Comment Promotion: Talking about Inequality
Michael Drew said
People’s concerns about inequality, from what I can see, have more to do with the issue of the lack of growth at more modest levels of income in the light of these exploding returns to certain ideas and innovations that gain mass traction on a global scale (whether they’re movies, drugs, online networks, or soda pop). Proposals to address this disparity in growth are various
and Brandon Berg replied
But really, if leftists don’t want people to think that they’re complaining about rich people making too much money, then they should stop speaking disparagingly of “income inequality,” “the super-rich,” “the 1%,” “the rich getting richer,” and things like that, and start saying what they actually mean. You can see how we might find that confusing, can’t you?
This part of the comment didn’t get enough love so I thought that I’d promote this. There is a difference between saying those guys are making too much and saying that these guys are not making enough and we can take some from those guys (who can afford it easily) to give to these guys. In the first, inequality is the fundamental problem while in the latter, inequality evidences* a possible solution to helping the worst off.
*I’m not saying that it necessarily actually does, but if inequality mattered in the way Michael Drew was talking about, it would be because the recent increase in inequality unaccompanied by significant gains to the poor stood in an evidentiary relation to the idea that transferring money from the rich to the poor would not significantly reduce the amount of time and effort the rich put into making money.
The vast disparities of who gets a share of the growth pie seem to me to be evidence of the rich having gamed the system. If every bodies income was growing at the same rate those in the middle and at the bottom would be doing pretty well. The problem is the richest are getting richer and everybody else’s growth is flat. I don’t see redistribution per se as the solution. I don’t want to give people money just to drag them along with the richest. I’d prefer the system work so that the benefits of growth were shared around. Sort of like a rising tide lifting all boats. That seems like a nice image.
I dont’ see the reason for so much of the gains of growth going to the rich is because they have just become so frickin brilliant in the last 2 or 3 decades. I think it is because they have had the rules written for them leading to things like the increased financialzation sp? of the economy.Report
That seems like the biggest problem to me too. The first step I think is to actually do some research to figure out just why this pattern of income is emerging.Report
From what I’ve read, it seems to do with gains in productivity; being able to do more work with less people. Traditioanlly, I think that 2/3rds of nation’s wealth were supposed to go to wages and 1/3 to the owners of capital. It seems to be reversing because of productivity gains.Report
Increased productivity might be part of the culprit but that still leaves us with a big question of what it means for a society that has such technology that a very few get huge rewards and growth is flat for the large majority. Even still productivity is the nicest explanation which i don’t think covers it. I’m in a rush as this minute so i can’t really expand but it think the vast increase in financial engineering has led to lots of paper gains with no wealth trickling down. We should be aiming for a society where everybody gains wealth, but that isn’t really what we have now. It’s great that gizmos are getting cheaper but that isn’t a balance for all the increases in wealth going to very few.Report
greginak, I imagine that the rest comes from a shit in government policy from one that favors income equality to an extent to one that allows the rich to retain as much money as possible.Report
” a shit in government policy ”
I saw what you did there.Report
The worry is that the rich are taking what they don’t have a just claim to when the poor do have a just claim to it, and that it could go to the poor without loss to society overall
(possibly might help everyone).
Now maybe you have an account of distributive justice like Nozick’s and you disagree that the poor have such and such a claim, but that is the important dispute here.Report
the rich are taking what they don’t have a just claim to when the poor do have a just claim to it
What makes a claim “just”?Report
That it is fair. What is fairness, you ask? A fair society is one that has basic institutions that a rational agent, behind the veil of ignorance, would chose for the basic structure. In crude terms, a fair society is one where everyone is treated as well as possible and as equally as possible, where inequalities associated with pure arbitrary luck, for example being born blind or into a home where your parents don’t help you learn life-skills or without inheritance, are smoothed out as much as possible without making things worse for the very class of people (“the worst off”) who the smoothing over is aimed at helping.
But of course, you don’t want to hear about that. Based on your past comments, I assume you mean to suggest skepticism about whether there are any objective truths about justice or morality.
And then I will reply that if there are no objective truths about justice or normativity, then the claim “We should have the sort of society Jaybird thinks we should have where there is little (or no) coercion” is not objectively true. Relativism for the goose is relativism for the gander. Recoil arguments against relativism and all that.
And then you will say something brief and flippant and snide that isn’t relevant.Report
Nah, I was going to go somewhere else at first.
You put into words something that I see quite often: the rich don’t have a “just” claim to what they have while, at the same time, the poor do. I’m wondering what gives this justice.
See, imagine this sentence: “you’ve got someone who works really hard and someone who doesn’t work very hard at all”
Is the immediate response to assume that the person who works really hard is the single parent in poverty who is working three jobs (and spending all of her free time at job interviews) and the person who doesn’t work very hard at all is the 1%er who has just been given everything (on a silver platter, no less)?
You see this with “you didn’t build that!”, as well.
My problem is not, necessarily, with the proposition that “the rich” don’t have a “just” claim to the things that they have. I do wonder where the poor get one.
I understand that “you didn’t build that” means that, hey, there’s an entire system in place to help you put a business together and turn profits… but what about the people who have never so much as made something for us to say “you didn’t build that” to?
I don’t see the function whereby their claims become “just”.Report
In the Abrahamic religious tradition, a “just” society has a series of competing goals.
Everyone has a basic human dignity, and everyone has different skills, for example.
So there is a “just” hierarchy of different rewards, which is limited- beyond those limits the inequality becomes “unjust”.
Obviously not everyone accepts this framework. But it does inform and undergird most of Western law and philosophy. And just as obviously, there is an incredibly wide lattitude within it to arrive at different conclusions.
If I’m understanding your comment correctly, Jaybird, you are asking about the claim of someone who has never contributed anything.
I would start by asking if this group exists. Are there really such people who have contributed absolutely nothing, who are completely devoid of any positive cotnribution to our society?Report
I would start by asking if this group exists. Are there really such people who have contributed absolutely nothing, who are completely devoid of any positive cotnribution to our society?
Version 1: Yes, we call them lawyers
Version 2: Yes, we call them politicians (many of whom used to be lawyers)Report
Sorry, I couldn’t resistReport
Well, let’s look at the “contributing absolutely nothing”.
Some people tend to read that phrase and immediately imagine Paris Hilton types.
Some people tend to read that phrase and immediately imagine, let’s cut and paste something from Shazbot here… someone who was born “into a home where your parents don’t help you learn life-skills” and, presumably, has contributed about as much.
Now, perhaps, “absolutely nothing” is an overstatement… so let’s go back to use the phrase that I used: the people who have never so much as made something for us to say “you didn’t build that” to.
It’s a lot clunkier, I’ll grant… but the folks to whom it would never, ever occur to us to say “you didn’t build that”? I don’t see where their claim comes from in the first place, let alone what makes it “just”.
The view I’m arguing against seems to be reading “The Grasshopper And The Ants” and assuming that Paris Hilton and her ilk are the Grasshopper and the person who doesn’t have life skills is the person who, for some reason, has a “just” claim on what “the rich are taking”.Report
But if neither Paris nor the non-non-builder contribute anything, how do we justify their inequality?Report
I would have gone with an odd number of “non”s.
How do we justify their inequality? If there is a better argument than “it’s none of my business”, I don’t know what the argument would be.
So let’s assume, for a second, that it is our business… Well, there are people whose first thought is a variant of “I have a long list of things I’d like to say to, take from, and otherwise require of Paris Hilton!”
And there are others whose first thought is “there needs to be some repairs done to the person who was never given life skills. If repair is impossible, we need to limit potential damage done in the future.”
