Robinson misunderstands limited liability. A key feature of incorporation is that non-employee stockholders have limited liability for actions made by employees. Why should the former, who have minimal control on how the corporation is run, be held personally responsible -- beyond the worth of their stock -- for the actions done wholly by others, employees? Even trying to make them responsible is a big conundrum. The ownership of publicly-traded stocks of big companies is ever-changing. (If non-employee stockholders are personally responsible, then why not lenders, too?)
Robinson abuses the concept of marginal utility. It was developed to explain an individual’s valuation, not different valuations by different persons like he does. He shows no understanding of marginal utility’s importance to market prices or the division of labor.
All but one of his “explanations” of why opponents of socialism are wrong (Chapter 12) are weak or wrong. His response to one alleged criticism of socialism -- that socialists are boring and humorless -- isn’t worth further comment.
He says critics say socialists dislike freedom, but he says “Democratic socialists believe deeply in freedom.” He adds, “capitalism actually restricts people’s freedom. We believe that the choices capitalism gives people -- obey your employer or starve to death -- are not really choices at all “ (234). Huh? They can’t seek a different job, become self-employed (be their own boss), find free food from a charity, or sponge off relatives or socialist friends? He characterizes “free market freedom” as “the freedom to die when your medical bill exceeds your paycheck” (245). Oh my, so simplistic and so wrong.
One “freedom” that Robinson doesn’t mention is that many socialists approve of is a government free to use coercion and bullying against other people they dislike. The freedoms and rights of people they dislike matter little or none to them. When they decide who gets elected, that’s the road to democratic mobocracy, or as Karl Marx said it, the dictatorship of the proletariat.
To be continued.
Thursday, February 13, 2020
Tuesday, February 11, 2020
Why You Shouldn’t Be A Socialist #1
Nathan L. Robinson’s book Why You Should Be A Socialist might convince some socialists they are wrong. It’s that poorly argued.
His critique of capitalism is a harangue and hate speech. Chapter 3 is even titled ‘The Army of Psychopathic Androids: How Capitalism Works.’ He shows at best a superficial understanding of how capitalism works. He shows no understanding of how markets develop and change, the price system, entrepreneurs, division of labor, risk, or the role of knowledge and information in economic production and distribution (see F. Hayek's work). Capitalism (or free enterprise) does not ban ownership by other than stockholders -- worker-owned firms, nonprofits, coops, credit unions owned by depositors, mutual insurance companies owned by policyholders -- none of which Robinson acknowledges. Such firms can exist in capitalism because it’s a voluntary, live and let live system. And if a business were worker-owned like Robinson says all should be, wouldn’t the workers then be capitalists? Or would they somehow operate with no capital, not even borrowing from outside lenders?
He makes many contrasts between capitalism and socialism. One he doesn’t make is voluntary versus coercive. That’s probably because of the following. In capitalism, or a free market, entrepreneurs create goods and services for customers to satisfy the latter's particular needs. They deal with suppliers and employees voluntarily. The entire system is voluntary; coercion is banned. Entrepreneurs are not forced to create, and they don't force investors to give them money, employees to work, or customers to buy their products. Government is the opposite - a system based on coercion. A politician's ability to get something of value for themselves or others is the power to coerce certain people to provide it for them.
“If a corporation were a person, they might be the worst person you have ever met in your life. They might manipulate you into doing things you don’t want to do, take advantage of your weaknesses, lie to you if it benefited them, and show zero regard for basic standards of moral conduct” (78). Does this describe Robinson’s own corporation, Current Affairs, LLC? Anyway, Johnson & Johnson’s reaction to the 1982 Tylenol poisoning contradicts his very biased portrayal. If any business treats its customers and suppliers with zero moral regard, the business will soon fail.
