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    The Inevitability Of Unintended Consequences

    Why central planning efforts will ultimately backfire
    by Adam Taggart

    Tuesday, May 10, 2016, 6:04 AM

No plan of operations extends with any certainty beyond the first contact with the main hostile force.

~ Helmuth von Moltke the Elder

Shit happens

~ Anonymous

Anyone involved with managing projects, people or systems knows that the only thing that can be planned with absolute certainty is that things will never go 100% according to plan.

This is true even in exceedingly simple situations, which we've written about at length here at Peak Prosperity (the uncontrollable nature of the straightforward Beer Game detailed in this post on the Bullwhip Effect outlines this well). And it's one of the truisms that gives us the most confidence that the world's central planners will eventually lose control of the global systems they are trying to manage via increasingly heavy-handed intervention.

History is full of examples where governments' best-laid plans failed in spectacular fashion, exacerbating the very problems they were intending to solve. Here are a few of our favorites:

Hoy No Circula

In the late 1980s, the air pollution in Mexico City had reached concerning levels. City planners decided that reducing the number of cars on the roads would have a material impact on improving air quality via reduced emissions, so they launched the Hoy No Circula ("today [your car] does not drive") program.

Hoy No Circula mandated that only certain cars could drive on certain days of the week. The rules were based on the last digit of a car's license plate. If your license plate ended in a 5 or 6, you couldn't drive your car on Mondays. If it ended in 7 or 8, Tuesdays were out. And so on.

The expectation was that people would commute via public transit more and, on any given day, there would be 20% fewer cars on the road. 20% fewer cars meant 20% fewer emissions, leading to improved air quality.

But… that's not quite how things worked out.

People, being people, didn't want to change their behavior. Having to find alternate transportation plans every few days proved a frustrating inconvenience. So how did the public respond? By buying a second car, with a license plate ending in a different digit than their primary vehicle.

This was bad for several reasons. Not only did it prevent the number of cars driving on the roads each day by dropping by the expected amount, but these secondary cars were predominantly cheaper, older "beater" cars — which were much more pollutive automobiles.

Even those who chose to commute instead predominately took taxis instead of public transit (Mexico City had, and continues to have, insufficient options for public transport). Most of the taxis in use when Hoy No Circula was first implemented were Volkswagen Beetles, one of the worst-emitting vehicles in circulation at the time.

So air quality in Mexico City actually worsened after the implementation of Hoy No Circula. And traffic congestion, which was already bad, got worse, as well.

The Cobra Effect

Such misguided policy-making isn't anything new. In our recent book Prosper!: How to Prepare for the Future and Create a World Worth Inheriting we share a fine example dating from the Crown rule in India era:

During British colonial rule of India, the government became concerned about the large number of cobras in Delhi. So it issued a bounty on the poisonous snakes, paying a fixed sum for each dead cobra brought in by the public. It didn’t take long for things to start going sideways on this plan. In order to receive more payments, enterprising residents began breeding cobras.

Clearly this was not what the British rulers intended. Once they discovered how their program was being abused, they terminated the bounty scheme. And what happened next? Yep, with no incentive left, the breeders set their now-worthless snakes free. And the cobra problem in Delhi skyrocketed to much greater heights than before the bounty program began. The “solution” had the exact opposite effect as intended.

(Source)

An Inexhaustible Supply

Sadly, the inability of the central State to recognize its vulnerability to the law of unintended consequences is mighty. Each generation of policymakers refuses to learn from the errors of the preceding ones, and remains confident that as long as it has good intentions (at least publicly), success is inevitable.

But instead, we get bungle after bungle.

The economy is slowing? Fill the banks newly-printed capital! They'll lend it out, thus increasing the velocity of money, spurring consumer spending and re-igniting economic growth. This was the thinking in the wake of the 2008 slowdown — but what happened? The banks realized it was much safer to hold on to that new money, lever it up and buy 'safe bet' instruments like US Treasury bonds — thereby making risk-free profits. The money that the banks did deploy largely went into the assets that most favored the banks and their richest clients, resulting in the widest wealth gap our country has ever experienced in its history.

