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Jason Kuznicki

Jason Kuznicki is a research fellow at the Cato Institute and contributor of Cato Unbound. He's on twitter as JasonKuznicki. His interests include political theory and history.

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  1. Let’s define “rich” in relative but not positional terms, ie, someone is “rich” if they earn income or hold wealth more than two standard deviations above the mean (or median if you prefer). Then there are two operations that reduce the number of “rich” people. One is reducing their absolute wealth, and the other is increasing the mean (median) wealth.

    I have a feeling that people mean something like this. Certainly 73% of people would be right to say that they don’t want the number of top-end outliers to increase, because that means most of us are getting relatively (or absolutely!) worse-off. Then 21% probably think along the neoliberal lines you do, starting from the position that more rich people is a strictly better thing, defined in absolute terms.

    From my perspective, then, this poll says that “natural neoliberals” are a small minority, and that absolute-based thinking is simply not a good way to do economic analysis.Report

    • Avatar Jason Kuznicki says:

      Tell me, though — why is it that people would want to increase the median income, but not to the degree that people making the median income would be plausibly called rich?  (Note that when we look at the entire world, the U.S. median income is by many defnitions “rich” right now.)

      Even so, assuming it doesn’t make anyone worse off, I would certainly want to increase the median income.  Even assuming it made some very wealthy people worse off, I’d still do it.  Happily.

      It just seemed way, way less than intuitive that that was what the question was asking about.Report

      • Avatar Benjamin Daniels says:

        I absolutely agree that people making the median income in the US can plausibly be called rich already, certainly so relative to the rest of the world. Which is why I think that “rich” has to take the locally relative definition. From that perspective you can increase the median income all you want, but “the rich” still refers only to the outliers.

        It may be counterintuitive from the neoliberal standpoint, but from that poll I would guess that just 21% of people have neoliberalism as their natural disposition. For most people, the perspective I’m describing is, I think, the intuitive response to such a question.Report

        • Avatar Jason Kuznicki says:

          So taking an ordinary or poor person and making them an outlier is bad?  Even without destroying anyone else’s wealth?  And without any crimes being committed?

          You’re gonna make Kanye cry, do you know that?Report

          • Avatar Benjamin Daniels says:

            I think yes, on both charges.

            Chris Weaver’s comment below gets at one angle – it’s in part about the concentration of wealth. But I guess what I’m really saying is that you can’t make one person better off and leave everyone else unchanged. No matter what, you are making everyone else live in a society that is more unequal.

            People’s preferences – and society’s collective preferences – may in fact be opposed to a net increase in wealth if that increase is “badly” distributed (however you define that).

            It’s not about “eat the rich” vs “let the good times roll”. That’s naive neoliberalism where growth and aggregate output is all that matters, and where redistributive concerns are painted as some sort of uninformed populism.

            It’s much more realistic to model the aggregate welfare function not as a simple sum of individual outcomes, but also as a function of the distribution of outcomes (or at least to include preferences about distribution in the individual welfare functions if you still want aggregate welfare to be additive over individuals). Distribution does matter to people, whether you agree with it or not – we can just make your term a net zero on that count.Report

            • Distribution does matter to people, whether you agree with it or not

              Okay, then, instead of trying to make everyone rich, let’s first find a way to eliminate envy. Then we can make people wealthier without pissing everybody off.Report

              • Avatar Mike Schilling says:

                It’s not envy to note that concentrated wealth equals concentrated power, which often tries to remake society in ways that harm me, or at least that I dislike.Report

              • And yet the left always wants to focus on unconcentrating the wealth as an indirect way of unconcentrating the power, instead of just directly unconcentrating the power.  Funny, that.

                 Report

              • Avatar 62across says:

                And the right always wants to concentrate the wealth thereby concentrating the power. Funny, that.

                If concentration of wealth equals concentration of power, what would you suggest is the direct way of unconcentrating power?Report

              • Avatar Chris says:

                Because wealth is power, however it manifests it. Concentrate it in a centralized government? Wealth will manifest it there. Concentrate it in the market? Wealth will manifest it there. Concentrate it in military might? Wealth will manifest it there. Wealth = power, and power = wealth. This is where the left is coming from, and it’s something that you have to understand in order to understand the left.Report

              • Chris,

                I understand it.  I also understand it’s flaws.Report

              • Avatar Chris says:

                Every reduction is going to lose some information. I think this particular one does pretty well with the evidence, though, as long as we understand wealth to be a relative term. This, I think, is where Jason’s confusion lies: wealth, to most people, is relative, and it’s a good idea to think of it that way, because the power itself is relative in a way that mirrors wealth.Report

              • Avatar Mike Schilling says:

                It’s a libertarian myth that wealth becomes power only through government action.Report

              • Avatar Chris says:

                I don’t think libertarians actually harbor that myth. I do think they believe that the power of wealth through government is morally different from the power of wealth through the market, but that’s because they simply have a different value system than, say, most of us on the left (and I mean actual left).Report

              • Thank you, Chris.  As usual Mike Schilling creates a strawman about libertarianism. (And, of course, engages in some of that liberal bumper-sticker debating.)

                There are different types of power; there is the power to buy and there is the power to compel.  I’d much rather someone “buy” my compliance rather than compel it because I get something in return.

                When wealth meets government the power that gets expressed is the power to compel, because as Max Weber said, “the state is that human institution that successfully claims a monopoly on the legitimate use of force.”  All government is based in force, even democracies.

                Of course in a purely anarchic world wealth can buy thugs to engage in compulsion.  And of course no libertarian worth his salt finds that acceptable.  (And the recognition of that is what disproves Mike’s strawman.)   Different libertarians deal with that outcome differently, of course, but I interpret it as possibly meaning at least two different things.  On the one hand it can be the justification for (limited) government, to rein in that use of wealth’s power.  On the other hand, it can actually become the origins of the state.

                Most libertarians, I think, will agree that the state is justified in constraining the wealthy’s use of thugs.  But we think that when you give the government power to do much more than that, you create a center of power that’s very attractive to those who want to exercise it, and of course the wealthy are going to be advantaged in getting control of it.  So we don’t understand why liberals are so cavalier about enhancing that center of power so that it becomes more attractive to those with wealth.

                I think that’s a real paradox, and no liberal here has satisfactorily explained it.  It’s one of those areas where I want to challenge League liberals on.  If you worry about the wealthy’s use of power; and you are frustrated that government keeps getting co-opted by the wealthy, why do you still believe that giving government the type of power that’s attractive to the wealthy is a good idea?Report

              • Avatar Tom Van Dyke says:

                Heh, exc, James.  The liberal solution is to make everyone equally rich.  Unfortunately, pounding down the nails that stand up makes everyone equally poor instead.

                But that’s OK, as long as everybody’s equal.Report

              • James,

                I think that’s a real paradox, and no liberal here has satisfactorily explained it. It’s one of those areas where I want to challenge League liberals on. If you worry about the wealthy’s use of power; and you are frustrated that government keeps getting co-opted by the wealthy, why do you still believe that giving government the type of power that’s attractive to the wealthy is a good idea?

                I don’t see this as a paradox at all. Government needs the tools to contribute to the solutions of problems. Those tools can be misused to be sure, but that doesn’t speak to something wrong about the underlying idea that when used properly those tools can improve human welfare a great deal. Cointelpro is a mark against the FBI, it doesn’t mean we don’t need an FBI. Simplifying for the sake of this discussion, the wealthy using the levers of power to advance their own mercenary ends is a possibility to be wary of, but it doesn’t discredit the entire project of deploying government power for social welfare. Also, there is a spectrum of effectiveness, from particularly uncorrupt countries to deeply corrupt countries, from particularly effective mechanisms of advancing social welfare to less effective mechanisms. Liberals merely want to push America into the uncorrupt, effective social welfare end of the spectrum. (By this I don’t mean to say that this territory isn’t contested, or that libertarians or conservatives want a corrupt, badly performing social welfare system. We disagree about the best means to bring these ends about.)Report

              • Creon,

                Your analogy misses the point.  I’m not arguing against the existence of government/FBI.  I’m arguing against giving it the kind of power to regulate the economy that liberals want to give it, because that’s precisely the power that attracts corporate interests like flies to shit.

                That also doesn’t mean no regulatory power (although some libertarians will say so, and my less honest liberal friends here will say all libertarians say so).  There is the power to pass general regulations for health and safety–the generalized “police power” as it’s called–and then there is the power to make preferential regulations that help certain economic interests and harm others.  Liberals do not want to strip government of that power, because they want to use it to limit the wealthy and help the less wealthy.  The goal is fine, but the means necessary to achieve it are its own undoing because the wealthy are inevitably more capable of gaining control of that power than the masses.  That’s the paradox I’m talking about.Report

              • James,
                Then why does this phenomenon, wealthy co-opting the government to advance their ends, not occur in every developed country? We should see this pattern throughout the developed world, in fact more so in countries with even more centralization than the US, even more government regulation and interference in the private sector. I’d point to those other developed countries and say, well if they can make it work there, why can’t we make it work here?

                And there are a handful of mechanisms that I’d suggest to account for this danger – not a foolproof inoculation, but that’d help. Publicly financed elections or generous fundraising matching systems, larger professional bureaucracies as opposed to the presidency reaching deep into the bureaucratic innards and appointing deputy assistant deputy undersecretary for x, y, and z, closing down some of the government-industry revolving doors through better thought on the career trajectory of key individuals (Members of Congress, their staffs, senior regulators), and more use of quangos. As I said, not immunity from the problem you raise, but other developed countries show it isn’t an insuperable obstacle.Report

              • Creon,

                Are you sure it’s not happening in other countries?  Or is it just happening to a somewhat lesser degree?

                If we want to shift to a discussion about how the institutional structures of government can affect the degree of influence by the wealthy, I’m all in.  Because the governing structures do make a substantial difference.  They just don’t make all the difference, and there’s still going to be disproportionate influence by the wealthiest.  But for the record, I think it’s the parliamentary system–along with some cultural differences–that makes the difference.  Elect everyone on a big party ballot and it’s harder for the wealthy to promote particular winners than when we’re electing everyone by districts.  So I’ll give you Western Europe on that score as doing better than the U.S.  I’ve become more and more disenchanted with our electoral structures in recent years and would willingly chuck what we’ve got at the moment.

                Publicly financed elections or generous fundraising matching systems,

                Public financing might help, but it’s also an incumbent-protection program.  Generous matching funds might work, but either you dole them out to all comers or you reinforce a two-party system.  Take your poison–maybe they’re worthwhile.

                larger professional bureaucracies as opposed to the presidency reaching deep into the bureaucratic innards and appointing deputy assistant deputy undersecretary for x, y, and z,

                Yes.

                closing down some of the government-industry revolving doors through better thought on the career trajectory of key individuals

                Yes, although as Obama found out, often the most qualified people to be your advisers are exactly those who’ve been rolling around in the revolving door.  This would probably sort itself out over time, but would be hell for the first few presidents dealing with new rules.

                As I said, not immunity from the problem you raise, but other developed countries show it isn’t an insuperable obstacle.

                Agreed that it would help.  But I think we disagree on how much the wealthy influence other countries.  And I think that as long as we do single-member district elections they’ll be of seriously limited impact.  But, yes, if we can improve the situation, I’m all for it.  But I think to a large extent it’s sticking band-aids on the problem, when you’re saying “we still want to offer this great big juicy lollipop; we just want to make it harder for you to get.”Report

              • Avatar Stillwater says:

                James,

                So we don’t understand why liberals are so cavalier about enhancing that center of power so that it becomes more attractive to those with wealth. I think that’s a real paradox, and no liberal here hassatisfactorily explained it.

                I think Shilling got to the answer upthread, and I’ve answered this many times: it’s because the wealthy, by having centralized private power, have the ability to create state power if there isn’t a sufficiently powerful government in place to check it.

                I mean, I’ve said this till I’m blue in the face, but the libertarian conception of government being an entity causally and conceptually separate from the very real interests of those who grant it power is a myth. Government arises to serve the interests of the privately powerful. That’s even true for the US. In the best of circumstances, the government created is democratic and based on something like immutable rights which serve as a check on private power – eg., that no one under the authority of government can violate another’s rights. So the liberal project isn’t so much to increase the power of government for its own sake as it is to pry the power of government, in both it’s active and passive forms, from the grip of a few hands and put into the hands of as many as possible. Isn’t that what all the major liberal battles have been over for the last century? Extending basic rights to those who either are not accorded them, or are accorded them but aren’t granted protection of them by government?

                So, to refocus on your question, regulatory capture isn’t a fundamentally new phenomenon from the liberal’s pov: it’s just a continuation of government serving the interests of private power either actively or passively. That regulation creates additional types of governmental corruption over and above merely permitting the first order bad behavior is a serious criticism against regulation, and against liberals insofar as they don’t take the issue seriously.

                But I think even liberals could agree with that without concluding, as you do, that too much government is the primary problem here. Insofar as the problem is real, it’s still primarily a case of too much private power (economic or otherwise). (And just so Jason – if he’s reading this – doesn’t misunderstand that last sentence, it doesn’t mean that liberals hate the rich.) That is, there are first order bad behaviors certain economic actors will engage in to further their self-interest that have negative effects on others, and government has a legitimate role to play in trying (sometimes ineffectually) to constrain them. And there are second order behaviors which actors are permitted to take only as a result of government, which I think everyone could agree are problematic. It seems to the latter is the libertarian complaint here. But it also seems to me it isn’t inconsistent with liberalism.

                 

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              • James,
                I agree that the wealthy have privileged access to political systems around the world. So yes, I’d expect to see government being co-opted by the wealthy to some extent. I’d argue the co-opting is happening to a lesser degree in other developed countries evidenced by lower child poverty rates, higher PISA scores, and better social mobility (as measured by intergenerational earnings elasticity). Gains from economic growth and increased productivity are more evenly distributed across those societies when compared to those measures in the US. Altogether these other countries are performing well on broad social welfare indicators and the corruption perceptions index. If government being co-opted by the wealthy means performance on these metrics like Germany or the Nordic countries then I would welcome our new wealthy overlords. I think we disagree as to how much success we could achieve in combating government capture through institutional adjustments. To me, the social welfare successes government can achieve are a prize worth the tradeoff of self-interested actors’ interest in rent-seeking, iron triangles, and such.Report

              • Stillwater,

                I confess to being puzzled by your response.  First,

                the libertarian conception of government being an entity causally and conceptually separate from the very real interests of those who grant it power is a myth

                How is that a libertarian conception?   I honestly don’t understand that claim.

                Second, this,

                the wealthy, by having centralized private power, have the ability to create state power if there isn’t a sufficiently powerful government in place to check it.

                seems to conflict directly with this,

                Government arises to serve the interests of the privately powerful.

                If that is how government arises (and in all truth I think that’s a claim most, or at least many, libertarians would agree with), then how can there be a sufficiently powerful government that is opposed enough to the interests of the privately powerful to act as a check them?  That is the paradox I’m talking about, and you haven’t resolved it here.  You seem to be not really recognizing it.

                the government …is … based on something like immutable rights which serve as a check on private power – eg., that no one under the authority of government can violate another’s rights.

                That statement is using the theoretical definitions wrongly.  Let’s start with the Declaration of Independence. Jefferson stated that there are “certain unalienable rights” and that the reason we create governments is to secure those rights. That is, as you are arguing, using government to protect us from private power.  But libertarians agree with this–we support government for the purpose of preventing/punishing theft, etc.  But Jefferson was also specifically writing about governmental violations of those rights, as shown by the list of grievances that make up the bulk of the DofI.  Fast forward to the Bill of Rights, which is all about limiting governmental deprivations of rights–as the Constitution proper is a recognition of the necessity of having a functional government, the Bill of Rights is a recognition of the danger of that government to our rights and liberty.

                Now, directly to your statement, people acting under the authorit of government are not exercising private power.  That’s where you are misusing definitions.  And if you read Madison’s arguments in Federalists 10 and 51, you see in his explanation of the Constitution a very deep concern about constraining both those in government and those outside of government from using that power for their own purposes.  But the issue is never about private power, per se, which governments are simply assumed to be authorized to constrain–the issue Madison is concerned about is about how you give government the power to constrain private power without making it possible for private power to take control of the institutions of government and transform their private power into public power.

                So the liberal project isn’t so much to increase the power of government for its own sake as it is to pry the power of government, in both it’s active and passive forms, from the grip of a few hands and put into the hands of as many as possible.

                I get that, but it’s not in fact the sum total of the liberal project.  If the liberal project was just to try to distribute control of public power as widely as possible, so that no one person or group could control it, there’d be little argument between us.  But liberals do want more public power than libertarians–they want greater government capacity to constrain private actions (which they would call private power, but which we libertarians would not necessarily define so–as with our discussion of sweatshop wages).  It is that greater power that I see as creating the paradox-the more public power that is available, the harder is the project of keeping it widely distributed, because that public power is a valuable good.  The more valuable it is, the more people will seek to control it, and the more organized an interest is the greater will be its ability to find ways to control it.

                Isn’t that what all the major liberal battles have been over for the last century? Extending basic rights to those who either are not accorded them, or are accorded them but aren’t granted protection of them by government?

                And libertarians tend to side with liberals on this issue, because for the most part (although not entirely) those were battles against public power, not private power.  The primary issue in the civil rights movement for example, was not that blacks were often forced to go to the back door of restaurants, although that was a real issue, but that they were denied equality in public accommodations like schools, buses, public restrooms, parks, etc., as well as being denied the right to exercise their due share of public power by voting.  The civil rights movement was indeed about extending/diversifying control over public power, but it was also in large degree about limiting that public power.

                When limiting power is a major issue, there’s great overlap between liberals and libertarians.  Where we part ways, usually, is when it comes to increasing government power.  I agree, liberals don’t want to increase public power just for the sake of increasing it (and those who say so are guilty of very shallow argument), but undoubtedly liberals want to increase it more than libertarians do.

                So, to refocus on your question, regulatory capture isn’t a fundamentally new phenomenon from the liberal’s pov: it’s just a continuation of government serving the interests of private power either actively or passively.

                Exactly!  But my point is a) that it’s inevitable, absent really stringent constitutional constraints, and b) liberals dislike regulatory capture but insist on granting government the very power that leads private interests to work overtime to capture it–that, again, is the paradox.

                That regulation creates additional types of governmental corruption over and above merely permitting the first order bad behavior is a serious criticism against regulation, and against liberals insofar as they don’t take the issue seriously.

                But I think even liberals could agree with that without concluding, as you do, that too much government is the primary problem here.

                Well obviously they do, but in doing so they still fail to recognize the paradox–that by wanting that much government they encourage capture by private power.

                Insofar as the problem is real, it’s still primarily a case of too much private power (economic or otherwise).

                I disagree.  Without access to public power, private power is more limited.  Access to public power simply expands the sum-total power of those interests.

                Ultimately I don’t think you take seriously enough the incentives of those with private power.  When government is granted the power to regulate them, that power is neutral–it can potentially be used either to constrain those private interests or to advance and protect those private interests.  Given that, what incentive do those private interests have in letting themselves be constrained?  Rather, the more regulatory power that is given, the stronger their incentive to control that power so it is used to promote their interests.  Liberals want that power to be used to constrain them, but who has the greatest capacity to influence the state?  Ultimately, no matter how widely we try to distribute control over the levers of public power, we average citizens exercise it normally through the vote–the elite and other well-organized groups have disposable resources to spend in the effort of trying to influence and control it.

                Once you recognize that, it’s hard not to be very pessimistic about the prospects of granting government any very substantive regulatory authority.

                Or as James Buchanan wrote in his autobiography (how lucky I am to be reading it right now–it has really helped me organize my thoughts in this discussion): “Positive public choice theory suggests that the rent seekers are indeed to inherit our earth…”

                 

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              • Creon Critic,

                Yes.  Institutions (rules and procedure; political structure) matter.  I am far from saying that all systems are equally bad (again, I am not an anarchist, and I don’t see this as a binary “either total government or no government” choice).  I think the U.S. system is worse, as far as control by the elite goes, than the Austrian system.  And then again, the Russian system is worse in that regard than the U.S. system.  I have my own ideas about what types of institutional changes are desirable to constrain the problem.

                Now where the real challenge to my position comes is that the European states have even more regulatory power than the U.S. So why don’t I admit that you can grant more regulatory power without creating more regulatory capture?  Because in Europe it’s just a different set of interests that capture.  In the U.S. it’s the financial interests,  In France it’s the farmers.  In Britain its the unions, etc.  That’s obviously over-simplified, but I hope what I mean is clear.  I think all of those captures are bad, because they all result in unproductive, and by my definition, illegitimate transfers of wealth. Is that “better” than having true elites be the ones with control?  Arguably, and in my gut at least I tend to agree, although I haven’t thought it through.  But better does not necessarily equal good enough.  so while I do think that a parliamentary structure is better for the government, I would still limit the authority of that government dramatically.Report

              • Creon,

                I would also add that from what I’ve heard about western Europe, there are serious problems of endemic poverty there as well.  I fully admit to not having been there, so this is all secondhand, but from what I’ve read it appears that most western European cities have some really nasty slums, just as a lot of American cities do.  And to the extent they are preventing absolute destitution by means of redistribution on a scale/structure that constrains economic development, they are effectively creating total dependency of the lower class on the political structure.  In an ideal world (heavy emphasis on “ideal”) there would be no need for political dependency among the lower classes.

                I cannot find it right now, but I remember an interesting blog post by, iirc, Tyler Cowen, arguing persuasively that while European cities were much better places to visit, American cities were much better places to live (unless one was wealthy).

                That’s not a paean to the U.S. system.  Just a statement that we ought to not over-idealize the European political approach.  There’s a lot of trade-offs between theirs and ours, and at least for me, my inclination toward one or the other depends largely on what individual factors I’m considering at the moment.  (E.g., if I consider what it’s like to be a Pakistani in London or a Turk in Berlin, I could easily persuade myself that Europe is hell, but of course that’s not the whole story.)Report

              • James,
                I don’t think I agree with the idea that some interest (if not the wealthy) must have captured the government – speaking on a macro level here. I have variously seen this described as consensus democracy, consensual democracy, or consociational democracy – but basically those countries that have used government to mediate labor-industry conflict, managing distribution of the gains from productivity/economic growth and finding more egalitarian answers. Nearer Nordic model levels of taxation and government spending as percent of GDP must horrify those who put a lot of stock in the idea that government spending should be held to 18% of GDP (TVD linked to a CATO report and I think the Republican presidential candidates have mentioned this idea).

                As for an allegedly unproductive and illegitimate transfer of wealth, I think I’d have to refer you to the Krugman Socialist Hellhole Blogging piece I mentioned in another thread. Illegitimacy is something we’d have to argue over, I’ll say in reading Roger’s point about win-win, voluntary transactions I think it has become clearer to me that I think markets merely produce outcomes. Even if the steps along the way are legitimate, so not even bringing into view the allegations of exploitation, I want to examine outcomes for comporting with ideas about social cohesion, fairness, and social justice. Also, the well has been so thoroughly tainted by past illegitimate force, there is not a fair starting point from whence to proceed into this win-win scenario – again, speaking on a macro level, so on the basis of things like social mobility between generations as opposed to whether a homeowner and a contractor can agree on a price for some building work.Report

              • James, I understand there’s no European paradise to be had. I lived in Germany for a year and in the UK for three years, and I understand there are complicated things going on under the surface that some American liberals may gloss over – issues of race, nationality, solidarity, who is Other and such. And yet, according to OECD figures, many European countries consistently outperform the US on some important social welfare measures that I’m sure you’re familiar with: child poverty, infant mortality, social mobility. And it isn’t as though the US doesn’t have its own pretty nasty history on race.

                Also, I recently came across this at Sociological Images, I think the image is too big so I’ll just link to the post with an excerpt: Start-Ups and Safety Nets,

                …look at this chart showing the rate of start-ups per working-age population:

                [Image over at Soc Images]

                The US ranks 23rd. That doesn’t quite square with all those photo-ops where the president (Obama, Bush, Clinton – they all do it) goes to some small successful company out in the heartland. What is it about these other countries that makes for more risk-takikng?
                James Wimberly has an answer: the safety net. He makes the point with an analogy – his own photos of kids on a rope-walk – a single rope hung between two platforms in what looks like the Brazilian rain forest. (It’s really just a replanted hillside, formerly the site of a favela). The kids have safety devices – hard hats, a safety harness, guide-ropes to hold on to. Without these, only a few of the most f oolhardy would try a Philippe Petit walk. But the safety devices allow lots of kids to take a risk they would otherwise avoid.
                The same logic applies to small business….