On p. 79 he misrepresents Milton Friedman's position. Friedman did not say a corporation's sole responsibility is to its shareholders and shareholders' only concern is profit. He said a corporation's main responsibility is to its shareholders, and he recognized that shareholders’ desires may include some sort of social responsibility. They also have a means of expressing that, via voting their shares. Some corporations contribute to charities and do charitable gift-matching. Friedman also qualified corporate social responsible action to include the business staying within the rules of the game, i.e., engaging in open and free competition without deception or fraud. Robinson blatantly ignored it. Very likely Friedman made these remarks when others were advocating greater coercion and bullying of business by those in government on behalf of some political view of "social responsibility."
To be continued.
His critique of capitalism is a harangue and hate speech. Chapter 3 is even titled ‘The Army of Psychopathic Androids: How Capitalism Works.’ He shows at best a superficial understanding of how capitalism works. He shows no understanding of how markets develop and change, the price system, entrepreneurs, division of labor, risk, or the role of knowledge and information in economic production and distribution (see F. Hayek's work). Capitalism (or free enterprise) does not ban ownership by other than stockholders -- worker-owned firms, nonprofits, coops, credit unions owned by depositors, mutual insurance companies owned by policyholders -- none of which Robinson acknowledges. Such firms can exist in capitalism because it’s a voluntary, live and let live system. And if a business were worker-owned like Robinson says all should be, wouldn’t the workers then be capitalists? Or would they somehow operate with no capital, not even borrowing from outside lenders?
He makes many contrasts between capitalism and socialism. One he doesn’t make is voluntary versus coercive. That’s probably because of the following. In capitalism, or a free market, entrepreneurs create goods and services for customers to satisfy the latter's particular needs. They deal with suppliers and employees voluntarily. The entire system is voluntary; coercion is banned. Entrepreneurs are not forced to create, and they don't force investors to give them money, employees to work, or customers to buy their products. Government is the opposite - a system based on coercion. A politician's ability to get something of value for themselves or others is the power to coerce certain people to provide it for them.
“If a corporation were a person, they might be the worst person you have ever met in your life. They might manipulate you into doing things you don’t want to do, take advantage of your weaknesses, lie to you if it benefited them, and show zero regard for basic standards of moral conduct” (78). Does this describe Robinson’s own corporation, Current Affairs, LLC? Anyway, Johnson & Johnson’s reaction to the 1982 Tylenol poisoning contradicts his very biased portrayal. If any business treats its customers and suppliers with zero moral regard, the business will soon fail.
On p. 79 he misrepresents Milton Friedman's position. Friedman did not say a corporation's sole responsibility is to its shareholders and shareholders' only concern is profit. He said a corporation's main responsibility is to its shareholders, and he recognized that shareholders’ desires may include some sort of social responsibility. They also have a means of expressing that, via voting their shares. Some corporations contribute to charities and do charitable gift-matching. Friedman also qualified corporate social responsible action to include the business staying within the rules of the game, i.e., engaging in open and free competition without deception or fraud. Robinson blatantly ignored it. Very likely Friedman made these remarks when others were advocating greater coercion and bullying of business by those in government on behalf of some political view of "social responsibility."
To be continued.
Sunday, February 9, 2020
Free File, Gov't Audit, ProPublica
The Treasury Department's Inspector General for Tax Administration conducted an audit of Free File program. IRS management did not, but could comment on the audit and did. Here is the audit report. Following is a summary.
To participate in the Free File program, taxpayers must access the IRS.gov Free File web page and choose a software application there, which directs them to a provider's (member's) website, e.g. TurboTax. Many taxpayers are unaware of this requirement (They believe wrongly they can go directly to the provider's website.) Once on the provider's website, taxpayers are not guaranteed a free return filing. On the Free File site, the taxpayer faces a myriad of criteria for being able to utilize the various software applications. Even if the taxpayer decides that he or she meets the criteria initially, upon entering his or her return information, the taxpayer could then be informed that the return no longer qualifies for free filing.
The modified agreement between members and the IRS requires the member to direct the taxpayer back to the IRS.gov Free File web page, where the taxpayer must restart the process to select a Free File offer. However, at this point the taxpayer has spent significant time on attempting to file, and thus may prefer to pay a fee rather than restart the time-consuming process. The auditor suspects this is why providers do not disclose all of their criteria on the IRS.gov Free File web page.
