten-foot poll.

Based on Scheer’s responses to questions about abortion and gay marriage, I can’t see him governing substantially differently than Harper. The Conservative party will continue Harper’s legacy of slowly and incrementally dismantling the Canadian welfare state, while avoiding nearly all contentious topics. With Scheer, Harper is effectively controlling the party from beyond the political grave.

I think I narrowly prefer Scheer to Bernier. Bernier seems unelectable, but if he were to win it would be an absolute disaster for the Canadians and provinces who rely on the Federal government for assistance. Scheer is probably more electable, but much more incrementalist. He represents a creeping threat to the welfare state, rather than an immediately existential threat.

I joined the Conservative Party to influence their leadership race away from high variance candidates, even those candidates who I thought would be safely defeated in the general election. Last year’s election in America taught me I couldn’t put my faith in certain candidates being “doomed outside the primaries”.

I’d have preferred Chong. But I think I can live with Harper era policies repackaged with a smile.

Biology, Politics

Medicine, the Inside View, and Historical Context

If you don’t live in Southern Ontario or don’t hang out in the skeptic blogosphere, you will probably have never heard the stories I’m going to tell today. There are two of, both about young Ontarian girls. One story has a happier ending than the other.

First is Makayla Sault. She died two years ago, from complications of acute lymphoblastic leukemia. She was 11. Had she completed a full course of chemotherapy, there is a 75% chance that she would be alive today.

She did not complete a full course of chemotherapy.

Instead, after 12-weeks of therapy, she and her parents decided to seek so-called “holistic” treatment at the Hippocrates Health Institute in Florida, as well as traditional indigenous treatments. . This decision killed her. With chemotherapy, she had a good chance of surviving. Without it…

There is no traditional wisdom that offers anything against cancer. There is no diet that can cure cancer. The Hippocrates Health Institute offers services like Vitamin C IV drips, InfraRed Oxygen, and Lymphatic Stimulation. None of these will stop cancer. Against cancer all we have are radiation, chemotherapy, and the surgeon’s knife. We have ingenuity, science, and the blinded trial.

Anyone who tells you otherwise is lying to you. If they are profiting from the treatments they offer, then they are profiting from death as surely as if they were selling tobacco or bombs.

Makayla’s parents were swindled. They paid $18,000 to the Hippocrates Health Institute for treatments that did nothing. There is no epithet I possess suitable to apply to someone who would scam the parents of a young girl with cancer (and by doing so, kill the young girl).

There was another girl (her name is under a publication ban; I only know her by her initials, J.J.) whose parents withdrew her from chemotherapy around the same time as Makayla. She too went to the Hippocrates Health Institute. But when she suffered a relapse of cancer, her parents appear to have fallen out with Hippocrates. They returned to Canada and sought chemotherapy alongside traditional Haudenosaunee medicine. This is the part of the story with a happy ending. The chemotherapy saved J.J.’s life.

When J.J. left chemotherapy, her doctors at McMaster Children’s Hospital [1] sued the Children’s Aid Society of Brant. They wanted the Children’s Aid Society to remove J.J. from her parents so that she could complete her course of treatment. I understand why J.J.’s doctors did this. They knew that without chemotherapy she would die. While merely telling the Children’s Aid Society this fact discharged their legal duty [2], it did not discharge their ethical duty. They sued because the Children’s Aid Society refused to act in what they saw as the best interest of a child; they sued because they found this unconscionable.

The judge denied their lawsuit. He ruled that indigenous Canadians have a charter right to receive traditional medical care if they wish it [3].

Makayla died because she left chemotherapy. J.J. could have died had she and her parents not reversed their decision. But I’m glad the judge didn’t order J.J. back into chemotherapy.

To explain why I’m glad, I first want to talk about the difference between the inside view and the outside view. The inside view is what you get when you search for evidence from your own circumstances and experiences and then apply that to estimate how you will fare on a problem you are facing. The outside view is when you dispassionately look at how people similar to you have fared dealing with similar problems and assume you will fare approximately the same.

Dr. Daniel Kahneman gives the example of a textbook he worked on. After completing two chapters in a year, the team extrapolated and decided it would take them two more years to finish. Daniel asked Seymour (another team member) how long it normally took to write a text book. Surprised, Seymour explained that it normally took seven to ten years all told and that approximately 40% of teams failed. This caused some dismay, but ultimately everyone (including Seymour) decided to preserver (probably believing that they’d be the exception). Eight years later, the textbook was finished. The outside view was dead on.

