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The Best Way to Ensure a Long-Term Morality

My post this morning, about the incentive for those who rely on Minnesota trees to ensure the long-term health of Minnesota forests, came right up to the edge of a much bigger topic.  The most-important factor guarding humanity against the tragedy of the commons — wherein individuals use up natural resources because the incentive to preserve never outweighs the incentive to profit for any one person — is that the human beings involved think forward to the future beyond their own personal needs and desires.

As I wrote earlier, we can expect people not to poison their own well, so to speak, by destroying the resources on which they rely, but only within a certain range.  If the activity (like cutting down trees) is relatively difficult and the people able or willing to do it are relatively few, it is more likely they’ll collectively recognize their long-term incentives.  If something is easy to do and many people are doing it, then it is less likely that they’ll delay immediate profit for longer-term stability, because somebody else can come along and edge in.

Obviously, it also matters how far into the future the players are looking.  If people are desperate to have a meal today, they’ll be more careless about the resources.  The selfish, childless businessman of progressive fantasy need only preserve the resource to the extent that he can capitalize on it.

This is where the topic expands.  A business owner who sees him or her self as building a multi-generational source of income will worry about critical resources indefinitely into the future.

That principle extrapolates beyond businesses, too.  People who are thinking about their own children and their children’s children have a living, breathing reason to figure the future into everything they do.  That is, making families and children central to personal and cultural meaning has philosophical benefits for the entire society.

This realization points an interesting light at secular progressivism, which is fundamentally anti-family in its philosophy.  When progressives find it necessary to appeal to a long-term perspective for their political advocacy, as with the environment, they have to resort either to abstractions (the good of humankind) or to a religious elevation of something else (like the planet) as an object of concern in its own right.

Neither alternative can compete with the incentives that come from love of one’s children.

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The Once-ler Protects His Long-Term Interests

As part of a series called “Capitalism Is Saving the Planet,” Isaac Orr reviews the forestry industry in Minnesota for the Center of the American Experiment:

Did you know that Minnesota’s forests are flourishing? According to research from the U.S. Forest Service, forests account for 17.7 million acres of land in Minnesota out of a total of 54 million acres, meaning forest cover about 35 percent of the state. Furthermore, this number is increasing due in no small part to the fact that 51 percent of forested land in Minnesota is owned by the timber industry.

From 2012 to 2017, Minnesota’s forested land area increased by 755,000 acres, which equates to an increase of 1.7 percent. During this time, the number of live trees increased by one billion trees, increasing from 14 billion to 15 billion, which is a 7.1 percent increase in the number of trees in our state.

The image of the industrialist Once-ler denuding the world of Truffula trees for his own selfish gain does not appear to apply.  The companies are trying to balance their profits with preservation, utilizing new technologies and techniques to be more efficient.

The forestry industry has incentive to preserve the resource on which it depends.  So, even if we disregard people’s sense of right and wrong (which we shouldn’t do), self-interest is not divorced from reason.  Just so, workers who come into your home have incentive not to steal from you because the long-term benefit of trustworthiness is more valuable than just about anything in your house.

We should recognize, however, that all of this may apply only in a limited range of economic activity.  Cutting down and milling trees is a relatively difficult activity, so the barriers to entry are high, the participants relatively few, and the cutting relatively easy to track and regulate (whether through government or industrial practice).  In circumstances in which the profits are high and the players many, the tragedy of the commons will be more likely.

In other words, what this case study does most effectively is to remind us of the danger of blanket analyses and categorical thinking.  A moralistic children’s story can create a humanoid monster willing to destroy the planet for just a little profit, but we shouldn’t apply him for cookie cutter analysis of every business.

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A Culture of Pay to Play

Yesterday, I suggested that IGT’s $150,000 donation to the Democratic Governor’s Association (DGA) looks kind of quid-pro-quo-ish, given that the organization’s chairwoman is Gina Raimondo, who was at the time preparing a long-term, no-bid contract for the country in her role as Rhode Island’s governor.  WPRI’s Eli Sherman now reports that this instance was actually part of a much more pervasive culture of pay to play:

IGT and Twin River Worldwide Holdings – the state’s leading gambling companies – contributed $150,000 and $100,000 to the DGA through the first half of the year, respectively. The national organization announced Wednesday it raised a record-breaking $19 million during the same period. …

… IRS records show IGT on average has contributed $159,285 each year since 2013, including $175,000 last year and $160,000 in 2017.