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              • Creon,

                I have variously seen this described as consensus democracy, consensual democracy, or consociational democracy

                Also interest-group liberalism.  I fundamentally disagree with the approach, though, because it’s primarily not about setting up the rules for fair exchange procedures in society, but about battling over a political division of the wealth of society (which is what leads to persistent budget deficits, as future citizens are not an organized interest).  Many, perhaps most, political scientists like this model, because most of them have an open, or at least residual, belief in the nobility of politics.  I’m an outlier.   I place great reliance on Alexander Bickel’s claim that “the highest morality is almost always the morality of process.”

                Of course here you and I are operating from different normative values.  It’s hard to reconcile those.  I’m not insulting your normative stance; I just don’t share it.

                As for Krugman, I didn’t claim that European cities were complete hellholes.  I repeated the claim that mostly they’re better places to visit than to live (unless you’re well off).  He writes about a walking tour of Stockholm, which is quintessentially a touristy type thing.  Now I know diddly about Stockholm, and perhaps it’s all wonderful.  But I can take you on a walking tour of Chicago that would leave you believing it has no nasty areas.  In fact I’ve spent, all told, about 3 months of time in Washington, D.C., and I’ve never seen any bad areas–but that doesn’t mean they’re not there.  Now nobody who criticizes European social democracy actually claims there wouldn’t be beautiful cities, or at least parts of beautiful cities–in fact that’s pretty much what we would expect, that parts of the city are beautiful because they are preferential recipients of benefits from the state.  To take a non-social democratic example, Dubai has some stunningly impressive areas, and I could take you to Dubai and boggle your mind at how great it is.  Then I could take you to the guest worker housing…

                So what do others who aren’t Krugman say about Stockholm? Try here, and here. Is Stockholm worse than, say, Detroit or L.A.? Probably not; it’s just that it’s not necessarily that much better. As usual when he’s taken off his economist hat, Krugman is very selective with his evidence. Would anyone believe that when he went to Stockholm he was shown the s***ier parts of the city?Report

              • Creon,

                many European countries consistently outperform the US on some important social welfare measures that I’m sure you’re familiar with: child poverty, infant mortality, social mobility. And it isn’t as though the US doesn’t have its own pretty nasty history on race.

                I totally agree.  I hope I haven’t given the impression that I’m arguing the U.S. is necessarily that much better.  Obviously I’m pretty critical of us, too.  I just find–at least from some of my own close friends–a tendency to over-romanticize Europe in a way that glosses over those problems.

                To add to your list, one of the most shocking things I’ve read in the last couple of years was a report showing that the U.S. has a smaller proportion of small businesses among all of its business entities than does Western Europe. That’s not good for us at all, and directly contradicts our commonly held beliefs and national economic mythology.  One of these days I’m going to blog at length about that.Report

              • Avatar Jason Kuznicki says:

                It’s not envy to note that concentrated wealth equals concentrated power, which often tries to remake society in ways that harm me, or at least that I dislike.

                I understand that concentrated wealth equals concentrated power, and vice versa.  Which is exactly why I choose the way I do.

                I imagine a control panel with two buttons, one red and one green.

                Push the green button, and some random non-rich person gets a $200,000 per year income, while leaving nobody worse off.

                Push the red button, and some random rich person becomes poor — no wealth, very little income.  Nobody gains anything, not even their victims, if it happens to randomly pick the next Bernie Madoff or whatever.

                The red button concentrates wealth.  The green button spreads it out, while also helping to increase total wealth.

                Given those choices, I’d push the green button all day long, again and again, until everyone was rich.  I’d probably punch someone if they pushed the red button.

                And left-liberals should feel the same way — for solidly left-liberal reasons.Report

              • Avatar Chris says:

                The very set up of the game shows that you’re still not getting the way the left (and most people, I imagine) see wealth, and in particular, the category “rich”: it’s relative. If everyone makes $200,000 a year, then $200,000 a year isn’t rich.Report

              • I suspect Jason gets that.  I also think he rejects it for the hooey that it is (unless a Chevy Cavalier costs $200,000).Report

              • Avatar Jason Kuznicki says:

                So what matters is having more than your neighbor?  Rather than always having good food on the table, a nice house, a car, health care, and a little savings on the side?  Plus a decent champagne on New Year’s Eve?  You can easily get all that for $200,000, and that’s not a bad living at all.

                But if all that matters to liberals is having more than your neighbor, then liberals have given themselves a Sisyphean task. It’s not merely difficult, in these terms, to make people wealthy, but literally impossible.

                 Report

              • Avatar Jason Kuznicki says:

                I suspect Jason gets that.  I also think he rejects it for the hooey that it is (unless a Chevy Cavalier costs $200,000).

                Then it wouldn’t be $200,000 in real terms, because inflation would have eaten the most of it.

                 Report

              • Avatar Chris says:

                Jason, see my comments below. What people consider rich, and whether they think there are too many rich people, are two different things. I don’t doubt that, framed the way you’ve framed it, people would choose your option. At the end, though, they still wouldn’t consider themselves or any of the other people whose lives they’ve just transformed to be rich. They might feel less animosity towards the rich though (until prices go up accordingly, and suddenly their new level is their old level, but that’s a different story).Report

              • Avatar Jason Kuznicki says:

                Again, I thought I was careful to specify that we were talking about $200,000 in real dollars, not nominal dollars.

                I tend to think people at that level aren’t going to be as envious.  This may actually be a different view of human nature than yours, but if so, do tell me — how do we actually fix the problems caused by envy in society, if no amount of rearranging wealth (and no amount of getting wealthier) can do it?Report

              • Avatar Chris says:

                My answer is in all of my comments below. I don’t think the problem that comes out in this survey (to the extent that it reveals anything) is wealth, or even relative wealth, but anxiety, lifestyle insecurity, however you want to describe. I don’t think people making $200,000 in real dollars (granted, when you’ve given everyone the same base amount, that pretty much negates the possibility of them being real dollars, doesn’t it?) feel that anxiety, unless they’ve been really careless. A lot of people in the middle class do, even without making bad choices. But take them out of that situation, and the animosity goes away.Report

              • Avatar Mike Schilling says:

                I can picture a level of wealth where everyone can buy $200,000/yr worth of mass-produced stuff [1], and that would be great.   Does this mean enough good schools, teachers, jobs, parks, medical care, etc. to go around, or that we all have fancy cars an 80-inch TVs? if the latter, I don’t much care.

                 

                1. Of course, you’d save some of it, but you know what I mean.Report

  2. Avatar North says:

    It seems to me that there may be a growing disconnect in public perception between wealthy people and activities that benefit society. When a lot of people think new rich now days they don’t think about entrepreneurs who invent new services or goods that make people better off nor do they think industrialist who employs thousands. A lot of them probably think of a well networked executive who shuffles money back and forth with other well networked executives producing no benefit that they can understand when they think of the rich. They may think of an executive who’s appointed to head a corporation, pays himself a massive salary, flies the company into a mountain and golden parachutes out at the last moment when they’re thinking about the rich.

    I don’t assert those perceptions as being true but the wealthy perhaps have a branding problem right now.

    Also, you are deriving a lot of meaning from what is, on it’s face, a pretty odd sort of question that’d be very easy to give a knee jerk answer to without considering it very much.Report

    • Avatar Jason Kuznicki says:

      Also, you are deriving a lot of meaning from what is, on it’s face, a pretty odd sort of question that’d be very easy to give a knee jerk answer to without considering it very much.

      This isn’t a lot of meaning.  It’s some very, very elementary welfare economics.

      Still, people found it more appealing to signal “I don’t like the rich” rather than “let’s get good times going again.”  Even trying really hard to be charitable, that’s the best I can do here.Report

      • Avatar Murali says:

        It’s some very, very elementary welfare economics.

        Maybe not. Hanging out with libertarians and economist can have really weird effects on your intuitions. A lot of people just dont find defining “rich” in absolute terms very intuitive. So, when you ask people who are the rich guys, they will think about the “other guy who has so much more money than I” and that guy buys luxury goods and does strange work that doesnt seem to create value for society. What the hell is he being paid to do anyway? Its like what was Chandler Bing’s Job?Report

      • Avatar North says:

        Combine the first half of my comment with the second and your average low info poll respondent can be expected to interpret that poll question very differently than you do. You see a poll asking if there should be more rich and think that more rich people means more production, more wealth and more economic activity which means everyone’s better off and earning more. Your average low info respondent on the other hand probably thinks more rich means more poor, more parasites and more crooks wrecking the economy and driving the country into a ditch which means everyone’s worse off and earning less.

        I’m not saying that the low info respondant is correct, I’m simply saying you’re failing to consider other less well informed views than yours.Report

        • Your average low info respondent on the other hand

          Okay, then, instead of trying to make everyone rich, let’s first find a way to eliminate envy increase their information. Then we can make people wealthier without pissing everybody off.Report

          • Avatar North says:

            Eliminate envy? And they say libertarians aren’t utopianists.

            Seriously though James, I was defending my original assertion that Jason was over reading into the poll in question. Not making some paen to the wisdom of the unwashed masses.

            And ya gotta admit that the economic leaders haven’t been covering themselves with glory the last few years. I mean I know, it’s all statist interventions fault I don’t find it surprising that the vox populi is feelin sour.Report

            • Dammit, “eliminate envy” was supposed to be struck out.  I was jokingly repeating my comment from above, but replacing that phrase with “increase their information” (which in a better world would be a synonym).  I wasn’t actually snarking at you–I agree with you.

              They say comedy is all in the delivery.  My students rarely laugh at the right moments, either.Report

    • Avatar Roger says:

      North
      The branding problem is the talking points of the left and the populists.Report

  3. Avatar Rufus F. says:

    If I had to answer this question, say for a job interview, I’d go with “not enough rich” for sure. If someone called me on the phone and asked me a question like that, I’d probably tell them to go hang it.Report

  4. Avatar Jaybird says:

    The game is given away when you realize that poverty is defined by the things one does not have rather than the things one does.

    It doesn’t matter if someone has a house, and two televisions, and a refrigerator, and a microwave, and a game console, and a space heater, and a window air conditioning unit if this someone also doesn’t have first dollar health care coverage for diseases that can be prevented by exercise/diet.Report

    • Avatar Jaybird says:

      Well… so long as someone else has first dollar coverage for such things.

      If we could cut down the tall poppies, we could finally eliminate covetousness (which is personally indistinguishable from poverty).Report

      • Avatar greginak says:

        Yeah geddy lee’s voice does sound like high pitched straw crunching.Report

        • Avatar Jaybird says:

          The problem, Greg, is that there are folks who have come out and said that poverty is relational.

          It ain’t a strawman if people actually argue that we won’t know what poverty will look like in 100 years.Report

      • Avatar Chris says:

        Except that’s not really true. Poverty is, for many, anxiety. If you can get rid of that, I doubt people will be nearly as concerned about the fact that some dude has a 75 foot yacht when at the end of the month they have to worry about whether they’re going to have money to buy food, much less have gas or bus money to get to work. Poverty = anxiety. Covetousness is a symptom.Report

        • Poverty is, for many, anxiety.

          Riffing off that, is the reverse also true, that anxiety is, for many, poverty?  Because I think this feeds back into my rising expectations argument.  If our expectations rise along with our wealth, so that despite objective increases in our standard of living our subjective sense of our well-being does not improve, then no matter how objectively well-off the middle class becomes, they will still be–or at least feel themselves to be–impoverished.

          And many people take that feeling to be the critical issue, and ask for further increases in their standard of living to ameliorate that feeling, but unless we can achieve–quickly–vast increases in wealth for the middle class, we will still be feeding that feeling rather than ameliorating it.

          That’s why I insist on the inter-generational comparison, because as hard as it is for people to accept (because it is impossible for any of us to really feel our ancestors’ anxiety in the way we feel our own), it is ultimately the only way for most of us to successfully diminish that anxiety in the here and now.  I honestly think that those who focus on the anxiety and promote and validate it are, although well-intended, doing everyone in the middle class a disservice.

           Report

          • Avatar Chris says:

            Oh, I don’t think anyone would deny that our standards of living have increased, largely due to technology (money-wise, my generation is worse off than its parents at the same age, but my parents didn’t have a laptop in their 30s). However, that doesn’t change the fact that some people are constantly, or at least at the end of every pay period (whatever that is), genuinely worried about their food, their transportation, and their housing, to say nothing of their cable or whatever other luxuries they may or may not be able to afford. Sure, they don’t have to worry about where their next meal is going to come from every day, but they still have to worry, and a lot, about pretty basic things. There’s no way around that, and comparing it to the anxieties of the past, or of poorer countries, is kind of irrelevant.Report

            • Chris,

              Are we talking about the middle class or the poor?  If someone’s worried about paying for food and they don’t have cable, I’m not talking about them.

              If they have cable but they’re worried about “pretty basic things,” just what things are we talking about?  Job security, I get that and don’t dismiss that at all.  But you’re talking awefully vaguely here, and it’s a lot easier to push your line of argument when it’s kept that vague.Report

              • Avatar Chris says:

                There are plenty of people who are in the middle class who live from pay check to pay check. One emergency — having to buy a new car unexpectedly, having sudden medical bills for oneself or one’s child (or one’s parents, or whoever), fire or natural disaster without sufficient insurance coverage (because insurance companies suck, regardless of what they’re covering), a lay off, getting fired, one’s spouse getting fired, or whatever — can mean the difference between middle class with cable and a nice meal out once or twice a month on the one hand, and taking the bus to the food bank and living with one’s parents on the other. Like I said, there are degrees of anxiety, and even the rich get anxious about their lifestyle, but I guarantee you that a great deal of the animosity towards the rich comes from the fact that people below a certain income level have to worry every day about what might come on the next, because their lifestyle is on ground that shaky. I’ll put it this way: if you can save enough money to support your lifestyle without a job, or in case of emergency, for more than a month or two (and many in the middle class couldn’t even for a few weeks), you probably aren’t thinking there are too many rich people, even if you don’t consider yourself rich.Report

              • There are plenty of people who are in the middle class who live from pay check to pay check.

                Who has denied this?  The point is not that there aren’t such people, but that there were such people in the past, too, but they were living pay check to pay check with a lower material standard of living.  I’m not arguing everything’s peachy keen for everyone in the middle class.  I’m arguing that it’s a fallacy to claim the middle class are worse off now than in the past.   You’re not targeting your rebuttal to that, but to some claim I’m not making.Report

              • Avatar Sam says:

                James,

                Respectfully, it sure seems like you’re saying everything is peachy for everybody in the middle class when the basis of comparison is the world today versus the world 50 years ago.  Whether or not you’re intending this is immaterial. What I read is somebody saying, “Hey, it’s better having MP3 players than record players, so all of your other complaints are moot.”

                This is especially true when you argue that it is a disservice to even consider the anxiety felt by those in the middle class, as if instead we should be pointing to a cellphone constantly and saying, “Isn’t that so much better than a rotary?” Because frankly, the cellphone is super cool, but it isn’t making me feel better if my job is getting shipped overseas, if I can no longer afford a mortgage payment, if the CEO is continually getting raises while I am not, etc.Report

              • Sam,

                You think this is what I’m saying because you’re committed to an ideological position from which you are unable to step back and look at the larger picture.  You keep pointing out that the middle class has it rough today.  I keep saying, yes, by today’s standards, but less so by historical standards.  And you keep saying, so far as I can tell, only today’s standards matter.  And I’m trying to point out that in that case the middle class will always have it rough, forever and ever, amen.  And it means that, contra what has been claimed here, things are not worse for the middle class now than they used to be.  Things are approximately the same level of toughness, but with better cars, better entertainment opportunities, and better houses.

                But if people would moderate their rising expectations things would be less rough for most of them.  Yes, some people would still worry about their jobs being shipped overseas, but that’s not the majority of the middle class.  And if you’re worried about your job being shipped overseas, buying a 1,200 square foot house makes a lot more sense than buying a 2,000 square foot house.

                You know who hasn’t lost their houses in large numbers in the past several years?  Those who didn’t get loans that were actually stretching their means.  People who kept their expectations in check.

                To me you seem to make it sound like this is impossible, nobody can be expected to do that.  But it doesn’t change the facts on the ground that by doing so you can relieve a lot of that anxiety.  Sure, by comparing things to 50 years ago I’m not going to be very persuasive to some people–it would be a lot easier to be persuasive if I repeated the same emotionally compelling stuff you’re saying.  But I don’t think it’s true enough to be worthwhile–partly true, but not nearly covering the comprehensive set of facts about this issue.Report

        • Avatar greginak says:

          Well you want to see who covets a 75 foot yacht the most. Go talk to a group of people with 65 foot yachts. And boy those people with 75 yachts just can’t take their  eyes off those 85 yachts.

          Anxiety…well yes. But that anxiety is about affording health care or how to juggle the full time and part time job and hope the brakes on the car hold  out for a few more months. There is anxiety and then their is anxiety.Report

          • Avatar Chris says:

            Sure, but as anyone who’s ever lived from paycheck to paycheck can tell you, that anxiety is very real, and it affects everything you do (and it affects your health). The anxiety is what poverty is, and it wouldn’t make much sense to talk about levels of poverty if there weren’t levels of anxiety.

             

            Again, if you get rid of the anxiety, if you make it so even people who don’t make enough to afford many luxuries don’t have to worry about the necessities, ever, you won’t find much griping about the rich. Sure, envy will still be around, because envy is a basic human emotion, but it won’t take the form of class hatred or worse.Report

            • Avatar Chris says:

              I should add that this is, in a sense, what our system does: hey, you have a nice TV, you can eat a microwave dinner or McDonald’s, and you have a computer, so why would you worry about this huge power imabalance that comes with the distribution of wealth we have? Just go play your X-Box.Report

              • Avatar Jaybird says:

                What level of Maslow’s Hierarchy are we talking about with this?

                It seems to me that, at some point, what level of Maslow’s Hierarchy you’re fretting about ceases to be my moral/ethical responsibility.Report

              • Avatar Chris says:

                Pretty basic. It’s been my experience that people stop worrying about their television or their high speed internet when the shit hits the fan. There are some people for whom the shit is always pretty damn close to the fan.Report

        • Avatar Jaybird says:

          Poverty can be alleviated through pharmacology?

          I support this solution.Report

          • Avatar Chris says:

            No, because as any psychiatrist aware of the data will tell you, psychopharmacological solutions without behavioral changes and talk therapy are pretty much short term fixes that merely mask the underlying problems. But good snark, dude, good snark.Report

  5. Avatar Chris Weaver says:

    Personally I think the problems we are facing result form the system reducing the number of rich people and thus concentrating the wealth. We have given too much power to too few. Any wealth redistribution effrots should focus on increasing opportunities for meritorious contributors rather than on simply reducing the numbers of the rich.Report

    • Avatar wardsmith says:

      Why should there be “wealth redistribution efforts“?

      Given that in your utopian fantasy such a thing occurs, what is to motivate anyone to “meritorious contribution” KNOWING that their “wealth” is going to be “redistributed” away?

      This is the fundamental rub. Soviets tried what you’re talking about, as have others. To keep society running smoothly, THINGS have to get done. Until we have the Brave New World ‘deltas’ to do all that grungy work we’re too intelligent and important to do ourselves, society will require “winners and losers” of the economic variety and the impetus of wealth or lack thereof to coerce that grungy work getting done. Until you solve this problem you’ve solved nothing.Report

      • Avatar ThatPirateGuy says:

        Because they would still become more wealthy than get are now. Honestly anyone with more than 100 million in networth who still works is motivated by more than mere money.

        In addition describing moving towards the tax policies of say the united states during the era in which it defeated the ussr might seems strange.Report

      • Whoa, Danger, Danger, Will Robinson.

        Chris Weaver didn’t say anything about re-establishing the Soviet Union.  Sometimes there’s a middle ground between “I have an idea for how to improve things” and “I want to establish a murderous totalitarian regime that will starve to death or outright murder millions of people.”Report

        • Avatar Murali says:

          I want to establish a murderous totalitarian regime that will starve to death or outright murder millions of people.”

          Let’s leave aside the mass murder etc. A lot of the starvation was brought about by trying to run a large centralised command economy. Massive redistribution creates bad incentives. That said, Mr Weaver’s comments were so vague and at most obliquely referred to the problem as  about having too few rich people or something that it is not entirely clear how we can go from there to the soviet system. Its not even clear how much he is actually arguing in favour of redistribution.Report

  6. Avatar david says:

    I wonder what poll results would be if the question had instead asked about the number of poor people.

    Implicit in the question is some assumption of where the new rich people are coming from (whether existing poor people are being made rich by magic or by redistribution or whether rich people are being introduced from overseas) and the varying results are, I think, more interestingly interpreted as presenting different intuitions on what generates unequal outcomes.Report

  7. Avatar Erik says:

    At Scalzi’s blog, there was a quip: “Being poor is knowing exactly how much everything costs.”

    I think this at least is one standard by which everyone can and should be rich. I’m rich by this standard (when I go shopping, I put stuff in the basket and pay with minimal attention to the price) despite earning only $60K/year.Report

    • I like to say that my mother is rich enough to enjoy agonizing over prices.Report

    • Avatar ThatPirateGuy says:

      Most Americans don’t put only in front of 60k per year. I don’t know you cost of living but the median national income is $26,364. People like you me and my girlfriend easily double that. I’m saving 13200 a year for retirement and she is paying off a new car and all of her credit debt in less than 6 months. This is going on while we eat out multiple times a week and I support the expensive hobbies of miniature gaming and tattoo collecting. We can’t use ourselves as anything but examples of people who are making it.

      http://blogs.reuters.com/david-cay-johnston/2011/10/19/first-look-at-us-pay-data-its-awful/Report

      • Avatar wardsmith says:

        Then there’s always net worth:

        Report

      • median national income is $26,364.

        That’s a very misleading number, as it includes all members of households, working and non-working, above the age of 14.  So when my daughter turns 15 she’ll be included in that, whereas she currently isn’t.

        Using Wiki because I’m in a hurry, the median household income is a little over $50k, the median income for men who work full-time is around $45k, and for women who work full-time it’s around $35k.

        I make no claim that those numbers are satisfactory.  I only put them out there for greater accuracy of data on which to base arguments one way or the other.Report

        • Avatar Benjamin Daniels says:

          Also, this: http://economistsview.typepad.com/economistsview/2011/09/mean-vs-median-income-growth.html

          There’s a good data and discussion on mean vs median incomes in the US, and this gem:

          “Average real income per family in the United States grew by 32.2 percent from 1975 to 2006, while they grew only by 27.1 percent in France during the same period, showing that the macroeconomic performance in the United States was better than the French one during this period. Excluding the top percentile, average United States real incomes grew by only 17.9 percent during the period while average French real incomes — excluding the top percentile — still grew at much the same rate (26.4 percent) as for the whole French population. Therefore, the better macroeconomic performance of the United States and France is reversed when excluding the top 1 percent.”Report

        • Avatar ThatPirateGuy says:

          really? It is always nice to know the real story. A question is the household income refering to aggregating the income of both of the adults in a marriage? I have heard both yes and no.Report

  8. Honestly, I’m wary of interpreting this poll much one way or another.  The terms are just too poorly defined, and in context mean too many different things to too many people.  On top of that, “rich” is not a terribly neutral term these days, if it ever was.  “Wealthy” might have been a more neutral term, but “rich” carries with it connotations of obscene wealth and power over the lives of others even though it is definitionally mostly just a synonym for “wealthy.”  “Rich” conjures up images of Marie Antoinette; “wealthy” conjures up images of a successful retiree on easy street.

    More than that, though, what you usually get with responses to poll questions like this are emotional gut reactions, not well-thought out responses.  I agree with you – there’s not nearly enough rich (or at least wealthy) people in this country, nor for that matter could there ever be enough.  If, that is, we’re defining “rich” in absolute terms.  But to reach that point, you need to give the question enough thought to get past the connotations of “rich.”

    That 31% think would answer that there are too many rich people under those circumstances doesn’t surprise me; hell, if the pollster caught me on a bad day, I might have even given that answer.

    The response that confuses me is the 42% saying just about enough.

    More than anything, I would like to see the cross-tabs on this.  I cannot find the actual poll, either, and this is not the sort of thing that Kaiser usually polls on, which makes me a bit more skeptical about this.Report

    • Avatar felix says:

      “Things are sort of roughly all right now” and “the second one you said, the answer in the middle” are the sort of things people often say in answer to polls when what they mean is “I don’t want to admit that I don’t understand the question.” (Really the only good answer to this question as drafted is “I don’t understand this question.”)Report

      • You are, of course, correct.  But it’s so much more fun to pretend like the people responding to the question after having their dinner interrupted interpreted the phrasing exactly as we would interpret that phrasing so that we can appropriately make our political point.Report

    • Avatar Jason Kuznicki says:

      Honestly, I’m wary of interpreting this poll much one way or another.  The terms are just too poorly defined, and in context mean too many different things to too many people.