From the inside view, the doctors were entirely correct to try and demand that J.J. complete her treatment. They were fairly sure that her parents were making a lot of the medical decisions and they didn’t want J.J. to be doomed to die because her parents had fallen for a charlatan.

From an outside view, the doctors were treading on thin ice. If you look at past groups of doctors (or other authority figures), intervening with (they believe) all due benevolence to force health interventions on Indigenous Canadians, you see a chilling litany of abuses.

This puts us in a bind. Chemotherapy doesn’t cease to work because people in the past did terrible things. Just because we have an outside view that suggest dire consequences doesn’t mean science stops working. But our outside view really strongly suggests dire consequences. How could the standard medical treatment lead to worse outcomes?

Let’s brainstorm for a second:

  • J. could have died regardless of chemotherapy. Had there been a court order, this would have further shaken indigenous Canadian faith in the medical establishment.
  • A court order could have undermined the right of minors in Ontario to consent to their own medical care, with far reaching effects on trans youth or teenagers seeking abortions.
  • The Children’s Aid society could have botched the execution of the court order, leading to dramatic footage of a young screaming indigenous girl (with cancer!) being separated from her weeping family. Indigenous Canadians would have been reminded strongly of the Sixties Scoop.
  • There could have been a stand-off when Children’s Aid arrived to collect J.J.. Knowing Canada, this is the sort of thing that could have escalated into something truly ugly, with blockades and an armed standoff with the OPP or the military.

The outside view doesn’t suggest that chemotherapy won’t work. It simply suggests that any decision around forcing indigenous Canadians to receive health care they don’t want is ripe with opportunities for unintended consequences. J.J.’s doctors may have been acting out of a desire to save her life. But they were acting in a way that showed profound ignorance of Canada’s political context and past.

I think this is a weakness of the scientific and medical establishment. They get so caught up on what is true that they forget the context for the truth. We live in a country where we have access to many lifesaving medicines. We also live in a country where many of those medicines were tested on children that had been stolen from their parents and placed in residential schools – tested in ways that spit on the concept of informed consent.

When we are reminded of the crimes committed in the name of science and medicine, it is tempting to say “that wasn’t us; it was those who came before, we are innocent” – to skip to the end of the apologies and reparations and find ourselves forgiven. Tempting and so, so unfair to those who suffered (and still do suffer) because of the actions of some “beneficent” doctors and scientists. Instead of wishing to jump ahead, we should pause and reflect. What things have we done and advocated for that will bring shame on our fields in the future?

Yes, indigenous Canadians sometimes opt out of the formal medical system. So do white hippies. At least indigenous Canadians have a reason. If trips to the hospital occasionally for people that looked like me, I’d be a lot warier of them myself.

Scientists and doctors can’t always rely on the courts and on civil society to save us from ourselves. At some point, we have to start taking responsibility for our own actions. We might even have to stop sneering at post-modernism (something I’ve been guilty of in the past) long enough to take seriously its claim that we have to be careful about how knowledge is constructed.

In the end, the story of J.J., unlike that of Makayla, had a happy ending. Best of all, by ending the way it did, J.J.’s story should act as an example, for the medical system and indigenous Canadians both, on how to achieve good outcomes together.

In the story of Pandora’s Box, all of the pestilence and disease of the world sprung as demons from a cursed box and humanity was doomed to endure them ever more. Well we aren’t doomed forever; modern medicine has begun to put the demons back inside the box. It has accomplished this by following one deceptively simple rule: “do what works”. Now the challenge is to extend what works beyond just the treatments doctors choose. Increasingly important is how diseases are treated. When doctors respect their patients, respect their lived experiences, and respect the historical contexts that might cause patients to be fearful of treatments, they’ll have far more success doing what it is they do best: curing people.

It was an abrogation of duty to go to the courts instead of respectfully dealing with J.J.’s family. It was reckless and it could have put years of careful outreach by other doctors at risk. Sometimes there are things more important than one life. That’s why I’m glad the judge didn’t order J.J. back into chemo.

Footnotes:

[1] I have a lot of fondness for McMaster, having had at least one surgery and many doctors’ appointments there. ^

[2] Doctors have a legal obligation to report any child abuse they see. Under subsection 37(2)e of the Child and Family Services Act (CFSA), this includes “the child requires medical treatment to cure, prevent or alleviate physical harm or suffering, and the child’s parent refuses to consent to treatment”. ^

[3] I’m not actually sure how relevant that is here – Brian Clement is no one’s idea of an expert in Indigenous medicine and it’s not clear that this ruling still sets any sort of precedent, given that the judge later amended his ruling to “make it clear that the interests of the child must be paramount” in cases like this. ^