It seems to me that the second thing can be said now, of course… but it also seems that the assumption is that it would be wrong (or, at least, “not just”) to spend time addressing the second without first addressing the first. The disconnect is the degree to which we see Paris Hilton as a problem.Report
OK, its Monday morning, so maybe my reading skills aren’t working well.
Are you talking about people who have little or no skills? Unemployed people/ unemployable people, whether they are wealthy or poor? And you are asking what claim they have?
Who is in this group? I can’t think of anyone except those who are mentally ill, or physically disabled, or who are substance abusers.
If these are the people you are talking about, we can discuss them. If not, I need a bit of clarification.Report
I am not particularly concerned with the Paris’s of the world, except insofar as they contribute to the creation of people who can’t be more than non-non-non’s… Or even folks slightly above that.
I tend to think our issues in this area are structural, institutional… Not personal. Paris is a manifestation, not a source.
But that’s just me. I’m not sure I’ve ever really shaken my fist at the 1% non-ironically (disclosure: at last check, we were in the 17th percentile).Report
I’m speaking about the folks who, for whatever reason, have never held a job.
I suppose the follow-up snarky joke is a variant of “YOU MEAN LIKE PARIS HILTON???” which brings us back to the disconnect that I was talking about. But, er, no. I don’t mean like Paris Hilton.
But Shazbot’s example of the person born into a family where s/he learned no life skills is an example that I’m pleased enough to run with. Someone who, when we talk about what we, as a society, are obliged to provide as a baseline to everyone would be eligible for The Full Monty. Laptops, high speed internet, everything.Report
OK so you are asking where the indolent, who never work, derive a claim on the industrious. Lets begin by stipulating that the number of people we are talking about is vanishingly small.
The tradition holds that even they are deserving of a threshold level of dignity- food, shelter, clothing.
The justification is that there is an essential human dignity that isn’t earned or granted, but just exists.
This is where the language of “rights” breaks down. It isn’t a right, or a legalistic claim on Paris Hilton’s wealth.
Calling it a “right” implies that it is divorced from any reciprocity, that it can be demanded independent of any other consideration.
Instead it is an obligation on the rest of us, that we are obliged to respect their dignity and afford them the treatment we would wish to receive.
Actually, it is very reciprocal- the moral obligation to afford care to those who are needy is complemented by the moral obligation that they be industrious, and self-sufficient to the best of their ability. Remember that in the tradition, indolence and greed are both condemned.Report
I imagine that we can come up with something like a sliding scale… people who, at this end, require The Full Monty and the vector away are the people who contribute much less than they consume, contribute less than they consume, contribute a little less than they consume, contribute about as much as they consume, contribute more than they consume, and contribute a lot more than they consume.
Heck, this even allows for stuff like the food stamps required by Wal-Mart’s workers to be put on Wal-Mart’s ledger.
If we want to add some degree of morality to this, we could say something about how consumption without contribution would be bad… but make allowances for children (and how the elderly might consume more today, but they contributed more yesterday and our ledgers should account for that) and discuss how, morally, the goal is to contribute more than you consume.
We on the same page here?Report
Sure.
Especially since one of the underlying moral points is that we never know when we will slide from one end of the scale to another.Report
Ah, but there are things we can do to move ourselves up the scale, to insure ourselves against sliding down, and to make sure that even if we cannot move further, that we know that it would be immoral to backslide if it’s in our power to not backslide.
To be a net contributor would be the goal, right? To build up one’s ledger so that it doesn’t matter if the occasional entry has to be red, right?Report
There are things we control, and things we don’t. The outcome of our life is determined more by th things we don’t, than by what we do.
But even then, “building up the ledger” isn’t really what the tradition is getting at; Industriousness is aimed at contributing to the group, and less about insuring against the vagaries of fate.
The tradition is teleological, and advancement of the purpose is considered to be superior to the advancement of the individual. “What is bad for the beehive cannot but be bad for the bee”.
I know it grates on libertarian nerves, but that’s the tradition.Report
but that’s the tradition.
Eh, whose tradition? And perhaps some supporting evidence or a cite? Because that just strikes me as a pretty broad brush you’re using.Report
I’ll also note that you seem once again to be assuming that libertarians are purely self-serving, which I’ll also note once again is not true of all libertarians. But I note that without holding any expectation that you will finally start exhibiting any kind of honesty on the matter. You have your liberally defined view of libertarians and no encounters with real world libertarians can possibly refine it. Ideology over empiricism–it ain’t pretty, but it keeps the cognitive dissonance at bay.Report
Jaybird,
As near as I can tell, you said nothing that implies anything that I said was false.
I argue that 1. A just distribution is one that benefits the worst off, a la Rawls and most every contemporary liberal. And 2. We could redistribute more from the rich to the poor, for example with universal healthcare and larger social security paid for by more progressive taxes, without loss to the very capitalist system that does benefit the worst off more than a more-egalitarian Marxism.Report
“the tradition” I am referring to is what is called the Abrahamic tradition; It in and of itself is pretty broad, and admits a lot of variety, but it is pretty clear that the there is a social contract, that the individual is subordinate to the group, and all is subordinate to the notion that there is an essential human dignity.
I am not sure where you are getting any snide reference to self-serving libertarians- I was specifically trying to be non-judgemental here.
Maybe echoes of arguments past are poisoning the well here.
The point of this subthread is to justify to Jaybird the claim of the poor on the rich. If you disagree with the tradition, or my interpretation of it, then just say so.Report
Shazbot, I’m not saying that what you said was false.
I’m saying that I don’t see how you get to the poor having a “just” claim on what “the rich are taking”.
As for the Abrahamic Tradition being the tradition of our society, has this been instantiated anywhere? I mean, if we wanted to argue “This is an Abrahamic country!”, would that be cool with everybody? I think that something that important should be written down somewhere. Perhaps even in stone.Report
LWA,
Are you claiming that the Abrahamic tradition is “the” western tradition? Because when you say “libertarians don’t like to hear it,” that’s what I feel like I’m hearing.Report
Should be easy to prove…. A show of…um…hands. Who is circumcised?Report
Yes, I would say that the “western tradition” is what we are talking about- isn’t this tradition what the 17th century Enlightenment thinkers drew on? Doesn’t it underlie most of common law and the Constitution?
Again- plenty of room within the tradition for debate- Lord knows, that same tradition was invoked to defend slavery, and attack it. So I know it would be foolish to assume mine was the only interpretation.
But if someone wants to know what makes a poor persons claim “just”, I would start any justification with the Western traditon of what that word means, and build from there.Report
The Western Tradition also contains such things as “The Little Red Hen” and “The Grasshopper And The Ants”. The Parable of the Talents is contained in The Western Tradition.
And when it comes to Enlightenment Thinkers, Voltaire is about as likely to get you to atheistic libertarianism as to the position where you’re arguing that the US is of the Abrahamic Tradition. Perhaps even more so.Report
Yes, I would say that the “western tradition” is what we are talking about-
You’re alternating between thecterms “Abrahamic tradition” and “western tradition,” so I am reading that as the two being synonomous.
isn’t this tradition what the 17th century Enlightenment thinkers drew on?
Have you read the English social contract theorists? I’m not sure how to reconcile a theory of atomistic individuals contracting with each other to minimize their interpersonal conflict with the idea that “Industriousness is aimed at contributing to the group, and less about insuring against the vagaries of fate.”
Does this from Hobbes sound Abrahamic?
