From time to time, the claim is made that we need to import indentured servants from Asia, because the STEM fields are short of labor. This is a variation of the old line about crops rotting in the fields for the lack of stoop labor. The fact that no human living in America has ever experienced a food shortage due to crops rotting in the fields underscores the fact that these claims are nonsense. Indentured servants from Asia are cheap and more important, the threat of them depresses wages for American workers in the STEM jobs.

That’s the cost of cheap labor that is easy to see. There are other costs that are not so obvious. In the case of the tech fields, indentured servants from Asia have had the perverse effect of discouraging young Americans from going into these fields. When tech firms started filling entry level jobs with foreign labor, they made the field unattractive to young people, who correctly saw that jobs were scarce and the ones available paid low wages. Young Americans were advised to not go into technology, as a result.

Put another way, cheap foreign labor drove out domestic labor from these entry level jobs, thus institutionalizing the use of indentured servants in the low level tech jobs. Slavery had the same effect where it was practiced. In the case of tech, there is a social element involved. You go to college in order to get  a good job. That’s a social definition that goes beyond earnings. If your field requires you to work with smelly South Asians for five years until you can be the supervisor of smelly South Asians, that’s viewed as a low-status field.

There’s been another consequence to the use of indentured servants. People think of tech as coding shops in Silicon Valley, but the vast majority of American business relies on small local firms that bring a combination of technical and business skills to the their role as technology consultants. The usual pattern is someone works as a programmer for a developer and then goes out on his own as a consultant, supporting clients that use the software that he worked on as a developer. He becomes their part-time CTO.

The result of flooding the entry level jobs with middle-aged Asians on H1-B visas has been a shortage of people in these higher end consulting and development jobs. In many parts of the country, the shortage of people with a mix of business and technology skills that can be used to solve real world problems is acute. You can find plenty of pajeets, who can write code but are useless at solving problems. Locating someone with business and programming skills that can solve real problems is becoming close to impossible.

At the other end of the labor market, the hidden cost of cheap labor has created another problem. The landscaper hiring Mam-speaking tribesman from Guatemala is no longer hiring teenagers on summer break. Retail operators in vacation areas game the system and import Eastern Europeans for service jobs. The availability of cheap foreign labor has made the summer job a thing of the past. It used to be a part of growing up in America, but now it is a rarity. Instead, seasonal work is done by foreigners.

In general, the part-time job and summer job was when a young person started to learn how to be an adult. They had to show up on time and learn how to get along with strangers. They had to learn how to put up with a crappy boss and perform tasks that seemed stupid and pointless, in order to get paid. They also learned the value of money and its connection to labor. That first check, with the taxes taken out of it, was the great eye opener for every young American. Today, they don’t experience that until adulthood.

There’s another aspect to this. The summer job for boys was often manual labor, like operating a rake or lawnmower for that landscaper. Maybe it was as a laborer on a job site for a roofer or painter. It was there that a young man got his first taste of being a man, because he was around adult males in their natural habitat. A young man learned that men are not as forgiving as mom and that you had to be earn their respect. Young males today don’t experience this. Instead they live like girls through college and come out soft.

This is probably why millennials have such a terrible reputation among employers. The girls are spoiled brats, making crazy demands, while the boys are hysterical sissies. One of the things employers will tell you on the side is that they are very careful about hiring millennials. They would prefer to overpay for a semi-retired boomer than hire a petulant man-child from the millennial generation. When a millennial takes over a family business from a retiring parent, it is a good bet the company will go through a rough transition.

Public policy is about trade-offs. The cost of cheap labor is not limited to the direct cost to labor markets. There are hidden, long term social costs. The generations of young people warped by the consequences of not working will show up in the culture long after pajeet is back in Bombay wrangling cobras. What foreign labor does is it monetizes future social capital and pulls it forward. It is a form of debt creation, not a lot different than eating the seed corn. Future social harmony is consumed today, with no way to replace it.