Money velocity still not perking up? Take the bold step of charging negative interest rates on bank deposits! That's sure to get money out into the larger economy, where it can seek a positive return. This is what a growing number of countries are experimenting with today; but like Japan and the EU are realizing, imposing negative nominal interest rates actually boosts demand for cash, gold and safes to store them in. Turns out, desperate and bizarro-world tactics like NIRP cause investors to prioritize return OF capital higher than return ON.

Workers not able to get jobs paying them enough to live on? Double the minimum wage! This sounds noble, but places a heavy cost burden on the already-beleaguered small employer. As we've recently discussed, dramatically boosting the minimum wage without any commensurate relief for small and medium-sized businesses simply adds to the incentive for these companies to shed as many jobs as possible and to invest in long-term non-human solutions like automation. We are permanently destroying the supply of jobs available to our workforce.

The point here is that in many cases (if not most), governments' cures are often worse than the disease they are treating. Or as my favorite de-motivational poster puts it:

Conclusion

And very likely compounding these unintended consequences is the basic principle of uncertainty. In his article Why Our Central Planners Are Breeding Failure Charles Hugh Smith opined on how unknowable much of the results of current monetary policy will be, despite the Fed et al's assurances that they have everything well under control:

As noted above, any policy identified as the difference between success and failure must pass a basic test: When the policy is applied, is the outcome predictable?  For example, if central banks inject liquidity and buy assets (quantitative easing) in the next financial crisis, will those policies duplicate the results seen in 2008-15?

The current set of fiscal and monetary policies pursued by central banks and states are all based on lessons drawn from the Great Depression of the 1930s. The successful (if slow and uneven) “recovery” since the 2008-09 global financial meltdown is being touted as evidence that the key determinants of success drawn from the Great Depression are still valid: the Keynesian (or neo-Keynesian) policies of massive deficit spending by central states and extreme monetary easing policies by central banks.

Are the present-day conditions identical to those of the Great Depression? If not, then how can anyone conclude that the lessons drawn from that era will be valid in an entirely different set of conditions?

We need only consider Japan’s remarkably unsuccessful 25-year pursuit of these policies to wonder if the outcomes of these sacrosanct monetary and fiscal policies are truly predictable, or whether the key determinants of macro-economic success and failure have yet to be identified.

It's this concern about the failure of the current strategy our central planners are pursuing, paired with the tremendous magnitude of the impending cost of that failure, that motivated Chris to issue our report The Consequences Playbook last year, which begins:

What’s really happened since 2008 is that central banks decided that a little more printing with the possibility of future pain was preferable to immediate pain.  Behavioral economics tells us that this is exactly the decision we should always expect from humans. History says as much, too.

It’s just how people are wired. We’ll almost always take immediate gratification over delayed gratification, and similarly choose to defer consequences into the future, especially if there’s even a ridiculously slight chance those consequences won’t materialize.

So instead of noting back in 2008 that it was unwise to have been borrowing at twice the rate of our income growth for the past several decades — which would have required a lot of very painful belt-tightening — the decision was made to ‘repair the credit markets’ which is code speak for: ‘keep doing the same thing that got us in trouble in the first place.’

Also known as the ‘kick the can down the road’ strategy, the hoped-for saving grace was always a rapid resumption of organic economic growth. That’s how the central bankers rationalized their actions. They said that saving the banks and markets today was imperative, and that eventually growth would return, thereby justifying all of the new debt layered on to paper-over the current problems.

Of course, they never explained what would happen if that growth did not return. And that’s because the whole plan falls apart without really robust growth to pay for it all.

And by ‘fall apart’ I mean utter wreckage of the bond and equity markets, along with massive institutional and sovereign defaults. That was always the risk, and now we’re at the point where the very last thing holding the entire fictional edifice together is beginning to give way. Finally.

When credibility in central bank omnipotence snaps, buckle up. Risk will get re-priced, markets will fall apart, losses will mount, and politicians will seek someone (anyone, dear God, but them) to blame.