This is the liberal tradition, that communitarians, who are much closer to your view, have harshly critiqued (and rightly,I’d say), for it’s a-social and atomistic perception of humanity. It’s a tradition drawn on by libertarians, and which political theorist Louis Hartz claimed was America’s only tradition (although that’s rather an overstatemen, imo).
Doesn’t it underlie most of common law and the Constitution?
Oh, dearie me, have you been watching Glenn Beck? The common law was primarily pragmatic, a law of conquerers seeking to subjugate and manage thise they’ve subjugated. To the extent it’s Abrahamic, it’s mostly because it evolved in a rather Talmudic fashion and became very intricately legalistic. In fact it became so legalistically rigid it become almost wholly divorced from justice, and the Brits had to create courts of equity, separate from the courts of law, to give justice a fighting chance.
As for the Constitution, we Americans romanticize and mythologize it in the most desperately religious fashion. The Constitution was devised for the most Hobbesian of purposes, to keep the states from beggaring each other and, likely, going to war with each other (NJ and CT were discussing a joint attack on NY), and fracturing into mutually contentious weak states that would be easy pickings for the British, French, and Spanish who surrounded them. Abrahamic? Each state’s delegation was looking out for its own interests, and compromised grudgingly and as a matter of pragmatism. Precious few were concerned about the whole, no matter what lies our teachers told us. Montesquieuean, yes. Abrahamic, not so much.
Not that I’m saying the Abrahamic tradition is absent from the American political tradition. Not by any means. And communitarianism has a solid, if non-central place. But the liberal tradition does have the best claim to being the most central tradition in America.
And while I think liberals aren’t as much like the classic liberals as some like to claim, they do draw extensively from that tradition (as do both contemporary liberals and conservatives, oddly). So in all seriousness, I think it’s clear that libertarians are closer to the central American tradition than more communitarian minded folks like you. That’s why your claim caught my attention.
(But note that I don’t think, “It’s not ‘the’ American tradition” is a good argument, either coming from you against libertarians or from anyone more grounded in the liberal tradition against you. The traditions should be judged on their own merits, not on which got a first or a firmer foothold through historical accident)Report
@lwa
1. Why does something being part of the western tradition matter?
2. By the time of the enlightenment, people may have been drawing on the greeks and the bible, but there were profound breaks with that tradition. Look at Kant, Hobbes, Hume and Smith.
3. Even if it is the case that F is good for a person iff it is good for the polis that the person have F, it is not clear what is good for the polis. The question of how we settle differences between people cannot be answered by pointing to the good of the polis if the good of the polis is precisely what is in dispute.
4. The view you are espousing gets implausible when we start looking at some extreme but not unrealistic situations. Suppose that it is good for the polis if John sacrifices his life for his platoon by diving on a grenade. I’m not disputing that it may be morally salutary for John to do so, but do you really want to commit yourself to the view that it is to John’s benefit that he do so?
5. Point no 3 is really really important. Just wanted to emphasise that.Report
JB,
“What makes a claim “just”?”
I already answered that:
“That it is fair.
What is fairness, you ask? A fair society is one that has basic institutions that a rational agent, behind the veil of ignorance, would chose for the basic structure. In crude terms, a fair society is one where everyone is treated as well as possible and as equally as possible, where inequalities associated with pure arbitrary luck, for example being born blind or into a home where your parents don’t help you learn life-skills or without inheritance, are smoothed out as much as possible without making things worse for the very class of people (“the worst off”) who the smoothing over is aimed at helping.”Report
It certainly seems to me that having children, followed by denying them life skills, followed by the assertion that it is the responsibility of society to feed, clothe, shelter, and otherwise support these children (and their children? and then their children?) is arguably “not fair”.
If I were standing behind the curtain, I’d push to come up with a different system.Report
I can see standing behind that veil of ignorance and thinking, “so, if it turns out that I’m craptacularly lazy, I’ll still be taken care of in system X, so I’m going to vote for system X, just in case.” I’m not sure that makes system X “fair” or “just.” 😉
More seriously, I can’t tell if you’re presenting the Rawlsian approach as “the” definition of justice or “your” definition of justice. One of those is just fine, the other maybe not so much.
(FTR: My problem with Rawls is not so much the veil of ignorance, which I think is rather a neat trick, but with the assumption that rational agency can be limited to a particular set of values such that the pre-ordained outcome is System X. Prospect theory kind of blows that idea out of the water.)Report
@ James-
I agree- there are many strands within the Western tradition- as I said, its wide enough to accomodate many contradicatory opinions.
There isn’t a way to derive an interpretation that is so conclusive as to exahust all objection.
But my point- which was pretty minor to begin with- was that usage of the word “just” has a long pedigree- and the idea that the poor have a legitimate claim to basic sustenance. It wasn’t just an arbitrary word usage.
@ Murali-
Certainly both individual liberty and group obligation are held in tension- I can’t think of any Western thinker who would advocate the level of communal obligation your example would suggest.Report
@lwa
2 points
1. What is the difference between what I said and “what is bad for the beehive cannot but be bad for the bee”?
2. Under some interpretations, this view goes back to Aristotle read Fred Miller, The nature of Justice and Rights in Aristotle’s PoliticsReport
LWA,
I don’t deny that tradition, as I noted. But you equated “the western tradition” with “the Abrahamic tradition,” which looked an awful lot like an effort at territory-claiming, trying to pull the whole scope of the western tradition into your favored thread of it, both by using the terms interchangeably, and then by trying to define the enlightenment, the common law, and the Constitution as Abrahamic. And then by suggesting that libertarians wouldn’t like hearing that the western tradition was the Abrahamic tradition, you appeared to be trying to define them right outside of the western tradition.
Maybe you weren’t. But it sure looked like some dirty pool from this side of the table.Report
One question I have for the justice crowd is whether a system can really be just or unjust. I can see people being just or unjust, because they have agency. But systems don’t have agency, and so they don’t have an inherent moral capacity, so is justice really a characteristic that is analytically applicable to them ? (Or is it just a shorthand we use; e.g., does “the system of slavery is unjust” really refer to the system, or to slave owners and those who support their ownership of other humans?)Report
Sure a system can be just in a number of senses even if the system has agency. Why? because when we say system, it is really shorthand for the rules practices etc that together make up institutions. And rules themselves can be morally appropriate or otherwise because the rules can reflect or even arguably create moral obligations. Even if it is just the former, when we say slavery is unjust, we are talking about the rule that permits slavery as being the wrong kind of rule to regulate relations between people. Thus to say that a rule or system is just is to say that people should abide by those rules or vote for those rules or legislate those rules if they are in a position to do so.
But yes, there is a question of what rules we should have to resolve social coordination problems and there is a ready and intuitively plausible sense in which some rules are morally better than others.
Some may even go further and say that these rules itself constitute social morality and individual obligations vis a vis actions and dispositions are derivative of these rules. This also seems like an attractive thesis, but I haven’t fully explored all the implications yetReport
One question I have for the justice crowd is whether a system can really be just or unjust. I can see people being just or unjust, because they have agency. But systems don’t have agency, and so they don’t have an inherent moral capacity, so is justice really a characteristic that is analytically applicable to them?
Try substituting the word “law” for “system” in the above and get back to me.Report
So then can people be just or unjust? Tying your answers in with Shazbot’s Rawlsian approach we seem to get a definition of justice that applies to systems, not people.