For Twin River, the $100,000 it contributed this year marks the first time in at least the last five years the company has given money to the DGA, according to a company spokesperson.

This inevitable mixture of politics and profit is important to keep in mind whenever government gets involved in a line of business, as it is with gambling.  The development of a pay-to-play environment becomes absolutely critical to remember when allowing a state to do as Rhode Island has been doing — involving itself deeply in economic development.  The more central government is in the economy, the more campaign donations increase in importance and the less relevant business viability or the health of the economy becomes.

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RI Has Been Following the Wrong Approach to Economic Development

GoLocalProv recently published an essay of mine laying out the errors of the central-planning approach to economic development and suggesting an alternative:

In [Bryant University Professor of Economics Edinaldo Tebaldi’s] vision, policymakers (like the governor and legislature) advised by experts (like economics professors) stand before the complex machine of our economy and turn dials as they seek the optimum operation. …

An alternative vision would treat Rhode Island’s economy more as a landscape in which valuable fruits cannot grow because opportunistic weeds are draining the substance of the soil and blocking out the sun.  The people who live here have roots and should not be forced to tear them out, but government makes it too difficult for them to flourish, so they wither instead.  In this view, the Ocean State and its residents already have everything they need to innovate and advance the economy, and anything that’s missing, they can figure out and procure.  They just need space and freedom.

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The Fruits of Top-Down Economic Development

As has been written in this space before, elected officials and bureaucrats simply aren’t well suited to taking business gambles with taxpayer money.  Even putting aside questions of competence (such as: Why would somebody who can reliably and profitably invest millions of dollars not be working for him or herself?), the incentives are wrong.  If a government agent makes a bad investment decision, he or she keeps working without losing a penny of income, and moreover, it’s very easy to spin the amount of success.

Along these lines, GoLocalProv reports:

The $1 million to build out Johnson & Johnson’s space at 1 Ship Street in the Jewelry District proved to be wasteful as the company used the space for less than two years.

As the Wexford Innovation Center was being developed it was agreed between Commerce RI and Johnson & Johnson that the company would move from the newly built on Ship Street to Wexford.

Johnson and Johnson was scheduled to take a full floor in Wexford — 25,000 square feet for their 75 employees and for potential future expansion.

But now Johnson & Johnson has slashed their space needs and only leased 40 percent of what they planned — just 10,000 square feet in Wexford.

With the cut back by Johnson & Johnson and Brown University moving just 85 existing jobs, the only new permanent jobs in the $88 million building are Cambridge Innovation Center employees — just 12 new hires in the Wexford complex.

In other words, the state invested tens of millions of dollars to keep labor unions busy building and to give some existing organizations an opportunity to move their offices within Rhode Island.  (At least one of those organizations is a tax exempt nonprofit, to boot.)  We’ll never know what opportunities our state has missed by not taking the simpler approach of freeing residents from our heavy tax burden and restrictive regulatory regime.

Given the (at best) debatable fruits of the government-centric economic development model, however, there is no principled reason not to give something else a try.  Of course, having no principled reason doesn’t mean insiders don’t have self-interested reasons.

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Bruce and the Incentives of the Central Planner

Here’s a telling note from Ted Nesi’s Nesi’s Notes on WPRI.com:

The CNBC list drew a lot of attention on social media, including from economic-development expert Bruce Katz, who tweeted: “I find this ranking difficult to understand given large drop in RI unemployment, investments in infrastructure, off-shore wind, innovation vouchers + innovation campuses, attraction of Infosys and other significant companies and many other smart moves.” Turns out Katz had good reason to have Rhode Island on the mind: on Wednesday night I ran into him in Providence, and discovered he was in town to interview with Commerce RI about writing its new economic development study. Katz, of course, helped put together the 2015 Brookings Institution report that provided the blueprint for the Raimondo administration on economic development. Katz has since left Brookings, and now runs a consultancy called New Localism Advisers. The other three contenders are Camoin Associates, TIP Strategies, and The Research Associates. Commerce spokesperson Matt Sheaff says there’s no timeline yet for making a pick.