In The Consequences Playbook (free executive summary; enrollment required for full access) we spell out what will happen next and how you should be preparing today for what might happen tomorrow. If you haven't yet read it, you really should. Suffice it to say, a tremendous amount of wealth will be lost if (really, when) the central banks lose control. And standards of living for many will be impacted. A little preparation today can make a huge difference in your future.

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26 Comments

  • Tue, May 10, 2016 - 4:50pm

    #1

    jtwalsh

    Status Bronze Member (Offline)

    Joined: Oct 01 2008

    Posts: 261

    We are from the Government and we are here to help you.

    In 1990 George Bush I and Congress agreed to pass an excise tax on luxury boats.  Any new boat worth over $100,000.00 was to be taxed 10% of sale price.  Who could complain about taxing fat cats able to by a boat worth that much?  What the politicos did not calculate in their equation were two small realities. 1. Buying a boat, for most people, is a totally discretionary activity.  Most buyers did not want to reduce their purchasing power by ten percent so they just did not buy. 2. Anyone wealthy enough to pay for a boat of that size had money to move and travel.  The people who absolutely had to have new boats immediately went looking in Bermuda, the Bahamas, the Caribbean,  Canada.  They purchased boats and docked them outside the US. Small ship builders up and down the Atlantic coast immediately saw their business collapse.  Thousands of jobs disappeared along with a significant portion of the tax base for the municipalities and states impacted by this move. I remember that here in Rhode Island, for months, the papers and television news were full of stories about closing boat yards and laid off, highly skilled workers.

    Many of the congress who had called for the bill, after hearing complaints from furious voters, turned one eighty and became the tax's main opponents.  The tax was repealed before the end of 1993.

    JT 

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  • Tue, May 10, 2016 - 7:41pm

    #2

    pyranablade

    Status Member (Offline)

    Joined: Nov 08 2010

    Posts: 209

    Too much complexity (your example: minimun wage)

    You may well be right Adam: Some small businesses might become unfairly disadvantaged by a 12 or 15 dollar minimum wage.

    But Walmart won't be disadvantaged unfairly by it. They'll still be able to make profits. And then we the taxpayers won't have to subsidize Walmart employees' health care costs. Don't they keep applications for medicare and/or medicaid in the breakrooms of all WalMarts? 

    I know, your point was only that when you have complex systems the solutions offered tend to make things worse, not better. I get your point, and you are completely right: Complexity leads to societal collapse. Government contributes to our problems by pandering to us – and by treating corporations like WalMart as priviledged "persons" – at the expense of real persons and small businesses.

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  • Tue, May 10, 2016 - 7:42pm

    Reply to #1

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2580

    CEO Pay

    Good example of an unintended consequence, JT!

    Here's another one, courtesy of Quora and sourced to friend-of-the-site Dan Ariely:

    American citizens often complain about how high CEO salaries are. The SEC attempted to mitigate this, and required CEO salaries to be publicly disclosed. As a result, they increased approximately three-fold between 1976 and 1993, going from 36 times the average worker pay to 131 times the average worker pay. "It encouraged other CEOs to demand higher pay, since now they had hard data telling them they were underpaid."[1]

    [1] Source: Predictably Irrational by Dan Ariely. 

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  • Tue, May 10, 2016 - 7:55pm

    Reply to #1

    KugsCheese

    Status Gold Member (Offline)

    Joined: Jan 01 2010

    Posts: 835

    Adam Taggart wrote:Good

    [quote=Adam Taggart]

    Good example of an unintended consequence, JT!

    Here's another one, courtesy of Quora and sourced to friend-of-the-site Dan Ariely:

    American citizens often complain about how high CEO salaries are. The SEC attempted to mitigate this, and required CEO salaries to be publicly disclosed. As a result, they increased approximately three-fold between 1976 and 1993, going from 36 times the average worker pay to 131 times the average worker pay. "It encouraged other CEOs to demand higher pay, since now they had hard data telling them they were underpaid."[1]

    [1] Source: Predictably Irrational by Dan Ariely. 