And if people can be just/unjust, what definition of justice do you propose that clearly applies to both people and systems, given the categorical difference between the two?Report
James,
My problem with Rawls is not so much the veil of ignorance, which I think is rather a neat trick, but with the assumption that rational agency can be limited to a particular set of values such that the pre-ordained outcome is System X. Prospect theory kind of blows that idea out of the water
The principles of justice that Rawls produces (while more determinate than I think he is warranted to make) don’t really pick out a system so much as identify constraints or criteria which a system must satisfy in order to count as just. I do think that something more indeterminate would be chosen behind the veil., but that isn’t the be all and end all of justice. Rawls himself argued that once we have these principles, we introduce them as further constraints, weaken the veil of ignorance and repeat until we get a set of more highly specific rules that are empirically informed etc. Of course, Rawls himself just jumped straight to making recommendations, but I think that that part can be unproblematically jettisoned without touching the Rawlsian core.Report
The traditional Rawlsian answer if I read him correctly is that the justice of individual acts is derivative of whether they accord with the correct rules.Report
Let’s assume for the moment that the following two statements are true: “Warren Buffet pays astronomically larger sums in taxes than his secretary does” and “Warren Buffet’s secretary pays an astronomically larger proportion of her discretionary income on taxes than Warren does.”
How one regards “income inequality”, as a problem, is likely tied into which one of those statements they find more troublesome.
Me, I’m more worried about what vast wealth disparity means for the value of money.Report
Me? I was just surprised at what he paid his secretary.
I think Greginak put it well up top, and there are sizable chunks of traditionalists and conservatives that are interested in exploring that nexus.Report
Just the use of the phrases mentioned doesn’t demonstrate that what is meant isn’t being said. In some cases it might not be; it’s fairly likely that indeed some number of people basically are complaining about the rich making too much money and/or are expressing distrust of how they make it. But it seems entirely possible to me that any of those phrases could be used not inconsistently in a larger statement whose main point is as I’ve described. if the issue is that the presence of those phrases is just off-putting for some observers to the point where they’re not inclined to proceed to see what point is actually being made in a given case, then I guess it’s just a tactical question for the strategic communicators in question whether to have their lexicon influenced in the way Brandon suggests by people like him. Uses of these phrases that are conceptually consistent with various messages might be confusing to some but it might be clarifying for others. It’s a matter of what you want whom to think, I suppose. I suspect that probably people speaking on this topic ultimately don;t care all that much what people who are determined to jump to conclusions based on the presence of such phrases without bothering to see what the argument really is come away thinking, since that behavior shows they were always unlikely to give arguments on this subject a far hearing in any case.
To Murali’s point, what he describes might well be the way that inequality might matter. I.e., I’ve been at fairly long pains here to say that I don’t believe it is the case that very many people who are concerned about inequality think that it is inequality simpliciter that merits concern. Another way to say this might be that they don’t think that “inequality is the fundamental problem.” I think they tend to think that some particular patterns or degrees of inequality are of concern, among them relative lack of income growth at levels below a certain amount (or other patterns). In light of great gains at higher income levels that might be a greater concern than in a generally stagnant economy (or it might not), for example. Another concern might be that the “worst off” being so badly off is more concerning in light of soaring wealth in some quarters. A remedy that suggests itself in light of this pattern might (as he said: and might not) be redistribution. In any case, my point is that these are the kinds of arguments that I tend to think have always been what people concerned about inequality have made: not that inequality itself is the fundamental problem, but that it is evidence of other problems, or might heighten our concern about other problems that we regard as the fundamental ones, or, as he suggests, that it might make certain remedies more workable than if the prevailing reality weren’t this particular pattern of inequality but rather just generally less wealth all around.Report
If what the left really cares about is how the worst off are doing, why do they keep talking about inequality?
I don’t speak for “the left” but personally, I’m less concerned with the worst off, who have always existed and will always exist, than I am about the hollowing out of the middle. I’m less concerned with the plight of the poor, which has always and will always suck to a greater or lesser extent, than I am about the increasing number of people who are falling below the poverty line as well as the increasing numbers of people hovering just above it.
My biggest worry about the folks at the bottom is that there seems to be less and less room in the middle for them to move into.Report
“If what the left really cares about is how the worst off are doing, why do they keep talking about inequality?”
Isn’t the answer pretty simple; because inequality creates more poor people, screws over the poor even more than others and makes it harder for them to become less poor. Basically a society with a large degree of inequality is a society that is worse for the poor. How is this a hard or good question.Report
But inequality can increase in ways that don’t make the poor worse off, in fact it often does.Report
It can but i don’t really think it has. In any case i really wonder about any society where most or all of the increases in growth are going to one small subset of the population.Report
What if the explanation for the lack of recent improvement (longer term the poor have clearly benefitted most) in lower quintiles is that the gains are actually going to unprecedented increases in the true worldwide poor? The last generation has, worldwide, been the best for those in severe poverty.
I do not see it as our poor vs our rich. The negative externality of a billion people rising out of severe poverty is increased competition with less skilled workers in world countries.Report
Roger, is it a zero-sum game, or no?
If nobody need suffer loss for the world’s most unfortunate to gain, then why are the first-world poor losing?
And if someone by necessity must suffer for the worst-off to gain, isn’t it cruel to enforce a system where that somebody is the second-worst off?Report
then why are the first-world poor losing?
Are they really losing, or just not gaining?Report
I think it is pretty easy to show that people starting in the lower class have gained tremendously on average over any recent era. Indeed many are now middle class or above. Most successful people start with bottom quintile periods. Indeed the last data I saw was that people starting in the bottom gain the most. If you think about, this is pretty obvious though.
Of course the normal stats you see are for the CLASS at one era vs the class in another era, which is a different thing altogether. If transfers, net taxes and non wage benefits are not included and instead of measuring individuals, we measure families (during an era of unprecedented declining family size), then incomes look flat. When you do adjust for the above factors, all classes have gained.
To Alan, of course economics is a positive sum game. But there are zero sum dimensions. Coke competes with Pepsi, and unskilled workers compete with other unskilled workers. To be honest, I am not even familiar with any positive sum institutions without at least some zero sum dimensions.
The “second worse off” (unskilled workers of the first world) have, as above, not lost ground. However if they did, the ultimate question is still what system could have produced better results. Suggestions?Report
To be honest, I am not even familiar with any positive sum institutions without at least some zero sum dimensions.
That’s a pretty cynical view of marriage, there Roger! But accurate, I’d say.Report
Let’s not pretend people aren’t actually losing here. In the past five years, fewer people are working, and those who are working are working fewer hours.
Those fortunate enough to own homes have either lost them, or seen the dollar value of those homes drop like a stone. Social services are being cut while the need is higher that it has been in the last several decades.
While the price of swimming pools and sports cars and flat-screen TVs has fallen, the price of food, clothing, and gas has gone up.
There’s this argument that because living standards today are better than they were half a century ago, that poor people today could/should just live by yesterdays standards and be satisfied. But an exploration of the facts on the ground show that’s not possible.
I remember that a few years back, someone tried to compare the costs of a modern home to one of the size and character that was built in the fifties. They had to give up–building codes prevented homes that small from even being built.
I pay $30 a month for a cellphone that’s far above anything that was available to my parents. It would be easy to say that I don’t need a cellphone and could just use a land line instead. Do you know how much I’d pay for that? $30, unless I also got Cable TV or internet in the same package. And that $30 cheap cellphone? I once turned down a retail merchandising job because my phone wasn’t able to run the software my employer needed me to use.
The problem of poverty is not merely a problem of limited resources. It’s also a problem of limited power, and limited opportunity. It’s never as simple as saying “well, find a cheaper place to live”–because they don’t make cheaper places to live. It used to be that the poor people could live in the cast-off housing of the well off. But now that housing gets bulldozed and replaced with something new and shiny before it ever gets into their price range. No manufacturer makes a car for poor people. Poor people buy cars that the middle class have used up and worn out–cars that get 5 mpg, can’t cast smog, and require a $1000 per year in maintenance.