      Did you imagine that this wasn’t one of my points?  The poll only makes any sense at all when we consider that it’s really asking something a lot more like the following:

      Given the existence of a tribe you mistrust, would you like that tribe to have more members, fewer members, or about the same number?

      If we read the poll result in that way, it’s actually sort of surprising the numbers aren’t even more ridiculous.Report

      • Avatar North says:

        If that was one of your points it didn’t get that meaning on the first review. When I read it over the I saw you identify the poll, describe it and the results and then light into liberals and the respondants in general. I wouldn’t describe it as a diatribe but it reads as very… exercised. I am missing the part where you cast doubt onto whether the poll was a good one or whether we should take the results very seriously. But I’ve misread many a post before so I could easily be missing something?Report

        • This.

          FWIW, I also think a lot of the pushback you’re getting here equally misses the point, presuming to speak for the 31% of purported respondents, and my snark was at directed at that just as much.Report

        • Avatar Jason Kuznicki says:

          I guess you’re right.  I have very, very often noted in this space how opinion polls tend to yield absurd results that are only explicable as signaling (if at all), and I didn’t think I needed to remind people that that’s a peeve of mine.

          I mentally put this poll in the same class as the one where everyone says we should cut foreign aid — to 10% of the budget, from an assumed 25% — when really it’s 0.3%.  Or the one where a significant number pegged corporate average profits 60% per year (which they appear to have thought was a bad thing, but which would really be transcendentally awesome, as I explain here).

          I guess I should have explained that I was working in that same mental category. I didn’t want to be too verbose, but yeah, it’s also possible to be too concise.Report

    • Avatar Jaybird says:

      That’s not how I learned the distinctions between the terms “rich” v. “wealthy”.

      The formula I had was “Shaq is rich. The man who signs Shaq’s checks is wealthy.”Report

  9. Avatar Mike Schilling says:

    Did pre-revolutionary France have too much nobility, too little, or the right amount?Report

    • Avatar Jaybird says:

      This comment explains much:

      If you see “The Rich” today as analogous to pre-revolutionary French nobility, you’re likely to answer a very particular way.Report

      • Avatar Sam says:

        Why on Earth wouldn’t you see “The Rich” today as being analogous to nobility elsewhere?Report

        • Because the nobility were part of what was essentially a semi-rigid caste system.  Social mobility in the U.S. ain’t really what it ought to be, but people move up and down–particularly across generations–in a way that would stun the sensibilities of the noblesse and devastate their sense of oblige.Report

          • Avatar Sam says:

            Social mobility in the United States has stagnated as the people desperate to make wealthy people wealthier have gotten their way.Report

            • Avatar Roger says:

              Sam
              No social mobility has stagnated via an epidemic of unmarried teen moms whose kids are forced into schools run for the unions. Nice work liberals.Report

              • Avatar Jason Kuznicki says:

                Teen births are at a record low in the United States.  They have never been lower since we started keeping track of that statistic.  In 1940.

                Granted, we’re still higher than most developed countries, but given our religious beliefs about birth control and abortion, this isn’t terribly surprising.  Nor should it necessarily be something to complain about, if one values adherence to those beliefs highly enough.Report

              • Avatar Murali says:

                Teen births are at a record low in the United States. 

                Dude, teen births cannot be anything other than 0. Even though some teens still behave like infants, when people are born, they are not teens!

                 

                Bazinga!Report

              • Avatar Jesse Ewiak says:

                That’s weird, because teenage pregnancy is the lowest it’s been since the government started tracking it in…1940.

                http://andrewsullivan.thedailybeast.com/2011/11/teen-mom-nation.html

                Yes, it’s higher than in other nations (thanks to evil liberal and socialists giving out condoms and birth control in those countries), but it’s still lower than the halcyon days of the 50’s.Report

              • Avatar Kim says:

                Yeah. teenage pregnancy is a reliable indicator of the amount of stress that society is in. We’re in pretty bad shape right now — that’s why our birthrate is plummeting. Nobody wants a liability-baby in this environment.Report

              • It’s not teen pregnancy per se.  It’s unmarried teen pregnancy.  Of course that’s been declining lately, too, but we’re comparing eras when it was common to get married right out of high school to an era where it’s common to wait until the mid 20s to get married.  So lots of those teen pregnancies from earlier eras were to married couples.

                But while we’re talking about stagnation in mobility and household income, it is worth noting that this happened during an era when divorce increased dramatically.  We all know that in divorces women are disproportionately likely to fall in income status compared to men, and two income households normally become two single-income households.

                Add to that the simple delay in marriage means there are more single-income households among twenty-somethings than there were a generation ago.

                And yet there’s a strange tendency to pretend that this didn’t play a substantial part in stagnating household incomes.  It ain’t the whole story, but it’s an important part of it.  And the solution to that part of it–persuading people to marry young–isn’t likely to win many friends here.Report

              • Avatar North says:

                James, per the red state model the main thing you get by persuading people to marry young is a whack of kids living through divorces in their teenage years.Report

              • Yes, today.  But of course in the past, when the teen birth rate was largely a function of married teenagers, divorce was less common.  Not that I’m advocating either teen marriage or making divorce difficult.  I agree with you, but stick to the claim that the other main thing you get is a high teen birth rate.Report

      • Avatar Chris says:

        Quite obviously, the rich today are a combination of the nobility (old rich: think Upper East Side) and the bourgeois, but then, the French Revolution just served to make the bourgeois rich like the nobles anyway.

        Besides, I think Mike’s analogy had slightly different mappings than your interpretation of it.Report

        • Avatar Jason Kuznicki says:

          Quite obviously, the rich today are a combination of the nobility (old rich: think Upper East Side) and the bourgeois…

          And this was true of the nobility in the Old Regime, too.  But other than that, I think James Hanley is basically right.Report

          • Avatar Rufus F. says:

            I think some of you might be surprised at how many nobles there were in the Old Regime with relatively little wealth and very few professions that they could take part in without losing their status. It was a society of privileged orders to be sure and one in which mobility was highly restricted, but it’s somewhat of a mistake to think of these orders as being defined by their level of wealth. In many ways, it was better to be a successful merchant by the eighteenth century than it was to be a member of the aristocracy. It’s just the crown was intermittently restricting trade and you had little say with them. It’s hard to say though if the Revolution changed much about the social structure, or if it just reflected changes that had long since been accepted. Remember that Voltaire’s jokes about the worthless aristocracy were chuckled at in high society salons by liberal-minded nobles keen to show that they were comfortable with the tenor of the times decades earlier.Report

            • Avatar Jason Kuznicki says:

              I think some of you might be surprised at how many nobles there were in the Old Regime with relatively little wealth and very few professions that they could take part in without losing their status. It was a society of privileged orders to be sure and one in which mobility was highly restricted, but it’s somewhat of a mistake to think of these orders as being defined by their level of wealth.

              Oh definitely.  But most people also imagine that Old Regime nobles all had pedigrees going back to Charlemagne, and the truth is mostly they didn’t.  By the Revolution, most of the nobility had been ennobled by purchasing an office at some point after the Renaissance, when the practice began.  Most nobles were acutely aware that they were former bourgeois, and the old nobles were most especially aware of, and resented, the fact.Report

          • Avatar Chris says:

            I agree with James as well.Report

  10. Avatar Michael Chaney says:

    Let me explain why.  To the left, this is a zero-sum game (remember, these are people who think Krugman is an intelligent economist although he is neither).  That means that if 1 guy gets rich, there are 100 others who have to become poor to finance his wealth.

    Of course, that’s bunk.  But until we start teaching real economics (not “Keynesian economics) this problem will continue.  Maybe as a public service someone should start giving free econ 101 lessons at the occupy protests.Report

    • I agree with you that the poll results can be explained (away) by participants assuming zero sum, but Keynesian economics is definitely not a zero-sum construct, flawed as it is.Report

      • Avatar Sam says:

        Why the hostility to zero-sum understandings? Surely you’re not expecting people with stagnant wages, foreclosed upon homes, progressively costlier benefits who see the wealthy getting wealthier to believe that the game isn’t one in which there are winners and losers. It’s one thing to have a particular view of economics; it’s another to assume that people aren’t going to look at the evidence in front of them to draw particular conclusions.Report

        • Sam,  It’s easier to interpret that evidence when you actually have that “particular view” of economics (which “particular view” happens to be the one held by economists ranging from Krugman to Friedman).  You’re making the mistake of looking at a single data point (what’s happening at this moment) and assuming its representative of a much larger data set.

          If you want the evidence that’s in front of us, compare average standard of living in the U.S. today to average standard of living half a century ago (1961).  We are, the great majority of us, much better off.  The economy in general is a positive-sum game, and if you don’t think so, you’re not really looking at very much evidence at all.

           Report

          • Avatar Jesse Ewiak says:

            They may be better of than they were in 1961, but are they better off than they were in 1981, when you could graduate high school and still get a middle-class job, you could afford to send your kids to college without going thousands into debt, and actually have a pension when you retire?Report

            • 1981? Sigh.  Have you looked at the unemployment numbers for the succeeding 2 years?  My brother was out of work for 18 months during that time.

              We’ve had a recession.  A very fishing serious one.  But there is no good reason to believe this is the new normal.

              And, yes, if you look at standards of living, on average (even including the rich) we’re better off now than we were then.  Our cars are safer and last longer, we have more access to entertainment and culture through the miracle of cables and satellites, we have access to a library of music or books in devices small enough to get lost in your knapsack, life expectancy for newborns since 1981 has risen about 2 1/2 years for females and almost 5 years for males.

              Yeah, it just fishin’ sucks to be alive now.Report

              • Avatar Jason Kuznicki says:

                We’ve had a recession.  A very fishing serious one.  But there is no good reason to believe this is the new normal.

                There is if you want to sell alarming newspapers.  Of course, the alarmism might be right if Europe implodes.Report

          • Avatar Sam says:

            James,

            Respectfully, why do we stop at 1961? Perhaps we ought to tell people struggling through personally dark economic times that they’re hugely better off than they would have been had they been alive 100, 200, or 500 years ago. Because they are. Except that human beings don’t sit around comparing their lives to what they would have been decades earlier. They look at the bills that are coming in at the end of the month, they look at their salaries, they look at the goals that their have for their lives, and the realize that there is a sometimes vast disconnect between the three. When they then see the wealthy aren’t getting hurt, but are in fact, getting wealthier, it becomes that much harder to believe in the positive-sum economy that you’re describing.

            Telling them that economists have measured and concluded that  everything is fine, is like being Kevin Bacon in Animal House and screaming at the panicked parade attendees.Report

            • Respectfully, why do we stop at 1961? 

              Because I was trying to be generous and not point out how vastly better off we are than folks in 1861.

              Perhaps we ought to tell people struggling through personally dark economic times that they’re hugely better off than they would have been had they been alive 100, 200, or 500 years ago.

              I do, when I’m not feeling so generous.  The point is not that nobody’s feeling pain now.  The point is that you claimed it’s a zero-sum game, and now you’re implicitly admitting that it’s not, without stepping up and confessing your error.

              Except that human beings don’t sit around comparing their lives to what they would have been decades earlier. They look at the bills that are coming in at the end of the month, they look at their salaries, they look at the goals that their have for their lives, and the realize that there is a sometimes vast disconnect between the three.

              Yes, and our persistent complaint is that the middle class is always struggling, and we think that in the right world the middle class wouldn’t struggle.  But because our expectations rise, because we insist on having ever more stuff to qualify as middle class, economic struggle is in fact a defining feature of what it means to be middle class.  The people decades earlier were economically struggling, too, but they were struggling with a lot less stuff.

              Very simply, if most people making middle class incomes today contented themselves with the living standards of the 1950s, they would have plenty of money to sock away in investments.  They wouldn’t be struggling at all.

              What you’re asking us to do is to ignore perspective.  To look at the current moment without any context.  Sure, people do in fact do that.  That doesn’t make it an intelligent way to try to understand things.Report

              • Avatar Jesse Ewiak says:

                We can have better technology _and_ pensions _and_ low-cost higher education. It’s not an either/or proposition.Report

              • Jesse,

                Can we really have “low cost” higher education?

                Be careful, that’s a trick question.Report

              • Avatar Jesse Ewiak says:

                Yes, we can have low cost public education subsidized by the public through their taxes. Yes, running a college is expensive. That’s no reason to stick 22-year-olds with the bills so you can give out a tax cut.Report

              • Jesse,

                Is that really “low cost”?

                Like I said, it’s a trick question.Report

              • Avatar Jesse Ewiak says:

                Our defense department, even if we cut it to levels both you and I would agree on wouldn’t be “low cost”, but yet we’d still pay for it via taxation.Report

              • Avatar wardsmith says:

                Well played.Report

              • Avatar Jesse Ewiak says:

                Oh, and I’d point out there’s not point to living to 80 instead of 75 if you’re working until you’re 78 at Wal-Mart to pay for your medication once Medicare becomes voucherized.Report

              • Lots of assumptions there…Report

              • Avatar Zach says:

                I would rather have the extra five years, even if it meant working as a greeter for 10-20 hours a week. I don’t think that working at Wal-Mart part-time as a senior is so horrendous as to make life not worth living.Report

              • Most of the Wal-Mart greeters I’ve seen don’t look like they’re distressed about having to work there.  I can’t imagine many things worse than standing in one spot being nice to people all day, but that’s just me.Report

              • Avatar Rufus F. says:

                My Aunt worked for five years as a Wal-Mart greeter before moving up to the position of Wal-Mart conversationalist. Now she has herpes.Report

              • Avatar Jesse Ewiak says:

                Sure, right now, because it’s a bonus for most seniors still working. Note, I said, _have_ to work. If a 70-year-old wants a part-time job because they’re lonely or whatever, fine. If they _need_ a part-time job so they can afford their rent and/or medication, that’s a failure of society.Report

              • Jesse, you don’t know that’s going to happen.  Let’s not play scare stories about improbable future bogeymen.

                 Report

              • Avatar Zach says:

                I was assuming that I was working in order to pay for my rent and/or medication. I’m still not sure why that’s such a horrendous thing that it would have been better if I had died at 75 then had to work part-time three extra years.Report

              • Avatar Mike Schilling says:

                @ Rufus:  Even funnier if I picture your namesake saying it.Report

              • I’d rather die in a bear fight or freak base-jumping accident before I get old enough to start losing my limbs to diabetes or losing my mind to Alzheimer’s, seriously.Report

              • Avatar Stillwater says:

                I think part your point might be that as wealth increases, expectations rise a well. So the narrow standard that people ‘aren’t making enough money’ is unhelpful. It reminds me of a poll where people were asked ‘how much more income would you need to be financially secure?’ and almost everyone in every income bracket answered roughly 15%. So, the argument that some objective standard be employed here is an important one. And if the objective standard doesn’t accommodate a preferred view, then I think the preferred view can be legitimately criticized on that score.

                But, you know as well as I, that this goes back to liberals not having a principled view of processes or outcomes that is in some sense measurable or clearly articulable. That’s a real knock on liberalism, one I’ve expressed concerns about and find even more troubling as these discussions go forward.Report

              • Stillwater,

                Yes, on all counts in your comment.

                And from now on I’m going to cite you as evidence that liberals are unprincipled!  *grin*Report

              • Avatar Stillwater says:

                Consider it a victory. Remember that conversation about liberal’s changing priorities? I think part of the problem here is that liberalism has won the major battles (not completely, of course) going back say 70 years – the poor are taken care of, economic quality of life has materially improved, access to economic and social opportunities are pretty open to all (no systematic discrimination in the workforce tho it lingers on), etc. There continue to be important battles, but they lack the centrality which important battles once upon a time did.

                If that’s right, then liberals priorities sorta have to change since the main drivers of policy have in some sense (not entirely!) been achieved. That’s much to general, of course, to not suffer from huge pushback, but I say it to make the following point: if it’s true that liberal initiatives have accomplished their main goals of protecting the poor and worst off, extending basic rights and equality of opportunity to all in the community, etc., then maybe it’s time for liberals to refocus on the ways government interferes with those very goals.

                Maybe I’m suggesting here that adopting some libertarian views re: limiting government are the logical next phase of liberalism once liberal goals have been achieved thru the use of government.

                 Report

              • Dear stillwater:

                I hereby wish to offer you a seat on my left-libertarian bus.  It’s sadly not very full, but I’m hoping that the low, low price of admission (free!) changes that.Report

              • Dear Mark Thompson,

                Nothing is Free.

                Cordially yours,

                Robert Heinlein.Report

              • Avatar Stillwater says:

                Mark, Thanks for the invite. I think my change of views about this really can be credited to Hanley’s one question (well, that and his pit-bull like relentlessness): what are the limits of liberalism? And in fact, I didn’t shy away from his challenge to liberals to justify our views precisely because I’d always wanted to do just that, especially wrt contemporary liberalism,  but couldn’t in the circular space of my own head.

                So, you know, count me in. At least on the fringes.

                 

                 

                 

                 

                 

                 

                 Report

              • what are the limits of liberalism? And in fact, I didn’t shy away from his challenge to liberals to justify our views 

                Which has led to both some good discussions and my profound respect.  This may be a good time to let the cat out of the bag and admit that one of the reasons I am actually a much more moderate libertarian than I usually let on is that Leaguers have done such a good job of challenging me on the limits of libertarianism.Report

              • Stillwater,

                But, you know as well as I, that this goes back to liberals not having a principled view of processes or outcomes that is in some sense measurable or clearly articulable.

                I didn’t understand what you meant by this – Rawlsian primary goods and Amartya Sen’s capability approach come to mind.

                I’m also deeply skeptical of your assessment, even with caveats, that liberalism has won the major battles on social insurance and social welfare (via Justin Wolfers’ feed, I think from a Pew Global Attitudes Project report, pdf),

                Report

              • Avatar Stillwater says:

                CC, that quoted comment was referencing some long and very detailed discussions between James and I, one’s which I don’t think I can summarize very well. The point I was making isn’t that liberals lack principles – I think they – we – do. It’s that we lack, in some sense of the word, systematic principles which permit objectively measurable success/failure, or which, alternatively, constrain the liberal project to clearly identifiable goals. I think that the overall goal of income equality might be useful role for government to play, but until some standard of ‘income equality’ is clearly identified, there is no goal to try to achieve. ANd that;s what James is arguing in this part of the thread: that data shows the material conditions people are living in are actually higher now than in 1961. So, if material conditions is the standard, liberal goals have already been met. If the liberal wants to shift the goal to some other standard, then they (we) have to clearly articulate what that standard is, or ought to be.

                Re: the claim about liberal goals having been met, I tend to think that’s for the most part true. But I also phrased it as a conditional: if those goals have been largely met, what follows for a liberal project based on promiting/protecting rights and opportunities to all? Maybe a better way to say it is this: to the extent that those goals have been met by us of government (in a specific area, say), liberals ought to focus on institutional structures within government which are inconsistent with those goals.

                 Report

              • Avatar Stillwater says:

                Well, that first paragraph needed some editing …Report

              • Avatar MikeH says:

                I’m not really clear on how things are so much better than they were in 1961.  In 1961, on my dad’s salary (he was a high-school grad) as a Sears department manager, my family lived in a ~1500 sq ft house that he paid $18,500 for.  He bought a new car every 4 years and took a couple of vacations every year.  In 2011, on my salary as an IT professional AND my wife’s salary as an executive assistant,  we live in a 1500 sq ft house that we paid $190,000 for, we buy a new car about every 4 years and haven’t been able to afford a real vacation in 3 years.  My Dad retired from Sears with  the house paid for and a pension from Sears along with his SSI and my parents enjoyed a nice retirement.  Meanwhile, my wife and I lost big chunks of our 401Ks (along with a bunch of stock (options) when the dot-com bubble collapsed and again in 2008.

                In ’61, I knew people who graduated from high school, joined the union, and went to work for Pennzoil or Continental Can.  They made good livings and retired with pensions.  A HS grad now is luck to get a job at Wendy’s.

                Sure, we’ve got all sorts of electronic gadgets that weren’t available then, but, for the American working class, I don’t see how things have gotten better.Report

              • Avatar Jesse Ewiak says:

                No, you simply don’t understand. Because we have the Internet and MP3 players now, we’re bad people for pointing out it’s harder for a middle-class family than it was twenty to thirty years ago.Report

              • Jesse,

                You’re really missing the point.  For most middle class families it’s not actually harder now than it was twenty years ago.  What keep it hard is that the insist on spending their money on things like internet service and MP3 players.  There’s nothing wrong with having those things, but if in fact people tried to live at the level of 20, 30, 40 years ago, they’d find that nowadays it’s easier now to do that than it was back then.

                But I know I’m a heretic for critiquing the middle class.  As Murali said over here, “people prefer false intuitive explanations over true counterintuitive ones.”  Data won’t persuade you as long as there is an emotionally compelling counterexample.Report

              • Avatar Jesse Ewiak says:

                Except, as I and other people have pointed out multiple times, as a percentage of income, spending on electronics, clothes, and other consumer goods have actually gone down as a percentage of income.

                People aren’t feeling a squeeze because they buy their kids an XBox at Christmas and have a $60/month phone bill (much like their parent’s did, only it was a landline and a cell phone), people are feeling a squeeze because their health care premium has skyrocketed, the cost of college has vastly outpaced inflation, and so forth.

                 Report

              • Avatar Mike Schilling says:

                What keep it hard is that the insist on spending their money on things like internet service and MP3 players.  

                Huh?  Internet service costs about the same as the newspaper + magazines subscriptions I’ve replaced with it.  An MP3 player is a hell of a lot cheaper than a stereo.  The device that lets me watch streaming Netflix on my TV is an indulgence, but it was a one-time cost of about fifty bucks.  It’s not hard because there are new toys.  It’s hard because big-ticket items like housing, health care, and college tuition are completely out of hand.Report

              • Except, as I and other people have pointed out multiple times, as a percentage of income, spending on electronics, clothes, and other consumer goods have actually gone down as a percentage of income.

                Yes, and that’s why people have a higher standard of living, something you keep dismissing as unimportant.  But you know what people give up when times are tough?  Small ticket items that they actually can live without.  If people have given those things up and are struggling, odds are they have my sympathy.  If they’re still spending on those things and are struggling, they’re making wrong decisions.  Those things do add up.  And you and Mike are really making my point here about rising expectations–you think we shouldn’t count these things in comparing what it means to be middle class because they’re normal and not major expenditures.  But that’s just internalizing the rising expectations so totally and completely that you can’t really see it.

                Mike Schilling–re: housing.  You want to bring down the price of housing?  Diminish the regulations governing the building of housing.  Limit people’s ability to move.  Get rid of the mortgage interest deduction on taxes.  Eliminate de facto subsidies of mortgages by getting rid of Fannie and Freddie.

                And let’s not forget, again, that the average house size has doubled in the last half century while families have gotten smaller.

                I’m not arguing for those policies.  I’m saying the factors that have driven housing prices aren’t mysterious, and they’re predominantly factors that liberals support; regulations, mobility, mortgage interest deduction, Fannie/Freddie. (Perhaps not, as a general rule, bigger houses; at least not among my liberal friends.)  And those are all supported for good reasons–I’m not knocking liberals for supporting those things.  I’m knocking liberals for supporting things that drive up housing prices then complaining about higher housing prices.

                 Report

              • people are feeling a squeeze because… the cost of college has vastly outpaced inflation,

                Jesse,  I still want you to dig into that question about a low-cost college education.  Is it possible to have such a thing?

                I’ll reveal the trick behind the question: Inexpensive for the buyer does not necessarily mean “cheap.”  It just means subsidized.

                And what effect do subsidies have on the real prices?

                Also, do you know what’s driving the increasing price of college education?

                It’s really simple to say education should be cheap, but if you start analyzing it beyond that bit of bumper sticker liberalism, it turns out to be a lot more problematic than you’re thinking right now.

                 Report

              • Avatar Chris says:

                James, I just want to point out, again, that there’s a difference between standard of living and what we might call lifestyle insecurity (I think I’ve heard that term somewhere, but I’m too lazy to look up). You can have a relatively high standard of living, historically, and still live paycheck to paycheck.Report

              • Avatar Mike Schilling says:

                And you and Mike are really making my point here about rising expectations–you think we shouldn’t count these things in comparing what it means to be middle class because they’re normal and not major expenditures.  

                No, I’m disputing your point about what’s signal and what’s noise. People aren’t insecure because they’re spending a few dollars a week on things that aren’t strictly necessary — they’re insecure because necessities keep getting more and more expensive, with wages not anywhere near keeping up.