    [/quote]

    All fueled by fiat money central banking.

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  • Tue, May 10, 2016 - 8:08pm

    Reply to #1

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2580

    What could go wrong with that?

    [quote=KugsCheese]

    All fueled by fiat money central banking.

    [/quote]

    And what could go wrong with that? wink

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  • Wed, May 11, 2016 - 11:26am

    #3

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4651

    Unintended consequences and negative interest rates

    Well, it turns out that even simple logic can escape our erstwhile world-improvers housed at the Fed.

    Negative interest rates were supposed to stimulate lending and therefore economic growth. They are doing the opposite. How can that be? Simple, they are a tax and taxes are never simulative.

    Are Negative Rates a Tax On the Creation of Credit?

    May 5, 2016

    What if the stimulant prescribed for the patient turned out to be a depressant?

    Rather than a subsidy for borrowers, negative rates act as a tax on lenders, writes Christopher J. Walker, director of research at the St. Louis Fed. The theory behind the novel policy is that, by charging a fee on banks’ reserves, they will be encouraged to lend out those funds and thus spur the economy.

    In actuality, this cost amounts to a tax, he continues, and has to be borne by someone. Banks could absorb it in narrower profit margins. Or they could pass the cost on to borrowers in the form of higher interest rates or fees.

    “None of this sounds very ‘stimulative’ for consumer spending. But then, no tax ever is,” Walker observes.

    When a tax is levied a business has a few choices. (1) It can eat the tax and have lower profits. (2)The cost can be passed on to consumers. (3) It can find other savings, typically in labor.

    So either higher prices result, meaning lower sales (not stimulative), or lower profits (ditto) or reduced labor (ditto again).

    But they are simulative for one activity and that’s speculation. Given the low growth economic environment that the Fed, et al., have engineered for us (and which is certain to persist and companies were encouraged to borrow to buy back shares in preference to investing in their own businesses) speculation shot to the top of the list of ‘things to do.’

    And so here we are in an earnings and revenue slump with stocks and bonds priced at their or near their highest levels in, well, ever.

    The reasoning behind why negative interest rates would not be stimulative is very logical and easy to work out. But the central banks not only could not work it out in advance, they are still struggling to make sense of the data which proves this to be the case.

    To which I say to humanity, good luck trying to work out the more subtle complexities of the various intertwined predicaments we face.

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  • Wed, May 11, 2016 - 12:47pm

    Reply to #3

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    lower rates = economy goes faster

    As far as I can tell this is an article of faith at the central banks since forever.  And empirically, this has been true right until the 2008 crash.  Of course, we haven't had peak private debt until now either.  I wonder if the two could possibly be related in any way?  I suppose if banks, debt and money aren't a part of your model, you wouldn't look at that sort of thing.

    Our current crop of thinkers are so focused on how to mash the interest rate pedal as hard as possible (in spite of the experience in Japan, and in spite of the clues that, just perhaps, debt does matter after all), they're getting rid of 500 euro notes in order to seal off the potential escape hatches for their work of genius.  This will work.  Just be patient.

    Max Planck once observed:

    A new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.

    Or paraphrased:

    Science advances one funeral at a time.

    Unintended consequences?  Safe sales rise in Japan.  Money rotates into gold.  People pay off debts and taxes early.  People withdraw cash from the bank.  People save more, especially elderly, because their interest income has vanished.

    I don't see any inflation here.  Except for asset prices that give off a yield.  And that reminds me.

    The unwind of those "peak prices for stuff with a yield" will be pretty intense if/when rates eventually normalize.  A long term bond is an extremely risky thing to own, unless you are holding it to maturity.  If there is a 2% rise in 20 year coupon rates, your bond's price will drop 20-30%.  A 4% rise means a 50% loss.  Is a 20 year bond at 6% really that unthinkable?

    When the sovereign bond bubble finally peaks, the losses will be catastrophic.  And what will happen to the pension funds then?  Will they hold those 20 year bonds to maturity?  Marked to market, they'll be horribly underwater…if things are bad now with no yields, they'll be much worse once bonds peak out.

