Money, employment, and wages

In A Humane Economy, (which I have not read) Wilhelm Röpke (1899–1966) argues that

...we cannot have all three: stable money, full employment, and further wage increases.

If that were that case which should we prioritise?

I think this can best be solved by looking at what the government should do, the nature of wealth, and the importance of work.

Man is created to work. The earth is cursed and thus work is often toilsome. Our attempts at redeeming work by removing toil have been moderately successful over the centuries. Work is what God has created men to do and as such it seems to be a priority over remuneration, or increases in remuneration. Still, we should pay what we have agreed to pay (James 5). High wages tends to allow a higher standard of living which seems a good in itself, though in a fallen world this can tempt us to seek security and independence from God (Deuteronomy 8). Further, wealth is its own temptation. Wage increases here are presumably for the masses, not the most wealthy. If wage increases were only for the latter then it would not seem wise to sacrifice stable money and high employment for this. Nevertheless, improving the material welfare for most of the population seems a desirable good.

Neither of these goods have seemed to me to be a priority of government. Policies that indirectly encourage vice and discourage virtue should be avoided, but the primary role of government is (direct) justice and punishment. So of the 3 options Röpke gives us it seems that goverment should only involve itself in one—money. If this is the case then we priorise stable money because it is a moral good. If money were material rather than fiat then stability would cease to be an issue. The problem would cease to be stable value and become an issue of equal weights.

Aside from this it seems to me that stable money is the only moral good in the list. Honest weights and measures are a necessity and dishonest measures sinful.

You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small. A full and fair weight you shall have, a full and fair measure you shall have, (Deuteronomy 25:14-15)

Whereas high employment and high wages are desirable. Quite desirable. But increases in unemployment is not immoral in and of itself. Of course high employment is likely to have flow on effects that limit immoral behaviour in the community, though indirectly.

Finally, wages reflect value. People over-estimate the value they provide and under-estimate the cost for a product or a service. Tax excluded, at minimum the cost for you to pay someone to do a job will be the wages for you to do the same job plus overheads. You can't desire someone mow your lawn for only $10 and expect people to pay you $20 for the same job. Even so, with stable money and high employment (and a few other important factors), wages will likely increase over time.

I therefore prioritise these 3 in this order:

1. stable money
2. full employment
3. wage increases

Bangladesh factory collapses

This is upsetting and seems unnecessary.

More than 600 bodies have been recovered from the garment-factory building that collapsed well over a week ago, police said today as the grim recovery work continued in one of the worst industrial accidents ever.

The building was structurally designed as a mall, but was used for industrial purposes with 3 extra stories added.

An architect whose firm designed the building said Sunday that it had not been designed to handle heavy industrial equipment, let alone the three floors that were later illegally added. The equipment used by the five garment factories that occupied Rana Plaza included huge generators that were turned on shortly before the building crumbled. Masood Reza, an architect with Vastukalpa Consultants, said the building was designed in 2004 as a shopping mall and not for any industrial purpose.

"We designed the building to have three stories for shops and another two for offices. I don't know how the additional floors were added and how factories were allowed on the top floors," Reza said.

I suspect a Western designed building may perhaps convert from retail to industrial relatively well, though adding 3 stories would require significant modifications as be mandated by consent approval.

Is the kilogram getting smaller?

copy of the
international prototype kilogram

The kilogram is currently defined by an object, the IPK. Definitions of basic units would seem to need a couple of criteria, constancy and precision. The unit should be stable over time. It should also be a highly accurate measure, as much as reasonable for other units that derive from it. But apparently the platinum-iridium cylinder is losing atoms, so think some.

The official kilogram, a cylinder of platinum and iridium maintained by the International Bureau of Weights and Measures, is more than 130 years old. It is stored under three glass domes in a safe in a basement in Sèvres, France, and can be accessed only with three independent keys.

Technically, the cylinder is not even the official kilogram until it has been cleaned in an authorized manner to remove contaminants. It is the only remaining international standard in the metric system that is still a man-made object. Some scientists now believe the official kilogram may be losing mass, which defeats its only purpose: constancy. This adds new urgency to a longstanding search for a new official kilogram, based, like the meter, on one of nature’s fundamental numbers, called constants.

One would also assume that such a unit is accessible, which this cylinder is not; kept under glass. Though there are several replicas around the world which are periodically checked with the IPK.