                Nor is the  internet a luxury for many of us.  I couldn’t do my job without connectivity from home.  I am not unique in this.Report

              • Chris,

                I’m not disputing that.  I’m pointing out that if people didn’t let their expectations rise much of that insecurity–not all–would be wiped away.Report

              • Mike,

                I’m not saying people are insecure just because of those small-ticket items.  As you may remember from other threads I’ve also talked about the doubling of home sizes while family sizes have declined by a third or more.  If a family of 6 has a 1000 square foot house, that’s 167 square feet per person.  If a family of 4 has a 2000 square foot house that’s 500 square feet per person.

                For many of the people we’re worried about right now that is a big part of the reason they’re anxious–the rising expectations led them to spend on that square footage per person.

                But for liberals middle class people are never responsible for any of their problems–it’s always the fault of the rich who’ve screwed them over.  (I don’t actually mean that, of course, but see how easy it is to play your moronic game of lying about the other side’s beliefs?)Report

              • Avatar Jesse Ewiak says:

                Yup, and you’re assigning all the blame to the person who signed the mortgage but assinging none to the person offering the mortgage.

                Oh, and by the way, Fannie & Freddie actually had a much lower default rate than many private lenders, I’d happily phase out the mortgage interest deduction, and even the FBI has said there was an epidemic of mortgage fraud committed by the banks. But I know, government intrusion into business – bad!Report

              • Jesse,

                You seem to have missed the point where I said I didn’t actually mean that; I was just mocking Mike for playing that kind of game.  Do try to keep up.

                As for Fannie and Freddie’s lower default rate, it was still enough to drive them broke, so I’m not sure exactly what you’re boasting about.  And perhaps you don’t understand that their very existence, the expectation that they would be backed by the government, provided an incentive to mortgage brokers to offer riskier loans (look at the percentage of subprime loans held by F&F).  You also conveniently forget the government’s pressure on the industry to offer more subprime loans.

                Yes, there’s enough blame to go around, both government and industry (nobody should have been buying such opaque tranches of RMBSes so eagerly–and that was the real industry problem, not this fake business about mortgage lenders scamming people).  And borrowers.  In the end, nobody put a gun to their head and forced them to buy.  Someone offered them a deal they should have rejected; they took the deal.  You seem to be treading awfully close to my strawman of saying they don’t bear any responsibility for their own actions.Report

              • Avatar Jesse Ewiak says:

                If I go to a doctor and he tells me I need this procedure and it turns it out it ruins my life, it’s perfectly reasonable to blame the doctor. Yet, I say the same thing about a banker and I hear calls of personal responsibility. I guess I should’ve known medical jargon just like I’m expected to be able to parse a 60-page document.

                As for Fannie and Freddie, no one is saying they’re blameless. But, the banks are far more to blame, yet you’re not calling for the dissolving of Citibank, BOA, or JPMorganChase. After all, Fannie & Freddie lost market share during the 2nd Bush administration because they most subprime loans didn’t meet their standards.

                84% of total subprime loans were made by private lending institutions during the boom and 83% of subprime loans to low-and-moderate income home buyers were made by private lending institutions. To look at those numbers and think the problem is Fannie & Freddie is insanity.

                 Report

              • Avatar Mike Schilling says:

                nobody should have been buying such opaque tranches of RMBSes so eagerly–and that was the real industry problem, not this fake business about mortgage lenders scamming people

                Once there was value in worthless loans, lots of them were produced.  I’m surprised you, of all people, doubt the power of the market.Report

              • I guess I should’ve known medical jargon just like I’m expected to be able to parse a 60-page document.

                I don’t accept the analogy.  You can be expected to know how much a mortgage is costing you.  If you can’t figure out your own budget, you have a problem that goes beyond unscrupulous lenders. (I mean the general “you,” not “you” specifically.)

                yet you’re not calling for the dissolving of Citibank, BOA, or JPMorganChase.

                Really?  Do you know that?  I was all for letting the failed banks fail.Report

              • But you know what people give up when times are tough?  Small ticket items that they actually can live without.  If people have given those things up and are struggling, odds are they have my sympathy.  If they’re still spending on those things and are struggling, they’re making wrong decisions.  Those things do add up.

                Is it that they do give them up or that they ought to?  It doesn’t seem to me beyond the realm of imagination that poor people–or if I don’t use the word “poor,” then maybe “less off than I am”–might spend money on small ticket items that yield temporary and instantaneous pleasures rather than on what they actually need.  Of course, if things really were so bad that it’s a question of bare survival, then they probably would opt to give up those small ticket items.

                Of course, maybe they should spend more frugally (heck, maybe I should).  And I think one is justified, to some degree, in withholding sympathy from those who don’t spend frugally.  (Or at least withholding some sympathy; I find it hard to have much patience for those who claim categorically to have “no sympathy” for someone who is in a bad way even if that situation is due partly to that someone’s own improvident decisions.)Report

              • @ James

                You can be expected to know how much a mortgage is costing you.

                Sure.  But when you look at your 2% APR loan mortgage payment, and you look at the housing market and houses are appreciating by 15% or more a year, it’s not entirely stupid to say, “Hey, I can afford this $950 payment even with the $250 PMI, because in two years I’ll have enough equity that the PMI is gone and in 5 when it adjusts I’ll just get another ARM.  The worst that can happen is that interest rates go up, what, 3%?  I can still get an ARM for a low enough rate that my mortgage payment will be less than it is now with the PMI”.

                Except then the bubble bursts, and your house depreciates, and you can’t get rid of the PMI (okay, maybe you should have seen that one coming) and now you don’t qualify for a refi because nobody’s offering ARMs to you and you don’t have enough equity to qualify for a 30 year fixed.

                Just like a lot of businesses got screwed when credit dried up, a lot of homeowners got screwed, too.  And while I can certainly say, “I told you so” on account o’ I’ve never had anything *but* a 30 year fixed, I don’t think it’s *entirely* unreasonable to be sympathetic with the large volume of people who believed their loan officer who told them (a) that an ARM was a good idea in the first place (b) that housing prices never go down… not since WWII, look! and (c) that no matter what happens, they can just come back and refi and the loan officer will take care the paperwork for an extra $6K slapped on the loan.

                 Report

              • Avatar Kim says:

                James,

                bullshit. bullshit and more bullshit. Planned obsolescence makes many things infeasible. (okay, so maybe cars have gotten better. Except them, then!)Report

              • Once there was value in worthless loans, lots of them were produced.  I’m surprised you, of all people, doubt the power of the market.

                Mike, do you ever take a moment to think anything through?  I have never argued the market is perfect and nothing goes wrong.  Markets are chaotic, and it’s out of that chaos that value is created.  But sometimes it goes wrong.  I’ve never denied that and you’ll never find any place where I have.

                Ford produced Edsels.  Ooops, I guess I’m doubting the power of the market!  GM went broke because it couldn’t make cars at a cost it could sell them for.  Oh, I’m doubting the power of the market!

                No, you ninnyhammer, the power of the market is the power to reward the good ideas and to punish the bad ones.  If the government hadn’t stepped in there would have been a whole hell of a lot more punishing going on.

                But, again, you’re deadwrong if you see the mortgage bubble and crisis as solely a market phenomenon.  Government policy played a huge role in it, and helped to distort markets, creating the bubble.  It was the bubble that fooled banks into stupidly thinking the RMBSes were valuable when in fact it was impossible to see the value of the mortgages they contained.  So, yes, the banks made careless decisions and deserved to be punished by the market–that’s the power of the market.

                But who’s going to punish the government that set up short-sighted policies and then bailed out the banks?  Not anyone who desperately keeps trying to absolve the government of its responsibility in the whole scheme.Report

              • Avatar Mike Schilling says:

                 It was the bubble that fooled banks into stupidly thinking the RMBSes were valuable when in fact it was impossible to see the value of the mortgages they contained.  

                Why is it libertarians don’t think rich people are ever responsible for their own behavior?  (That one was deliberate.)  They were stupid and greedy, exactly like the VCs in the 90’s who invested in internet companies with no business plan or hope of profit.  People can be blinded by greed.  When enough of them are blinded by the same thing at the same time, you have a bubble.  That doesn’t absolve the people responsible.  Yes, the government had a part in it, but the government didn’t force anyone to invest in opaque CDOs, or treat CDSs as real insurance policies, or any of the other nonsense that passed as financial genius five years ago.

                So, yes, the banks made careless decisions and deserved to be punished by the market–that’s the power of the market.

                And punished the rest of us, who are living with this crappy post-crash economy, even though it wasn’t us who got hypnotized.Report

              • Avatar Mike Schilling says:

                But sometimes it goes wrong.  But sometimes it goes wrong.

                And I think you may have missed my point.  The Edsel was produced because Ford misjudged the market, and failed because the market rejected it.. Crappy loans were produced because there was a market for them and because the market is a powerful force.Report

              • I wrote: It was the bubble that fooled banks into stupidly thinking the RMBSes were valuable when in fact it was impossible to see the value of the mortgages they contained.

                Mike responded: Why is it libertarians don’t think rich people are ever responsible for their own behavior?

                This is rather unbelievable.  I say that banks were stupid, that they let themselves be fooled by the bubble, and Mike claims I don’t think they’re at all responsible for their own behavior?

                Maybe you should try reading my comment one more time, Mike.Report

              • The Edsel was produced because Ford misjudged the market, and failed because the market rejected it.. Crappy loans were produced because there was a market for them and because the market is a powerful force

                And in the end the crappy loans would have gone the way of the Edsel if the government had not intervened.  You are in error to think that these are fundamentally different things.  The market doesn’t just discipline bad decision s in only one way (producers failing to sell).  It also disciplines buyers who make bad choices (I mean particularly here those who bought the mortgages).  Both of these failures, the Edsel and crappy mortgages, were how the market punishes participants who make bad choices.

                And I want to re-emphasize that the market for bad loans was as much a result of government policy as it was of anything else.  The political encouragement of subprime lending,  the elimination of capital-gains taxes on home-sales, and the Fed’s loose monetary policy all played a role.  And it’s not that any of those policies were ill-intentioned, or that by themselves any of them were stupid.  It’s that in conjunction they helped stimulate a boom.

                I was at a conference recently where an academic MD was talking about the problem of chemical combinations in the environment.  He said we don’t yet even have  a handle on safe levels of most chemicals individually, and we know almost nothing at all about the harms caused by these chemicals–even at low levels–in combination.  It was a sobering thought.  The relevance here is that public policies have a similar logic.  We don’t have a good ability to predict how they’re going to function in combination, but it’s certain that in combination they will have effects.  A priori we don’t know if those combined effects will be good or ill, but being non-intended effects, it’s wise to be wary of them.Report

              • Avatar Mike Schilling says:

                What about  (That one was deliberate.) was unclear?Report

              • Well your whole post sounded like you still thought I was giving a total pass to the banks.  Frankly, you’ve been so persistently…what shall I say, dishonest? inaccurate (a nicer term than the alternative), that I have no confidence in your integrity.

                I’d prefer to have intelligent discussions with you, but you’ve consistently refused to make that possible.  I’m still open to the possibility, if you’ll stop making false claims about libertarianism.Report

              • Mike,

                A $190k house in current dollars is only about 1/3 more than an $18k house in 1961 dollars, not ten times as much.  Just to make things clearer.   Odds are your house has amenities your dad’s house didn’t, so a lot of that price increase relates to quality.

                That car you buy every four years is vastly higher quality than the car your dad bought ever four years.  (And what is this obsession with buying new cars ever four years–you obviously don’t care very much about going on vacation, as demonstrated by your obvious preference for buying a new car as soon as the old one’s paid off.)

                You’re not accounting for those things.  And more importantly, you’re comparing just two data points.Report

              • Avatar MikeH says:

                The $190K house was built in 1921, the only thing is has that my dad’s house didn’t is central air, a microwave oven and smoke detectors.   If those had been available in 1961,  my guess is that we would have had them.  He purchased the house new in 1960, when we moved from Pennsylvania to Florida.  A far as the car goes, we put about 20K miles per year (we live in an area where mass transit is pretty much nonexistent) on the car and have found that when a relatively low-end auto (we have a Mazda 3 right now) gets over 80K miles on it, it gets unreliable and starts to nickle & dime you on repairs.  My dad was a Mercury Comet man, for some reason and I think he just liked the smell of a new car.

                So, the house costs 3 times as much, it takes a college education and two incomes to have even a similar standard of living, pensions are no longer available…exactly how have things gotten better?Report

              • 1/3 more does not mean 3 times as much.  It means 33% more.  In 1961 dollars, a currently $190,000 house would be $24,000.  In 2011 dollars, a 1961 $18,000 house would be roughly $145,000.Report

              • pensions are no longer available

                Another not-quite-truism.  A vast proportion of the middle class is now in defined contribution pension plans or 401Ks, whereas previously they would have been in defined benefit plans.  We can argue about the relative merits of those, of course.  For my part I’m dubious about defined benefit plans because they so often require your company to still be in existence when you retire–that’s a bigger wager than most people recognized back in the ’50s (and by “most people,” I don’t mean “dumb people,” lots of the smart ones didn’t correctly evaluate that risk, either).Report

              • Avatar wardsmith says:

                James, I truly respect you and your comments here on the League. Unfortunately as an economist (I think that’s what you are, plz correct me if I’m wrong), you’re making the mistake of discussing facts with folks who want to discuss feelings..This is akin to the fights I used to have with my wife. Logic and facts are all well and good, but dammit I want a new car cause Suzie has one and I always hated that bitch! So there! 😉Report

              • Avatar Stillwater says:

                I think the criticism of people denying countervailing facts because of an emotional investment in their views is pretty standard across all political views. It seems to me your claim here does just what you’re criticizing others for: denying the facts and expressing a feeling.

                 Report

              • Avatar wardsmith says:

                Stillwater, I contrast your position here with what you said here.

                I can go back through all the liberals on this blog and show emotionally charged phrases referring to the economic condition primarily of OTHERS. Then more emotionally charged positions in response to reasoned facts and statistics.  That’s what I meant by ‘feelings’ and while it is a criticism it is not an admonishment. Women are better for their feelings than without net net. We’d all be a bunch of robots if we only worked from logic with no emotion.

                Unfortunately Economists have to work with what they’ve got. They can’t predict with any accuracy because they can’t account for the ridiculous insane things people do in their formulae. Chris can’t handle a discussion and prefers snarky comments but join me below where I’m going to bring in new facts and figures to buttress this case even further.Report

              • Strictly speaking I am not an economist. I am a political scientist who is more interested in economics than political science.  I do have substantial background in economics, I read more writings by economists than by political scientists, and I do teach a political economy course that’s cross-listed in both political science and economics.  But credential-wise, I’m a political scientist.Report

              • Avatar wardsmith says:

                James, Ah I think I’ve gone and confused you with that James K. fellow. Well you’re hitting on all cylinders on the economics points and are highlighting the ignorance of many on said subject. Murali’s quote still stands, these things are often counterintuitive and people prefer their wrong but locally intuitive thinking.Report

              • Avatar Sam says:

                1. I really think you’re not going to get far when you’re talking to people worried about their economic condition if you say, “Hey, you’re better off than you were in 1861. Shut up already.” That’s just me though. Feel free to keep trying it.

                2. Zero-sum games produce winners and losers. People who have been laid off, people who are bankrupted by medical bills, people who have seen entire industries that they counted on for livelihoods aren’t winning. That you’d look at these people and tell them that their struggles are evidence of a positive sum game is offensive at best.

                3. How can you expect people to measure living standards against anything but what they’ve known? You’re asking human beings to be unrealistic at this point, simply because it would better fit your own world view.Report

              • Avatar Roger says:

                Sam

                What you are arguing for is that ignorance of history is bliss. Unless you know what the base case is (abject poverty) and the solution (positive sum voluntary specialization and exchange) then you ate likely to recommend solutions that feel good as they make things worse.Report

              • Avatar Mike Schilling says:

                Why not 1661?  Do you know that Louis XIV had to wait until the next day to hear the jousting scores?Report

              • Avatar Jaybird says:

                I remember reading a history how folks bragged about the emperor being rich by saying that he had leek soup every day of the year.

                They weren’t progressive enough to understand that leek soup every day doesn’t mean anything if you don’t have internet.Report

              • Avatar Jesse Ewiak says:

                Jaybird in 1935: “Wow do all these people want electric power ran out to their house by the state? And for it to be paid by taxes? Silly liberals.”Report

              • Avatar Jaybird says:

                To be perfectly honest, I see such things as “power (electrical or gas or whatever)” as one of the things without which you are, indeed, impoverished.

                I also include stuff like “running water” and “sewage” and “enough calories” and “some degree of climate control”.

                It’s when people have all of these things that I’m willing to say “okay, whatever you are, you are no longer impoverished”.

                And people then talk to me about stuff that is higher and higher and higher on Maslow’s hierarchy.Report

              • Avatar Jesse Ewiak says:

                I’m sure 2011 Jaybird does. But, I’m sure there were plenty of conservatives and libertarians in 1935 America who saw it as an unreasonable use of federal power and proof the average American was getting more lazy. After all, he could just get a job and get electricity out to his farm on his own dime.

                I look forward to the 2051 version of Jaybird saying something like, “they weren’t progressive enough to think electricity every day doesn’t mean anything without free access to nanotechnology.”Report

              • Avatar Jaybird says:

                Well, keep in mind, the entire world had access to Solar for all of human history.

                Now, I do not think that people are entitled to as much power as they could possibly want… but I do think that people who cannot afford enough electricity to run a refrigerator year round and a heater in wintertime are, in fact, in poverty and removing them from poverty would entail making sure that they had, at least, that much.

                Now if you’d like to argue that electricity is technically a luxury, I suppose that I would concede the point.Report

              • Why not 1661?

                Why not, indeed?  If you actually had an argument for why not I think you might have tried to make it.

                 Report

              • Avatar Mike Schilling says:

                I did.  You are richer than Louis IV because you have espn.com.Report

              • Avatar Jesse Ewiak says:

                I can access Wikipedia, thus I have a better life than William Randolph Hearst!

                 Report

              • Avatar Jason Kuznicki says:

                I wouldn’t trade places with William Randolph Hearst.  Absolutely not.

                Who would I trade places with?  My daughter, possibly, or her eventual children.  Someone living in the far future.  No one from the past, unless it was only temporarily.Report

              • I can access Wikipedia, thus I have a better life than William Randolph Hearst!

                Jason’s thoughtful comment aside, I am astounded at the dishonesty of Jesse’s comment.  I am comparing the middle classes of one era v. another.  I was not comparing the middle class of today vs. the superwealthy of a prior age.  To bring in Hearst is so wholly irrelevant to what I was saying that it can hardly be credited as having been written by someone as intelligent as Jesse.  It’s amazing how a critique of the middle class enrages normally thoughtful people.  It’s as though they think that group is off-limits for critique–clearly we have a sacred cow here.Report

        • Would you deny that wealth is driven by exchange?Report

    • Avatar Murali says:

      Krugman is hardly an “economics is zero-sum” kind of guy. and Keynesianism, no matter what the likes of Don Bodreaux claims about it really differs from Austrian and Neoclassical schools with respect to what the causes of business cycles and what to do about them. The rest of the time, they agree. It is easy for lay persons and government officials to overstate and misuse Keynesian theory, so much so that it is possible to think that keynisan theory is true and still remain within the classical liberal fold.

      Its also a mistake to suppose that zero sum interactions are not possible. Insitutions do matter, and even if zero sum interactions won’t dominate in a free-ish market, that doesnt really say anything about the current crony caplitalist system you have. The current crony capitalism may very well be encouraging zero-sum interactions that trnasfer money from the worst off to the better off.Report

  11. Avatar Joecitizen says:

    The above is mixing fantasy with reality. If there were a universally applied unit of accountability, no predation. If there was a universal self imposed ethical standard, it would not matter where the arbitrary point of where the rich begin and the poor cease to exist?Report

  12. Avatar Roger says:

    I agree with MC,

    If you have a zero sum world view or are just an envious person, then other people’s wealth is bad.

    Jason, Michael and I default to assumptions of a positive sum world. Of course there are societies and individuals that got their wealth in a negative sum win/lose way — they cheated, lied, stole or otherwise tore the wings off little flies. I hope there are less of these people.

    I think this poll question partially captures people’s world view.Report

    • Avatar greginak says:

      I don’t think the world is completly zero sum but i think there is somethign like that going on. I’m fine with postive sum interactions but i do not think that there is an ever increasing pie such that everybody can always have more and at the same time the rich can get richer at a fast rate. I think the world is sort of zero sum and what kind of assumptions about how we would like the world to be are not terribly relevant to reality. As an example lowering the capital gains tax directly helps certain people but does little for most people. Or having no Cap Gains tax would really benefit a small group.Report

      • Avatar Roger says:

        Greg
        This proves you do not get how wealth and prosperity are created. In a positive sum voluntary exchange it is possible for both to benefit. Those producing the most benefit for the most people will gain the most. And this is wonderful. Liberals fundamentally misunderstand the world. You guys are dangerousReport

  13. btw, really like the title on this one!Report

  14. Avatar Just John says:

    I’m calling “bullshit” on the “it’s-not-a-zero-sum-world” advocates, not because the statement itself is false but because it does not mean what such advocates seem to assert that it means.  At any given time every system is zero-sum.  Doesn’t matter what scale.  The movement of time is required to enable outside inputs.  Freeze the moment and there’s only a definite amount of anything, no more no less.

    Introduce the reality that there’s a future and you introduce the reality of net change over time.  That net change can amount to contraction or expansion of whatever you want to count in the system in question.  It’s easy to get people to agree that it’s better for the system to be bigger in the future.  It’s a little harder to make them feel secure that their piece of it will be bigger than what they’ve got right now or what they would have in the future without the proposed changes — and if they feel insecure about it, it’s because it seems right now that they or others they know (or maybe just about everyone) have been screwed somehow, probably by rich people.

    It seems to me that there are too many rich people, not nearly enough rich people, and certainly not the right amount of rich people.Report

    • Just John,

      Your “calling bullshit” argument depends on “freezing the moment.”  Since we cannot ever freeze the moment, the non-zero-sum argument is not bullshit.Report

    • Avatar Jason Kuznicki says:

      I’m calling “bullshit” on the “it’s-not-a-zero-sum-world” advocates, not because the statement itself is false but because it does not mean what such advocates seem to assert that it means.  At any given time every system is zero-sum. 

      Say I’m a baker.  I have 100 loaves of bread.

      The first loaf of bread is worth a lot to me, because if I didn’t even have that, I’d starve to death.

      The last loaf of bread isn’t worth all that much to me, because with 99 loaves of bread left over, I’m not going to starve for a good long time.

      You come into my shop…  and, for a small amount of money, I give you my 100th loaf of bread.  It’s now your first loaf of bread.  And therefore it’s become more valuable.

      Sure, you can freeze time, but time doesn’t ever actually do that on its own.  Instead, we’re all exchanging stuff all the time, and making more value, even if it’s just by re-arranging stuff, as in the example.  That’s not even counting production, which also requires time, and which also can be (and often is) positive-sum.Report

      • Avatar Just John says:

        Exactly.  The mere fact that time moves on and we live in a dynamic system means that planning should assume that things will be different in the future than they are now.  But there’s nobody arguing that’s not the case. Even in accounting, where they freeze the moment all the time in financial statements, there’s an assumption of dynamic change.  Any entity that can’t pay its short-term liabilities cannot continue as a going concern, not fundamentally because of the rules of accounting, but because of the remedy actions of creditors and loss of access to suppliers, and financial statements are supposed to give us a basis for assessing prospects for survival to profitability.Report

    • Avatar Roger says:

      JJ,

      “…if they feel insecure about it, it’s because it seems right now that they or others they know (or maybe just about everyone) have been screwed somehow, probably by rich people.”

      Exactly our point. Many or most on the far left misunderstand the world. This is one reasons progressivism is fundamentally dysfunctional. Free enterprise and science are potentially positive sum systems. They can create prosperity, wellbeing and knowledge. To understand the world we live in people must recognize this potential.

      I am not saying nobody ever gets cheated or robbed — indeed for most of history the average person was cheated and robbed by the elites and priests. Free markets create the possible path for positive sum creation. To participate you must add value to others. That is the way it works. We forgot to tell young people this and now they take to the street with bongo drums and demand a piece of the pie.

      The answer is put the dang drums away and start adding value to others. Build something. Create something. Work for someone. Serve someone’s needs.