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  • Wed, May 11, 2016 - 1:52pm

    #4
    Edwardelinski

    Edwardelinski

    Status Bronze Member (Offline)

    Joined: Dec 23 2012

    Posts: 324

    Publicity Whore Fisher speaks:

    Talk about massive unintended consequences, former Dallas Fed official Fisher is very concerned over major hits that major insurance companies may be faced with, along other financial institutions.Not much on how they destroyed the American consumer.For those that may own the insurance companies.Run.Fast.For those that can stomach the interview.go to cnbc.com. Future derivatives collapse anyone?

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  • Wed, May 11, 2016 - 3:24pm

    #5

    newsbuoy

    Status Bronze Member (Offline)

    Joined: Dec 10 2013

    Posts: 120

    Slice of Ludic fallacy anyone?

    Lifted from the "weekiepeedia" (allegedly):

    The alleged fallacy is a central argument in the book and a rebuttal of the predictive mathematical models used to predict the future – as well as an attack on the idea of applying naïve and simplified statistical models in complex domains. According to Taleb, statistics is applicable only in some domains, for instance casinos in which the odds are visible and defined. Taleb's argument centers on the idea that predictive models are based on platonified forms, gravitating towards mathematical purity and failing to take various aspects into account:

    • It is impossible to be in possession of the entirety of available information
    • Small unknown variations in the data could have a huge impact. Taleb differentiates his idea from that of mathematical notions in chaos theory, e.g. the butterfly effect
    • Theories/models based on empirical data are claimed to be flawed as they may not be able predict events which are previously unobserved, but have tremendous impact, e.g., the 9/11 terrorist attacks or the invention of the automobile, a.k.a black swan theory

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  • Wed, May 11, 2016 - 3:41pm

    Reply to #4

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    bonds + insurance = problem

    EE-

    I forgot completely about insurance companies!

    In a very real sense, anyone with a house for which you have an insurance policy (me! omg!) has an interest in the continued success of these insurance companies.  Any relatively large disaster that causes one of these companies to have to pay out flood/fire damage to a large number of people could well end up not getting paid out after the bond market starts to normalize.

    Wouldn't that be an Unpleasant Surprise.

    And I do wonder about that California earthquake policy I have.  I'm guessing if we have a big one, it will be defaulted upon.  But I keep paying, just in case it won't be…

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  • Wed, May 11, 2016 - 9:30pm

    Reply to #4
    Edwardelinski

    Edwardelinski

    Status Bronze Member (Offline)

    Joined: Dec 23 2012

    Posts: 324

    Recipe for disaster

    When a former Fed Official publicly outlines his concerns over the unintended consequences of negative rates you pay attention.He admitted they never foresaw the effects the policy would have on insurance companies,banks,etc.He has now given the future playbook on upcoming defaults in the industry. Consider it a warning.

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  • Wed, May 11, 2016 - 9:49pm

    Reply to #3

    KugsCheese

    Status Gold Member (Offline)

    Joined: Jan 01 2010

    Posts: 835

    Re: Unintended Consequences And Negative Interest Rates

    It should be obvious that CB's have no concern for Main Street.  CB's concern is keeping governments solvent therefore NIRP makes sense.  

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  • Thu, May 12, 2016 - 12:39am

    #6

    Arthur Robey

    Status Platinum Member (Offline)

    Joined: Feb 03 2010

    Posts: 1814

    Bureaucracy.

    [Sarc] We are just one Bureaucratic layer away from paradise[/Sarc]

    Stephan Moleneux,  philosopher.

