Business & Economics: October 2005 Archives
One of the intangible kinds of wealth that "poor" Americans enjoy is societal protection against devestating natural disasters like the earthquake in Pakistan.
One of the most disturbing aspects of Hurricane Katrina, to those of us fortunate enough not to be directly affected, was that our vast national wealth apparently did little to mitigate the damage. However, that's not true at all! Weather satellites and weather prediction are very expensive and very hard to do, and our investment in those technologies gave the residents of the Gulf Coast days of warning time that would have been unthinkable for more primitive societies. Those extra days potentially saved hundreds of thousands of lives.
As for earthquakes, it's unlikely that a 7.6 in California would kill nearly as many people as the quake in Pakistan appears to have killed. I'm no expert, but I'd predict an American death toll of hundreds, not tens of thousands as we're seeing there. Why? Because our structures are built to much higher standards, at much greater cost, than similar buildings in Pakistan. Further, we don't have hills and mountains full of stone age villages just waiting to succumb to mudslides.
Even the poorest Americans enjoy the intangible benefits of our advanced civilization, though the wealth won't show up in their bank accounts or income statements. Another reason why, by any reasonable historical standard, there really are no "poor" Americans.
The Evangelical Ecologist has a fantastic roundup of the many benefits of telework (a.k.a., telecommuting) to individuals and to society. I'm not an environmentalist by any stretch of the imagination, but I'm all for reducing pollution and preserving the environment as secondary benefits that result from increasing efficiency, productivity, and quality of life.
Private Sector Industry Studies:· An International Telework Association & Council (ITAC) study found that telework reduced turnover by an average of 20 percent, boosted productivity by up to 22 percent, and trimmed absenteeism by 60 percent. Additionally, it allowed companies to adhere more closely to the Clean Air Act, the Family and Medical Leave Act, and the Americans with Disabilities Act.
· An earlier (1999) study by Telework America showed that employees who telework can save their agencies up to $10,000 per year in reduced absenteeism and retention costs.
· A study by the American Management Association found that the absenteeism costs were reduced by 63 percent, an average of $2,000 saved for every employee.
· AT&T estimates its telework program realizes approximately $150,000,000 in annual savings ($100,000,000 through direct employee productivity, $35,000,000 through reduced real estate costs, and $15,000,000 through enhanced employee retention). For employees, cost savings from reduced commuting as well as improved morale and work productivity were identified as benefits. Also, AT&T teleworkers work an average of 5 more hours per week than AT&T office workers.
· Dow Chemical: Administrative costs have dropped 50% annually (15% attributed to commercial real estate costs.) Productivity increased by 32.5% (10% through decreased absenteeism, 16% by working at home and 6.5% by avoiding the commute.)
The cost savings in energy, real estate, facilities management, and so forth are astounding. As an engineer, I'm keenly aware that jobs move around geographically, and I hate commuting. I'd never take a job 20 miles away unless I had no other choice, but it would be a whole different story if I could work from home a few days a week. In Los Angeles, or other highly congested urban centers, a major telecommuting trend could lead to tremendous decreases in traffic, pollution, and stress.
(HT: Instapundit.)
The recent ice debacle is an excellent example of why centralized economies perform so poorly.
Ninety-one thousand tons of ice cubes, that is, intended to cool food, medicine and sweltering victims of the storm. It would cost taxpayers more than $100 million, and most of it would never be delivered. ...Over about a week after the storm, FEMA ordered 211 million pounds of ice for Hurricane Katrina, said Rob Holland, a spokesman for the Army Corps of Engineers, which buys the ice that FEMA requests under a contract with IAP Worldwide Services of Cape Canaveral, Fla. The company won the contract in competitive bidding in 2002, Mr. Holland said.
Officials eventually realized that that much ice was overkill, and managed to cancel some of the orders. But the 182 million pounds actually supplied turned out to be far more than could be delivered to victims. ...
Some people, including Michael D. Brown, the former FEMA director, have questioned why the agency spends so much money moving ice.
"I feebly attempted to get FEMA out of the business of ice," Mr. Brown told a House panel this week. "I don't think that's a federal government responsibility to provide ice to keep my hamburger meat in my freezer or refrigerator fresh."
Well Mr. Brown is certainly right about that! Ice can be a critial supply in some circumstances, but when you're giving it away for free you've got no idea where it should go or when. As many commentators have pointed out recently -- defending "price gouging" -- prices are signals to the market of when to produce and distribute resources. If the price for a commodity is higher in one place than another, that price is a signal to producers to supply more. But when the government buys a bunch of ice to give away for free, the job gets horribly bungled because their socialist tendencies distort and ignore the ice market. What's more, just imagine what useful supplies this money and these trucks could have been used for if FEMA hadn't hoarded them.
Despite the absurdity of the debit card give-away, people spending cash are less of a distortion on the market than when the government gives away resources with less liquidity.