      This world needs more rich people that got their by providing values for others.Report

      • Avatar Benjamin Daniels says:

        Agree. For many on the left, the complaint is that the market isn’t free – that corporations and the already-rich simply play by different rules. They can give unlimited amounts of money to candidates; we are capped at $2400. They can lobby full-time during the off-season; we get to vote every other year. They take income as capital gains and pay half the tax rate of a wage-earner. That’s not fair by any standard, free-market or not.

        For others, there’s the idea that capitalism as an order is inherently wrong. Capital should not be given the privileged position. Policy should seek to maximize human well-being instead of profit (and no, the two are not identical in any realistic scenario). Free-market capitalism maximizes all the wrong things: profit, exploitation, risk; in reality it takes a strong representative government to curb these vices and provide stable social insurance, productive and rewarding employment, and an ownership stake in society for all.

        Neither of these positions are naive to the benefits that markets can and do provide. They are simply critical of a philosophy that takes market outputs as morally justified a priori, without considering what those outputs actually are and to whom they accrue.Report

        • Avatar Roger says:

          Benjamin

          Of course capital should not be given privilege. The rules of free enterprise are that all interactions are voluntary and nobody can restrict competitors from offering superior terms. Thus the dynamic snuffs out exploitation and unfairness.
          I don’t know if market outomes are morally justified or not (unless we define this as via the rules of the game). I do know that they are positive sum and more efficient than the alternatives.
          Don’t you progressives see the truth? Your solutions are the path to failure and poverty. That is why we keep arguing to look at the larger picture.Report

      • Avatar greginak says:

        Wow Roger. Lots of people who work are pissed at the way it appears the rich and corporations have gamed the system and get extra helpings of pie. Are you really going with people who aren’t happy with the current system are lazy and not working?Report

        • Avatar Roger says:

          Greg,

          No, I will accept “naive”.Report

          • Avatar greginak says:

            Naive? Is it naive to expect that working hard will bring you a decent life. Yes given human history, No given that has actually happened at times in the US.Report

            • Avatar Roger says:

              Greg
              It is naive to see the world as only zero sum. If we do so the solution appears to be to demand more of the pie. That is the problem. Not the solution.Report

              • Avatar greginak says:

                I can see an argument why i shouldn’t see the world as zero sum. I don’t agree with that but i can see a good argument for that. Naive…no i don’t see that anymore then believing everything can be a positive transaction. You are ascribing a values to the beliefs you like and dislike based on whether you like them. The world isn’t what we would like it to be or what our grandest theories suggest it should be.Report

              • Avatar Mike Schilling says:

                Sometimes it’s negative sum.  Say you loan money to someone who won’t be able to repay it.  He uses the money to buy a house, and you camouflage the loan among some slightly less bad ones and sell it to investors.  The person who can’t repay it has no benefit once he’s been evicted, the investors are out the loan value minus the resale value of yet another foreclosed house, and you have your commission, which is far lower than the investor’s loss.  This is called free enterprise, and anyone’s who’s lost his job because of the resulting collapse is just an ignorant loser who doesn’t underhand economics..Report

              • Avatar Jesse Ewiak says:

                “Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.” – Andrew Mellon, Secretary of the Treasury under Herbert Hoover _or_ some people in this thread.Report

              • Avatar wardsmith says:

                The Chinese Hanzhu character for Crisis is conjoined of two characters, one meaning “Danger” and the other meaning “Opportunity”.  Mellon was right speaking as an economist and wrong speaking as a liberal. Japan’s economic “crisis” will not improve after 20 years of liberal measures for precisely the reasons Mellon was hinting at. 20 years ago the price of real estate in Tokyo ALONE exceeded the value of all the rest of the real estate in the world, at least on paper. Clearly unsustainable. They needed massive devaluation and liquidation to “purge” the system. They haven’t done it. FDR kept things in stasis (or tried to) for 10 years, the only reason we got out of the great depression was WWII.

                When you have cancer they give you chemotherapy, which is nothing less than poison. It puts you through hell, but it can also save your life. Not all medicine goes down with a spoon full of sugar.Report

              • Avatar Benjamin Daniels says:

                Gah, no, and no.

                For a thorough debunking of the danger/opportunity saying, this: http://pinyin.info/chinese/crisis.html

                And for a similar debunking of Mellon and of your assertions about Japan, go read some 1990’s Ben Bernanke papers, the sort that led him to be appointed by a conservative as central banker.

                To address your Great Depression point, read Lords of Finance. It goes into detail as to how WWII was really exceptional fiscal stimulus and how FDR accompanied it with incredibly easy money, and how that saved the world after all.Report

              • Avatar wardsmith says:

                Ben, my wife is Chinese. I’m glad an occidental decided to lecture other occidentals on what orientals mean when they write things. On the other hand, her understanding not influenced by him is in agreement with what I said. I had heard this in a Chinese professor’s home told me by that professor almost 30 years ago. There were of course a lot more words and I’m handicapped in not being able to type pinyin. Perhaps using a dictionary definition of opportunity is misleading and the rest of my response is not indicative of “opportunity” in the same sense as your source’s misgivings.

                Put another way, there is a weiji moment when you and I are practicing gung fu. Every punch you throw has a danger element to it and an opportunity for me to place you on the ground with prejudice. Regardless of what Mair thinks, he would do well to experience some tai ji quan and round out his word driven understanding of a great culture.

                Bernanke is a fool. Precisely how has he stopped or alleviated this crisis we are in? I’ve already recommended you read some Duncan, I’m assuming you haven’t yet.

                There are plenty of books discussing the disaster that was FDR’s reign of terror. I could link to multiple books, but followers here might want something web available like this.Report

              • Avatar Roger says:

                Mike and Greg
                Let’s take a step back.
                Of course not everything in the world is positive sum. Most interctions clearly are not. Of course someone can find a way to cheat someone else with complex financial products

                The point of free enterprise is to replace the 10,000 year path to wealth — steal or extort it– with a system which when enforced limits actions to positive sum expected win win scenarios.

                The reason we are 20 to 100 times as prosperous as our ancestors is that we established a system where most wealth comes from doing good for others rather than stealing from them. No it is not perfect. It is just better than the alternativesReport

              • Avatar Mike Schilling says:

                Of course someone can find a way to cheat someone else with complex financial products

                Which, for the past few decades, has seemed like a much faster and surer route to wealth than building a business that creates a useful product or performs a useful service   Go no further than that to see why people in general disrespect the wealthy.Report

              • Avatar Kim says:

                For the past thirty years, that hasn’t been the case. More money has been made through FIRE (and other bubbles) than through actual innovation.

                I’m a liberal because I believe in positive sum — because the reactionaries that want to cut their taxes and steal our parks are the same ingrates who don’t believe in veterans benefits — and do believe in treating people like slaves (including elected officials. wasn’t just J. Edgar, ya know)Report

    • James and Jason, I think Just John has a point. I have the ultimatum game in mind. Two players distribute a windfall, Player 1 proposes a distribution and Player 2 can reject or accept with the proviso that a rejection means neither player gets anything. I understand rejections of unfair distributions, 99 to 1 for instance, without invoking envy or covetousness. Those who respond “too many rich people” could be rejecting unfair divisions on egalitarian, social justice basis. Essentially saying that too high a proportion of the gains from increased productivity and economic growth have accrued to the wealthy and overall things would be better off with more equitable distributions.Report

      • Avatar Just John says:

        Thank you, Creon Critic.  That’s much clearer on the interpretation of the poll results.  Apologies to all on my irrelevant tirade on the irrelevance of the “it’s not a zero-sum game” meme.Report

  15. Avatar Tod Kelly says:

    I think that you may be misinterpreting the answers given by the respondents, Jason.  I’d be willing to bet if the question was phrased “Do you think more people/less/people/same have more wealth/enough wealth to live comfortably/have luxury items/ etc. that you would get the percentages you are looking for.

    I think “the Rich” is starting to mean something in our culture that is different from how you mean it; it donsn’t mean people who have wealth.  I think when most people think of “the RIch” they think of the guys who didn’t mind screwing their future to make a few hundred million (a la AIG and Bear Stearns).  Or the people that have seemingly unlimited money and spend some of it on lobbying to make sure they can’t have affordable health insurance.  Or the Kardashians.  I suspect most people answering this “less” to this question are saying we don’t need more people like that.

    I’m not saying that view is correct or even healthy; I’m just saying that’s what people are really trying to tell you.Report

  16. Avatar Patrick Cahalan says:

    I think you might be reading a bit too much into simplified poll language.Report

    • Avatar Ethan Gach says:

      Rich is only meaningful when used to denote someone’s wealth relative to someone else.

      The clearest way to interpret the poll is that the respondents are zeroing in on the amount of inequality they are comfortable with.  A certain number of rich people (i.e. relative to their peers) is desirable.  But 50% rich people implies 50% of people being extremely poor.Report

      • Avatar Jason Kuznicki says:

        In relative terms, yes.  I’m not sure what a society would actually be like if it were half billionaires and half millionaires.  But I’d be willing to find out.Report

        • Avatar Ethan Gach says:

          While someone can have an arbitrarily large number of dollars or other currency, I’m not sure that capital and natural resources can be continually amassed in the same way.

          If rich mans have a disproportionate access to capital and resources, I’m not sure how someone with even a million dollars could stay rich seeing as how they’d still only have their labor to give, and presumably all of their peers would be in a similar boat, meaning that 50% millionaires would just lead to inflation until the underlying inequalities re-emerged.Report

          • Avatar Jason Kuznicki says:

            Again, I’m talking in real terms here, not in nominal terms. It would be easy to make half of us millionaires in nominal terms, but the resulting society would be really, really crappy because of the hyperinflation.

            What would a society be like in which the bottom half were all millionaires in real terms?  I have no idea, but it can’t be that bad, can it?Report

            • Avatar Ethan Gach says:

              So are you saying what if everyone were given 1 million right now (out of thin air than from someone else)?

               Report

              • Avatar wardsmith says:

                If “everyone” suddenly received $1M we’d look like Zimbabwe, the relative value of a million would rapidly diminish to worthlessness. The only way the game works is if some have it and others don’t otherwise no one will be willing to give up their goods and services for something they already have in abundance. Want a latte? That’ll be $250 cash. Want a car? That’ll be a $500K.Report

              • Avatar Jason Kuznicki says:

                I specified that the wealth increase would be in real terms.  How often do I have to repeat it?  Not nominal terms, real terms.  (Those both are terms of art, by the way, and my use of them should have been enough to answer your question.)

                To make a short story needlessly long, I’m not saying “fire up the printing presses.” That would be a disaster, and anyone even slightly aware of economics will agree.

                I’m saying “Imagine there was a way to give everyone the same opportunities possessed right now, by rich people, on account of their being rich.”

                That’s wealth in real terms.  That’s what I’m asking for.Report

              • Avatar Ethan Gach says:

                So your saying, what if production costs came down, out put went up, and people had access to the goods/services that now only rich people can indulge in?

                Wouldn’t that be environmentally unsustainable?Report

              • Avatar Jason Kuznicki says:

                Not with suitably awesome technologies.

                Look, I’m not saying it’s at all practical to give everyone this kind of purchasing power, given the technology we have today.  I’m just saying that it would be really really nice if we could.

                This would be a supremely banal point, of course, but for the poll results.Report

              • Avatar Ethan Gach says:

                Right, which is why I’m trying to understand the context of this “everyone is a millionaire” scenario.Report

              • Avatar Jason Kuznicki says:

                I don’t know what the context would be.  Radical technological change, perhaps.  Frankly, if I knew even 1/300 millionth of that scenario, I’d run out and apply it to myself.

                The point is that the poll question asks me to contemplate a world in which I make myself (or a fellow American) richer.  It seemed obviously a nice thing for me to do.  So nice, in fact, that I’d do it all day long if I were able.  Which is why the results of the poll were so stunning in the first place.Report

              • Avatar wardsmith says:

                Jason, I believe you asked the right question in the first place in the right way. I clearly understood the issue with Ethan’s question, sorry for jumping in to correct his understanding, but there are lurkers too who need correcting. 😉

                It is easy to posit the economy you describe. I always look to the old Star Trek. No one seemed to be slaving for a paycheck, what everyone wanted in that (libertarian) Utopia was something meaningful to do with their lives. It was all about avocations not vocations. Except for those schmucks who wore the red shirts and got killed when they went to the planets, I’m guessing they were paying off student loans to the Star Fleet Academy.

                My grandfather was a millionaire and lost every penny in the great depression. At 68 he had to go back to work and died leaving 5 children and a widow 2 yrs later. While he had wealth, his greatest avocation was reading and he had spent considerable sums accumulating an impressive library. Unfortunately my grandmother did not share his love of books and sold many of them for less than pennies on the dollar. Fast forward to today and books are dirt cheap. Everything is relative.Report

              • Avatar Jason Kuznicki says:

                Yes, more or less exactly the old Star Trek.

                A post-scarcity society might still have envy, but it would be a lot easier to mock, in sort of the same way that we mock people who, in this day in age, are still openly racists.Report

              • Avatar Mike Schilling says:

                I was actually going to make that point: envy:libertarians::racism:liberalsReport

              • Avatar Patrick Cahalan says:

                I always look to the old Star Trek.

                Having matter replicators does skew things just a tad, assuming you have ubiquitous power to run them.

                Of course, you won’t be able to replicate anything without paying a licensing fee.Report

              • Avatar Jason Kuznicki says:

                As one approach to avoiding large concentrations of wealth, I would greatly shorten the lives of patents and copyrights.Report

  17. Avatar Roger says:

    BD,

    I agree with concerns of privilege and inconsistent rules. 100% But if that is what OWS was about, it would be a wing of the Tea party.

    Free enterprise does not maximize exploitation. It expressly prohibits it by insisting that all interactions be mutually voluntary.

    And yes, the far left is totally naive to what markets deliver. That is why they actively undermine the system that created prosperity and wellbeing for billions.

    If the far left gets what it wants, billions will die and the rest will be impoverished. Other than that it’s a pretty good idea.Report

    • Avatar Benjamin Daniels says:

      Exploitation is systemic under complete free enterprise. People who do not own capital are dependent on those who do. There is always market power and monopoly at work, allowing the rich to extract profits from hard work while never allowing the workers to accumulate wealth. The fact that workers agree to do this is irrelevant – what choice do most really have?

      You’re right about the “far left”, but that’s a red herring. I’d be an idiot for arguing that the right is actively trying to destroy prosperity or whatever just because a few hardliners want to undo governance in its entirety.

      Most lefties I talk to, even at Occupy, are just left-liberals like me. And most of them hew to some variant of the positions I described above. Some are anti-capitalist but not anti-market (myself included); others are simply Tea Party (ie, “the game is rigged”) types but with liberal social values to boot. These are eminently reasonable outlooks in my mind – true communists or whatever are are rare as Ron Paul types on the right. They’ll always be there, but that’s not what the debate is about.Report

    • Avatar Sam says:

      Roger,

      Free enterprise doesn’t exist. It never has. It never will. At least in the way that you seem to be defining it.Report

    • Avatar Kim says:

      oh yes, you can kindly tell what a free market does… the next time your credit card gets stolen. Don’t say I didn’t warn you!Report

    • “Exploitation is systematic in free enterprise.”

      “No such thing as free enterprise.”

      “Free markets mean it’s ok to steal other people’s property.”

      You all three fail introductory economics.Report

      • Avatar Roger says:

        Wardsmith brought up star trek. I read a few weeks ago a blog where the writer compared the utopian world of star trek which is 350 years in the future with the real world 350 years ago.
        The difference between the past and now is greater than the difference between us and utopian star trek.
        All this whining on the plight of the middle class misses that liberals are trying to fix their woes by throwing sand in the gears that allowed us to flourish today. It is better to be poor in America than an aristocrat 350 years ago.Report

        • Avatar Mike Schilling says:

          It is better to be poor in America than an aristocrat 350 years ago.

          Do you think that if you gave Louis XIV a chance to be an auto worker, he’d jump at it?Report

          • Avatar Tod Kelly says:

            Depends.  Would he get to be an auto worker that got to boss people around and boink any gal he fancied?Report

            • Avatar Mike Schilling says:

              It’s good to be the guy that tightens the lug nuts on the right front wheel!Report

              • Avatar Roger says:

                When Louis got an infection or his ticker started acting up or the peasants started revolting. He would hit the transport button.Report

              • Avatar Zach says:

                When Louis got an infection or his ticker started acting up or the peasants started revolting. He would hit the transport button.

                Yes, speaking as someone who would be dead several times over before the advent of modern medicine, I wouldn’t take that trip back to Versailles.Report

              • Avatar Mike Schilling says:

                Make it a real choice, not the best of all worlds.  King of France in the 17th Century, or unemployed with poor prospects today.Report

              • Avatar Jaybird says:

                The 1% of then vs. the bottom quintile today?

                Personally, I thought that your choice between the top 1% and the guy who tightens lug nuts today was more telling.Report

              • Avatar Jaybird says:

                Then again, there are parts that would be appealing.

                The running water, the electricity, the internet…

                The biggest problems he’d have to deal would entail living unattended and being shot from time to time.Report

              • Avatar Mike Schilling says:

                Considering that the profession of the aristocracy was arms (though this had largely decayed by Louis’s time), I don’t think physical danger would be the deal-breaker.Report

              • Avatar Zach says:

                I would choose to be unemployed with poor prospects. I would still have access to modern medicine, modern plumbing, and computers. I also still be more likely to see more of the world than a 17th-century king ever did. I might not eat as well, but I’m also less likely to succumb to food-borne illness. I might not dress as well, but it also doesn’t take an hour or so and a retinue to prepare my evening wear.Report

        • Avatar Joecitizen says:

          The middle class at least had economically viable cottage industries 350 years ago.Report

      • Avatar Benjamin Daniels says:

        James, that’s just ad hominem. I did not fail intro economics, nor intermediate economics, nor advanced economics, in fact I graduated with departmental honors, am a working economist currently, and will be in a graduate program next year for Philosophy and Economics at a well-known school.

        So, when I attempt to explain lucidly and concisely what I mean by systemic (not systematic) exploitation, I do hope you will argue it on the merits, or at least ask for clarification if I have underexplained in the interest of brevity, rather than resorting to unfounded personal attacks.Report

        •  

          Good for you, Ben, and sincerely I wish you success.  (And kudos for keeping your cool in response to was indeed an insult, although not technically an ad hominem.)  I’m concerned at your mention of “philosophy and economics,” though.  To me that suggests the wrong turn, away from empirical analysis and into squishy normative analysis. (I’ve talked to philosophers about economics–they general seem to understand it about as well as economists understand philosophy.)

          Because, sincerely, if you think exploitation is common in free markets then I think you’re using an ideologically-motivated definition of exploitation.

          I will explain at more length.

          Exploitation is systemic under complete free enterprise.

          No, in a free enterprise system people earn their marginal productive value.  Exploitation in market systems is a Marxist connotation, stemming from his labor theory of value, which was fundamentally flawed.

          People who do not own capital are dependent on those who do.

          As people who do own capital are dependent on those who do not, else they would lack a labor force.  Capital without labor is of no value; labor without capital can survive on its own.

          There is always market power and monopoly at work,allowing the rich to extract profits from hard work while never allowing the workers to accumulate wealth.

          There is frequently market power at work, but to say there is always monopoly at work in a free enterprise system is fundamentally wrong, both theoretically and empirically.  Monopolies make above-normal profits, attracting competitors who compete those profits away.  This is standard economics–I sincerely hope your economics profs did not fail to teach you this.

          The fact that workers agree to do this is irrelevant – what choice do most really have?

          I’ve just been re-reading Hernando de Soto’s The Other Path for my political economy class.  I highly recommend it, and he answers your questions.  Peasants streaming into Lima, Peru, from the countryside started tens of thousands, maybe hundreds of thousands, of small businesses.  This is one of those arguments that make me irate–in the guise of being concerned about the plight of workers you infantilize them, seeing them as helpless and hopeless except when given alms by the corporations.  I wish you could have gone to my 20th high school reunion–I was blown away by how many of my classmates had started their own businesses, including some who never went to college.

          I’m left wondering what kind of economics education you received that didn’t answer these questions.  You obviously did well, but I wonder if your program did well by you.Report

          • Avatar Benjamin Daniels says:

            I think I’ll start from the bottom and work backwards on these. First, I completely agree with your comments about small business. Entrepreneurship, even in a Marxian model, is often talked about in a Schumpeterian framework; it’s small business owners who in my view best offer a model of a post-capitalist (but still market-based!) economy, since they are essentially laborers ‘who own the means of production themselves’ – from one perspective, Marx’s ideal.

            Unfortunately not everyone can do this, for various reasons – lack of access to credit, or education, or health insurance, or simple risk-aversion or lack of ability. These pure laborers are dependent on wages from capital to finance their day-to-day existence; whereas capitalists, even in the absence of labor, have accumulated the wealth to live comfortably for at least a short stretch of time. The dependency is asymmetrical; therefore, the resultant bargaining power is inherently in favor of employers; therefore it is systemically true that workers receive an ‘unfairly’ low portion of the surplus from collaboration (which is not an issue for entrepreneurs). (Also I could throw in ‘reserve-army’ stuff here but I’m sure you’ve heard that plenty.)

            Aside: Marginal productive value is a non sequitur. It’s only possible to assign such a value to labor if the level of capital is static, and it’s only possible to assign such a value to capital if the level of labor is static. But both are dynamic and codetermined, so marginalism is useless when talking about what is fair compensation for each factor. (This thinking is not essential to my point however.)

            With respect to monopoly, I think the empirics show that there is usually at least partial monopoly (a la the Card and Krueger minimum wage study) in effect, which is attributable to permanent rigidities in the system (natural/geographic monopoly, barriers to entry, returns to scale). When this is the case there is no mechanism of competition in labor’s favor, and oh so very rarely is this situation reversed. In other words, even if you take the marginalist approach, workers are often paid below their product while capitalists almost never are – and somehow the system prevents most workers from ever accumulating any wealth of their own, while constantly enlarging the fortunes of the owners.

            So to call it exploitation is a charge that can be assessed even from the neoclassical framework, which I can assure you was not lacking in explication in my coursework. In any case I did look into the program I mentioned and was assured that the Economics half remains mathematically rigorous (the courses are the standard postgrad fare) while the Philosophy half will take the track of interrogating assumptions like rational choice in a similarly rigorous fashion.

            Also, thanks for responding. 🙂Report

            • Avatar Roger says:

              Benjamin,

              In reviewing this thread, your comments stood out as reasoned and relevant. As I stated in other places, most of the other progressives/ social democrats/ leftists/ whatever are so blinded by a deep zero sum bias, that they have been incapable of addressing the issues.

              You understand the positive sum possibilities of free enterprise; however, you express concerns with power imbalance and what you call “exploitation” of labor. This is a topic that libertarians and progressives have made some traction on in past discussions (as James, Creon and Stillwater can hopefully attest.)

              That said, I totally disagree with your take on exploitation for about a half dozen various reasons.

              Let me start with just one. The are about a gazillion different employers in America. Each of them competes– not with employees — but with other employers for quality labor. It is expensive hiring, training, and developing human resources. Therefore the most relevant power imbalance is not between employees and employers, it is between employers (and they don’t even have to be direct competitors). To get and retain quality employees, it is necessary to offer benefits, compensation, etc. In other words competition between employers (who are often equals) is what eliminates the potential for systematic exploitation.

              There is nothing that prohibits some employers from taking the strategy of offering great packages of benefits to employees. Sure another company can take the Scrooge McDuck path, but I really have to question why any prospective employee would apply or stay there for long.

              This doesn’t even include the freedom of a person from going into business for himself (handyman, taxi, hair stylist), to work on commissions, to take out a loan and buy a small franchise (insurance sales), etc.

              The point is that — where it is allowed to exist — open competition, aka free enterprise, negates your charges of exploitation. I’ll save my other arguments for later.

              Others feel free to jump in.

              And Happy Thanksgiving!Report

              • Avatar Benjamin Daniels says:

                Happy Thanksgiving to you too!

                Of course the problem of exploitation in the neoclassical framework disappears if you assume perfect competition, perfect information, perfect mobility, perfect credit,etc. But that’s just not what the world looks like. The empirical evidence, and also our non-rigorous abservations about the world, make it very clear that owners and employers gave a real advantage in bargaining and in politics. You can’t assume that away.Report

              • Avatar Roger says:

                Benjamin,

                No reasonable interpretation of  free enterprise assumes perfect anything. I assume only competition, not perfect competition (nor perfect balance of power for that matter).

                Are you denying that there are untold thousands of potential employers and that they constantly compete with each other for employees? Do you deny that one strategy to attract and retain employees is to offer superior benefits, working conditions and wages than competing firms?