     

    https://m.soundcloud.com/stefan-molyneux/fdr-3286-what-pisses-me-off-about-brexit-uks-eu-referendum

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  • Thu, May 12, 2016 - 2:36am

    Reply to #1
    Edwardelinski

    Edwardelinski

    Status Bronze Member (Offline)

    Joined: Dec 23 2012

    Posts: 324

    Good point JT

    I have a place on the Cape.By the way,no more cod left on the Cape.Woods Hole is trying to figure that out.Ted Kennedy reversed that debacle with that tax.I remember after the 2008 collapse John Kerry decided to park his 10 million dollar yacht over in Newport to save the 500 grand in taxes Ma would have asked for.All hell broke loose.The Really rich and entitled are different.For example,Ethel K. has forgotten her wallet in Hyannis,for the last 20 years when entering mom and pop dining places across the Cape.The posse usually includes 10 or more.Family businesses take a huge hit on a regular basis.Don't get me started on the pools.Entitlement at its best….

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  • Thu, May 12, 2016 - 3:58pm

    Reply to #1

    jtwalsh

    Status Bronze Member (Offline)

    Joined: Oct 01 2008

    Posts: 261

    Short Memory

    Edwardelinski:

    I had completely forgotten about the John Kerry yacht parking incident.  We Rhode Islanders always feel that the supposedly sophisticated folks from Massachusetts look down at us as children of a lesser god (at best).  There was much amusement here that we were able to cut Massachusetts's tax base with the assistance of their own senator.

    The important point here is that the well off and well placed are more often the ones who can move quickly to take advantage of the "unintended results" of government action. The average "Joe" just gets left further behind in the dust.

    Thanks for reviving the memory on this one.

    JT

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  • Thu, May 12, 2016 - 5:39pm

    #7

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2580

    Affordable Health Care Act

    The law of unintended consequences strikes again:

    Pass sweeping new health care coverage mandates for the public (i.e., the Affordable Health Care Act — actually a stealth tax) that don't apply cost-constraints to the big insurance companies — and you're surprised at how fast rates start rising?

    Hat-tip to ZeroHedge for this:

    "What you're saying is one of the real worries that we're facing with the cost of health insurance because the costs are going up in a lot of markets, not all, but many markets and what you're describing is one of the real challenges."

    "There's a lot of things I'm looking at to try to figure out how to deal with exactly the problem you're talking about. There are some good ideas out there but we have to subject them to the real world test, will this really help a small business owner or a family be able to afford it. What could have possibly raised your costs four hundred dollars, and that's what I don't understand."

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  • Fri, May 13, 2016 - 1:21am

    #8
    bronx43

    bronx43

    Status Member (Offline)

    Joined: Nov 23 2015

    Posts: 12

    Helicopter money

    I think the government/Fed will go to helicopter money and/or large scale fiscal stimulus before they follow suit with negative nominal interest rates. What do you think would be the unintended consequences of helicopter money/fiscal stimulus? 

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  • Fri, May 13, 2016 - 2:37pm

    #9
    Uncletommy

    Uncletommy

    Status Bronze Member (Offline)

    Joined: May 03 2014

    Posts: 524

    Does this qualify under unintended consequences?

    http://www.theguardian.com/world/2016/may/12/indian-doctors-ivf-woman-70s-gives-birth-fertility-treatment-daljinder-kaur?utm_source=esp&utm_medium=Email&utm_campaign=GU+Today+main+NEW+H+categories&utm_term=171935&subid=17905408&CMP=EMCNEWEML6619I2

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  • Fri, May 13, 2016 - 2:43pm

    Reply to #3
    Edwardelinski

    Edwardelinski

    Status Bronze Member (Offline)

    Joined: Dec 23 2012

    Posts: 324

    "Unfunded Liabilities" in CA

    Stanford University just released there research showing a deficit in "unfunded liabilities" in California and the numbers are staggering.On the low side 300 billion, with a range up 1 trillion.The municipal bond market is going to have a field day with this.All politics is local.Dan Walters has a great write up in sacbee.com

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  • Fri, May 13, 2016 - 8:11pm

    #10

    pyranablade

    Status Member (Offline)

    Joined: Nov 08 2010

    Posts: 209

    ZPG Uncle Tommy

    From time to time people on this site bring up the true fact that our scarcity problems are caused by human population. Right now our society has defaulted to feeling that any woman can have children if she wants them. So we have Octo-moms and Septuagenarian Moms and there's no stopping them. 