How perfect is this.  A guy who was at the center of RI’s failed economic development strategy is publicly praising the state’s economy four or five years later while also secretly in the running for a big contract from the state government.

The archetypal central planner would no doubt disagree with this assessment, but a skeptical observer might see in the above blockquote a reason to doubt central planning.  Even by their own philosophies central planners aren’t demigods who should be expected to get every decision right from the start, which means they have to be able and willing to review their results with a cold, clinical eye.  The political incentives and human nature, however, make that practice virtually impossible.

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CNBC Sends RI to the Back of the Business Class… Again

Unless you’ve been getting your news mainly from the governor’s official press release feed, you may have heard that Rhode Island has dropped back down to last place on CNBC’s top states for business:

In the previous 10 years, Rhode Island has been ranked 50th four times, 49th twice and 48th twice. For each of the last two years, the state was ranked 45th.

“Having our rating drop even lower is disappointing but not surprising,” House Speaker Nicholas A. Mattiello said in a statement Wednesday afternoon. “In recent months, I have repeatedly called attention to the fact that our economy is losing ground compared to other states, despite years of major investment to reverse that. Government needs to do a better job of letting new and established companies conduct their business here in a timely manner.” …

Mattiello said Rhode Island needs “fundamental changes in the way state departments and agencies interact with businesses.” He cited the Department of Labor and Training and the Department of Environmental Management and said businesses need “real regulatory relief … not more fines and bigger hassles.”

The most disappointing aspect is that Mattiello’s talk doesn’t match his actions.  You just finished a legislative session.  That was your opportunity to have an effect.

The subindexes of CNBC’s ranking give some indication of the state government’s flawed approach to economic development, comparing 2019 to 2018.  In particular, if you’re trying to kick-start the economy in a top-down way, one of the levers you can control is access to capital, and indeed, Rhode Island improved for this iteration of the ranking, from 43rd to 39th.  Nonetheless, the Ocean sank from 28th to 48th when it comes to the economy.

At the end of the article, one of the governor’s many PR flacks (Matt Sheaff, who works for the Commerce secretary) offers a list of carefully chosen economic statistics to suggest the opposite — delusional and sunny — conclusion.  Sheaff’s list is suspiciously similar to one that Bryant University Economics Professor Edinaldo Tebaldi offered in a recent essay for GoLocalProv.  I’ve got a response forthcoming on that site, so I won’t go into detail, here, but suffice it to say that every point is either fleeting, misleading, or not as significant as it seems.

Our state is languishing and, over the long term, losing ground within the United States, and that needs to change.  The sad thing is that Rhode Island really does have so much potential, if it would just throw off the excess baggage that our elected officials continually layer on us.

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Rhode Island’s Politicians Are Failing

For too long, the political class has failed the people of our state. At $888 per year for each of Rhode Island’s one million residents, a family of four is paying over $3,500 annually for excessive compensation deals for government workers, while the basic needs of their own families are being ignored by politicians.

With almost two-thirds of these excessive costs being heaped upon municipal taxpayers, our recent Public Union Excesses report further estimates that property taxes could be reduced by 25% if more reasonable, market-based collective bargaining agreements were negotiated.

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Rhode Island: An OK Place to Live

Obviously, the more subjective the thing an index attempts to measure, the more subject it will be to interpretation, and WalletHub has made a cottage industry of cranking out subjective rankings.  That said, the Web site’s “Best States to Live in” ranking from June has some interesting considerations for the Ocean State.

Notably, the Ocean State is supposedly the 29th best state in which to live… which seems OK, considering Rhode Islanders’ expectation to come in at the very bottom of all rankings.  OK begins to look not so good, though, when one zooms out on the map.  WalletHub claims Massachusetts is #1 and New Hampshire #3.  Vermont and Maine are both in the teens, and Connecticut comes in at #20.