                Sure there are power imbalances in every real interaction. And yes, some firms do exploit people (and some people exploit each other and some employees exploit their employer). This does not redefine the relationship between employers and employees as fundamentally exploitative.

                The relationship between employers and laborers is fundamentally positive sum. Both gain. It creates value for both parties. This is not exploitation. If one party did feel cheated, they can and do go elsewhere. Of course change isn’t frictionless. It doesn’t have to be though for the dynamic to work.Report

              • Avatar Benjamin Daniels says:

                I’m not denying either of these things. What I’m saying is that market imperfections tend to systematically benefit owners and employers.

                Yes, voluntary employment is positive-sum, and yes, it’s mutually beneficial. These are necessary, but not sufficient, to make the existing system ‘right’.

                If everyone feels cheated, but there is nowhere else to go, that’s systemic exploitation. I’d argue we see that today. The system exploits workers because it pays them almost nothing from profits. If a worker is lucky they are compensated for their own output. But a third live near or in poverty because their compensation is hardly enough for subsistence, and they lack the mobility or bargaining power to seek a better deal.

                Things are better than they would be without competition, I agree. But we have a lot further to go to make the system morally acceptable.Report

              • Avatar Roger says:

                Benjamin,

                 

                Thanks for the reply.

                 

                What economic proof is there that the market imperfections work either only — or primarily — in the benefit of employers? After all, the power imbalance argument cuts both ways. I could just as easily convince myself that since the terms of employment are a matter of life and death for an employee and just another task of minuscule importance to the manager of the giant corporation that the employee would attend 100% effort into optimizing the relationship, while the manager would just suffice. Perhaps you are aware of empirical data on the matter though?

                 

                Why are you arguing that everybody feels cheated and that nobody has anywhere to go? This seems to be an odd observation coming from someone trained as an economist. I think you mean that YOU feel that everybody is cheated and nobody has anywhere to go. Certainly I know hundreds of people– including myself — that don’t feel they are cheated. I know some people that do feel cheated — most of which constantly change jobs (usually to another that “cheats” them). Finally I know many an employer that feels chronically cheated by their employees. I think we need to be careful about projecting our values here on others though.

                 

                Finally, what do you mean employees are paid almost nothing out of profits? Wages are set by supply and demand. Employees don’t compete with employers, they compete with other employees (and prospective employees), and I am skeptical that enhanced employment mobility would even lead to higher (as opposed to lower) wages. Are you suggesting that if another prospective employee is willing to do a job for less than me, that they be prohibited from doing so?  Or are you suggesting that they do be allowed to have the job, but that you can personally denote it as exploitation?

                 

                I guess you are right that some employees can only earn subsistence wages. I would add that some employers only seem to create losses, and some investors lose fortunes. That does seem to be a sad fact of free enterprise. The system that created prosperity ten or a hundred times above that of our forefathers does so via creative destruction and constant consumer-driven change. This isn’t a bug though. It is a necessary feature. Right?Report

              • Avatar Benjamin Daniels says:

                That first argument doesn’t make much sense. If employment is life-or-death for the employee, then the employer can pay even less!

                Secondly, I’d agree that there are quite a lot of people who are on good terms with their employers and feel that their wage is fair. But when unemployment is so high, and underemployment even higher, and wages have been stagnant for the past thirty years, that’s *systemic* exploitation. Not *systematic* – because systematic denotes that there are widespread cases that can individually be called ‘exploitative’. That’s not what I’m arguing. I’m arguing that, in aggregate, the system creates an unfair and unbalanced distribution of wealth and power. The exploitation is ‘systemic’. And it can still be true that some employers feel cheated – but it’s very hard for me to believe that’s a representative case when, for example, profits have recovered so well while wages and employment have not.

                On the next point, I’d argue that employees do have to compete with employers. When a hire is made, there is some amount of surplus product – the positive-sum gain – that would not be available otherwise. My argument is that workers recieve very little of this surplus profit because of the systemic imbalance.

                As for creative destruction, yeah, that’s how capitalism is supposed to work. But I personally think it’s rather heartless to apply the sme principle to individual human beings. Isn’t that Scrooge’s line? “If they’re going to starve, let them, and reduce the surplus population.” But then that’s capitalism, and the lack of intrinsic value on life and labor is a good part of the reason I’m anti-capitalist.Report

              • Avatar Roger says:

                Benjamin,

                Thanks again. Awesome discussion. In a world of competing employers this does make sense. I am surprised the Marxist economists haven’t studied it (lol). In a reasonably competitive market, a decision of trivial importance to one party and significant importance to the other party implies a “systemic” imbalance in favor of the party of significant importance. The employee will be incentivized to optimize, while the employer will reasonably settle with being satisfied.

                The point is that you are simply asserting that the overall dynamic is weighted against employees. In a period of high unemployment (last few years) I suspect you may be partially right though. It seems that the dynamic — whatever it normally is — would change in favor of employers.

                Stagnating American wages can reflect lots of things. Increased competition from women entering the workplace. Increased competition from developing countries. Increased competition from a steady stream of immigrants. Again though, these don’t reflect exploitation, just more opportunities for these parties that were previously excluded (in many cases coercively) from the fruits of free enterprise. I’d call this less exploitation.

                If wages have gone through the roof for a billion Indians, Mexicans, Chinese, Koreans and Vietnamese and stayed the same for 100 million Americans, it seems like a great thing in the world to me. Worldwide, more people left poverty in the last decade than in any decade in the 13.8 billion year history of the universe. This doesn’t smell of exploitation to me.

                There are also other good explanations as to why profits have recovered and unemployment hasn’t. Mandatory rising and uncertain health care benefits. Barriers to starting new businesses (where virtually all net new jobs are created). Barriers to self employment. Licensing requirement and minimum wage increases (pulling out the bottom rungs of the economic ladder). The aforementioned global competition in labor markets. Skill/job mismatches in a dynamic economy. And increased payoffs to technology/capital over labor. Finally I believe profits usually recover before hiring in recessions (don’t they?)

                No, rooting for the creativity of free enterprise is not a vote for Scrooge McDuck’s (or that old guy from the Simpsons) cry for starving the masses. That is why the libertarianish voices in this thread keep pointing back and out to the overall track record of free enterprise. Pre-capitalist lives were short, unfree, illiterate and miserably poor. Starvation was rampant. The poor were actually skinny back then. Creative destruction hasn’t impoverished the poor. It has enriched them. It has done more for the poor than all the good intentions of the Marxists. Indeed, absent these good intentions it would have done even more for them and a lot sooner.

                The intrinsic value of life and prosperity — especially for the downtrodden — is exactly why I am for free enterprise. It is truly miraculous. Weirdly so.  We all owe our lives and privileged positions to the greatest engine of progress ever created.Report

              • Of course the problem of exploitation in the neoclassical framework disappears if you assume perfect competition, perfect information, perfect mobility, perfect credit,etc.

                Benjamin, since I come from a public choice approach, with other major influences being Schumpeter and Hayek, I, at least, cannot possibly assume perfect market conditions.  I still reject your statement of exploitation.

                Assume lack of mobility, for example.  Much of lack of labor mobility is an individual choice.  Obviously labor is more valuable in some areas than others, just as any other commodity is.  The individual who values staying in their home and community in a high-unemployment area more than they value a higher wage with attendant loss of community, familiarity, etc., in a low-unemployment area has made a rational choice.  To say they are exploited is to deny them their humanity, their ability to be individually rational.

                In short, the concept of “exploitation” comes into play through failure to treat employees as competent adults, to take seriously their role as economic actors, and to treat them not as actors–those who can act, can make choices–but as wholly dependent variables.

                And again you show that you are comparing the real-world market to the idealized market, but not likewise comparing idealized government to real-world government.  To quote James Buchanan again, “The test of the market is the comparison with its institutional alternative, that of politicized decision-making.”Report

              • Avatar Benjamin Daniels says:

                Roger:

                We’re getting there. All the things you said are right. I totally support free enterprise, and for the reasons you listed. But I don’t support capitalism, again for the reasons you listed. Under capitalism, yes, profits recover first. I think this is wrong; I think employment ought to be the first priority of recovery. Under capitalism, yes, stagnating wages can result from increased opportunity and more globalised industry. I think this is wrong too; I think that labor ought not to be disadvantaged when its ranks grow. You can attribute this to supply and demand, sure, but what I’m saying is that this is *wrong*: there are moral implications to wages beyond just satisfying a particular economic model. For workers, we have a responsibility to make sure that markets produce wage growth and decent employment at human standards, and I think experience has shown that workers don’t get this out of capitalism.

                James:

                You blame all these systemic disadvantages on the revealed preferences of workers themselves. That’s a perfectly natural implication of the neoclassical/neoliberal mindset. But again, my stance is that such an approach is morally insufficient.

                It has nothing to do with saying that workers aren’t responsible adults. To say they are exploited does not deny them human rationality. It says that the system is stacked against them – it says that their best rational behaviors produce suboptimal outcomes. It says that a different system would produce different incentives,which would produce better opportunities and outcomes for workers as a whole.

                And I totally agree with the Buchanan quote. I’ll say this again: I’m anti-capitalist but not anti-market. I rarely advocate for centralized decision-making. My base stance is that all markets are positive creations and that central control is the default alternative – and that markets are vastly preferable. But I assert that all markets are created by collective decision and that we have the responsibility to create and manage them responsibly.

                Specifically, I’m arguing here that the market we have does nothing to address the imbalance between individual human workers and faceless fungible capital.

                If workers could live forever, relocate at will, go without eating, never tire … Then the system as it stands might be fair. But they can’t. They have needs and limitations. Our market simply does not accommodate that because of the impersonal and fantastic assumptions of neoclassicism. So labor is systemically disadvantaged and exploited no matter how rational their individual decisions.

                On the flipside I’m promoting a Marxian (not Marxist – those guys are indeed radical ideologues) model that really asks up front what are the inherent imbalances in the economy and how can we correct them through market design. The very point is to take human rationality (and irrationality a la Ariely, Zak, etc) into account when doing this.

                Also it will make sense here to repeat anoth basic position: that markets are awesome and capitalism in simply a primitive technology for implementing them. But we now have the technology to do better. We have the data processing ability and mathematical foundation to set up markets that by default provide employment, security, and insurance for workers without impeding innovation, in fact probably increasing it through the channel of increased real incomes. The whole goal is to increase the opportunities for people to exercise their human desires without living day-to-day, paycheck-to-paycheck in a nasty and brutish marketplace that denies basic humanity to its participants.Report

              • Avatar Roger says:

                Benjamin,

                 

                What a fascinating perspective! I would love to hear more.

                 

                My understanding is that markets are not so much “created by collective decision,” as they are emergent properties of (primarily) decentralized activities. I view markets as a vast, decentralized problem solving system aimed at solving the needs of consumers. The free market acts as a complex system, like a global brain.

                 

                The problem is that we do not understand it or have any current ways to aggregate the decisions, needs, values, contexts and tradeoffs of the various players, whether consumer, employee, employer or entrepreneur. How will Marxian influence overcome these issues? Do you believe that data processing and the decentralized nature of smart technology will be able to overcome these hurdles?

                 

                My understanding is that free enterprise places the consumer as sovereign. Every producer depends upon satisfying the needs of consumers. As the leader of a product development team (before I retired) I certainly found this to be the case. CEO’s and executives may fool themselves into thinking they are in charge, but only to the extent they can meet consumer needs. (I actually subcontracted Ariely’s efforts several times and was on a discussion panel with him once. Dan was required reading for my team. Are you guys working with him now?)

                 

                The point I am trying to get to though is that as you try to make it more responsive to employees, how will you keep it from being less responsive to the needs of consumers? We are all consumers, and I worry that master planning will make the system less effective at its actual purpose. Stated another way, it doesn’t do employees any good if they all get higher wages and it just goes into higher prices (higher costs) or less innovation (lower profits). Thoughts?

                 

                Finally, are you planning on starting small and experimentally and growing out from there? Or larger scale?Report

              • Avatar MFarmer says:

                “We have the data processing ability and mathematical foundation to set up markets that by default provide employment, security, and insurance for workers without impeding innovation, in fact probably increasing it through the channel of increased real incomes.”

                Please explain how this market will be set up and how the default works. Who sets up the market, makes the rules and enforces the default? Will owners who choose to set up different rules be allowed to vary from the plan? Will there be owners as we understand ownership presently?Report

              • Avatar Benjamin Daniels says:

                Roger,

                Unfortunately there’s no “us guys” right now, just me trying to figure out what’s going on, what could be possible, and spreading awareness about it while refining my positions.

                Again, I agree with almost everything you’re saying about markets. But so my thought on their origin is this: yes, they arise automatically, but only when the central authority declines to assert its primary authority. Otherwise how can you talk about the rise of markets over the last 200 years, other than in the context of the state stepping back and allowing it to happen?

                But my other argument is that you can’t just say “consumers v producers” and have a complete sense of the system. The same people have other roles as workers, employers, owners, debtors, creditors, etc. No particular split of the population is the “right” perspective, but each one implies different actions. So I think there’s an ongoing trade off among these – and Marxian influence really just asks that we recognize this. Besides, which consumers are driving “consumer sovereignty”? The richest ones, surely, which means that most are marginalized even if consumers *as a class* have power.

                As for the trade off between wages and prices, I definitely don’t think wage increases will be matched one-for-one with price increases. Namely, the top 25% or so already make plenty, and the top 10% maybe should make less. So we’re increasing wages for inframarginal consumers, not across the board. That should be a real wage increase without a corresponding hike in prices.

                I did meet Dan Ariely once and had a nice chat about individual rationality as a mechanism of group rationality (ie a preprogrammed solution to prisoners dilemma situations). But I was just an undergrad then. What do you work on that involves that sort of research?

                And as for trying it out, well, right now there is Occupy. It’s a radical approach but sometimes that’s what’s needed, to take the best aspects from a bold experiment and incorporate them into the mainstream system. And it should be quite clear why Occupy is a threat to capitalism. It’s been called a vital urbanism and a successful DIY space; workers there have [collective] ownership of their inputs and outputs, effective representation and fair political participation, full social insurance through mutual aid, and money does not determine status. Yet it’s also a functioning marketplace. Really, an incredible success from a market socialist perspective like mine.Report

              • Avatar Benjamin Daniels says:

                MFarmer:

                Western “ownership” is also a primitive concept. In China, for example ownership is split into a number of different aspects. Ownership “proper” (ie the right to sell an asset) often belongs to the state, which fulfills the Marxist demand for collective ownership. But private managers often have rights to operation and a portion of residual claims (profits), fulfilling the market demand for marginal incentivization. So assets are managed efficiently by private incentive but the benefits accrue to the state, lessening the burden of taxation while funding the budget for infrastructure and other public works.

                All markets have to be set up by the government that is making space for it. We set up our own market over a long period of progressively evolving regulations, and the new market should be no different. I can’t describe the specific contours of what would work, but a great deal of what I think is most problematic in our market can be solved by strong social insurance and productive social employment programs. For example, people save too much because healthcare is a large and variable expense; free public healthcare frees up a great deal of the individual budget for increased consumption. At the same time, millions are unemployed even while we have endless amounts of deteriorating infrastructure and the ability to borrow or print money at a profit to the federal government – and there’s no reason a government shouldn’t be constantly solving both those problems, which would increase employment and output.Report

              • Avatar MFarmer says:

                So, you propose a more vigorous central planning and State ownership of profits, and China is your model?

                I appreciate your honesty, but this is a recipe for disaster. It’s not much different from what destroyed the USSR. In a global economy in which Asian countries are at least becoming market efficient through moveing more and more toward privatization and capitalist principles, for us to move in a central planning and socialistic direction will price whatever we produce out of the global market, and if we subsidize employment and benfefits, we’ll go broke with no one to lend to us. Where is the all the money going to come from to support this plan? And what will motivate “managers” to make profits for the State? The entrpreneurs will go to markets overseas who appreciate their talents, and we will be left with buffoon, patsy clerks.Report

              • Avatar Benjamin Daniels says:

                MFarmer:

                I did not propose more vigorous social planning, only socialization of profits. Remember, the majority of profits in our current system accumulate to people who take no part in the active management of the enterprise anyway. All I’m saying is, rather than let profits go to fund the Keynesian casino, why not use some part of them to reduce the tax burden?

                Management stays privatized; companies stay private; but through a sovereign-wealth-style mechanism, profits are collectively shared. And this without changing the incentive structure at all from its current form. The ‘cost’ is just up-front investment, but the returns over time (decreased taxes, increased services) are more than worth it.

                Again, again, again: I am not advocating central planning.Report

              • Avatar MFarmer says:

                If not central planning, then how do you explain this?

                “All markets have to be set up by the government that is making space for it. We set up our own market over a long period of progressively evolving regulations, and the new market should be no different. I can’t describe the specific contours of what would work, but a great deal of what I think is most problematic in our market can be solved by strong social insurance and productive social employment programs. For example, people save too much because healthcare is a large and variable expense; free public healthcare frees up a great deal of the individual budget for increased consumption. At the same time, millions are unemployed even while we have endless amounts of deteriorating infrastructure and the ability to borrow or print money at a profit to the federal government – and there’s no reason a government shouldn’t be constantly solving both those problems, which would increase employment and output.”

                 

                 And, again, why are “private” owners going to give profits to the State to distribute to others?Report

              • Avatar Roger says:

                Benjamin,

                Do continue to share as you refine your positions. This is a great forum to bounce ideas off people of a wide variety of ideologies.

                Yes, I believe the state did support markets by enforcing property rights and acting as a referee with courts and police.

                And yes, everyone is a consumer, and to gain influence within the system we are all compelled to serve other consumers. If I want more of my needs satisfied, I need to do a better job of identifying and solving others needs in better ways for less. My concern with the OWS movement is that they don’t seem to recognize this truth.

                Before retiring (I now consider myself a surf bum) I led a team of people responsible for consumer driven product design.  We created, designed, built and implemented products that were intended to meet the diverse needs of consumers. I just saw a commercial for one of my old products a few minutes ago.

                The value we got from Dan’s work was related to the role of irrationality and various cognitive biases that people operate under. Actuaries and product designers and marketers tend to assume too much rationality, and this gets in the way of effective product design and delivery.

                A lot of my comments on the League deal with my observations that cognitive biases influence our world views. I believe humans are genetically wired to see the world as zero sum, to see problem solving as top down, and to see competition as destructive. These biases cause a lot of mistakes and interfere with social progress.

                 

                 Report

              • Benjamin,

                my stance is that such an approach is morally insufficient.

                I’m an empiricist.  I just don’t have that much patience with groping around for “morally sufficient” approaches.  I’m curious about how the world works, and willing to allow moral sufficiency for just about anything that isn’t coercion.  When your moral approach requires coercing someone who isn’t coercing anyone else, I’m persuaded you’re on the wrong path.

                 Report

              • Benjamin,

                My base stance is that all markets are positive creations and that central control is the default alternative

                Empirically false.  Humans engaged in trade before there were governments to engage in central control.  Even non-human primates engage in trade (see, for example here).

                I’m anti-capitalist but not anti-market.

                But markets produce capitalism, so this is a non-sequitur.

                market design

                Maybe you’re familiar with Hayek and reject him.  If not, I suggest reading his work on spontaneous order carefully.  He has a famous phrase, “the product of human action, but not of human design.”  The moment you start talking about market “design,” you are in fact favoring centralized control.

                 

                capitalism in simply a primitive technology for implementing them. But we now have the technology to do better. We have the data processing ability and mathematical foundation to set up markets that by default provide employment, security, and insurance for workers without impeding innovation, in fact probably increasing it through the channel of increased real incomes

                You definitely need to read Hayek.  This is classic socialist planning debate argumentation, and Hayek thoroughly eviscerated this argument.  Really, this is just terribly terribly wrong.  It’s all wishful thinking–it would require a central planning board.  And, no, we do not have the data processing ability for two reasons.  First, there’s far more data than you realize; nothing less than the sum total of all transactions that take place in our economy.  Second, and more fundamentally, the critical data, what consumers want at what price, is not given, but is discovered in through the market process.

                 

                Western “ownership” is also a primitive concept. In China, for example ownership is split into a number of different aspects.

                This is false.  The western approach to property rights actually splits it into multiple aspects, too.  That is the whole concept of property being “a bundle of rights,” a concept that is remarkably consistent across philosophy, law and economics.  You seem to like using the word “primitive” as a handy pejorative, but you never seem to use it in it’s proper sense.

                it should be quite clear why Occupy is a threat to capitalism.

                Funny, OWSers keep saying that they don’t want to do away with capitalism…

                workers there have [collective] ownership of their inputs and outputs, effective representation and fair political participation, full social insurance through mutual aid, and money does not determine status. Yet it’s also a functioning marketplace.

                This is all nice high-flying rhetoric, but try putting it into more concrete applications.  You talk about collective ownership of outputs, but what actual outputs does OWS have?  Do they really have collective ownership of inputs?  Nobody owns their own tents, megaphones, bongo drums, food, water, sleeping bags, etc?  How has it proven itself to be a functioning marketplace?  Superficially, at least (and I haven’t followed it closely), their structural system seems to be cracking.  A couple of months isn’t long enough to establish a real track record for a functioning market.  Don’t let idealism intervene with your ability to engage in serious analysis.

                 

                Management stays privatized; companies stay private; but through a sovereign-wealth-style mechanism, profits are collectively shared. And this without changing the incentive structure at all from its current form.

                No, no, no–this requires some really substantive explanation.  You want to radically change the collection of profits without changing the incentive structure at all? Unless people are not motivated by profits, then changing the collection of profits must change the incentive structure.

                Look, on the one hand I don’t want to come down too hard on someone who’s just finished their B.A.  As a college prof I’m often happy that my students walk away knowing at least as much as they do, while knowing they really do not know enough.  On the other hand, I do want to unnerve you a little bit, to hopefully shake your confidence in your market socialist ideas as you go into grad school, in hopes you’ll be open to alternative ideas.  I strongly urge you to read Hayek’s “The Use of Knowledge in Society,” and to think very carefully about his claim that the critical knowledge for organizing markets is discovered in the market process–that it does not exist a prior to be collected.  And I encourage you to read public choice theory, because you currently don’t seem to have a realistic understanding of how political processes work, so you are pairing them up as an ideal against the real-world market.  (That is, while you say you agree with Buchanan, you don’t yet understand his words.)  And my advice is to pay close attention in your econ classes and to blow off the philosophy classes.  They’re good for developing analytical thinking skills, but substantively they’re of little value.Report

              • 1) This is what I mean when I say that governments preceded markets:

                “[W]hat anthropologists observe when neighbors do engage in something like exchange with each other, if you want your neighbor’s cow, you’d say, “wow, nice cow” and he’d say “you like it? Take it!” — and now you owe him one. Quite often people don’t even engage in exchange at all — if they were real Iroquois or other Native Americans, for example, all such things would probably be allocated by women’s councils.” (Source)

                It’s that a form of collective agreement and decision-making predated anything that would be termed a functioning market with price signals (which from my discussions with Hayekians seems to be the key feature from that standpoint).

                2) Markets do not necessarily produce capitalism. In every case, markets have produced a central government to manage some portion of the economy, and in some cases they have produced a central government that owns or manages most of it.

                3) Market design is not an option. The book Nudge makes this clear. Markets are not spontaneously created in some perfect image – they at best take the shape of the space cleared for them, and the government clearing the space has to shape it.

                4) I am not arguing for socialist calculation, simply for our ability to take effective measures of the key parameters we’d need to shape new markets. For real-world examples, see the cap-and-trade sulfur market as well as the radio spectrum auctions. Both were ‘designed’ markets that were highly successful. The idea is to design a market in which the price signals are true and accurate, and the outcomes are fair.

                5) Parts of Western law may do this, but in practice the bundle of rights approach is rarely applied. Firm managers, for example, are often paid exorbitant salaries which have no relation to the performance of the firm. What incentivizes them to produce profits? I agree that we understand the concept, and I only argue that we should apply it.

                6) I’m not speaking for OWS or its intentions, only for how I observe it to be a threat to capitalism.

                7) Ownership of inputs need not be collective (sorry, I bracketed ‘collective’ to make it an optional modifier) – some of the tents and other supplies are clearly privately owned, while others are allocated from a collective pool (clothing, for example, is washed through an exchange system without individual ownership). Some of they key inputs – “our streets”, “our parks” – are under express collective ownership. Ownership of outputs is even more collective; the message, the newspaper, the occupation itself are all seen as collective property because they are produced by a process of consensus. But the key fact isn’t the collective or non-collective ownership; it’s the fact that the workers are in ownership of the inputs and outputs, which is undeniably true.