So we may see a future definition based on fundamental constants rather than objects. Of course this inhibits us measuring whether or not these constants are in fact constant over space and time.

What standards should the government concern itself with?

In a previous post I identified 3 principles from Amos that merchants should take note of when trading. They were:

1. Accurate labelling
2. Clear agreed price
3. Not passing off refuse for merchandise

One could argue that the third is a variation on the first.

How can we apply this to our current culture? Let's consider how salesmen may abuse these principles in the West.

Inaccurate labelling

This is difficult to do because of current law but examples could include:

• Jimmied scales
• Misquoting house or land area

Unclear agreed price

This is also difficult to do because our money does not have intrinsic value. Ignoring the prudence, or lack thereof, of this policy, this means that the value of cash in a single transaction is not usually disputed. There are however several actions which I think abuse the principle of agreed price. These are when there is an added cost that is not immediately apparent such as:

• Additional transaction costs
• Excluding sales tax
• Postage and packaging, especially when the item cannot be purchased without paying this and when the amount does not correspond to the true cost

Refuse for merchandise

I think there are several examples of these that currently occur

• Cars involved in previous undisclosed accidents
• Functionless fuel additives
• Liquid in food
• Air in food
• Sick livestock

Including these principles in law

Many of these issues can be avoided thru enforced labelling. This gives people relevant information on a product. It is hard for an individual to consider every product. This is why a Ministry of Standards is useful, they can research such things. The important thing is that people get what is agreed to. These are my introductory thoughts.

Foodstuffs

All food should be sold subject to weight or volume. Foods that are solid at room temperature should have weight included. Liquids at room temperature should be volumes. One could consider the addition of weight or volume based on the temperature sold at, so for some items both weight and volume would be required, i.e. frozen liquids.

All food labels should include a moisture content and air content (if relevant). If water is added it should be listed as an ingredient. Note that there may be nothing wrong with including water and air in food. Air makes for texture in ice cream and other desserts. Adequate labelling, such as selling ice cream by weight in preference to volume discourages abuse of this process.

Energy and macroingredients (fat, protein, carbohydrates, moisture) should be included on all labels. I am not certain if ingredient lists should be mandatory by law but as a consumer this is my personal preference.

Machinery and electronics

Objects should be assessed for relevant function. The attributes that contribute significantly to this function should be mandatory for labelling and an independent definitions should be used.

Objects that are not fully functional without additional items or purchases need to be clearly labelled.

It seems somewhat reasonable to specify expected lifetime of the equipment under normal use. It would be difficult for this to be enforced for individual items but appropriate for state prosecution if the majority of items fail prior to the specified lifetime.

Medications

Strength and range of strengths for individual doses should be noted. Example 50 mg (48–54 mg). Non-existent accuracy should not be implied by several significant figures for dosing. Side effects (absolute greater than placebo) should be documented to a set frequency, eg. 1%. Though serious events may need to be documented to a lower frequency.

Claims of benefit with no comparative studies can be made but mention of this should be required. Example: May aid sleep, no controlled studies comparing to placebo available.

What constitutes a medication versus a supplement and who should be allowed to prescribe presents a much larger question and probably fits the domain of a broad Medicine Act rather than a Standards Act.

Second hand items

This will depend on the item but a list of relevant disclosures could be mandatory. This is currently the case in this country with vehicles, probably because of their cost and previous abuses.

Pricing

All costs must be disclosed on saleable item. Quoting price with a disclaimer mentioning exclusions of unspecified costs should be forbidden. Granted sales tax goes to government and not to the business, but the customer still has to pay this figure. Quoting full price with the disclaimer "includes a sales tax of $x" is acceptable.

Exceptions may exist for international transactions where sales tax and postage will depend on the customers destination, though this could be easily addressed.

Caution

As mentioned in previous posts, this is about information the consumer needs to make an appropriate decision, it is not about setting what the minimum standard should be. One can insist that paper is labelled by the density (mass per square meter) without specifying what density paper should be sold at.

I also think that in general enforcement should be at the level of government rather than individual. Individuals fighting corporations in the courts are usually at a disadvantage. Individuals can choose to argue their case thru the courts if they wish, but bringing the matter to a regulatory body should be sufficient. It is too time consuming for an individual to fight over a few dollars, but worthwhile for a company. Because such episodes are unlikely to be isolated, a regulatory body would have powers to enforce appropriate action (relabelling products) and an appropriate fine if necessary.