    Or could we at least stop the medical people for "advancing" the science of fertility?

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  • Sat, May 14, 2016 - 3:03am

    #11

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2580

    Another Unintended Consequence Of Minimum Wage Hike

    Cross-posting this from the automation thread:

    Wendy’s (WEN) said that self-service ordering kiosks will be made available across its 6,000-plus restaurants in the second half of the year as minimum wage hikes and a tight labor market push up wages(…)

    In addition to self-order kiosks, the company is also getting ready to move beyond the testing phase with labor-saving mobile ordering and mobile payment available system wide by the end of the year. Yum Brands and McDonald’s already have mobile ordering apps.

    Declare a 50-67% hike in the minimum wage over the next 5 years and what will companies who employ low-skill labor do? Answer: Invest in replacing human labor.

    As Andy Puzder, the CEO of Carl's Jr succinctly puts it:

    “Does it really help if Sally makes $3 more an hour if Suzie has no job?”

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  • Sat, May 14, 2016 - 11:33pm

    #12

    blackeagle

    Status Bronze Member (Offline)

    Joined: May 16 2013

    Posts: 225

    We are a competitive culture

    Something that hit me: Contemporary cultures are by nature competitive. We raise our children to be performers… and tough luck for the losers. At school, at work, everywhere you look, this is the same pattern.

    Over time, with the help of overpopulation and resources scarcity, this behavior can only get more acute.

    So, Wendy eliminating jobs for better performance? All will do the same if given the opportunity. The fault to the wage increase? No. This is merely a pretext. The real point is lower cost and higher profit.

    Stagnation is seen as a shame, as a loser's trait.

    We have to be winners… including myself. If I don't perform, then someone else will do. if I don't get this money, someone else will get it. If I don't get this job, someone else will get it. If I don't spread my ideas, someone else will spread a different point of view. Etc… 

    Could be summarized as this: I will drive the last nail, not you!

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  • Sat, May 14, 2016 - 11:45pm

    #13
    treebeard

    treebeard

    Status Bronze Member (Offline)

    Joined: Apr 18 2010

    Posts: 551

    Unintended consequences

    Lot of entireties make decisions that have unintended consequences.  From the micro – individuals, households, small community groups, to the macro – large corporations, central banks (private entities by the way) to indeed governments.  Somehow when we get on this track it seems that the only entities that ever do that are governments, when the problem is people, at what ever scale they function at.

    Lets dive beneath the surface a bit.  Complexity is not a problem, we live in a universe that is complex beyond our imagination.   Is it not the fact that human constructs, when complex, can become out of sync with the universe in which they exist because poor constructed thought processes, like those that conclude that governments are the only entities capable of decisions that have unintended consequences?

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  • Sun, May 15, 2016 - 6:44am

    Reply to #13

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    endemic unintended consequences

    TB-

    Yes you make a really good point.  Its much easier to point at government and make fun of the actions they take that ends up backfiring.  In our own lives, some of us feel unhappy so we eat a lot to comfort ourselves – intention is comfort, unintended consequence is, we get fat.  In fact, now that you mention it, our entire lives are chock full of unintended consequences.

    Perhaps the problem lies with the common approach that we all take to life, rather than what role we are playing in society.

    Re-reading Tao, I see that it describes a way of thinking and being that encourages a whole sequence of beneficial consequences that somehow all occur without explicit effort – and in fact, how explicit effort tends to result in a whole lot of bad things happening.

    Somehow, if you simply are, consequences occur, and the better you are, the more positive the consequences become.  I have always been really fuzzy about how that all happens; engineers are all about an if-then cause-effect world.  I can't simply sit at my screen and "be" and have the program write itself.

    And yet…"being" an engineer, the code does really flow without a lot of effort.  Maybe that's what they mean.  Doing without effort.  Is it really work if you're having fun?  But its more than just having fun, its having an understanding of how everything fits together – and if at first you don't understand, you just try stuff that feels like it might work until you discover the right approach.  My sense is, you cannot replace one great engineer with any number of mediocre engineers.  It is not the amount of code that gets written, it is the number of bugs (and what is a bug but an "unintended consequence"?) that are written into the stuff that comes out.  Not-creating bugs comes from true understanding, and true understanding is relatively rare.