                8) People are motivated by profits. But again, in our system the most active managers are insulated from the company’s performance, and it’s totally unrelated marginal investors who are affected by the share price. This doesn’t seem to align incentives in any meaningful way. So to reallocate the marginal profit accumulation from individual wealthy investors to the central government through sovereign wealth would not appear to dramatically change our incentive structure. Obviously I’m not arguing for complete government ownership, nor even partial government control. But as evidenced by TARP, the auto bailout, and the loan program that funded Solyndra (which remains the programs only failure to date, 1% of investments), the government can get quite a good deal on its investments without changing the incentives of companies or managers. The successful wealth funds of other nations also support the approach.

                9) To claim that the information does not exist prior to its collection through markets is an even stronger argument for my position. It is to assert that the information is endogenous to the shape of the market itself; it is to admit that market design and implementation have real effects on the shape of commerce. I’m not simply arguing for politicized market design – I’m saying it is not optional, that it is happening all the time whether we like it or not, and we had better face up to that. If that’s the case, then the philosophy of economics seems ever more important – because if we are going to have to design our markets (as I argue we are), we had better have a good understanding of what we want out of them.Report

              • if they were real Iroquois or other Native Americans, for example

                You’re talking about societies that had already developed formal governmental structures.  That’s pretty late in the game–I’m talking about eras pre-governmental structures, and in the governmental era, exchange between people in different societies.  The evidence overwhelmingly demonstrates that not just humans engaged in trade prior to the establishment of governments, but so did our pre-human ancestors.  It’s an inversion of hominid history to say government precedes markets, even though markets developed most fully when their were governments (because then property rights and contract are better protected).

                 

                In every case, markets have produced a central government to manage parts of it

                Markets produced the government?  I’ll say two things.  First, that contradicts your claim in 1 that governments precede government and in 3 that governments make the space that make markets possible.  Second, you have a definition of markets that I can’t comprehend if you argue that government is an output of markets.

                 

                Market design is not an option. The book Nudge makes this clear.

                Interestingly, the author of nudge has found it exceptionally difficult to accomplish any nudging once put in a position to do so.  The error you’re making here is to confuse structure with design.  There is no overall central source of design for the market–that is beyond human capacity.  We can tweak and shape certain parts of it, but for the most part we’ve only successfully accomplished that within the bounds of limiting overt bad behavior; and have failed when we try to shape particular outcomes.

                 

                For real-world examples, see the cap-and-trade sulfur market as well as the radio spectrum auctions. Both were ‘designed’ markets that were highly successful

                More designed “auctions” than “markets.”  After auctioning, the real-world undesigned market determined the value of the auctioned-off property rights.

                 

                in practice the bundle of rights approach is rarely applied.

                You’re not looking closely.  Easements are leased regularly, naming rights to stadiums are sold, rooms are rented out in homes, etc.  All that depends on rights being divisible bundles.

                 

                as evidenced by TARP, the auto bailout, and the loan program that funded Solyndra (which remains the programs only failure to date, 1% of investments), the government can get quite a good deal on its investments without changing the incentives of companies or managers.

                I’ve seen loss estimates on TARP ranging from $10 billion to $50 billion, and on the bailout of GM of $10 to $80  billions–that’s what you call “quite a good deal”?  Compared to Solyndra, I guess it is. And what is your evidence that the incentives of the companies or their managers have not been changed?  That sounds like pure guesswork on my part, especially as Obama essentially required GM to get serious about producing a money-losing electric car.  And as far as TARP goes, the very problem of the bailout may have been in that it reinforced the same incentives, rather than changing them–i.e., by reinforcing the confidence that big companies could totally privatize their profits and socialize their losses the government reinforced the perverse incentive to make overly-risky decisions that created the problem in the first place.

                 

                Re: #9.  You answered too quickly.  You haven’t taken the time to read Hayek’s argument and think it through.  Of course the structure of the market helps create information, but that’s why we can’t predict the outcomes of markets when we try to consciously design them–because we don’t know what kind of information they’re going to create.  That’s why your hope of designing markets based on knowing what you want out of them is an impossible fantasy–we never know what we will get out of them until after they’re instantiated, whether by conscious design or just through their evolution.  Again, pay attention to Hayek’s argument that human institutions are the product of human action, but not human design.  Even if you’re never persuaded by Hayek, he provided the most thorough rebuttal of your position, so you can’t claim to really know your own argument in depth until you’ve come to grips with Hayek’s critique.  Keep in mind that this is the work that earned Hayek the Nobel prize–find a satisfactory rebuttal to his argument and you’ll have made a hell of an accomplishment.Report

              • “Even strongly market-oriented economists typically note that the market can function effectively only within a system of well-defined and enforced property rights and that government is therefore needed to establish and enforce these ‘rules of the game.'”

                It’s not that there has to be a central institutional authority to say that “government precedes markets”. It can be something as simple as “custom” or any group method of controlling individual behavior. This is definitely logically prior to, or at least contemporaneous with, the evolution of what I would call a “market”.

                “Carl Menger proposed that the origin, formation, and the ultimate process of all social institutions – including law – is essentially the same as the spontaneous order Adam Smith described for markets.”

                (Source for both quotes.)

                This is what I meant to get at when I said “markets created government”. I was using “markets” as shorthand for this process, and you’re absolutely right to say that that’s inaccurate and inconsistent on my part. I meant that formal governments arose spontaneously to meet a collective need. But for my argument it is enough that functioning informal governments (resource-sharing, primitive patriarchy, whatever) governed behavior before functioning markets did. And this I believe is true.

                TARP and GM: I don’t know where your numbers are coming from. TARP profited $24 billion (source, source). GM recouped almost half its investment at IPO (above expectations), and will produce profit for the government (source). Not to mention the enormous public value produced by the restructurings and continued operation these loans made possible. The Department of Energy loan program that funded Solyndra has a 4% default rate, far better than the Small Business Administration’s 12% default rate (source). The government has proven time and again that it can make smart, profitable investments that market failures prevent from otherwise happening.

                Incentives should not be changed for managers because the key priority remains profitability. The financial incentives for most of the firms’ managers are literally unchanged with the exception of a few pay caps at the very top. I agree that some of the bailout programs (AIG, for example) simply socialized losses. But a sustained program of investment in healthy companies would look nothing like the portfolio created through buying up failing companies with the intention of saving them. That’s a totally separate issue.

                As for Hayek, I look forward to reading this argument in depth. But from a quick consideration of your citation it seems really obvious that his argument falls apart with even a little bit of critical reflection. After all, if markets create the information, then the type of market we have will change the type of outputs we get. And we know we have the ability to shape what markets look like through different regimes of property rights, consumer protection laws, etc. And I’m not saying that we can create a market right out from scratch and get what we want. I definitely believe that making small marginal improvements over time is the way to go, to see what works and what doesn’t. But – we can and do make these sorts of adjustments constantly, so why not simply admit that they matter, admit that no choice is morally neutral, and get to work on shaping them the way we want?

                One last point: “Libertarian Neutrality is an Illusion.”Report

              • “Custom”?  Well that’s an entirely different beast.  Now you’re on much more solid ground.  You still need to consider certain types of exchange among primates as constituting specialized markets.  But since our primate kin also give evidence of rudimentary elements of culture, at that point custom and markets appear to be evolving simultaneously.  But for most purposes going with culture as a precursor is analytically sufficient.  The problem you’ll run into, though, is that custom is not “designed,” either–we’re back to Hayek once again, “the product of human action, not human design.”

                Just as creationists look at organisms and can’t believe such a complex structure is not designed, some people have a hard time understanding that something as complex as a capitalist economy could occur without design.  But in many ways evolutionary theory provides a sound model of markets.

                Overall I think your concept of government is too broad.  If I may pull rank and speak as a political scientist, you’re conflating governance with government.  Of course all primitive societies engaged in governance, but they didn’t necessarily have government.  In fact formal institutions of government seem to have arisen as a consequence of agriculture–food surpluses gave government something useful to control that enabled them to exert more control over the population (in a very real sense government may have begun as theft).

                As to your source on TARP’s profit–you do realize the Treasury is a political institution that has an incentive to report things favorably, right?  Their numbers are a function of the banks selling off lots of bad loans to Fannie and Freddie, which got a bailout, too…but a non-TARP one.  A total bailout account has to deal with that.  See also this. As to GM, the government took a loss of $10 billion on its first sales of stock, and the market value of its remaining stock also portends further losses. As to the “enormous public value produced by the restructurings and continued operation,” you’re failing to understand the dynamics of markets–bailing out failing companies does not create “enormous public value.”

                You may not remember, but we bailed out Chrysler once upon a time, and everyone cheered the great government success when they paid back their loans early. Chrysler went onto be a bumbling, stumbling company for the next thirty years until it came to the government once again begging for a bailout. That’s what counts as success in political markets.

                 

                As for Hayek,… from a quick consideration of your citation it seems really obvious that his argument falls apart with even a little bit of critical reflection.

                And that’s why there’s been no successful refutation of it by economists?  You need to slow down.

                After all, if markets create the information, then the type of market we have will change the type of outputs we get.

                That’s not a refutation of Hayek; that’s agreement. And if we pervert the market will ill-designed regulation the output we get is false price signals.  For example the over-valuation of farmland caused by agricultural policy that is driving family farms under because young farmers can’t afford land.

                And we know we have the ability to shape what markets look like through different regimes of property rights, consumer protection laws, etc.

                Of course we know we have the ability to shape them–what we lack is the ability to accurately foresee what that shape will be.  I imagine you’ll disagree with that, but only if you haven’t looked closely at the problems of perverse incentives, unintended consequences, regulatory capture, concentrate-benefits/dispersed-costs, etc.  It’s a human conceit that we can predict the future; it’s not a reality.  Again, you need to stop thinking in terms of an idealized government and look carefully at the real-world government.

                I definitely believe that making small marginal improvements over time is the way to go, to see what works and what doesn’t. But – we can and do make these sorts of adjustments constantly, so why not simply admit that they matter, admit that no choice is morally neutral, and get to work on shaping them the way we want?

                Of course we’ll continue to do this.  But doing it and doing it well are very different beasts.  You’re overestimating our capacities to “shape them as we want,”  and overestimating government responsiveness to evidences of failed policies because you’re working with an idealized vision of government.  What you’ll find in Hayek is that government can’t do this well because the information that would be necessary–the real valuations of things–are not available a prior.  You’re assuming we can know the value of particular outcomes, but in the absence of market signals we can’t.   The market is a process of discovery, not one of achieving a pre-determined end, but you are asking that we design markets to achieve pre-determined ends.

                A majority of new product launches fail, but you anticipate that government, with its unproductive incentives, will do better?

                Ultimately, both markets and government serve the process of coordinating human activity. Neither does it perfectly. But government lacks good incentive structures to make net-benefit investments. Decisions are driven by political considerations, not financial ones. Again, you need to apply the logic of economic analysis to government or you are making false comparisons–a real-world market vs. an idealized government.Report

              • Incentives should not be changed for managers because the key priority remains profitability.

                No, the key priority becomes re-privatizing the socialized portion of profits.  I don’t think you answered MFarmer’s question about who does the initial investment.  Even if the managers’ incentives remain unchanged (and that’s dubious), somebody has to invest in those companies.  If too much profit is skimmed, their investments go elsewhere.  Even if you’re not changing the managers’ incentives you’re changing someone’s incentives, and until you come to grips with that your scheme is incompletely understood.

                 But a sustained program of investment in healthy companies would look nothing like the portfolio created through buying up failing companies with the intention of saving them. That’s a totally separate issue.

                First, a sustained program of investment in healthy companies is what every stock-picker wants.  Turns out the best way to do that long-term is to follow the market average.  If government just wants to invest money in the stock market that way, well, that’s an interesting concept, but I don’t think it’s what you mean.  If you mean government can do a better job of predicting what companies will be profitable, it’s incumbent upon you to explain where these extraordinary abilities come from.

                You also are ignoring the reality of political pressures.  No congressmember is going to pressure the government to invest in a profitable firm in his/her district.  There’s just damn little political incentive to invest in successful businesses.  But a failing business creates lots of political pressure because votes are involved–“10,000 jobs will be lost in my district if we don’t act!”

                The Department of Energy loan program that funded Solyndra has a 4% default rate, far better than the Small Business Administration’s 12% default rate.

                That comparison hardly proves anything about the overall capacity of government to pick winners, since your bad-job comparator is also a government agency.  And while I haven’t looked at the numbers, both default rate and total loss matters.  A high default rate isn’t harmful if the losses are, collectively, very small, because only small amounts were given out.  And a low default rate doesn’t matter if there’s only one loss but it’s vast.  It’s standard investment logic–it’s ok to risk more if the odds of loss are small enough, and ok to accept higher odds of loss if you’re betting small enough amounts.  A real comparison of the DoE and SBA requires more information.Report

              • Avatar Patrick Cahalan says:

                @ Benjamin:

                Stick around and comment more.  Write a guest post or three.Report

              • Ditto what Patrick C. said.Report

              • Avatar MFarmer says:

                “So to reallocate the marginal profit accumulation from individual wealthy investors to the central government through sovereign wealth would not appear to dramatically change our incentive structure.”

                So, who does the initial investing?Report

              • Avatar MFarmer says:

                Also, how do aggressive, advancing companies grow if profits aren’t put back into the company?Report

            • Benjamin,

              Unfortunately not everyone can do this, for various reasons – lack of access to credit, or education, or health insurance, or simple risk-aversion or lack of ability.

              I strongly recommend you read The Other Path.  Peruvian peasants lack access to credit, education, and health insurance, and yet they show entrepreneurialism anyway.  In a developed country, those things become an excuse.  As to risk-aversion, that’s why I never became an entrepreneur–too bad for me, it’s nobody’s responsibility to provide for me at the level I want.  The risk-averse will have to take what they can get.

              Marginal productive value is a non sequitur. It’s only possible to assign such a value to labor if the level of capital is static, and it’s only possible to assign such a value to capital if the level of labor is static. But both are dynamic and codetermined, so marginalism is useless when talking about what is fair compensation for each factor.

              No, on two levels.  First, “fair” compensation is the non-sequitur.  Just as a fair price is what buyer and seller are voluntarily agree on, so is compensation, because it’s just the price of labor.  And it’s not necessary that everything be static–in a dynamic world (which is the only proper way to understand economics), the employer is constantly re-evaluating whether the employer is providing enough value for the paycheck, and the employee is constantly evaluating whether the paycheck provides enough value for the labor.

              As to the empirics of monopoly, I think you’re mostly wrong.  The dominant monopolistic behaviors stem from government protected industries (politically created barriers to entry), not from economies of scale or any other natural barriers to entry.

              I thought of you while reading James Buchanan’s biography last night.  He writes of not learning in his undergraduate economics education of “the coordinating propererties of decentralized market process, an ignorance that made [him] vulnerable to quasi-Marxist arguments and explanations about economic history and reality…  ”  Elsewhere he writes that “In retrospect it seems naive in the extreme to advance institutional comparisons between the workings of an observed and an idealized alternative…if market organizations are to be replaced by politicized order, or vice versa, the two institutional structures must be evaluated on the basis of predictions as to how they will actually work. Political failure, as well as market failure, must become central to the comprehensive analysis that precedes normative judgment.”

              In other words, many economists (and League liberals) compare the real-world market to the idealized market, and of course then they find it comes up short.  And then they ask for government regulation because they have an idealized version of government.  So not only are they comparing the real-world market to the idealized market, they are also comparing it to the idealized government.  The only proper way to proceed is to compare the real-world market to the real-world government.  It’s a necessary basis, I think, to understand the ideal in each case, but it’s an intellectual error to fail to analyze government/political failure as rigorously as one analyzes market failure.  If I could send you into grad school with one idea to ponder, that would be it–consider the reality of government performance just as critically as you examine the reality of market performance.Report

  18. Avatar wardsmith says:

    Jason posited a very intriguing point, much of which has been hopelessly lost in the almost 200 comments that followed. His basic premise began with the idea that wealth accumulation should be a GOOD and should be considered so. To quote him: “I’d like everyone to be rich, which means, obviously, that we have too few rich people. Failing that, I’d like to select some random non-rich person, and, without changing anyone else’s wealth, make him or her rich..”

    Luckily for us, there exists a mechanism that does EXACTLY THAT. It is called the lottery. So to further examine his hypothesis, we should look at what happens when some “random non-rich person” is “made rich”. This paper is particularly excellent. Because I can’t make more than two links on this site without spending time in moderator purgatory, I’ll save some effort and use this link to point to several more studies.

    A good takeaway:

    According to Dr. H. Roy Kaplan author of several books on lottery
    winners, “winning the lottery doesn't change people's lives as much as
    is imagined.
    (..)
     “You can catapult people from one economic status to another
    overnight, but a lifetime of beliefs and experiences change more
    slowly.
    People who were outgoing and gregarious before winning took it in
    stride," Kaplan said. "People who were shy and withdrawn before
    winning became suspicious and paranoid.
    Most lottery winners keep their jobs, but find their relationship with
    co-workers changed. Most are inundated with requests for money, both
    from friends and strangers.
    Money doesn't change a person's level of happiness, said Kennon
    Sheldon, a psychologist at the University of Missouri at Columbia. "We
    consistently find that people who say money is most important to them
    are (the unhappiest)," Sheldon said.”

    Report

    • Avatar Jason Kuznicki says:

      Actually the lottery is a bad example, I think, because on the margin it makes millions of people poorer.  It concentrates wealth without adding to the sum total of wealth at all.  The imagined change would add to the sum total of wealth while also getting rid of poverty in absolute terms.  So the lottery is not really at all what I’m talking about.

      The other reason, which you bring up, is that winning wealth from a lottery is not the same as being the sort of person who is able to keep and manage wealth, which I must concede, well well after the fact, to be a necessary precondition to maintaining a high level of income in the long term.Report

      • Avatar wardsmith says:

        The lottery is just a redistribution mechanism, something I thought liberals would applaud. I disagree that it makes millions substantially poorer. As Dilbert says it is a tax on those who can’t understand statistics. However, it is still a voluntary tax.

        The second point is the more critical one. I could write up an OP showing that the lotto is a perfect example of why bleeding heart economic measures can never work. Fundamentally a person’s nature rules them, and fundamentally not everyone has the kind of nature that allows them to “keep and manage wealth”. One third of lottery winners declare bankruptcy within 5 years. The only reason the Kennedy’s have money today is because of iron-clad irrevocable trust funds. Unfortunately those same trust funds (and all the rest like them) are the primary reason wealth accumulates to the wealthy in this country. Changing the inheritance laws just reshuffles the deck for the specialized industry of wealth managers and law firms who will find and exploit every loophole in whatever law gets crafted. It is just the nature of the beast.

        I applaud your thought model anyway and clearly you’ve hit a nerve or two (viz the 200+ comments). Great job. Hope this isn’t keeping you from that novel you’re writing. 🙂Report

      • Avatar Mike Schilling says:

        And another reason is that the cure for chronic malnutrition is not force-feeding of foie gras, nor should someone who changes his mind about being a teetotaler start by downing a quart of scotch.

        And, by the way, the ability to keep and manage wealth is a learned skill, not a character trait.Report

        • Avatar Jason Kuznicki says:

          You sound like a conservative of the worst, most paternalistic old-money sort.

          We can’t expect the lower classes to be able to handle wealth, so it’s just as well that they’re poor, right?  They’re happier that way.

          As for me, I’d at least like to see them try.  I’m willing to bet a lot of them could figure it out, and even if some of them couldn’t, well, okay.  I can live with that.Report

        • Avatar Kim says:

          Mike,

          what the hell makes you think most rich folks know how to keep and manage money? they pay someone to do that shit. 😉 (apologies if I’m strawmanning. wanna make the point anyhoo).

           

           Report

  19. Avatar Tim Kowal says:

    Without reading all the comments, my ctrl+f shows no one here talking about rent seeking.  While I 100% agree with Jason et al. that we need to shake this zero-sum notion we have about wealth, I ask Jason if he’d be willing to alter the premise as follows:

    On what theory is it preferable to go around doing the opposite — taking one rich person at a time, and, without changing anyone else’s wealth, making him or her poor? I can only think of one, and that’s if the rich person in question got rich by committing a crime or engaging in corrupt acts, including rent-seeking.

    For our purposes here, I can’t see any relevant distinction between “criminal” conduct and unethical/corrupt conduct.  Since we’re concerned about maximizing wealth for everyone, we need to condemn all behavior that systemically prevents this from occurring to the advantage of the few with influence, and which all results in the question of wealth turning into the zero-sum game and spoiling the whole libertarian premise about wealth.Report

  20. Avatar Sam says:

    I don’t study enough of this to know the answer: what are the free market economies you’re endorsing? When and where has one existed wherein violence and governance haven’t played a role and where all of the exchange has been voluntary?Report

    • Avatar Jason Kuznicki says:

      I’m not endorsing any free market economies in this post.  If I could push a button and give random non-rich Americans a real income of $200,000 per year (i.e., by somehow creating that much wealth, not by printing money), I would do it. All day long.  That’s all I’m saying.

      Some people on this comment thread would not do it, on the flatly mistaken assumption that doing so would worsen inequality.  It wouldn’t.  It would lessen inequality and increase wealth, and I would urge them to take the same position I am in the thought experiment.

      31% of Americans, it seems, would go around destroying random rich people’s wealth, even though the effect of doing so would be to increase the concentration of wealth, while leaving no one better off at all.  This is appalling to me.

      None of it, however, has anything to do with any putative free market.Report

      • Avatar Sam says:

        Well, I appreciate what you’re saying here, except that there are plenty of other people who have turned this thread into an opportunity to full-throatedly endorse the benefits of the marketplace. But no marketplace that I can come up with historically has existed without violence and the biggest marketplaces always involved governance. The technologies that James is insisting are evidence of the greatness of our society now were all created within a governed and regulated marketplace, so it isn’t like free market advocates get to claim those achievements for themselves and their system. It’s that advocacy which is baffling. Meanwhile, would you push the button if $200,000 was transferred from a random rich person to a random poor person?Report

        • Avatar Sam says:

          I don’t know how to use the commenting system, apparently.

          My question is: would you press the button if the $200,000 being given to a random poor person wasn’t being created out of thin air, but was being taken out of the bank account of a random rich person? For the sake of this, we’ll define rich as anybody having more than a million dollars (even though that’s obviously a ridiculously high standard).Report

      • 31% of Americans, it seems, would go around destroying random rich people’s wealth, even though the effect of doing so would be to increase the concentration of wealth, while leaving no one better off at all.  This is appalling to me.

        I do concede that there probably is a certain sort of priggishness among the anti-wealthy-people crowd:  an insistence that most “rich” people are cheats by definition, coupled with the firm belief that someone else (not the anti-wealthy person) is the “rich” person (hence the “1%” cry).  There also seems to be a sort of retributionist outlook:  “we need to punish the rich because they are rich (but not me, because I’m not rich, it’s those others).”

        But I wouldn’t be surprised if much of the 31% actually believe the effect of destroying random rich people’s wealth would increase the welfare of most others–say, by a taxation scheme that requires the wealthy to pay more and results in such general good items like well-implemented universal health care, or a balanced budget, or free x-boxes for all.

        If that’s what they believe–and I think on some level many of them probably do, although I cannot claim to know with certainty–then they might be mistaken.  And I think you and other commenters on this thread have fleshed out some of the ways in which they are mistaken.  But that’s a different proposition from the proposition of they simply want to “go around destroying random rich people’s wealth, even though the effect of doing so would be to increase the concentration of wealth, while leaving no one better off at all.”

         

         Report

        • I also suspect that if the question on the poll were “would you support pressing ‘a button and giv[ing] random non-rich Americans a real income of $200,000 per year (i.e., by somehow creating that much wealth, not by printing money),'” (and not, “do you think there are too many rich people”) then a lot of the 31 % would say yes.

           Report

      • Sam,

        First, markets are about voluntary exchange.  By definition, exchange that occurs through violence and theft is not a “market” transaction.  Beginning with the assumption of pure anarchy, we can of course legitimately question how much voluntary exchange there will be vs. how much violence/theft there will be.  That’s an empirical question, and while we might disagree on the relative amounts, I think we can agree on the minimal claim that there will be some amount of each (both voluntary exchange and theft).  Consider pre-Columbian Native Americans, for example.  There was much theft between tribes, but there was also exchange that brought goods from the coast all the way to the center of the continent.