Something I noticed, when I started posting podcasts to YouTube, is that copyright strikes come up automatically. Put in just a few seconds of any song, no matter how obscure, and YouTube will say the copyright owner made a claim. This is nonsense, of course, as no one could be policing this stuff and filing claims. The software scans the uploads for patterns matching something in their database. If the pattern is close enough to anything, then YouTube issues a copyright strike and puts the onus on you to dispute it.

I tested this by using some music I found on an old CD. It was from a cover band a million years ago. I took some clips and uploaded them with some talking by me. Sure enough, the clip got flagged for a copyright claim. The ridiculous part was the alleged claimant was another cover band. I tried a few more clips and no hits, but then a few more were flagged, with different claimants. The last batch of hits were completely wrong. It appears close enough is enough for them to make you go through the hassle of disputing it.

The game that YouTube is playing is both defensive and underhanded. By defaulting some copyright claim on everything, even vaguely similar to what they have in their database, they avoid being sued by legitimate copyright holders. That makes sense, given the nature of copyright laws. Of course, they’re also using this as an excuse to avoid paying creators for their work. YouTube loses money, so anything they can do to avoid paying creators drops right to their bottom line. They know most people will not dispute the claims.

That came to mind when I saw this on Drudge the other day.

Ed Sheeran is on the receiving end of a monster $100 million lawsuit by a company claiming the singer ripped off a Marvin Gaye classic.

A company called Structured Asset Sales filed the lawsuit, claiming Ed’s song, “Thinking Out Loud,” is a carbon copy of Gaye’s “Let’s Get it On.”

According to the lawsuit, Sheeran’s song has the same melody, rhythms, harmonies, drums, bassline, backing chorus, tempo, syncopation and looping as “Let’s Get it On.”

Gaye’s song was written by a guy named Edward Townsend and Gaye in 1973. Townsend died in 2003, and Structured Asset Sales bought one third of the copyright. So, take that in … the claim is that just 1/3 of the song is worth $100 MIL!.

Sheeran’s song was a huge hit … nominated for a Grammy for Best Record, Best Performance and Song of the Year in 2016.

And, according to the docs, Ed’s single and the album it’s on — “X” — sold more than 15 million copies and the song has been played on YouTube more than a billion times.

Sheeran has already been sued by Townsend’s heirs. He called BS on that suit. No word if the Gaye family might also sue.

Now, I clicked on the story, because I was puzzled by why the estate of a long dead singer would be suing some goofy looking white kid. It turns out that the goofy looking white kid is a pop star of some note and he is accused of ripping off Marvin Gaye. It is another reminder that I am now completely disconnected from modern pop culture. Not in a million years would I have guessed that guy was a pop star. He looks like a dork you would see working in a cubicle. I did not find his music enjoyable, but what do I know?

Of course, the idea of making a copyright claim on something you give away, by posting on the internet, is a mockery of the law. It’s perfectly reasonable for a performer to complain about people ripping off their music and posting it on-line, but when the performer gives the content away, they should have no complaint. Not only that, a quick search of YouTube finds every Marvin Gaye song ever recorded, is posted multiple times. There’s even live stuff from the old days. Exactly no one is paying for Marvin Gaye music.

Listen to the songs in question and it is hard to see the similarities, at least not enough to support the claim. That’s not going to be an issue, because if it goes to court, both sides will have digital experts claiming the songs are digitally the same or different, according to each side. There are only so many possible song ditties, so by now every conceivable riff has been used in a song. Using software to compare songs, it’s possible to claim everything is derivative, if not a straight copy, of something else.

None of that matters. A battle of experts in front of a jury means a coin toss, so the case will be settled. It does not cost a lot to file the initial claim, but it does cost money to litigate these claims. Plus, the goofy white guy has his reputation being tarnished, so both sides have an incentive to settle. The estate of Marvin Gaye just wants money, so they will be happy to take a quiet payoff off, without the goofy white guy admitting to anything. That’s the whole point of these lawsuits. The whole thing is a form of greenmail.

