Ryan Bourne for the Cato Institute: Goldman Sachs CEO Lloyd Blankfein tweeted recently: "Arrived in China, as always impressed by condition of airport, roads, cell service, etc. US needs to invest in infrastructure to keep up."
This raises an interesting question: How do we know how much infrastructure investment is needed in the U.S.?
From an economic perspective, the answer is certainly not "invest to the point where our airports feel as high quality as China's." But absent real markets, the amount "needed" is difficult to quantify — an example of the "knowledge problem" associated with central planning.
What level of congestion would drivers tolerate before they were willing to finance road expansion, for example? Eliminating all congestion would be prohibitively expensive. So, how far should expansion go? How often should a road be repaired? How much transportation should be by train?
Markets are good at finding the optimal mix of infrastructure spending over time and rewarding those that are better at satisfying demand. Governments, even with the best of intentions, lack the necessary knowledge to find that mix. …
To really get more responsive infrastructure investment to need, we need more markets in infrastructure provision and to remove the artificial barriers that prevent private investments. A greater use of user fees, such as tolling and congestion pricing, for example, could lead to a greater link between demand and funding.
Wage thieves get away with it
Amy Traub for Demos: If you want to make crime pay — and get a lighter penalty if you're caught — you're better off cheating your employees out of their fair wages than trying to nick the latest video game console or pair of designer shoes off the shelves of your local retailer ...
It is one way the American justice system is skewed in favor of power and privilege, treating the crimes of the powerful, such as stealing from employees' paychecks, far more leniently than crimes committed by those with less power, such as shoplifting.
Drawing on data from a rigorous new study of minimum wage violations by David Cooper and Teresa Kroeger at the Economic Policy Institute, we compare the dollar value of shoplifting with the value of minimum wage violations and find that they are roughly comparable. Each year between 2013 and 2015, retailers lost about $14.7 billion to shoplifting, while employers stole an estimated $15 billion through one form of wage theft alone: paying less than the legal minimum wage.
Minimum wage violations and shoplifting are crimes of similar scale, yet that's where the similarities end. Despite the way that wage theft devastates working Americans and their families, pushes hundreds of thousands of people into poverty, robs states and cities of tax revenue, and places law-abiding businesses at a competitive disadvantage, we find that dramatically more resources go into detecting and deterring shoplifting than into preventing wage theft.
When wage thieves are caught, they face a starkly different experience from shoplifters. If a shoplifter steals more than $2,500 in merchandise, he or she can face felony charges in any state in the country. Many states impose felony charges for stealing much less valuable merchandise. Yet criminal penalties of any kind are rare when it comes to wage theft. Even when millions of dollars are stolen from employee paychecks, only mild civil penalties are applied under federal law.
Break the rules, get paid
Adam Millsap for the Mercatus Center: A new paper in the Quarterly Journal of Economics finds that the combination of intelligence and a willingness to break the rules as a youth is associated with a greater tendency to operate a high-earning incorporated business as an adult, i.e. be an entrepreneur. ...
The authors ... examine the individual characteristics of incorporated and unincorporated business owners. They find that people with high self-esteem, a strong sense of controlling one's future, high Armed Forces Qualifications Test scores (AFQT) — which is a measure of intelligence and trainability — and a greater propensity for engaging in illicit activity as a youth are more likely to be self-employed and incorporated.
Moreover, it's the combination of intelligence and risk-taking that turns a young person into a high-earning owner of an incorporated business. As the authors state, "The mixture of high learning aptitude and disruptive, 'break-the-rules' behavior is tightly linked with entrepreneurship."
These findings fit nicely with some notable recent examples of entrepreneurship — Uber and Airbnb. Both companies are regularly sued for violating state and local ordinances, but this hasn't stopped them from becoming popular providers of transportation and short-term housing.
If the founders of Uber and Airbnb always obtained approval before operating, the companies would be hindered by all sorts of special interests, including taxi commissions, hotel industry groups and nosy neighbors. Seeking everyone's approval, including the government's, before operating likely would have meant never getting off the ground and the companies know this. It's interesting to see evidence that many other, less well-known entrepreneurs share a similar willingness to violate the rules if necessary to provide their goods and services to customers.
Compiled by Joseph Lawler from reports published by the various think tanks.