The auditor made 8 recommendations. The first 3 follow.
1. Better advertising of the Free File program and how to use it.
2. Require providers to fully disclose all criteria on the IRS.gov Free File web page.
3. Establish goals and performance metrics for the Free File program.
Regarding #2, IRS management said it had seen no evidence of any additional criteria being used to charge taxpayers!
How did ProPublica respond here?
1. They used the "scathing" audit as a chance to repeat their attacks on providers such as TurboTax and H&R Block.
2. They described the recommendations of the auditors.
3. They excused the IRS due to budget cuts
What's missing from their response? They said nothing at all about the scenario described above where the taxpayer attempts to use one of the Free File software application but fails. Like I wrote here, ProPublica invokes a double standard -- one for providers and a different one for the IRS! In ProPublica's view, all blame for the incomplete criteria on the Free File web site goes to the providers and none to the IRS, despite the site being owned by the IRS. I don't agree with the auditor's suspicion stated above. Hypothetically, if the criteria were complete, it would be more complicated, and even more taxpayers would be thwarted from using it. And who would ProPublica then blame for that? The providers 100% and the IRS 0%, of course.
Yahoo News, CBS News, and Daily Beast parroted and spread ProPublica's story.
In my personal experience as a volunteer, most taxpayers who come to us want help. Many want somebody else to do the work for them. Dealing with the software themselves alone is unpleasant. VITA and similar sites offer the most help in person. Software vendors' paid products offer far more help than IRS.gov Free File.
To participate in the Free File program, taxpayers must access the IRS.gov Free File web page and choose a software application there, which directs them to a provider's (member's) website, e.g. TurboTax. Many taxpayers are unaware of this requirement (They believe wrongly they can go directly to the provider's website.) Once on the provider's website, taxpayers are not guaranteed a free return filing. On the Free File site, the taxpayer faces a myriad of criteria for being able to utilize the various software applications. Even if the taxpayer decides that he or she meets the criteria initially, upon entering his or her return information, the taxpayer could then be informed that the return no longer qualifies for free filing.
The modified agreement between members and the IRS requires the member to direct the taxpayer back to the IRS.gov Free File web page, where the taxpayer must restart the process to select a Free File offer. However, at this point the taxpayer has spent significant time on attempting to file, and thus may prefer to pay a fee rather than restart the time-consuming process. The auditor suspects this is why providers do not disclose all of their criteria on the IRS.gov Free File web page.
The auditor made 8 recommendations. The first 3 follow.
1. Better advertising of the Free File program and how to use it.
2. Require providers to fully disclose all criteria on the IRS.gov Free File web page.
3. Establish goals and performance metrics for the Free File program.
Regarding #2, IRS management said it had seen no evidence of any additional criteria being used to charge taxpayers!
How did ProPublica respond here?
1. They used the "scathing" audit as a chance to repeat their attacks on providers such as TurboTax and H&R Block.
2. They described the recommendations of the auditors.
3. They excused the IRS due to budget cuts
What's missing from their response? They said nothing at all about the scenario described above where the taxpayer attempts to use one of the Free File software application but fails. Like I wrote here, ProPublica invokes a double standard -- one for providers and a different one for the IRS! In ProPublica's view, all blame for the incomplete criteria on the Free File web site goes to the providers and none to the IRS, despite the site being owned by the IRS. I don't agree with the auditor's suspicion stated above. Hypothetically, if the criteria were complete, it would be more complicated, and even more taxpayers would be thwarted from using it. And who would ProPublica then blame for that? The providers 100% and the IRS 0%, of course.
Yahoo News, CBS News, and Daily Beast parroted and spread ProPublica's story.
In my personal experience as a volunteer, most taxpayers who come to us want help. Many want somebody else to do the work for them. Dealing with the software themselves alone is unpleasant. VITA and similar sites offer the most help in person. Software vendors' paid products offer far more help than IRS.gov Free File.