I don’t give a fish that the Waltons make billions while their employees make $7/hour. I care about this: When the Waltons spend a month in the tropics, they’re enjoying the well-deserved fruits of capitalism. But when an employee asks for an hour off to take his daughter to the doctor, he’s not a team player and should consider looking at a different line of work.Report
the price of food, clothing, and gas has gone up.
Have they all? Clothing? I’m pretty sure clothing is a lot less expensive today than when I was a kid. And food, well, that’s in large part a function of oil prices. And oil prices, well, they have gone up…and yet that middle class with its disappearing purchasing power is still buying trucks. That one’s a mystery to me, how so many people can afford to buy and drive the damn things, but they are.Report
Since you were a kid? sure. According to the number that Chris Carr posted on his “Mammon” thread, the price of children’s clothing has fallen by a third since 1960 (inflation adjusted).
I’m more talking about changes over the last five or ten years.–I found hard numbers for food from the USDA. The inclusion of clothing, though, is anecdotal and based on my own, very static, shopping habits.
There are huge benefits to be had from globalization and manufacturing changes–but they’re already in place and accounted for. At this point, just as with food, the price of clothing is governed by the supply of materials and the cost of energy. And neither of those have been kind in recent years.Report
Alan,
It seems you are picking and choosing trends to match your conclusion. If long term it is down, use short term. If short term is down in most fields, find a filed which bucks the trend.
Long term, the cost of living in terms of number of hours needed to work at average wage is not just down, it is way, way down. Average hours worked per year is about half of what it was pre modern era, and standards of living are up by a factor of more than twenty.
During the last generation, without looking at data, I am fairly confident all the below are true…
Food as a percent of total income is down.
Cost per mile driven or flown is flat or down slightly
Housing affordability is at an all time best
Costs of Clothing and household stuff is at an all time low
Natural gas is at or near all time lows
Electronics and electronic-enhanced entertainmentare at unbelievably low prices and continue to become an increasingly influential part of everyone’s lives. We are actually quickly approaching costs of zero.
Quality of air and water (environment) are as good as ever during our lives.
Amount of time in liesure is up for men and women and all sub categories by race and income.
The problem areas in terms of affordability are health care, government services and education. All these areas have massive market distortions, coercive monopolies and interference of the type I railed against below in terms of exploitation contributing to inequality.
(Rod’s interpretation that this is due to Brenton Woods is as creative as it is unpersuasive, as can be seen by comparing these same fields to other places or services without severe market distortions.)Report
Roger,
“During the last generation, without looking at data, I am fairly confident all the below are true…
Food as a percent of total income is down.”
Petrochemicals and draining our aquifers will do that. Combine that with global warming, and you’re getting the current spikes. Don’t expect to be eating chocolate in twenty years. And you aren’t eating bananas anymore (“yes we have no bananas”?) — at least in terms of getting quality ones.
“Cost per mile driven or flown is flat or down slightly” — oil’s up since last I drove (1999), and headed higher. Ain’t coming back down, I’d wager.
“Housing affordability is at an all time best” — homeownership rates are going down. (not sure if this is really me arguing) and sprawl is headed up. Americans continue to be stupid and ignorant and refuse to plan for the future.
“Costs of Clothing and household stuff is at an all time low”
… not on a per annum basis. If the clothes fall apart (as women’s clothes are designed to), you tend to spend more because you need to.
Time was when folks just had a few pairs of pants…Report
This pattern is starting to become familiar…
Week 1
Team A: we are working longer hours for less money and everything is getting more expensive! We need to do something!
Team B: actually the reverse is true over the long term and the medium term, you are just picking convenient bits of short term data to support your need to show things are getting worse. Because if things are not getting worse, you can’t justify coercive interference. And btw, the only areas that have gotten worse are the ones we let you interfere in.
Team A: Nuh uh.
Team B: here is the data on leisure, here are actual costs in terms of hours worked, here is data for areas where you interfred vs areas we did not, etc, etc
Team A: yeah, but I knew this guy who lost his job last week after working hard and he can’t afford eggs this week and the eggs he got were not even grade A
Team B: ???
Week 2
Repeat week 1Report
While my concerns about inequality are, in general, those that Michael Drew discusses in his comment, I think there is another aspect of the problem that makes pure inequality a problem, even if the very rich are doing better without it coming at the expense of the rest. great accumulations of wealth and income translate into great accumulations of power to influence both the contours of our economic system and our political system. So when inequality increases, that increases the degree to which the wealthy few are capable of corrupting our political system and bending it to their own narrow interests. This is a cause for concern, although perhaps not one of sufficient magnitude to explain all of the left’s concern about the issue.Report
This is a very valid concern, that wealth=political power.
There is also the concern that extreme disparity in wealth =extreme disparity in goals and interests.
This tears apart the sense of community and patriotism; its hard to define what is in “America’s interest” when our individual interests are so different.Report
At the risk of doing a no-no, I failed to realize the conversation moved to this post, and would like to second Don’s concerns by reposting my comment below….
The are some excellent arguments against inequality rather than against poverty. Here are a few…
The wealthy do so at the expense of the poor (as per Greg). To the extent this is true, I totally agree this would be a problem. Enron?
The well off use their influence and money to rig the game to preserve a privileged status. To the extent this is true I think it is a problem. It basically can lead to class immobility and inequality of opportunity. History reveals this is endemic just about everywhere.
The well off use their influence and money to distort politics and democracy. I agree this can be a problem too.
The inequality leads to revolution and we all get beggared or buggered. Again, if true, this could be a big problem. Is it true??
Finally, that inequality creates or feeds envy and dysfunctional status arms races. Again, it is hard to argue with at least some aspects of this criticism.Report
Just curious, Roger – what evidence would you need to believe any of these conditions were true?Report
Alan,
I believe each is frequently true.
The markers of a zero sum, win lose interaction between rich and poor is usually coercion. In modern states which establish a monopoly on coercion, most of it will occur using the state as a middle man. Examples include ethanol subsidies. This is a zero sum interaction increasing inequality between the haves and the have nots. There are millions of others (going both directions, btw).
On rigging the game in favor of incumbents, I see this as extremely widespread today and historically. Again the rigging is usually done using the state as the agent of coercive enforcement. Most licensing regulations. Many union privileges. Trade restrictions. These dramatically reduce mobility.
On distorting politics, I am of a more mixed position. To the extent the well off use politics to influence coercion or privilege as above, it is a common place problem as above. However, there is also the fact that politics and democracy are supposed to work by diverse parties struggling for their selfish interests. I almost chalk this one up to a feature and bug of democracy. In other words, of course the rich fight for their interests, the non rich are also trying to use the system against them. It is easy to overextend democracy into zero sum games. That is what we have today.
I think revolution is unlikely, and where it occurs is not driven so much by the have nots as those using the have nots to back them in a power grab of taking others stuff.