Looking at the subcategories, RI’s worst result was in “affordability,” which shouldn’t surprise anybody.  The Ocean State was the fourth least affordable state, after New York, California, and New Jersey.  But here’s the thing:  No New England states are very affordable.  Massachusetts, for example, is 43rd and New Hampshire is 42nd.

So what makes the difference?  Massachusetts is in the top 5 for everything else:  economy, education & health, quality of life, and safety.  New Hampshire only misses the top 5 in quality of life.  Meanwhile, Rhode Island only breaks the top 20 on the safety subcategory (at #5).  The conclusion is that Rhode Island might not be able to avoid being expensive, but that only means it can’t afford to be unattractive by other measures.

Here’s where the subjectivity of the index becomes important.  Quality of life includes things that Rhode Island can’t help, like the weather, and things that depend on one’s values and interests.  The importance of “miles of trails for bicycling and walking” will vary from person to person.

But quality of life also includes things like the quality of the roads, which is pretty universally valued.  Meanwhile, multiple criteria that the index uses center around leisure activities that cost money, which means disposable income is a factor, as is the ease with which businesses can pop up to answer the demand.

MIT’s Living Wage Calculator states that a single Rhode Islander needs to make $12.35 per hour over a 2,080-hour workyear.  However, $1.86 of that goes to taxes.  For comparison, in New Hampshire, only $1.50 per hour goes to taxes.

This all suggests an unsurprising solution for improving Rhode Island’s standing:  lower taxes, use the money that is collected for things that are of more universal value, and decrease regulations.  We’d all have more money to spend, we’d feel better about our day-to-day life, and we’d be better able to answer each other’s needs.

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The Question of Cashlessness and Dictatorship

Since we’ve recently had some discussion about cashless business and the way it connects with freedom, which is particularly appropriate this week, developments in Hong Kong deserve a timely mention:

In Hong Kong, most people use a contactless smart card called an “Octopus card” to pay for everything from transit, to parking, and even retail purchases. It’s pretty handy: Just wave your tentacular card over the sensor and make your way to the platform.

But no one used their Octopus card to get around Hong Kong during the protests. The risk was that a government could view the central database of Octopus transactions to unmask these democratic ne’er-do-wells. Traveling downtown during the height of the protests? You could get put on a list, even if you just happened to be in the area.

So the savvy subversives turned to cash instead. Normally, the lines for the single-ticket machines that accept cash are populated only by a few confused tourists, while locals whiz through the turnstiles with their fintech wizardry.

How do I reconcile my agreement with the concerns of Reason’s Andrea O’Sullivan, who wrote the above, and my aversion to the Rhode Island government’s ban on cashless retail?  Well, I ask myself an important question:  Did the General Assembly pass and the governor sign that legislation in order to preserve the rights and anonymity of the people of Rhode Island?

No.  By all appearances, somebody complained to a legislator or two about running into difficulty making a purchase at some point.  The politicians thought the legislation would buy them some good will from desired constituencies (like young voters), and they don’t give much thought to the rights of business owners to define their own business models.  That doesn’t mean that the legislators’ conclusions were wrong or right, but it does suggest that they weren’t crafted carefully in such a way as to balance the interests of various groups and all of our interest in preserving our freedom.

Yes, Hong Kong does give us preview of a dystopian future.  Everybody’s accustomed to life without cash, and they’re on the dangerous edge of a communist dictatorship.  In evaluating legislation in the Ocean State, we shouldn’t start by imagining how it would play if transported into a dictatorship, but rather by asking whether it brings us closer to being one.

To avoid the dystopia, we need the freedom to innovate.  A society in which the government does not feel it has the authority to impose business requirements is one in which people will develop new technologies and value their freedom, competing against large conglomerates that, themselves, would one day be subject to takeover by a central government.