Friday, February 7, 2020
Amazon 2019, ITEP and its wake
ITEP published another erroneous and biased article about Amazon's income taxes, this time for 2019. I wrote about ITEP's reporting of 2018 results in December, 2019. This latest report asserts that Amazon paid only $162 million in U.S. federal income tax in 2019, an "effective" rate of only 1.2% of its U.S. income before tax of $13,285 million.
1. The $162 million is not income taxes paid; it is part of income taxes accrued in accordance with GAAP accounting principles and practices.
2. Amazon's 10-K page 63 clearly states it paid $881 million U.S. federal income tax in 2019. The author ignored it. 881/13,285 = 6.6%.
3. The author also ignored the other part of Amazon's 2019 GAAP provision for income tax, $914 million. Thus the "effective" tax rate was (162 + 914)/13,285 = 8.1%, not 1.2%!
4. The author says, "The company reports that it deferred $914 million of federal taxes to future years." This is wrong and backwards. The $914 million on page 64 of the 10-K is not deferred from 2019 to future years; it was deferred from past years to 2019. What the author describes goes on a balance sheet, not an income statement.
To illustrate, suppose Company X spent $500 million on capital equipment in 2018, GAAP requires spreading the cost over 5 years, but the IRS allowed all of it to be deducted in 2018. GAAP allowed deducting only $100 million in 2018. So $400 is deferred, with $100 million deductible each year 2019-2022. The tax effect is a tax rate times $100 million, or $21 million if the tax rate is 21%. So $21 million goes to the deferred part of Company X's 2019 provision for income taxes. Amazon's $914 million deferred income tax provision for 2019 is akin to Company X's $21 million for 2019.
Losses carried forward from earlier years may also affect a deferred provision for income tax. It appears to have reduced Amazon's 2019 provision by $34 million.
CNBC, Yahoo Finance, and The Verge parroted ITEP's report. I suspect Bernie Sanders will parrot it on the campaign trail, too.
1. The $162 million is not income taxes paid; it is part of income taxes accrued in accordance with GAAP accounting principles and practices.
2. Amazon's 10-K page 63 clearly states it paid $881 million U.S. federal income tax in 2019. The author ignored it. 881/13,285 = 6.6%.
3. The author also ignored the other part of Amazon's 2019 GAAP provision for income tax, $914 million. Thus the "effective" tax rate was (162 + 914)/13,285 = 8.1%, not 1.2%!
4. The author says, "The company reports that it deferred $914 million of federal taxes to future years." This is wrong and backwards. The $914 million on page 64 of the 10-K is not deferred from 2019 to future years; it was deferred from past years to 2019. What the author describes goes on a balance sheet, not an income statement.
To illustrate, suppose Company X spent $500 million on capital equipment in 2018, GAAP requires spreading the cost over 5 years, but the IRS allowed all of it to be deducted in 2018. GAAP allowed deducting only $100 million in 2018. So $400 is deferred, with $100 million deductible each year 2019-2022. The tax effect is a tax rate times $100 million, or $21 million if the tax rate is 21%. So $21 million goes to the deferred part of Company X's 2019 provision for income taxes. Amazon's $914 million deferred income tax provision for 2019 is akin to Company X's $21 million for 2019.
Losses carried forward from earlier years may also affect a deferred provision for income tax. It appears to have reduced Amazon's 2019 provision by $34 million.
CNBC, Yahoo Finance, and The Verge parroted ITEP's report. I suspect Bernie Sanders will parrot it on the campaign trail, too.
Wednesday, February 5, 2020
Stand Out of Our Light #3
Reading Stand
Out of Our Light was
a refreshing change from reading The
Age of Surveillance
Capitalism,
which I wrote about here.
James Williams wasn't eager for a lot of government control the way
Shoshana Zuboff was. Zuboff considers Google, Facebook, Twitter as
enemies. She believes they have too much power over us and their
platforms enable others having too much political influence. Williams
in effect echoes Pogo, "We have seen the enemy and he is us."