Copyright abuse is a becoming a racket. The Digital Millennium Copyright Act (DMCA) was intended to protect owners of digital content, but grifters have figured out how to game the system for all sorts of reasons. Video game companies will file DCMA notices against YouTubers, who post bad reviews. Hosting platforms slip language into their terms of service, to claim ownership of your content. Restaurants are suing reviewers for bad reviews. Of course, everyone can claim ownership of just about any digital content.

It is a good example of another negative outcome from the technological revolution. The ability to copy and distribute content digitally means it is easy to steal. That means people steal it. The normal way an owner protects his property is by locking it up, but in the case of digital content, that’s not possible, so the state has tried to create a magical solution, which just encourages grifters and racketeers. My guess is the legal fees for copyright issues are one of the biggest cost of producing pop songs now.

The unexpected result of the technological revolution is that large swaths of intellectual property have been inadvertently swept into the public domain. In an effort to return the profits to the private owners of the content, laws have been passed, but the result is all of the costs have been swept into the public domain. The definition of the technological revolution is the socializing of costs, with the privatization of profit. Technology makes it possible to shift costs a million small ways, onto an unsuspecting public.

When most people think of business, they think of people buying and selling, making something and selling it or maybe selling a service. The old adage of buy low and sell high is still the basic idea of business. Rich people, however, like the people who currently rule over us, don’t think about any of that stuff when they hatch a business scheme. Instead, they think about how they can shift the cost of doing business onto the public or some unsuspecting suckers, like the American taxpayer. It’s how rich people do business.

This is not a new idea. Cost shifting was an integral part of the Industrial Revolution. The factory owner was not covering the full cost of his labor, for example, because he did not have to cover the cost of workplace health a safety. Building a bridge was a lot cheaper, because the cost of worker deaths was not the responsibility of the builder. No one thought about the costs of environmental degradation in the 19th century, so companies were free to dump poison into rivers and pump pollutants into the atmosphere.

It is not unreasonable to argue that the great fortunes made during the Industrial Revolution, at least in America, were made in large part from cost shifting. After all, it was not just the direct costs like labor, that were shifted onto the public. Once a man got rich, he could afford to buy politicians, who would pass laws giving the rich business owners leverage over their smaller competitors. It’s not an accident that those great fortunes were created early in the industrial age and none were created in later stages.

The political class in the early 20th century was still strong enough to push back against the industrial barons. It became politically popular to push through trust busting to weaken the industrialist. Then it became popular to push through reforms and allow unions to organize labor. Conservative proselytizing against these policies over the decades has obscured the fact that much of it was an effort to push those private costs back into private hands. The end of the industrial age corresponded with the end of cost shifting.

Today, cost shifting is everywhere in the economy. Tech companies have exploited pubic utilities, like the internet, to provide media services, without having to pay distribution costs. Amazon built its business, in part, on not having to collect sales taxes like every other retailer in America. Currently, their shipping costs are subsidized by the US Postal Service which loses billions every year. Then there are the many rackets that rely on government subsidies. Higher education is just one big upper middle-class subsidy.

The biggest cost shifting racket today is the use of imported labor. Recruiting, hiring and training Americans is expensive, because America is a first world society.Citizens expect first world working conditions. That makes it hard to shift labor costs onto the public, so companies prefer foreign labor. That way, they can pay lower wages and they avoid having to deal with employees who know their rights or have ideas about forming a union. Plus, foreign workers don’t sue for things like discrimination or poor safety conditions.

There’s a cost to this sort of predatory labor system, but those costs are shifted to the public in the form of depressed wages and high social costs. The migrants in every hospital emergency room are not having their bills picked up by their employer. When Pablo decides to get drunk and drive over an American, his employer is not paying the victim’s family or covering the cost of Pablo’s incarceration. The fact is, there is nothing more expensive to a society than cheap labor, it’s just hidden from public view.

The question though is if it is possible to get rich in a mature economy without massive cost shifting. No great fortunes were amassed from the end of World War Two until the technological revolution. That was a period when business costs were shifted back onto business. The tech revolution made it possible to get around the regulations and laws, because government never anticipated a digital economy. That’s starting to change just as the technological revolution is winding down and the public is pushing back.