I think envy is widespread and that status arms races are common. I am not sure I see either as requiring interference beyond mocking. If someone wants to buy $600 shoes, so be it.Report
Is it possible to “complain” (seriously, Brandon’s comment is almost too dismissive to warrant a response, but whatever) both about the fact that we have a permanent underclass — not just the poorest of the poor, but the working poor and those who live constantly on the edge of material collapse, which is a group that extends up into the working and lower middle classes — and complain about the fact that, at the same time we have such people, there are people who have more wealth than anyone could possibly reasonably want or need at the same time that we have said permanent underclass, as well as the fact that said permanent underclass remains both permanent and an underclass while the rich continue to move further and further away, materially? These are all issues that can create problems for society, and I don’t see why it’s confusing that someone might worry about all of them at once.Report
I think we are seeing living on the edge of collapse expand further and further upward as well. Not just the lower middle-classes but the middle-middle class (apologies for the redundancy) and younger people starting on professional careers who occupy a weird place class-wise.Report
Good point, and speaks to why it is possible to care about both things. Growing inequality, that is, the increasing concentration of wealth at the top, may not inevitably lead to the expansion of material insecurity upward (it’s not a zero-sum game, and all that), but in practice, it’s overwhelmingly likely to do so because those at the top aren’t merely collecting newly produced excess wealth.Report
Chris, it’s quite possible to care about both things. Like James says below, though, Brandon was referring to Mike talking about what liberals *aren’t* worried about… that they aren’t worried about the super-wealthy, just the stagnancy of the poor. Sitting on the other side of the table, the conversation seems to shift as to what it’s really about. Not in the sense of it being about more than one thing, but it being about, then not being about, one particular aspect of it. (I felt that I ran into this on the airline seating post, where I never got a handle on the extent to which I was supposed to worry about First Class itself.)Report
No, Brandon’s response is not too dismissive. Michael Drew said “liberals aren’t really worried about X,” and Brandon said, “if that’s true, and they want people to understand that, then they shouldn’t talk about X.” That’s fair.
Now you say “but we do care about X, as well as this other thing.” That’s fair, but it’s not a critique of Brandon, really; it’s a rebuttal to Michael. You’re saying that he’s wrong to say liberals aren’t worried about X, because at least some of them (understanding you’re not a liberal yourself) are. To which Brandon would reasonably respond, “Oh, well if they are, then their talk about X makes more sense.”Report
Michael says it has more to do with this thing than with that thing. Brandon is confused by this (and notice the subtle switch from “liberals” to “leftists”) because “leftists” or “liberals” also talk about the increasing concentration of wealth at the top? I don’t think so, because whatever I think of Brandon, he’s clearly too smart for that. He’s being dismissive.Report
Well, is Michael right or not? Do they care about that issue or not?
Is Brandon right rhat they talk about it,mor is he wrong?
As to Brandon’s slide from liberal to leftist, it’s a half-fair criticism. He should have been more carefulnand stuck to Michael’s term. On the other hand, I’ve asked those folks here who are on the other side of the aisle to explain to us over here how to distinguish between liberals, leftists, and progressives, and heck if we ever got a coherent set of distinctions. So I’d give Brandon some wiggle room. It’s not like we’ve been given much guidance on this.Report
But Michael isn’t saying that they don’t care about those things. Perhaps they talk about the distribution of wealth more because it is more salient, and certainly easier to talk about, but there are good reasons to think that Michael’s concern and the concentration of wealth at the top are related. For example, see the first comment to this post (greg’s). I refuse to believe that Brandon’s never seen that before, which would suggest, again, that he was just point-scoring.Report
Michael did say “more to do with,” which surely is fairly read to downplay the something else.
“My concern with the Nazis is more to do with their destabilization of Europe than their treatment of the Jews,” implies something more than “I give the one a concern rating of 10 and the other a 9.8,” right? 😉
More seriously, he’s trying to say he thinks they’re really more worried about X than Y, and Brandon’s saying that he thinks he’s hearing too much about Y to quite believe that. Neither one is necessarily off-base. There could be a whole lot of confirmation bias going on for either or both–Michael tends to notice X when it’s mentioned, Brandon tends to notice Y…who knows what a random sample of mentions would show? But you’re being too dismissive of Brandon’s perception, I think, not allowing that it could be a real perception, no less valid than Michael’s perception, and accusing him of unfairness. I don’t think you’ve shown anything yet that really backs up the accusation.Report
Recall what Brandon said:
But really, if leftists don’t want people to think that they’re complaining about rich people making too much money, then they should stop speaking disparagingly of “income inequality,” “the super-rich,” “the 1%,” “the rich getting richer,” and things like that, and start saying what they actually mean. You can see how we might find that confusing, can’t you?
He worded it snarkily (again, it was dismissive), but he’s clearly making a hard and fast distinction, or using an exclusive or. If we (leftists, meaning a wide swath of people from center left to rabid Chomskian anarcho-syndicalists?) don’t want people to think we’re talking about X, why do we talk about X? But Michael didn’t say that, or even imply that. He suggested that it’s more about Y, but as Greg quickly pointed out, X is Y, or at least X is a major cause of Y, so that caring about Y doesn’t mean not talking about X at all (which is what Brandon’s implying). If Brandon had said, say, “If they care more about Y, why do they talk about X more,” I’d understand, but that’s not what he said. He was being dismissive.
Anyway, I think I’ve made my case. I don’t want to make this subthread about Brandon. It’s more attention than he deserves. I’ll just point out again that X and Y are deeply intertwined.Report
Well, this is one of those cases where neither of us is able to persuade each other. The only solution is a steel cage death match to see who’s right!Report
Pistols at 10 paces! Wait, make it 20 (that way we’re guaranteed to miss).Report
Yeah, I don’t buy it. For one, nothing Michael says is inconsistent with the other piece that Brandon refers to, and in fact they could be related (Michael’s full comment even suggests that they may be). I think Brandon was playing gotcha, which is kinda what he does in any discussion of economic ideas left of, I dunno, Rothbard. Assuming Brandon’s been paying attention in the many discussions he’s had here, and probably elsewhere, with people to the left of libertarians on economics, then he must know that they see these things as related (and that Michael’s comment doesn’t suggest otherwise).Report
Ugh, this got embedded wrong (sorry). This was a reply to Will.Report
There is an old joke that is quite popular in Blue collar circles which goes;
Manager: Why are you only coming to work three days a week?
Employee: Because I can’t make it on two….
The point being that not everyone is obsessed with upward mobility. There is a significant portion of the population that views the exchange of hours for income as a poor bargain. They are quite willing to accept very modest means as long as their “quality of life” isn’t negatively affected. They interpret this as being able to live unharried, in a rural setting, with a great deal of free time to do with as they please. Many of these people migrate to cities for jobs but still have this mindset. They have less ambition than is required to be financially successful but are quite unwilling to change. In fact they view a more urban lifestyle with real disdain. Even though they live in the city and have factory jobs they dash “home” every weekend. My point being that it would be a mistake to place a value set on these people that is simply inappropriate. Some income inequality has deeper roots and more complex causes than have so far been expounded.Report
Isn’t this a bit of a false choice? Just because you aren’t concerned with upward mobility, doesn’t mean that your happy with poverty either. A lot of people just want a decent income for doing work rather than having to hustle to survive, change jobs every few years, and maybe have a couple of different careers in their life. While a lot of people would love to be rich, I think you would find that most people are going to be happy with a stable job that provides a salary in the mid-five didgets.Report
@leeesq I think we’re on the same side of this discussion for the most part although the median household income for 2007 – 2011 is $52,7xx http://quickfacts.census.gov/qfd/states/00000.html That looks like mid five digits to me. Bachelor Degree or higher among +25 age group 28%. Over the last 30 -40 years the percent of the population living below the poverty line has hovered between 11 and 15% I won’t post footnotes but I’m quoting statistics found on-line from seemingly main stream sources. In 1982 the unemployment rate (9.7) was higher than during the current recession although unemployment has been more persistent this time. The disparity of income increase over the past few years has been so widely publicized it would be almost impossible not to know about the 1% or 0.5%. My original point was that not everyone wants to be upwardly mobile. Perhaps rather than just urge the government to throw money at the problem we should give some thought to how the job market is changing and why. Why are there more low paying jobs with less than 30 hours work per week? and fewer skilled jobs? Employers react to market forces whether they are big or small. It isn’t always greed, it is often survival. The number of publicly traded companies in the US has dropped by 38% since 1997 (http://www.economist.com/node/21555552). I’m not an economist so I won’t try to say what it all means but it seems to me there are bigger forces at work here that demand attention.Report
This was written about recently as being the medium-chill lifestyle:
http://grist.org/living/2011-06-28-the-medium-chill/
I did not come from a medium chill family or town but if people want it, all the power to them.