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Cashless Businesses and a Boundaryless Legislature

As the budget rolls its way through the General Assembly, it’s useful to look for reminders about the political philosophy of our legislators.  In that vein, consider the legislation to ban cashless retail:

The General Assembly today passed legislation introduced by Rep. Mia Ackerman (D-Dist. 45, Cumberland, Lincoln) and Sen. William J. Conley Jr. (D-Dist. 18, East Providence, Pawtucket) that would protect the rights of customers to pay for things in cash.

“More and more retailers are shifting to cashless transactions in other parts of the country for various reasons,” said Representative Ackerman. “From a consumer perspective, this could have a negative impact on working class customers, senior citizens and college students who don’t have credit cards.”

The legislation (2019-H 5116A, 2019-S 0889) would make it unlawful for any retail establishment offering goods or services for sale to discriminate against a prospective customer by requiring the use of credit for purchase of goods or services.

Once again, we see legislators — led, in this case, by a real estate title examiner and a lawyer — who presume to set minute policy for every business in Rhode Island.  Even if one buys their argument that, all things being equal, it would be more just for businesses to accept cash, imposing that view as a blanket matter across the state makes it that much harder for people to find innovative ways to offer goods and services to each other.

Suppose, for example, there is a particular area prone to robbery.  Being able to advertise that there is never any cash on the premises might make the difference between whether a particular business finds it worthwhile to set up shop at all.  This problem is easier to understand if you think of a store that sells more-expensive products.

Or think of online sales, which the legislation exempts from the rule.  In essence, this bill would make it more difficult for somebody to compete with an online business by providing some person-to-person interaction.  That innovator couldn’t set up shop unless he or she is willing to go so far as to create processes for accepting and handling cash, which also includes having change to return to the customer.

One could say not only that this legislation is dumb, but also that it is dangerous and economically destructive to have a legislature that believes it’s even within the appropriate scope of its authority.

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Important One Year Milestone: Union Membership is Now Your Choice

The end of the 2019 school year coincides with an important milestone: June 27th will be the one year marker since the U.S. Supreme Court issued its landmark decision in Janus v. AFSCME, which determined that forcibly collecting union dues and fees from public workers, including teachers, is unconstitutional.

This summer is the perfect time to ask yourself the question: What is my union doing for me?

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Relentless Perpetuation of the “Equal Pay” Myth via Legislation

Helpful headlines notwithstanding, the Rhode Island Senate once again passed legislation to address the mythical “wage gap”:

A plan to close the gender wage gap in Rhode Island by adding new, sharper teeth to the state’s fair pay law and banning employers from asking job candidates their salary history sailed through the state Senate again Thursday.

“Rhode Island first passed an equal pay law in the 1950s, and I am sure it was revolutionary at the time, but we have not gone back and updated it unlike many other states,” said Sen. Gayle Goldin, lead sponsor of the pay equity legislation. “Passing this bill is not going to resolve the wage gap on its own, rather, this bill in combination with so many things we have worked on… is the way we will address the gender wage gap.”

And so it goes.  As long as progressives want to foster division and grievance, this legislation will keep appearing.  Maybe some year the gears of political necessity will get it over the finish line.  As that process plays on from year to year, opponents will tire of saying the same thing over and over again.  That’s the advantage of the left-wing approach to public “debate”:  When you refuse to acknowledge the other side’s arguments and just keep repeating the talking points, the other side moves to other topics, and the public just becomes used to the deception.

By way of a preventative measure, here’s my op-ed on the topic, from the Providence Journal last year around this time, which I published in more casual, expansive form in this space the month before:

Plainly put, this gives the government power to investigate just about any business and dictate changes to its pay policies, because the only pay differentials that wouldn’t have legal risks would be those between people of the same race, religion, sex, orientation, gender identity, disability, age, and nationality.  That is, for any two employees who aren’t more or less demographically identical, the lower-paid one could initiate a complaint with the state with the same treatment as complaints that the employer withheld pay, and the burden is on the employer to explain it and to prove that no other business practice could erase it.

Think about how much of an encroachment on private activity and interactions that is, as well as the presumption that government is some sort of neutral judge that can accurately assess every business decision.

If this legislation ever passes, I expect it will have some degree of the same effect as the ill-advised paid leave legislation which progressives did manage to pass last yearl.