    I did some research and found this explanation of my favorite Tao quote:

    The master does nothing, Yet he leaves nothing undone. The ordinary man is always doing things, Yet many things are left to be done… –Chapter 38

    Nonaction or inaction is almost a heretical thought in Western society. However, true wu wei is the most efficient action possible, the most spontaneous and often the most creative action. It is not a life of a sloth or laziness, but one in which the least possible effort yields the most effective and productive outcome. Actions come from a more intuitive area of the mind. The closest analogy would be when an athlete is "in the zone." The actions are not coming from the thinking or calculating area of the mind, but they are being done. Obviously, this is not the same as doing nothing.

    So wu wei is not non-action but effortless action. It is action without meddlesome, contentious, or egotistical exertion. It's the effortless action that results from combining your inner nature (P'u and Te) with the natural laws operating around you. In short, it is being in harmony with the Tao.

    The "how" of this is always the trick, isn't it?  Presumably, one cannot try or expend effort to get into this state, and expending effort to get there is likely counterproductive.

    If we want to change the course of the river, we have to reintroduce the wolves.  And yet, who among us "ordinary men" could have determined this was the correct action ahead of time?  The master re-introduced the wolves, they acted like wolves, and the river changed course.  Master did literally nothing to change the river's course, yet he left nothing undone.

    That approach beats the hell out of hammering rates down to zero by spending 3 trillion dollars trying to force-feed credit into the economy, only to end up with the unintended consequence being the impending collapse of the pension system.  "The ordinary man is always doing things, but there are many things left to be done."

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  • Sun, May 15, 2016 - 3:24pm

    #14
    treebeard

    treebeard

    Status Bronze Member (Offline)

    Joined: Apr 18 2010

    Posts: 551

    Yes, yes and yes.

    DF-

    Great thoughts, I could not agree more.  There are lots of terms for being "in the zone" as you mentioned, one of my standards borrowed from Zen is "non-doing". Another term is "complete action", where nothing is left over – because the doer is not separate from object of action or observation. To be in this state, it is imperative that we let go of results of our actions and that things be done for and of themselves, otherwise something is left over and action becomes incomplete.  The desire to control outcomes is the driver of unintended consequences.  So nothing is ever "finished".  When an action is complete, we need to wait and see what comes back at us and then respond accordingly with another "complete action".  We can never seem to do this because we cannot let go of FEAR.

    The very thought "government is the problem" is the poster child for unintended consequences, it creates all the problems that we say that we are against.  I yammer on and on the perceptual mind vs. the analytical mind, but to no avail. When we are in "the zone", we are using the perceptual mind rather than the analytical mind.  Unintended consequences is currently the water in which we all swim because we are currently so enthralled with the power of the "rational mind".  We are all doing it all the time!  Central banks, major corporations, governments, households, individuals, everybody and everything.

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  • Sat, May 28, 2016 - 12:33am

    Reply to #14
    Cornelius999

    Cornelius999

    Status Bronze Member (Offline)

    Joined: Oct 17 2008

    Posts: 364

    May the Force be With Us

    I spend a lot of time doing any exercises that help the body's energy flow. Experiencing this current flowing through me powerfully is like being part of a river; I can opt to be fully, or partially in the flow or get out of it completely. To enter the current even more, I can empty my mind and allow it to flow in the stream of consciousness in meditation. Hopefully, eventually I am not just one with the river but with everything that is. It is probably quite difficult to appreciate taoism without being able to work with this flow. The best way to change the course of the river is to be one with the river.

    Arthur Whaley's book is well named:  "The Way and it's Power." The Tao is about working skillfully with the power that underlies everything until it becomes second nature and effortless.  It's more about being a source of energy than destroyer of energy.   

    May the Force be with us.

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