        Second, “Free market” does not necessarily mean there is no government involvement.  Precisely because of the problem of theft and violence (humans being imperfect buggers, to paraphrase James Madison), most free-market advocates do want some government involvement.   The standard claim is that markets require, at a minimum, the enforcement of property rights and contracts.  That is, government is necessary to prevent theft, fraud, and violence, so that people can more safely approach each other for exchange, having more confidence that their exchange will in fact be mutually voluntary.  Governments are also useful for providing some infrastructure (roads, sewers, water treatment systems),* and for regulating negative externalities like pollution.

        Third, “Free market” is not a binary variable,** but a continuous one.  That is, a market is not either “free” or “unfree,” but is free to varying degrees.  The more the regulations are designed to be of general applicability, like safety laws, the more we can say the market is relatively free.  The more the regulations are designed to secure particular outcomes (tariffs, price controls, subsidies, etc.), the more the market is relatively un-free.

        So when free market advocates argue for free markets, they are not arguing for anarchy and they are not arguing for an economic structure in which theft is legitimized.  Stupid ones will argue for the elimination of pollution laws, and they should rightfully be mocked.  The degree to which caveat emptor should hold is open to debate, and even folks like JamesK and I, who have remarkably congruent views on this stuff, will certainly vary in particular details.  But you don’t have to be militantly pro-caveat emptor to be legitimately pro-free market.  To the extent liberals are opposed to state-ownership of industries and protective regulations (regulations that protect politically-favored businesses from competition), subsidies, and the like, they are actually fairly pro-free market as well.  Not as much so as I am, but mostly they also don’t want government dictating the majority of economic outcomes.

         

        ______________________________________

        *Although the market actually can provide more infrastructure than is commonly believed.  But often that occurs as a government/industry partnership, as with the leasing of toll roads.

        **If anyone wants to argue that libertarians treat it as a binary variable, I’m willing to mournfully agree.Report

  21. Avatar Mike says:

    What a dishonest load of crap.

    The “upper crust” could live perfectly happy lives on incomes that weren’t 50 standard deviations above the mean.

    <em>Note that if we define wealth in positional terms, the question has no meaning: We can never put more than 1% of everyone into the wealthiest 1%, and the question isn’t asking about simple population growth. It’s only if we define “rich” in absolute terms — say, a real income of $200,000 per year — that the question has any meaning at all.

    I’d like to give everyone a real income of at least $200,000 per year. Why don’t you? I’m really, truly boggled here.</em>

    I’d be happy with a distributional layout where the mean and median were both near $200k/year, the minimum was $50k/year, and the maximum was $400k/year. What we have now is a distributional layout where the median is $45k/year, the minimums are OMG FUCKING POVERTY even with people working multiple part-time jobs, and the maximum earners get in a single year many orders of magnitude higher than the LIFETIME earnings of someone who earns the median.

    What has to happen to make this occur? Well yes. The ultra-rich need to be less rich. The hoarding of wealth, and its effect upon society, is undeniable.

    <em>Failing that, I’d like to select some random non-rich person, and, without changing anyone else’s wealth, make him or her rich. And I’d repeat that operation as many times as I was allowed to. Wouldn’t you? </em>

    Except that that’s not how it works, and you know it.

    Then again, what do I really expect, honest logic from the political party that declared that people making $250k/year “aren’t really wealthy” while at the same time declaring that teachers making $45k/year (less of course paying their own health insurance over summer, and having to spend $5k or more per year on continuing education courses to remain certified) were “overpaid”, “lazy”, and deserved to have their collective bargaining rights stripped away even after their union agreed to a $5k pay cut in the form of “more employee healthcare contributions.”

    George W. Bush, 1999: “Don’t balance the budget on the backs of the poor.”
    Republican candidate field, 2011: “Fuck the poor.”Report

    • Avatar Kim says:

      250,000 is the bottom threshold of the middle class (via old measures). Thank California for that.

      That said, Pierre made a point way above — that most rich people make their money by cheating. I’ll put it differently. Most rich people keep their money by destroying (FIRE ring a bell?)Report

      • Kim,

        Thanks for the shout-out, but I didn’t really intend to say that.  I meant, although perhaps I was unclear about it, that people tend to believe that the rich make most of their money by cheating.  I actually don’t believe that, unless “cheating” is defined so broadly as to include systematic exploitation enabled by the capitalist system.  (Even then, I don’t believe that, but I do think we all have certain duties to others that the way things are organized enable us and give us incentives to neglect…..but that belief is probably best reserved for another comment threat.)Report

      • Avatar Jason Kuznicki says:

        Show of hands for people who think 250k per year is lower middle class. Seriously. Wow you have a talent for fantasy.Report

    • Avatar Roger says:

      There is a word for hitting a button that takes property from the wealthy and gives it to the poor. It is called theft. The appropriate response to theft is incarceration.

      This thread is revealing an absolutely amazing cognitive blind spot  on the part of most of those on the left. They are mentally incapable of grasping the positive sum potential of free enterprise. When we try to explain it to them they respond in ways that reveal it went WAY over their heads. To borrow a phrase, it is like trying to read economics to your puppy.

      Let me repeat. If you steal from those that produce value via win/win interactions, you are discouraging them from doing such action and the world will collapse back to a primitive state of squalor and short lifespans.

      If you want to get even with those that got their money illegitimately, you have my full support.

      It is critical that we separate the two. Please bark if you “get it”Report

      • If you steal from those that produce value via win/win interactions, you are discouraging them from doing such action and the world will collapse back to a primitive state of squalor and short lifespans.

        Only if you discourage a critical mass of them.  Taxation is like any other government imposition of authority: they don’t lead to revolt based upon binary triggers.  I generally agree with the first half of your statement, but it doesn’t lead automatically to the second half; in fact, there are historical levels of taxation that I would really call repressive in our recent history that have not collapsed a damn thing.  Do I think they’re a good idea?  No.  Do I think they were particularly just?  No.  But it didn’t collapse the U.S. economy, either, that’s hyperbolic to the extreme.

        If you want to get even with those that got their money illegitimately, you have my full support.

        Perhaps this would be a more fruitful exercise.  Thank you to Mr. Kowal for bringing it up.

        Let us assume that everyone is on board with the idea of a much freer market than the one we have now.  How would you go about unraveling established rent-seekers, other than the obvious taxing the shit out of them?  Productive suggestions would be *awesome*.Report

        • Avatar Kim says:

          Sunlight. Aka wikileaks.

          Now go ahead and call me a libertarian *smirk*Report

        • Avatar Tim Kowal says:

          I’m writing a lengthy post full of such “productive suggestions.”  And for that, thanks to Michael Drew pointing me to Larry Lessig’s new book, though as I’ll explain, Lessig gets only half the diagnosis right (rampant rent-seeking is a result of a lack of restraints on access to government, omitting the significant contribution of government policies that are misguided, prolific, and overbroad), and thus doesn’t come up with the right treatment.Report

        • Avatar Roger says:

          Patrick

          I was not arguing against democratically agreed upon taxation. I was arguing against robin hood (or spiteful vandalism)Report

          • Avatar Kim says:

            *snort* you didn’t say a word against robin hood, when he stopped your kids from playing with lead painted toys.

            In this strange, upsidedown twisted world, even robinhood can be (mostly) legal.Report

        • Avatar Roger says:

          Patrick

          The way they derive much of their privileged position is via regulations and regulators. We have created a complex system where some can get ahead by cronyism. Instead of creating value, we are building a system where it is necessary to fight over the rules. The answer is pretty obvious.

          Simple consistent rules
          Consistent enforcement
          Transparency
          No barriers to entrance and competition
          An ethos of honest toil as opposed to win lose exploitation
          Minimal interference in voluntary transactions
          A limited state that does a few things well
          A trust in voluntary decentralized problem solving rather than coercive top down
          Competition among institutions and regulatorsReport

          • Avatar Sunflower says:

            an ethos of honest toil is anaethema to those who have inherited their money. Put simply, they can’t keep up.

            Therefore, you need to fix the problem, before they finish lighting the world on FIRE. Oh, ho, did I speak too late? They say that housing is the bubble of last resort, you know…Report

      • Avatar Kim says:

        *growls* Talk to Lamont — he’s an entrepreneur. Made his money the honest way — by taking it from gobs of middle class people. Give him more middle class people, wealthier middle class people, and he’s got a bigger market.

        Entrepreneurs — true ones, have never had a problem with taxation — because making money to them is EASY. If there’s money that ain’t rotting in the pockets of the bastard rich.

        Know a guy who’s had more businesses than you’ve had years in your life.  He’s all for this taxation nonsense — and if you ever met him, you wouldn’t realize that he’d been a millionaire. Because entrepreneurs in general don’t act rich — they shop at Costco like everyone else.

        Getting money is hard to do illegitimately. Keeping it is almost impossible without being illegitimate. Entrepreneurs don’t care about keeping their money… there’s always more to make, after all.Report

      • Avatar Jason Kuznicki says:

        I wasn’t talking about giving it to the poor and neither was the question. I asked about destroying it. They lined up for that too.Report

        • Avatar Stillwater says:

          I asked about destroying it. They lined up for that too.

          Jason, sometimes your stubborn refusal to move off a view is frustrating. When 31% of people say there are too many rich people they’re not saying that the wealth of those people ought to be eliminated. They’re also not saying that the people themselves ought to be eliminated. (But you thought about it, didn’t you?) They’re saying that too much centralized wealth is bad, and having less centralized wealth is good. I mean, this was covered at the very top of the thread yet you keep repeating this nonsensical reading.

           Report

          • Avatar Mike Schilling says:

            Clearly, when they saw “rich” they thought “Jew”, and the poll is a shocking display of Antisemitism.  I honestly don’t see that there’s any other way to read it.Report

        • Avatar Roger says:

          The words for that are vandalism or wanton destruction of property. And yes they are lining upReport

      • Avatar Mike says:

        If you steal from those that produce value via win/win interactions, you are discouraging them from doing such action and the world will collapse back to a primitive state of squalor and short lifespans.

        Those who produce value via win/win interactions are not the ultra-stinking-wealthy.

        Those who produce value via win/win interactions are the middle class. Those making, currently, $40-150k per year.

        The “upper top” are a class of true leeches; they siphon from every interaction for their own greed. They are the classic “middle men”, unnecessary to the transaction, producing no good and providing no service, but enriching themselves off of the labor of those who actually do produce goods and services.

        If you want to get even with those that got their money illegitimately, you have my full support.

        That depends. Are you willing to include in this those who did “legal” but immoral things? How about the robber baron stooges who come into a company, rape its resources, fire the employees, cash in stock options, and then ride off on a golden parachute when the company collapses? How about the company “heads” who sell off a company because someone wants the patent portfolio, knowing full well that all the employees will be laid off and production moved to a slave camp in China within a year? How about those who avoid paying their taxes by converting “stock options” to non-taxable “ownership” and then taking low-interest “loans against collateral” to finance their lifestyle?

        The fundamental difference between us is that you are the sort of corrupt, incompetent, deluded stooge who thinks that the ultra-ultra-ultra-rich produce meaningful job growth, when the evidence is clearly the opposite: the machinations of the ultra-ultra-ultra-rich destroy jobs, destroy value, and do so only to enrich themselves by the pain of those below them.Report

        • Avatar Kim says:

          Mike,

          Don’t call them robber barons. You’re insulting Carnegie and people who actually worked for their damn money.

           Report

          • Avatar Mike says:

            Carnegie worked? Oh please. Carnegie got rich on the dead bodies of actual workers. He later sold out to the ultimate robber baron, JP Morgan, whose abuses were so egregious that between his behavior and that of Rockefeller, they triggered the necessity of the Sherman Antitrust Act and the trust-busting of the early 20th century.

            Here’s what Standard Oil was accused of: “Rebates, preferences, and other discriminatory practices in favor of the combination by railroad companies; restraint and monopolization by control of pipe lines, and unfair practices against competing pipe lines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price cutting at the points where necessary to suppress competition; [and] espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent”

            Now answer honestly: does that remind you of any companies today, or of the last 50 years? Because I can name an even dozen.

            The only good thing about Carnegie is that he was so remorseful of the lives he ruined that he gave most of his money away later trying to salvage what was left of his soul.Report

            • Avatar Kim says:

              *snort* don’t call that bastard remorseful. A free library meant people learnin while he wasn’t paying them.

              He started out working as a factory worker. The man got to the top the hard way — through his own work.

              Was he a nice guy? Nope. Few are at that level.

              But he’s worth ten times what a Koch is worth. For one thing, Carnegie and company read their Marx, and they learned something from ‘a that. I’d rather have evil bastards with money — so long as their smart. Smart is reasonable, so long as you’ve got cards to play.

              What gets me is that the current crop of “landed rich” is so blasted DUMB!

               Report

      • Avatar Stillwater says:

        If you steal from those that produce value via win/win interactions, you are discouraging them from doing such action and the world will collapse back to a primitive state of squalor and short lifespans.

        We’re already stealing from them – well not really, since the effective rate of the very wealthy is less than middle income folks – so I guess we’re on the quick slide to ruin.

        On the other hand, we’ve always been stealing from the wealthy, so I guess we’re already there.

        And of course, there’s also the view that since the producers produce and everyone else is a lazy parasite working for wages (ychhh!), the wealthy shouldn’t be taxed at all. In fact maybe everyone else ought to be paying them!

        Win/win!Report

      • Avatar Sam says:

        Once again, you’re aggressively denying the historical, structural, political, and cultural realities that lead to the wealth enjoyed by many of the people we’re describing as rich. You’re acting as though the game has always been fair and that the outcomes we’ve got today are a result of that. Most people are at least willing to acknowledge that the way we’ve reached this point in our history hasn’t been a series of positive-sum interactions.Report

        • Avatar Jason Kuznicki says:

          Mock it all you like.  What I’m hearing from people on the left in this thread is that material sufficiency is irrelevant.  All that matters is that no one should envy anyone too much.

          Many of these same people saying this would rather be William Randolph Hearst — or even Louis IV (!!!) — than a middle-class American today.  Why?  I don’t know.  I’m forced to conclude that these people suffer far more from envy than I do.  Physician, heal thyself.

          [Edit, because I can: This was meant to be a reply to Stillwater at November 23, 2011 at 12:22 pm. Confusing, I know.]Report

          • Avatar Stillwater says:

            So, suppose that one family controlled 80% of all the wealth in the US (this was achieved by some morally dubious marriages and what not), while the remaining 99.9% of citizens had ‘material sufficiency’.

            Is the left, or anyone else, justified in criticizing this arrangement, or would they merely be expressing envy?

            Is there a level of wealth imbalance in a rights based capitalistic democracy that is undesireable for principled as well as pragmatic reasons?Report

            • Avatar Jason Kuznicki says:

              I can’t imagine that kind of concentration of wealth without full-scale subversion of the government — not as an effect of the wealth, but as its cause.  You don’t become that wealthy without the use of state power.

              And although this wasn’t among the original claims of my post, I don’t even believe that the current concentration of wealth can be sustained in the absence of rent seeking.  I strongly suspect that a few fairly simple changes in our laws could have a big flattening effect, while also benefiting the poor and middle class — and that these changes would also be in the direction of individual liberty.

              Changes of the sort I have in mind include but are not limited to the following:

              –Reduce the amount of time corporations can hold intellectual property, perhaps to as little as seven years, without extensions.

              –Cut the defense budget in half.  At least.

              –Do not grant corporations special exceptions to zoning laws.  Instead, abolish the zoning laws.

              –Close corporate tax loopholes at all levels of government.  (I suspect the local ones rather than the federal do a lot more to prevent small businesses from starting up, but close them all anyway.)

              –Pass some sort of an anti-bailout amendment to the constitution.  I don’t know quite how to word this one, but we’d see a lot less “too big to fail” that way, and that would mean a lot fewer super-rich people, with a lot more opportunities for small businesses and startups.  Unfortunately, short of an amendment, I don’t know how we could stop politicians from doing this.  Even an amendment might not be enough.

               Report

              • Avatar Sunflower says:

                Too Big to Fail is already covered by antitrust. Can’t we start by breaking up Verizon? (It’s a national security issue…)Report

              • Avatar Jesse Ewiak says:

                First, you’re never going to get rid of zoning. People _like_ the idea that somebody can’t open a business up next to them and ruin the neighborhood. Yes, they’re is overboard zoning, but for the most part, eliminating zoning is high up there on the list of things that only libertarians are for.

                Second, without the auto bailouts, literally millions more people would be unemployed. Maybe those people could all become yoga instructors in the great neoliberal future.

                 Report

              • Avatar Kimsie says:

                i thoguht eliminating the ADA and eliminating child labor laws were higher than that, truthfully.

                *scurries out of the room ahead of the torches*Report

              • Avatar North says:

                Jesse, I agree that people in general and home owners in particular are very much NIMBY’s by nature but I think that a great deal could be done to minimize the abominable state of zoning in much of the urban areas and there is a pressing need (from a liberal point of view) to change the status quos both for economic, equality and especially environmental reasons.

                Zoning laws are generally a matter of the answer being set by default to “No”. People wishing to develop or redevelop must fight the inertia of the system. I’m of the opinion that this should be changed. I wouldn’t go so far as to say that zoning should be abolished but I do think it could be reformed so that development and increasing building density faces a more positive permissive default posture from the rules and that it’s incumbent on those who would object and obstruct such development to put in the energy and effort to prevent it rather putting the onus on the developers.Report

          • Avatar Benjamin Daniels says:

            It’s not about envy, it’s about power. Wealth inequality is power inequality, it’s both a cause and a symptom. Severe inequality subverts the government and distorts the markets.

            Nobody is saying that they have a preference against material comfort for the many. What they are saying is that they have a preference against material privilege for the few. The comparative perspective I detailed earlier makes quite a bit of sense of this, I think.

            This doesn’t mean that reducing inequality ex-post through transfers is a good solution. At best it’s a stopgap measure. What liberals like me really want to see is a system that consistently produces a distribution in which very few are considered “rich” from that comparative perspective – so that wealth and power both are naturally more egalitarian.

            What might I suggest as some first measures towards this system?

            1 – a “right to vote”, carried out in practice by flexible voting, vote-by-mail, and extra outreach to student and minority populations.

            2 – campaign finance reform. The wealth of one’s constituency should not be a necessary qualification for office. This means an end to Citizens United, but also some form of public election financing or individual-contribution matching to reduce the importance of large donors and PACs.

            3 – tax reform. The already-rich should not be able to call their income “capital gains” and pay taxes below those of the working class. That defeats the system of progressive rates entirely. Capital gains should at least be taxed as regular income.

            These are traditionally billed as “liberal” reforms, but I don’t see any reason why a principled libertarian would reject these proposals. They seek only to make sure that nobody is unfairly advantaged in the political process through their wealth, or to make sure that everyone is treated equally in the tax system.Report

  22. Avatar Stillwater says:

    James, a question. Benjamin and others have been arguing for a relational account of being rich, where being (say) two SDs away from the mean constitutes ‘rich’. Now, let’s say this can be justified with principles and normative expectations consistent with a goal of achieving the greatest liberty (or good, or whatever) for the greatest number.

    Now, I want to say that such an analysis of liberal goals is pretty rigorous and admits a target for policy. To the extent that libertarianism fails to clearly articulate such a goal or normative ideal of wealth distribution would the libertarian view suffer from the same criticism you were leveling at liberals?

    Maybe two things are at play here. One is that the libertarian believes that whatever distributions of wealth which result from eliminating destructive governmental interference are justified. Another is that eliminating government interference (given some other conditions, perhaps) will entail a targeted wealth distribution, and if it doesn’t further governmental tinkering is required.

    Shorter: does libertarianism include an income/wealth distribution as being preferrable or necessary for the libertarian project to be realized, or is any wealth distribution OK so long as it results from ‘free’ markets?Report

    • Avatar Stillwater says:

      And I’d love to hear from Jason, Roger, other libertarians, about this as well.Report

      • Avatar Roger says:

        Stillwater
        You ask the hardest questions.
        My answer is that wealth and profit and price are important signals within the market. They reflect the voice of the consumer who is sovereign. Because there are billions of consumers the system is decentralized and bottoms up. Rational planning does not work because we are trying to manage a system we do not understand. It is smarter than any committee.
        That said, I have no idea what the proper distribution is. If a person adds no value to consumers they will get nothing in return. If a person adds trillions of dollars in value then the top end is unimaginably high.
        I will add though that I am not an anarchocapitalist or market fundamentalist. I believe that systemic inequality could point to problems in society AND that non market institutions can and should be used to address poverty or other social ills. These should be designed in such a way as to minimize market distortions and in ways that value competition, creativity,experimentation and voluntary choice.Report

      • Avatar North says:

        In my own meager experience libertarians say that in a society with minimal intervention poverty will be greatly reduced. They usually go on to assert that voluntary contribution supported charity should then be sufficient to cover those who cannot contribute sufficiently to society to get enough to survive by in exchange.

        James specifically, when he talked about his idea of a libertarian (minarchist) society, allowed that some kind of wealth redistribution might be necessary to convince the lower ranks of society to go along with such a setup.

        But the whole dealie is no one knows exactly what a majority libertarian economy society would look like., it’s all theory. The only data points are pre-1900’s. The poor died in the streets but on the other hand  economies, technologies and morality have come a long way since then.Report

    • Stillwater,

      Ditto what Roger said about hard questions.  But good ones.

      I think the standard libertarian response is that “any wealth distribution is legitimate if it’s not accomplished through coercion.”  That’s the basic normative stance, probably.

      Underlying that is probably a belief that whatever wealth distribution occurs in a purely voluntary system (with that “pure” voluntarism being secured by a government that punishes theft and violence), will be legitimate by some unspecified allocationist standard.  That is, there’s an assumption that in fact people won’t be dying on the streets.  I think that’s probably there, although it’s rarely, if ever, specified.  As an example, libertarians tend to assume that if the wealth distribution becomes too extreme, human kindness (voluntary charity) will correct for it–if they did not believe there would be some allocational inequities unacceptable even to them they would not insist upon the need for charity.

      With that, three comments:

      1. Obviously that assumption is critiquable.  But in truth we don’t really know.  Most of the references to the 19th century are mis-placed because they assume there weren’t government policies in place that explicitly made it more difficult for the poor to find economic opportunities.  I’m not saying that’s the whole story; just that it’s a part of the story ignored by those who use the 19th century as a counter-example to libertarianism.

      2. The libertarian argument assumes a fully achieved libertarian state.  Setting aside idealism and pretending it would be an achievable outcome, the point is that they’re not necessarily making that claim about any midpoint along the way to that fully achieved state.  Some, undoubtedly, would argue that each step along the way is a here-and-now improvement, but a more sophisticated argument is that sometimes the here-and-now requires some pain in order to set up a better future (that’s not as far-fetched as it might sound as I’ve written it; it’s a basic investment argument).

      3. I personally am not fully persuaded the libertarian state would be satisfactory enough.  While it might be defensible by reference to certain normative standards, I’m more interested in the question of whether it would be acceptable to enough people to persist.  I’m not confident of that.  And I’m also not wholly persuaded it would be allocationally legitimate as measured by those unspecified standards, whatever they are (and I can’t specify them, because I think they’re wholly implicit and vague to libertarians).  And I am not persuaded about the sufficiency of charity because, as JamesK says, there is no market for charity so we can’t expect that market to clear.

      But before someone jumps in and says, “then how can you be a libertarian,” I want to emphasize that in being open about the imperfections of libertarianism, I am comparing its reality, rather than its ideal, to what I see as the reality of liberalism, not it’s ideal.  There’s a natural human tendency, indulged in by all sides in ideological debate, to compare the ideal version of our favored system to the real-world version of another’s favored system, and then to declare ours the winner.  I may even have done so myself at times.  But that approach is, obviously, illegitimate.Report

    • Avatar Jason Kuznicki says:

      Sorry I’m just now getting back to this.  I have to admit I haven’t been following the whole thread.  Stillwater writes:

      Maybe two things are at play here. One is that the libertarian believes that whatever distributions of wealth which result from eliminating destructive governmental interference are justified. Another is that eliminating government interference (given some other conditions, perhaps) will entail a targeted wealth distribution, and if it doesn’t further governmental tinkering is required.

      I am tentatively in agreement with point one.  I strongly suspect that removing government interference will result in both (1) more total wealth per capita and (2) less concentration of wealth than we have right now.  I also believe (3) that we can get from here to there via incremental steps, and that along the way, conditions will generally improve for the less well off.

      \My sense is that many left-liberals agree with (1) but disagree strongly with (2), and conclude that the per capita total wealth isn’t worth pursuing.  We rarely if ever get to (3), even though I’d have to say the case for it is pretty obvious, as with (for example) generic drugs and free peer to peer software showing that IP can and should be relaxed as a way of improving the lot of the less well off and preventing the concentration of wealth.Report

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