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Upcoming Budget: More Privileges for Insiders or Real Help for RI Families?

With the General Assembly session nearing the end, we fully expect the new state budget to contain no meaningful remedies to the many problems that plague our state, such as high taxes across the board, high energy and healthcare costs, and onerous regulatory burdens on job-producers. In our Public Union Excesses report, we identified that there are $888 million per year in excessive collectively-bargained costs, responsible for driving up local property taxes by up to 25%.

By capitulating to progressive-union pressure, and despite disingenuous claims that no broad-based taxes were imposed, Ocean Staters will once again bear increased burdens to pay for new taxes and regulations, more spending, and more union giveaways. Lawmakers chose to appease, rather than resist, the progressives’ job-killing, big-spending agenda.

Minimum Wage Cuts Close to Home for Far-Left Congresswoman

Is it too much to hope that a direct negative effect of progressive laws that hits very close to home for one particular progressive superstar would change some minds?

… the very [minimum wage] policies Ocasio-Cortez is set to draw attention to ultimately led to one of her former employers shuttering its own operations.

Charles Milite, co-founder of the Coffee Shop, where Ocasio-Cortez previously worked, said that the increased minimum wage to $15 per hour for businesses with more than 11 employees led him and his partners to reevaluate their business and shut it down.

“I know it doesn’t sound like much—$2 an hour,” Milite told Crains New York Business in April. “But when you multiply it by 40 hours, by 130 people, it becomes a big number. It was going to increase our monthly payroll $46,000.”

Ocasio-Cortez mourned the loss of the Coffee Shop and stopped in before it closed its doors. “The restaurant I used to work at is closing its doors,” Ocasio-Cortez tweeted last August. “I swung by today to say hi one last time, and kid around with friends like old times.” The freshman congresswoman, however, never acknowledged the policies that led to its demise.

At the level of Ocasio-Cortez, perhaps her investment in a particular ideology is just too big a bus to turn around on the ideological street, but could those who are not so far along perhaps give the matter some thought?

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Dealing with RI’s Endangered Place

Something seems odd about declaring the Providence Superman Building as “endangered,” making one wonder whether the designation is the result of lobbying by interested parties:

Rhode Island’s tallest — and vacant — landmark, the former Industrial Trust Building in downtown Providence, otherwise known as the Superman Building, is on this year’s list of the nation’s most endangered historic places.

For more than 30 years the National Trust for Historic Preservation has produced a list of the 11 most endangered places in the country to call attention to what it considers “one-of-a-kind treasurers.”

The 91-year-old art deco Superman tower, which earned its nickname for its resemblance to the Daily Planet building from Superman comics, joins Nashville’s Music Row and the National Mall Tidal Basin in Washington, among others, as this year’s threatened places.

On the topic, Matt Allen expresses the extremity of the opposing point of view:  “This is not an ‘iconic’ building. It’s an eyesore and a terrible investment. Tear it down.”  My views are somewhere in the middle, still bogged down in questions I haven’t answered completely.

How do we measure the value of some publicly accessible (or at least publicly visible) thing, like a building or geological feature that has contributed to an area’s character?  Who gets to determine what can, can’t, should, and shouldn’t be done?

The simplest answer that conforms with my philosophy is that people who want to preserve it should find a way to buy it with private money, and then to maintain it at least to a baseline standard for health and safety.   One complication arises in my belief that local areas can answer the relevant questions differently, so if the people of Providence want to use some measure of public resources to preserve the building, then to the extent the city is acting independently from the rest of the state, I’m not going to tell them they can’t.

This only raises the next question: On the state level, do we want to be the kind of place that preserves its landmarks?

My answer on this one is “no.”  Our state isn’t so thoroughly thriving that we can afford nostalgia.  Just like protectionism with dying industries, if we manipulate the market value of a building like this, we don’t allow the best use of that property.

Let the skyline change.  Let the city’s character change.  That’s the sign of human adjustment, and we should embrace it.  Anybody who disagrees should use their own money and sweat to find some use for the antiquated hulk.

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