“In fact they view a more urban lifestyle with real disdain”
This is where I have a problem. I’m largely a live and let live kind of guy. If someone’s idea of a good weekend is fishing or working on their barn in the country or cars, all the power to them. If someone prefers to have more time off than be in the rat race, all the same.
But I’m a city guy through and through and love what urban environments and metropolises have to offer and will defend them against all disdain.
Now why live and let live seems to be such an impossible concept is another discussion but it seems to revolve around a lot of outdated concepts of masculinity. Hence my debate with Rod on the other thread about using the word ‘twee.Report
Mmm I do love chillin.Report
Hence the name I suppose.Report
A joke that illicits a chuckle until you realize that the job pays half as much as it did when the joke was written, and the disturbing implications that follow therefrom.Report
Even adjusted for inflation “half” seems a little questionable. I don’t dispute that real buying power is declining for the average consumer according to most main stream news sources. I have to assume they check their facts although the numbers probably vary from one study to the next due to method. My point is that the solution has to be tailored to the need. There is no one size fits all answer.Report
Dale, I never assume mainstream news sources check their facts and numbers. Accuracy is not what pays their bills. Remember, these are the folks who make us think crime is increasing.
The best way to calculate buying power is to look at hours worked to earn an item. Lots of things have become much cheaper. I recently calculated that at minimum wage, a calculator that cost about a full week of labor back in the early/mid
70s costs about 2 hours of labor today.
Well, that’s not a big ticket expense, right? Except that it was back then–I think anything that requires a week’s work counts as big ticker–it’s just today that it’s not.
But cars, houses, education…the things so big ticket we take out loans for them? I haven’t done that calculation, but hours worked is really the best common currency to use to figure out whether the average consumer is gaining or losing buying power.Report
James: That’s cool, and Yay for progress. Electronic gegaws are cheaper the world over, and the world is very much a better place for it. But there’s no Moore’s law for agriculture, for transportation, or for clothing. In many cases, the fact that technology is cheaper just means we’re expected to own technology we didn’t have and didn’t need in the past.
When I was working in a grocery store, I looked at the $3000 specialized piece of inventory tracking equipment and said “gee, you could do the same thing with a $300 cellphone and a custom ap.” Three years later, I passed on a grocery merchandising job because they’d had the same idea I did, and they required their employees to have a $300 cellphone that I didn’t own.Report
Bingo, Alan. The last trucking job I had before my current one basically required their drivers to have their own cell phones because that’s how we were dispatched*. Ten years ago they just gave us all phone cards so we could call in from pay phones. When’s the last time you saw a payphone? Truck stops used to have rooms with maybe a half a dozen of the things lining the walls. Not any more.
* In my current job we have in-truck Qualcomm units, basically a computer with Internet access via the cell network that has a messaging function as well as GPS and electronic logs. And they’ll also send me dispatch info via text message but it isn’t a requirement; more of a convenience so we don’t necessarily have to just sit in our trucks if we’re waiting for a load. And AFAIK my old employer still requires the drivers to have their own phones; that was only two years ago.Report
The lefties keep talking about inequality bc it is an easy thing to rail against and gets votes, so they keep using the inequality card kind of like their other favorite card, the race card . It seems to me that they don’t do anything about it b/c their only idea about fixing things seems to be taking money from one group and giving to their favored underclasses. Besides if they did fix it, not that I you think you can, even the Soviets couldn’t, what would they have left to whine about?Report
We can always whine about vitriolic blog comments and people who think everything is just a card to hurt them, not an actual issue. Because of course the real issues are your issues, those leftie issues can only be about winning over you.Report
@ J@m3z Aitch I bought a Novus calculator back in about 72 that had “Polish Notation” It had slightly more computing power than a slide rule and was almost as fast. Remember, they put men on the moon with slide rules. More powerful ones sell in the grocery store checkout lane now. I still have it somewhere. Thanks for the useful comparison.Report
It’s amazing, isn’t it. All those missile silos on the great plains with a whole wall of computers…and my calc has more power (or would, if I could get around to getting a new battery for it).
As to the hours comparison, I picked that up from, iirc, the economist Russ Roberts.Report
Now if we could only eat calculators and live in our smartphones we would have it made.Report
Upload yourself. Digital Rod could live on a few cents worth of electricity a day.Report
I get it. I’ve heard it over and over here–all the availability of technological goods that people rush out to buy, that they’re wiling to stand overnight outside Wal Mart for after Thanksgiving dinner, none of that actually is important to them. But no matter how often you liberals say it, you never seem to look at what people are actually saying with their choices. Heck, check out Chris Carr’s post on the cost of raising children.
Sure, you can’t eat a smartphone, but if it’s not important and you’re hungry, then you don’t have to buy one, do you? Oh, but wait…without one you can’t get a job, I’m told…well then it’s a goddam good thing technology gets cheaper, isn’t it? The smug liberal sneer’s fun and all that, but it’s got a bit of a logic problem.
You know what other types of technology get cheaper? Safety features on cars so your kids survive that accident, air conditioning for homes so grandma doesn’t die in the next heat wave), replacement knees so people can walk without pain again. Yeah, you can’t eat airbags, air conditioning or titanium knees, so I guess we can just dismiss the value of those things.
Sorry, Rod, I know you’re a good guy, but I don’t buy this line of argument. Every time I hear it I see a huge disconnect from the reality of what real middle class people are doing and the choices they are making. I see liberals sneering smugly instead of thinking seriously. To me it’s nothing more than signalling–you’ve successfully signaled that you’re morally superior to me and care more about the plight of the working class. Good on ya. You’re a better man than me.Report
Jeebus, @jm3z-aitch , get over yourself already. Yeah, tech has gotten cheap and there are clear benefits to that beyond the toys. No question. But you have to consider; yeah, grandma can buy a window air conditioner for maybe $50 down at Wally-world. But can she afford the electricity to run it?
Bottom line is that between productivity improvements, technological advances, and out-sourcing, some things have gotten cheaper. But not everything, and in fact, some really important things like healthcare and education have gotten a lot more expensive relative to median incomes. And the overall measures of inflation are figured on a market basket of goods, some of which have gone up in price and some have gone down. But without knowing how your particular mix of goods compares to the “standard” basket you can’t just look at an overall inflation number to tell whether you’re better or worse off, much less pointing at something like the price of a calculator.Report
Rod, you’re an intelligent guy, so if you want to have a civil and intelligent conversation with me, you might do better than to start with a rather unintelligent trope that’s been parroted repeatedly here.Report
Also, about the only reason why food isn’t cheaper is because of trade barriers, protectionism and regulations (see food trucks and street food) that stand in the way of cheaper foodReport
So how, exactly, did you determine that Rod was sneering? Because I’m tempted to tell you that you’re full of poop up to your eyeballs.Report
Murali,
Good point. I’d add in our stupid policies (in the U.S.) of promoting the use of food to make fuel.Report
Sure, Mike, go ahead. I’ll even give you a leg up by admitting that my eyes are brown.Report
What are you considering a “trope”, James? My initial comment about eating calculators? I’ll happily stipulate that, although true as far as it goes, it isn’t anything like a complete analysis. But then neither is your apparent desire to short-circuit any discussion along these lines by pointing at those same calculators. I’m calling that a wash. But I think my latest comment, particularly the second paragraph (you did read that far, right?) is much more substantive. If you disagree, then frankly, you’re being an ass.