For
a more appreciative and optimistic article about personalized
advertising, see this
article.
In my view it's too rosy, since there is some dark side to this new
digital world. I sometimes get annoyed by being asked if I want to
sign up for notifications, by popups, and having to scroll by several
ads in order to read one article. I use an ad blocker. Fraud and
scams lurk behind some advertising. On the other hand, I am amazed by
the technology and appreciate a news feed that obviously
recognizes my past attention.
Monday, February 3, 2020
Stand Out of Our Light #2
The last four chapters of Stand Out of Our Light concern our freedom of attention.
Chapter 10. Rejecting attentional serfdom may be the defining moral and political task of our times. To date, the problems of "distraction" have been minimized or minor annoyances. Yet the competition for attention and the "persuasion" of users ultimately amounts to a project of the manipulation of the will. Since the inception of modern advertising we have seen it continually seek not only to fulfill existing desires, but also to generate new ones, not only to meet people's needs and demands, but to produce more where none previously existed.
Chapter 11. Pitfalls are sidestepped and misconceptions are cleared. There are things we should avoid doing in response to the challenges of the attention economy. We must be vigilant of slipping into an overly moralistic mode. Metaphors of food, alcohol, or drugs can be signals of such over-moralizing. We shouldn't wholly rely on self-regulation by the advertisers or their platforms to solve all problems. Ultimately, there is no one to blame. At "fault" are more often the emerging dynamics of complex systems rather than the decision-making of a few individuals.
Chapter 12. Visions of rebellion and reform. A hand-drawn map to a place no one has ever been. In digital media, advertising rules. It has moved from "underwriting" the content to "overwriting" it. In advertising parlance, "remnant inventory" refers to a publisher's leftover space, which it can sell at very low prices. [This might refer to the many ads that appear below articles on my smartphone.] In the European Union, website owners must obtain consent from each user whose browsing behavior they wish to track with "cookies." [Here in the USA I have seen a flurry of these consent requests lately.]
Chapter 13. The music swells and the rocket hits. A new light appears in the sky. Rejecting the present regime of attentional serfdom requires rejecting the idea we are powerless. It means rejecting novelty for novelty's sake and disruption for disruption's sake. The right sort of redesign hasn't arrived yet, but it has begun. The degree to which we are able and willing to struggle for ownership of our attention is the degree to which we are free.
Chapter 10. Rejecting attentional serfdom may be the defining moral and political task of our times. To date, the problems of "distraction" have been minimized or minor annoyances. Yet the competition for attention and the "persuasion" of users ultimately amounts to a project of the manipulation of the will. Since the inception of modern advertising we have seen it continually seek not only to fulfill existing desires, but also to generate new ones, not only to meet people's needs and demands, but to produce more where none previously existed.
Chapter 11. Pitfalls are sidestepped and misconceptions are cleared. There are things we should avoid doing in response to the challenges of the attention economy. We must be vigilant of slipping into an overly moralistic mode. Metaphors of food, alcohol, or drugs can be signals of such over-moralizing. We shouldn't wholly rely on self-regulation by the advertisers or their platforms to solve all problems. Ultimately, there is no one to blame. At "fault" are more often the emerging dynamics of complex systems rather than the decision-making of a few individuals.
Chapter 12. Visions of rebellion and reform. A hand-drawn map to a place no one has ever been. In digital media, advertising rules. It has moved from "underwriting" the content to "overwriting" it. In advertising parlance, "remnant inventory" refers to a publisher's leftover space, which it can sell at very low prices. [This might refer to the many ads that appear below articles on my smartphone.] In the European Union, website owners must obtain consent from each user whose browsing behavior they wish to track with "cookies." [Here in the USA I have seen a flurry of these consent requests lately.]