Take a look at the newspaper business. Prior to the digital age newspapers could be run profitably, but they had high labor and capital costs. In theory, the digital age offered the chance to slash those costs. The internet does not require printing presses and delivery trucks. But, the internet also slashed their revenue stream. All those ad dollars are now at eBay, Monster and so forth. Newspapers, without monopoly power and with no ability to shift their costs to the public, are all losing money and headed for extinction.

That does not mean it is impossible to turn a profit without cost shifting, but it does suggest it is impossible get rich without it. At least not billionaire rich. That would certainly explain the fanatical commitment to migrant labor by American business. It also explains the increasingly opaque financial system. It’s not so much about reducing costs as hiding them in the costs of other goods and services, like taxes and health care. It’s a lot easier and profitable than trying to make a better product or become more efficient.

The current age is one of extreme short term thinking. Americans have always been known for taking the short view, but today our culture is built around a “live for the moment” attitude. Sit in a business meeting and exactly no one talks about downstream possibilities. It is all about this month, this quarter or, for the sprinkling of long term planners, the remainder of the year. You see this in our politics, where everyone reacts to the latest polls or latest news event. We are a high time preference society now.

This is why immigration reform is proving to be a non-starter. The Left side of the political class sees nothing but opportunities to rig the next election with foreign ringers, so anything that interferes with that is blocked. The Right side is wholly owned by the cheap labor lobbies, who like the idea of disposable labor. It’s not that the people in charge think their grandchildren will be exempt from the ravages of mass migration. It’s that they are unable to think past the moment. For our rulers, tomorrow never comes.

Just because the people in charge have no interest in the future does not mean the future is equally disinterested in us. That’s what will make the coming years interesting, with regards to the economy. The Fed has finally begun the process of tightening the money supply, after a decade of an extremely loose policy.That means rising interest rates in the US and a strengthening dollar, relative to other currencies. This is not going to happen overnight, but the Fed is going to move quickly now that there are signs of real inflation.

The trouble is s big chunk of the economy have become addicted to cheap money. Take a look at the car business. Every car maker has setup special lending facilities so they can entice buyers. Instead of figuring out how to make cheaper cars, they offer near zero interest and extended terms. You can get from most makers a seven year term on a new car, along with a super-low interest rate. They may even offer cash back you can use for the down payment. There’s even sub-prime lending at the lower end of the market.

Now, the Feds are not bringing back 1970’s interest rates and they are going to move slow. Still, it has been a long time since interest rates have been close to historic averages and that means most people making decisions don’t know what it is like to live in that world. It has been 18 years since mortgage rates were above seven percent. It’s been 27 years since we saw eight percent rates. It’s been a decade since rates were above five percent. In other words, the world has become used to historically low rates.

It’s not just the retail end that will have to come to terms with a world of rising interest rates. Most business runs on credit these days. The bigger the business, the bigger the debt burdens. US corporation have $4 trillion in debt that will roll over in the next five years, according to industry analysts. What this means is their debt service will increase as they refinance old debt with new, more expensive debt. That’s how corporate debt works. Most of it is fueled by bonds, so new debt pays maturing debt plus interest.

Of course, business is not the only institutions relying on cheap credit. Governments around the world have come to depend on the endless appetite for sovereign debt to keep borrowing rates low. When central banks take money off the street, it means there is less money to chase after sovereign debt. Healthy debtors like the US government will not feel the pinch, but the struggling countries in Europe and South America are going to find it more difficult to sell debt. It may not take much to topple a country like Argentina.

Again, the Fed is not bringing us back to the 1970’s. Baring some inconceivable catastrophe, no one reading this will ever see double-digit interest rates again. It’s just that since the end of the Cold War, America has been living with historically low interest rates and it has changed the nature of our economy. Cheap credit makes short term deals more viable and more common. It also increases risk taking. The result of all this cheap money is an economy that lives for the moment. Everyone is in it for the quick buck.

In theory, the slow gradual return of interest rates to something close to historic norms should not have a big impact. Almost thirty years of super-low rates, means most of the institutional knowledge about working in a normal rate environment is gone or heading for retirement. That means a lot of people are going to have learn the hard way about how business and finance works in a less than free money era. Therefore, no one can really be sure what is going to happen as the Feds slowly raise rates over the next years.

