Government Regulation

Regulation, oh regulation.  How do you feel about government regulations?  There is at least one person that likes each regulation.  Right?  If there isn't, how did it become a regulation?

I'm not going to argue for "this" regulation or against "that" regulation; they may or may not have merit, but I would like to point out two things.  One, when someone considers the merit of a regulation, they often don't consider the "unseen".  Two, the more the regulations and the bigger the organization, the easier it is for regulations to become bureaucratically idiotic.

We may be better off in one dimension, but there are costs associated with every regulation, some of which are unseen.  Consider, the government requires a company to use a specific technology to reduce pollution.  True, in one dimension we're better off, we have less pollution, but what is unseen is how that regulation affected the companies behavior or choices toward other parties involved.  What might the company have bought if they wouldn't have had to buy this new technology?  How has the new regulation affected their business strategy?  Likely the cost is passed on to the customers, what might have they done with their money if their costs hadn't increased?  The consequences are hard to observe, let alone measure, but that doesn't mean they're not there.

As the regulations multiply in large organizations, it is easy for them to become more and more idiotic.  Consider this story and the examples of regulation stupidity.  The stupidity is bad enough (time waster), but that time wasting starts to cost us.  The regulation has to be dreamt up.  It has to be documented.  The regulation has to be enforced.  These are all costs associated with the regulation and when its not even possible for one part of an organization to know what another part is doing, you get inter-regulation inefficiencies.  Sometimes even working at cross purposes.

The upshot?  Try to consider the unseen when measuring a regulation's merit and even with merit there is a point where enough is enough.  I wrote a funny poem once where Congress finished they're work.  They came up with all the laws we needed and then were able to go home and close Congress.  That would never happen, but it's something to think about.  Do we come up the regulations because we feel compelled to come up with regulations, to try to fix the world through legislation?  Can you imagine a point where all the laws you wanted passed, were passed?

“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

—C. S. Lewis, God in the Dock: Essays on Theology and Ethics (1970)

In Search of Excellence: Face Painters

We had a company party a few months ago.  The company did a great job.  They thought of all the kids that were going to be there and rented a couple blow up houses to play on.  One even had a ball pit.  They were a hit.  There was lots of food, of all different varieties for every kind of taste.  They even had a cupcake truck.  Yes, that's right!  Think of an ice cream truck but instead of ice cream, lots of cupcakes!  Fun!

There was a lot that was awesome, but the best thing was the face painting and balloon tying.  The planners had a hired a company that performs for parties.  You'll find their link below.  They were excellent at their jobs.  They were personable, friendly, and engaging.  You can imagine that it might be tedious to paint faces for a never ending line of little kids or have to tie balloon after balloon, but there was none of that and we weren't even close to being the first group that came through.  They were professional and genuine entertainers.  The work they did and the gentle way the did it for kid after kid was amazing.  Can you tell I was impressed?

http://www.happilyeverlaughterparties.com/

It got me thinking about excellence again.  Do you strive for excellence in anything you do?  That question shouldn't sound accusatory, I'm sure there are things you do excellently.  There are some things that I strive to do excellently.  But there are other things at which I don't try as hard.  We have to make trade offs because we only have finite time (one of the only things we really do have), but could we do what we do a little better?

In my occupation, we call that extra striving "plussing".  Recently watching a documentary about Walt Disney, I found that he used it with his staff.  You can only do so much and the project has to go out the door, but plussing means doing just a little more than what was expected.  You meet the deadline, you finish the work, and then you do just a little bit more just to make it that much sweeter.

It's amazing what that last little bit does for whatever you're working on.  Thinking about it, that might be all that separates "really good" from "excellent".  The face painters and people tying balloons, certainly would have been really good if they had just practiced their craft.  But it was that little extra, the way they engaged the kids, the way they entertained that made them excellent.

Why should someone strive to be excellent?  It's rewarding, internally and externally.  If we were setting up a big party for kids and I was looking for entertainment, who do you think I'd check out?  That's right.  Because they were excellent.

"What-e'er Thou Art, Act Well Thy Part."

Tax Rates and Behavior

This is a long article about Cisco Systems Inc and how they legally avoid paying billions of dollars in taxes.  Check it out.  I'll wait...Ok?  Done?  Let's move forward.  Did you think, "Those dirty $@&%*#!  They should pay their 'fair share'!"?

That's not what I want to talk about.  Let's talk about why they do it.  That's obvious, right?  They don't want to give Uncle Sam billions of the dollars they've earned.  Did you notice the other thing?  They're willing to pay some taxes, if the rate is lower.  That's what all that jazz about a "tax holiday" was talking about.  It turns out that tax rates affect behavior!

You're probably thinking, "No d'uh, Jake!"  Well, it also turns out there are lots and lots of people that either don't believe it or ignore it because it doesn't fit with the agenda they want to push.  Check out this little blurb from Walter Williams:

           "Politicians, news media people and leftists in general entertain what economists call a zero elasticity view of the world. That's just fancy economic jargon for a view that government can impose a tax and people will behave after the tax just as they behaved before the tax, and the only change is more government revenue. One example of that vision, at the state and local levels of government, is the disappointing results of confiscatory tobacco taxes. Confiscatory tobacco taxes have often led to less state and local revenue because those taxes encouraged smuggling.           

            "Similarly, when government taxes profits, corporations report fewer profits and greater costs. When individuals face higher income taxes, they report less income, buy tax shelters and hide their money. It's not just rich people who try to avoid taxes, but all of us -- liberals, conservatives and libertarians.

            "What's the evidence? Federal tax collections have been between 15 and 20 percent of the nation's Gross Domestic Product every year since 1960. However, between 1960 and today, the top marginal tax rate has varied between 91 percent and 35 percent. That means whether taxes are high or low, people make adjustments in their economic behavior so as to keep the government tax take at 15 to 20 percent of the GDP. Differences in tax rates have a far greater impact on economic growth than federal revenues."

And the article about Cisco is great example of that adaptive behavior.  Think how much money it costs them to play those shells games, how much money they have to pay to lawyers and accountants, and how the complexity of the organization leads to inefficiency. It must cost a lot, but it certainly costs less than the taxes they would pay.

The upshot?  Unlike others, don't assumes that raising tax rates will necessarily bring in more income for the government to spend.