A biblical defence of standards

My recent posts on the need for standards and the government enforcement of such came from my thinking about weights and measures. This is a frequent biblical theme and I wish to mention several verses in defence of how important God sees honesty in trading.

The Lord commanded the Israelites that their measures were to be honest.

"You shall do no wrong in judgment, in measures of length or weight or quantity. You shall have just balances, just weights, a just ephah, and a just hin: I am the LORD your God, who brought you out of the land of Egypt. And you shall observe all my statutes and all my rules, and do them: I am the LORD." (Leviticus 19)

"You shall not have in your bag two kinds of weights, a large and a small. You shall not have in your house two kinds of measures, a large and a small. A full and fair weight you shall have, a full and fair measure you shall have, that your days may be long in the land that the LORD your God is giving you. For all who do such things, all who act dishonestly, are an abomination to the LORD your God." (Deuteronomy 25)

An ephah is a volume measure for solids and a hin is a volume measure for liquids. In Leviticus God points to length, weight, and volume as measures that should be standardised. Examples of relevant measures for the Israelites would have included

• Length: land
• Weight: precious metals
• Dry volume: grain
• Liquid volume: oil

Note that the Israelites had to ensure both the scales were accurate as well as the weights used on the scales. God commands them to do so:

• based on the fact that he indeed is God;
• that they may dwell in the land for a long time, either live to an old age or that as a people they may occupy Canaan for many generations; and
• because to not do so is dishonest and thus an abomination to God.

There are also several proverbs that mention the importance of honest weights and measures.

Unequal weights and unequal measures/
are both alike an abomination to the LORD. (Proverbs 20)

Unequal weights are an abomination to the LORD,/
and false scales are not good. (Proverbs 20)

God reminded Judah not only to have just standards but what the standards were,

"You shall have just balances, a just ephah, and a just bath. The ephah and the bath shall be of the same measure, the bath containing 1/10 of a homer, and the ephah 1/10 of a homer; the homer shall be the standard measure. The shekel shall be 20 gerahs; 20 shekels plus 25 shekels plus 15 shekels shall be your mina." (Ezekiel 25)

Hosea (Hos 12:7), Micah (Mic 6:10-11), and Amos spoke against dishonesty in trading. Amos makes some interesting comments on the actions of the people,

Hear this, you who trample on the needy/
and bring the poor of the land to an end,/
saying, "When will the new moon be over,/
that we may sell grain?/
And the Sabbath,/
that we may offer wheat for sale,/
that we may make the ephah small and the shekel great/
and deal deceitfully with false balances,/
that we may buy the poor for silver/
and the needy for a pair of sandals/
and sell the chaff of the wheat?" (Amos 8)

There are several behaviours he condemns besides that which concerns us currently. They are:

• Oppression of the poor or oppressed
• Concern for business over things spiritual
• Disregard for God's law
• Possibly forcing the poor to become bondslaves
• They do so just to get enough food to eat
• They do so because they are cheated out of the money
• The oppressors encourage this because they want their labour without cost
• And the price of bondslavery is unjustly low

Specific transaction sins of the merchant identified here are:

• Labelling merchandise as containing more than it really does
• Charging more than the agreed amount (via deceit)
  
• Including material/ refuse not desired by the purchaser

All these 3 actions the Lord considers abominations. We can conclude that merchants are to trade justly, and this includes:

1. Accurate labelling
2. Clear agreed price
3. Not passing off refuse for merchandise

Ministry of standards

Governments involve themselves in much of public life. It is reasonable to think that at least some involvement is excessive. Many would argue that most involvement is excessive. Of all the portfolios that governments have, there is one that I think should exist of its own accord.

We should have a Ministry of Standards.

Now we do have laws related to these issues, but I think the issue is important enough to warrant its own department with various divisions.

By standards I mean

• defining various standards;
• ensuring they are appropriate;
• enforcing their use; and
• prescribing punishments for breaches

Given that I prefer minimal government this may appear intrusive, but I see it as an issue of justice, and justice is an important role of government.

Defining standards

It is important to understand that I mean standards which are defined not prescribed. I do not think the government should enforce what manufactures should do, rather describe accurately what they in fact do. Granted there may be safety issues that mean minimum standards must be met in some areas, but by and large I think people should be able to exchange what they wish to do so. People should be able to buy products of varying quality.

