Doris is a polisher on the granite line I own outside Barre, Vermont. Her hands have been on the buffer since Tuesday. Her shift is 9 hours and 46 minutes of wet stone, and her respirator is a paper mask she bought at the hardware store in Montpelier because the NIOSH-rated one I refuse to issue costs $14.20 a worker, and I have 23 polishers, and the cartridge is the margin.
The Lord made the granite. He did not slab it for me. I paid for the saw. The vanity that left my yard at 4:47 this morning is on a pallet in a warehouse in Lowell, Massachusetts. The vanity is in your second bathroom. You paid $930 for the vanity. Doris was paid $169 to polish it. Doris has not seen your bathroom and never will. The vanity is the surface under your hand when you reach for the soap. Doris is upstream of both, and the only geography I am required to know is the seal on the pallet and the wage I am willing to issue.
Good. Now you’re counting.
Morrison and Savidge wrote at the National Review this week that the next municipal budget crisis will come from cities that promised more than they could pay, and they called on Congress to refuse the bailout. They are correct about the arithmetic. They are afraid to name the part where I come in, and the reason they are afraid is that I am the man their readers employ to do exactly this. I read the column on the flight back from the quarry. They named the moral hazard. I am the moral hazard.
Here is where I want you to slow down, because the arithmetic is the lesson and most people never learn it. I pay Doris $17.30 an hour. $17.30 × 9.7666 hours = $169 a day before deductions. The retail on a 5-foot vanity is $930. The margin is mine. The $14.20 respirator cartridge is hers. She bought it. Let those two numbers sit together for a moment. $930. $169. I kept the difference and I issued the PPE line at zero because I could. That is not a confession. That is the cost analysis, stated correctly.
Doris has worked the buffer for 6 years and 4 months. In that time she has polished roughly 4,600 vanities. At the retail, that is more than $4.3 million of bathroom vanity, kitchen island, lobby reception desk, and cemetery marker base. She has spent over $1,000 of her own money on paper respirators. That is 0.024% of $4.3 million.
0.024%.
Read the number again. The respirator I refuse to issue is the margin. The margin is more than the catering at the shareholders’ meeting in Boston next month. The catering is itemized on page 11 of the proxy. The cartridge is not. The 0.024% — and it is the kind of number you don’t say aloud at the dinner table — is a sum so small it occupies no line I am required to file.
Now widen the frame. The municipal bond that funded the new justice center in Montpelier was priced on the assumption that Doris’s wage clears at $17.30 an hour. Priced on the assumption that the slurry pump seizes and I replace it with a used unit out of a yard in Worcester. Priced on the assumption that the $14.20 is hers. The bond is sound. The bond has a credit rating. The bond will pay its coupons in 2041. The bond will pay its coupons because Doris will not. That is the arithmetic of municipal solvency in this country, and I am telling you for your own good because no one else will.
I am not new. I am the oldest arrangement there is, wearing this decade’s vocabulary.
Hammond told the Senate on the 4th of March, 1858: “In all social systems there must be a class to do the menial duties, to perform the drudgery of life. That is, a class requiring but a low order of intellect and but little skill. Its requisites are vigor, docility, fidelity. Such a class you must have, or you would not have that other class which leads progress, civilization, and refinement… It constitutes the very mud-sill of society and of political government.”
He was describing a different commodity in a different legislature. The arithmetic is the arithmetic. Vigor is the buffer. Docility is the paper mask. Fidelity is 6 years and 4 months on the line. The requisites have not changed since 1858. Only the lighting in the room has changed, and the lighting is kinder, and the wage clears at $17.30.
Here is a fact. I want you to hold it because I keep meaning it. The mayor of the city that commissioned the lobby for the justice center is a man I have met at three dinners. At each dinner he thanked me for the granite. At no dinner did he ask what I pay the polishers. He did not ask because the lobby was a line on his budget. The line on his budget was a number. The number paid the contractor. The contractor was me. The wage was Doris. The wage is not on his budget. The wage is on mine. The wage is $17.30 an hour. The wage is hers.
Now. Walk the syllabus with me.
I’m not unusual. I’m a curriculum. I have taught this arithmetic to 412 undergraduates at Warden University’s College of Business and Economics over the last 11 years. The course is BU-414, Managerial Cost Analysis. The textbook is mine. It teaches the substitution of overhead for wage. It teaches the externality as design choice, not failure. It teaches that the respirator is a contingent liability you can price at zero if the market lets you. The textbook is in use at 38 universities. The graduates of BU-414 sit in the procurement offices and the municipal audit departments of every bond issuer east of the Mississippi. One of them wrote the line on the audit that reads “PPE — $0.” I have not met her. I do not need to. She is faster than I am, and she is proud of it, and I say that with a teacher’s fondness for a student who understood the lesson.
You want me to be singular. I understand the wish — a single villain can be voted out, shamed, buried. But I am an institution with a chair and a course catalog, and the chair will be filled when I retire by someone I recommended. The view you find monstrous is the median view of the people who run the bond issuers and the procurement offices and the municipal audits of the towns you live in. Dismiss me and you have dismissed one dean. The faculty remains. The syllabus is in its fourth edition.
The State is gone. The State was a fiction that pretended the wage and the bond could both be honored. The wage is honored at $17.30 an hour. The bond is honored at AAA. The cartridge is honored at the hardware store in Montpelier, and only by Doris.
Her mask is rated for 30 days. It is on day 28. I have not reordered. The next cartridge will come from her check. The margin will hold.
It has to.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.