One of the many reason libertarians had no choice but to evolve into the pep squad for the managerial state is they could never finish their own sentences without sounding like loons. For example, their reification of free markets, often has them sounding like primitive shaman. Their deification of personal liberty would lead them to defending morally abhorrent things like the poor selling their organs to the rich. In order to avoid this, they developed the habit of stopping short of fully stating the inevitable ends of their ideology.

One of the errors of libertarianism, as well as the various tribes of the New Right, is the mistaken belief that markets are a Platonic good. Therefore, the free market is the end, rather than a means to some end. A popular trope among those in the post-war New Right was the claim that an undesirable end, arrived at through principled means, was superior to a desirable end, arrived at through unprincipled means. It is has always been a ridiculous statement that can only have utility in the world of forms, not on earth.

The marketplace is never perfect and it can often lead to undesirable ends. This is why it has to be viewed as a tool, one of the many tools a society has to better itself and insulate itself against its own internal division. A fair and open marketplace for housing, for example, will result in the maximum amount of affordable housing. Open borders and unfettered trade will lead to the corruption of the people’s laws. An unfettered recreational drug market will end up with large portions of the population exploited by a small part.

A less emotional example of this is the market for concert tickets. It used to be that states protected the primary market by suppressing the secondary market. The internet and the unwillingness of the people in charge to enforce the laws has changed that. The primary market has now been captured by the secondary market. The bulk purchase of tickets by brokers now makes them the primary player in the market. In fact, they can control the market, by manipulating availability. That’s what’s happening with concert tickets.

With the curtain rising on her “Reputation” tour, Taylor Swift blinked.

She buckled by having Ticketmaster turn off resale ticket listings on its interactive venue charts for the first leg of her North American tour, according to music-industry veterans.

The tour, which begins on Tuesday in Glendale, Ariz., shows plenty of primary tickets still available for the first nine shows.

But the delisting of secondary, or resale, tickets — a move experts called unusual if not unprecedented — makes the inventory of available seats seem much smaller.

On July 20, for example, Swift is scheduled to appear at MetLife Stadium as part of her tour’s third leg.

About half the seats still available for that show are represented by red dots on Ticketmaster’s venue chart, meaning they are up for resale.

The other half, represented by blue dots, signify primary sales. Those are the only dots currently visible to visitors trying to score tickets for a show on the first leg of “Reputation.”

Ticketmaster’s shutting down ticket resales for Swift’s early shows perplexed many in the industry because it handed secondary sales to competing resellers like StubHub.

On blockbuster tours, Ticketmaster admittedly makes more revenue on ticket resales than primary sales.

It also left some wondering if Ticketmaster was taking orders from its parent company, Live Nation, which as the tour’s overseas promoter, has much riding on “Reputation” being perceived as a success.

Now, the libertarian argument is that the venue should simply auction off the tickets for their show and not worry about the secondary market, because the bidding process would no doubt undermine the secondary market. The trouble is, there are no pure markets, so the sophisticated players in the market, would game the auction just as they game the direct sales market now. In other words, there can never be a free market, as long as there informational asymmetry and there is always a player with an information advantage.

If we stop pretending that a free market is an end in itself, we can think about the desirable ends would like to see in something like the concert business. Obviously, one end is for the performer and the venue owner to make a profit. Without them, there is no market for concert tickets. Secondarily, you want the fans to have access to tickets at a price that they see as reasonable. The libertarian idea of an initial auction solves one problem, but the other problems require shutting down the secondary market, like we used to do.

This is a trivial issue, as the world is not going to stop spinning if Taylor Swift can no longer make a living doing concerts. In fact, if all of our mass market entertainments dried up tomorrow, people would find new ways to entertain themselves. The point I’m trying to make is economics, particularly the market place, is always an means to an end. When thinking about what’s happening to us, the question is not how best to get people cheap stuff. It is about the kind of society we want the type of people we want in it.