Quality often relates to price. For any given object, desired price and quality vary among consumers. Some want high quality, others want low price. Most want high quality and low cost, but decisions are made at the margins. Government does not have a role in specifying a minimum standard (usually). Such a policy limits people, especially the poor who may not be able to afford such high quality items.

I do however think the government can have a role in ensuring that such items are of the claimed quality, and further, the government can have a role in specifying what must be shown on items for sale.

Examples include weights and volumes for foodstuffs, measurement dials in vehicles, breaking force and insulation property of glass, and electricity meters. Much of which is already covered by law.

Ensuring appropriateness

Consumers have the benefit of taking their custom where they will. Manufactures have the benefit in knowing exactly the quality of their product. Few consumers have the knowledge or ability to assess quality to this degree. Manufacturers may advertise various benefits of their product which is fine, but this should not be used to remove focus from more important quality issues that may not be mentioned.

Consider digital cameras. The quality of a photo is determined by several things including resolution. For people who print photos 6 megapixels is probably adequate. Now manufacturers can produce cameras of higher density such as 9 megapixels and they should be free to do so. This is good for larger photos, for cropping photos, and for digital zoom. The problem is that people may assume that the number of pixels reflects the quality of the photo because of the way cameras are marketed; but other factors are important such as the depth per pixel, speed of shot, stability of image capture, and software manipulation. So one may spend the extra money gaining extra pixels with no gain in printed product, and possibly worse if the pictures are blurred. He would be better spending the extra money on a camera that shoots more stable pictures at a lower resolution.

Defining standards of measures that affect photo quality that must be displayed on the product makes people aware of the issues, it lets them choose what they think best, and makes it harder for manufacturers to make cheap improvements and market the product as significantly superior.

Enforcing use

This is legislation that makes certain labelling compulsory and allows for the government to fund random testing to ensure compliance. Not compliance to some artificial mandate, rather accuracy of labelling. I am not concerned whether a product contains 1% or 20% sugar, just that one can trust the label.

Dealing with non-compliance

I think there is a role for this ministry to define the level of fines for breaches. The relationship between consumer and manufacturer is asymmetrical. Fortunately manufacturers are quite responsive to consumers for the sake of their brand name. However they may not be, especially in areas that may not have significant repeat service such as car and house sales. When organisations are blatantly and knowingly passing off a false product it is unduly onerous to expect a duped consumer to take up this cause. It costs them time, time that may be intentionally delayed by a company; money they may not have; and even if they were to win in court they may still be out of pocket and time and the company may be inadequately fined nor forced to significantly change their practice. Government enforcement is probably preferable.

I do not see this as applying to legitimate disputes, nor should it remove the ability for a consumer to act if they deem it necessary.

Nor am I anti-industry. I think some people make frivolous claims. Frivolity should be dealt with by claim dismissal and fining if necessary (paying the appropriate costs of all sides at minimum). Further, many companies care about both their employees and their customer base; they are what keep them in business.

Some caveats

• As mentioned above, I don't see the governments role as setting what standards a product should have, just what standards it should measured by and making those easily accessible, preferably displayed on the product. Of course the company can include any other benefits it wishes to, so long those claims are accurate.
• If the government wishes to set minimum standards, e.g. seatbelt positioning and engagement, then this is the role of a different department. It is very important the roles are not confused and that excessive red tape is not created.
• I do not think the compliance costs should be high. It is reasonable to measure the macro- and micro-constituents of foodstuffs as this is a one-off cost. Incorporating the data into a label is not that costly either. But requiring a car company to carry out extensive crash testing would be an excessive cost. Car companies remain free to do this of their own volition and many large car companies do this anyway. And the government is free to carry out this testing (though at whose cost?).
• I am not certain whether the government should enforce standards that are measured by a group not of the manufacturer's choosing. It is their product, they should have some say. Though if it is a sensible and well defined standard then the result should be the same whoever tests.
• Protecting vulnerable people from predators and the public from scams are important issues, but may come under a slightly different aegis. Possibly a division within the "standards" umbrella, probably within a policing portfolio.
• I think monetary policy and inflation comes under the definition of standards, but the issue of monetary standards is large enough to have a separate division within a Ministry of Standards.

Current law

I am aware that much of this is already in legislation. I do not mean to imply that this is not done. I just think it important enough for citizens that it is reasonable for the state to involve itself. It is after all an issue of justice, and justice is one of the few mandates of the state.

More to follow.