Chapter 13. The music swells and the rocket hits. A new light appears in the sky. Rejecting the present regime of attentional serfdom requires rejecting the idea we are powerless. It means rejecting novelty for novelty's sake and disruption for disruption's sake. The right sort of redesign hasn't arrived yet, but it has begun. The degree to which we are able and willing to struggle for ownership of our attention is the degree to which we are free.
Saturday, February 1, 2020
Stand Out of Our Light #1
Stand Out of Our Light is a book by James Williams. I enjoyed reading it, and it's short, only 130 pages.
It's about freedom and resistance in the attention economy, in which the Internet and smartphones are used to grab and keep our attention. The author used to work for Google but has since become a teacher of philosophy at University of Oxford. The title is derived from an amusing story told in Chapter 1 about the ancient Greek philosopher Diogenes. He sometimes walked in the daylight carrying a lantern. When people asked him why, he replied, "I'm looking for an honest man." (That's not the amusing story.)
The author prefers to call the current era the "Age of Attention" rather than the more common Information Age. The abundance of information easily accessed puts demands on our attention. The new technologies, the Internet and smartphones, challenge self-regulation. The design of technology embodies certain goals and values, and thus shapes the world we experience. The cyber- in "cybernetics" and the gover- in "government" both stem from the same Greek root: kyber-, "to steer or to guide" (p. 27).
In the twentieth century the modern advertising industry matured and began systematically applying new knowledge about human psychology and decision making. Advertising scope extended beyond providing information to include shaping behavior and attitudes. The goals and metrics of advertising became the dominant ones in the design of digital services. Google, Twitter, and Facebook are at core advertising companies. [Advertising is their dominant source of revenue.] Initially "cookies" were created to enable "shopping carts." Now they follow us as we navigate on our devices.
Chapters 7-9 of the book are organized by three metaphors.
- The "Spotlight" - Our immediate capacities for navigating awareness and action toward tasks. Enables us to do what we want to do.
- The "Starlight" - Our broader capacities for navigating life "by the stars" of our higher goals and values. Enables us to be what we want to be.
- The "Daylight" - Our fundamental capacities -- such as reflection, metacognition, reason, and intelligence -- that enable us to define our goals and values to begin with. Enables us to "want what we want to want."
These "lights" of attention pertain to doing, being, and knowing (p.49).
It's about freedom and resistance in the attention economy, in which the Internet and smartphones are used to grab and keep our attention. The author used to work for Google but has since become a teacher of philosophy at University of Oxford. The title is derived from an amusing story told in Chapter 1 about the ancient Greek philosopher Diogenes. He sometimes walked in the daylight carrying a lantern. When people asked him why, he replied, "I'm looking for an honest man." (That's not the amusing story.)
The author prefers to call the current era the "Age of Attention" rather than the more common Information Age. The abundance of information easily accessed puts demands on our attention. The new technologies, the Internet and smartphones, challenge self-regulation. The design of technology embodies certain goals and values, and thus shapes the world we experience. The cyber- in "cybernetics" and the gover- in "government" both stem from the same Greek root: kyber-, "to steer or to guide" (p. 27).
In the twentieth century the modern advertising industry matured and began systematically applying new knowledge about human psychology and decision making. Advertising scope extended beyond providing information to include shaping behavior and attitudes. The goals and metrics of advertising became the dominant ones in the design of digital services. Google, Twitter, and Facebook are at core advertising companies. [Advertising is their dominant source of revenue.] Initially "cookies" were created to enable "shopping carts." Now they follow us as we navigate on our devices.
Chapters 7-9 of the book are organized by three metaphors.
- The "Spotlight" - Our immediate capacities for navigating awareness and action toward tasks. Enables us to do what we want to do.
- The "Starlight" - Our broader capacities for navigating life "by the stars" of our higher goals and values. Enables us to be what we want to be.
- The "Daylight" - Our fundamental capacities -- such as reflection, metacognition, reason, and intelligence -- that enable us to define our goals and values to begin with. Enables us to "want what we want to want."
These "lights" of attention pertain to doing, being, and knowing (p.49).
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