In any case, when I was poking around the BLS CPI stats for the last fifty years or so, certain trends stood out. (I should point out that these comport fairly to the graphs presented by Chris Carr in his post as well.) The prices of general stuff–the kinds of general merch you get at Wally-world, K-mart, or Target have fallen substantially. Clothing is one of those things (I just bought a pair of shoes yesterday for $20.) Electronics of course has both gotten far cheaper and far more capable. Professional services–education, healthcare, legal, financial, etc.–have steadily risen at anywhere from 2 1/2 to 3 1/2 times the rate of general inflation. Food has risen at somewhat less than the general rate over the last 40-50 years. Finally, housing has drifted along at just about equal to the general rate. According to Schiller this has been true for the last century; the booms and busts tend to flatten out to equal the general rate of inflation over time.
A word about inflation as a concept: Inflation is to economists as “time” is to physicists. If you pin a physicist down, maybe get him a little drunk, and demand that he tell you what the hell time actually is, the best and truest answer he’ll come up with is “what we measure with clocks”. Seriously. In some general theories time even disappears entirely; gets cancelled out of the equations. Anyway, we like to talk of inflation as being a monetary phenomenon, “too much money chasing too few goods”, and that’s certainly one cause, perhaps even the most common cause of general inflation. But you can also get something that looks and feels a hell of a lot like inflation via other mechanisms, like an exogenous increase in resource inputs, such as what happened when OPEC flexed its muscles back in the ’70s. To the consumer it doesn’t really matter why, all that matters is that the prices they’re having to pay are rising.
So if you’re asked “what is inflation” you could go an a ramble about monetary policy and “cost push” and “wage pull”. Or you could just acknowledge that ultimately it’s just what we measure with the CPI and leave it at that, because when I’m at the grocery store that’s all that really matters.Report
Also, about the only reason why food isn’t cheaper is because of trade barriers, protectionism and regulations (see food trucks and street food) that stand in the way of cheaper food
I wonder about this. I don’t have any hard figures but it seems we already import a fair amount of food from Mexico as well as South American beef and specialty products from all over the place. I’m sure there are some tariffs and such that raise prices on some goods but then on the other hand we have farm subsidies that lower the cost of producing other foodstuffs. I mean if you just got rid of it all–tariffs, quotas, subsidies, etc.–I have to wonder where it would all balance out.
Keep in mind that much food has issues of perishability that put hard limits on how far and long it can travel to our store shelves, and/or substantially raise shipping costs by requiring it to travel by air freight vs. ships, trains, and trucks. Though not a food, flowers are like that; all shipped by air from central/south america in the winter.Report
Another quick note along these same lines: Starting points for comparisons matter a hell of a lot. I notice that Roger (not to pick on him; just an example) likes to go back to the 19th or 18th centuries, sometimes even farther (Middle Ages, Phaoronic times?) for his comparisons and then gush about how much better things are now and then attribute the entirety of that progress to “Markets”, as if technology and social morality hadn’t also advanced since then. (As well as ignoring that markets existed way back when as well.)
So yeah, that kind of advance is real and significant. But is it relevant to whatever discussion we’re having at the moment? When I look at measures of inequality in the U.S. I see a gradual but steady decline in measures of inequality throughout the middle and latter half of the century until we see a very sharp uptick starting in the ’80s which just explodes in the last twenty years. Don’t talk to me about the Gilded Age; I don’t care about the Gilded Age. Let’s talk about what’s happened and happening in my lifetime.Report
Yes, it was a trope. But, see, the calculator thingy, that was never meant to be more than 1) an example of how comparing hours worked to buy an item gives us insight into that item, and 2) some “gee whiz, doesn’t it just blow your mind that the hours-worked cost of something, anything really, could fall from ~40 to ~2.” If you wanted to take that as a claim that everything’s cheaper today and nobody ever struggles to buy anything, that’s on you, because it wasn’t even on my mind. Maybe if you’d read the thread where this started you would have seen that I wrote;
But cars, houses, education…the things so big ticket we take out loans for them? I haven’t done that calculation,
Now, looking at your comment;
The prices of general stuff–the kinds of general merch you get at Wally-world, K-mart, or Target have fallen substantially. Clothing is one of those things (I just bought a pair of shoes yesterday for $20.) Electronics of course has both gotten far cheaper and far more capable. Professional services–education, healthcare, legal, financial, etc.–have steadily risen at anywhere from 2 1/2 to 3 1/2 times the rate of general inflation. Food has risen at somewhat less than the general rate over the last 40-50 years. Finally, housing has drifted along at just about equal to the general rate.
This is interesting. And here’s a serious question. What are the causes of increase in the things that have risen in price so much? We tend to attribute this to market trends, but I see some areas of price increase where there is heavy government involved via subsidization of consumers (education), extensive regulation and a basic structure that is not truly market based but a response to government regulation (healthcare), and extensive cartelization (legal). On the other hand, I don’t know if there’s something there that would apply to financial services.
Is it possible that the political elements of these sectors might have something to do with their increase in prices? Can we actually broach that, or does the conversation just have to be about how markets are screwing these things up and government needs to fix the problem?Report
@jm3z-aitch
I tend to see the setting up of the market as itself a kind of government activity. When it screws up as with healthcare, the incentives go wrong and we get perverse outcomes. I’m sceptical of the distinction between distorted and undistorted markets. For example are pigouvian taxes distorted or not? Is IP law in general distorting or only our current implementation of it?Report
So yeah, that kind of advance is real and significant. But is it relevant to whatever discussion we’re having at the moment? When I look at measures of inequality in the U.S….
I know some of you think it’s not relevant, but I do. I mean, unless “whatever discussion we’re having” gets to be solely defined by your side so as to exclude the comparison; but if we get to be part of deciding what the discussion is, then, yes, I argue it matters.
But, see, it appears we’re often talking about different things. Are we talking about inequality or well-being? I was talking about well-being (although obviously the OP is about inequality), and you responded in reference to well-being, and now you’re shifting to inequality. They’re related discussions, but they’re not the same one. See,I don’t really care about inequality, per se, and if your talking about purchasing power, then you’re not really discussing inequality, either.
The reason I think looking at a century ago, or 50 years ago, matters, is because it helps us recognize that even if our well-being isn’t improving so much right now, we’re not necessarily in desperate straits. I think liberals arguing this point use too short a time span; “things are bad lately.” Maybe so, but they’re going to have to get one hell of a lot worse before they even begin to approach how bad they were for my parents in the 1930s, or my great great grandparents in the 1880s. So let’s not be so frickin’ glum, folks. By historical standards as well as by current world standards we’re doing all right.
Sure, we’d like to do better. Amazingly, none of us actually disagree with that. But the doom and gloom is seriously lacking in both historical and global perspective, which bluntly makes it pretty hard to respect. Perhaps it’s not a “white man’s problem,” but it’s certainly “contemporary westerner’s problem,” and that’s still pretty darn privileged.
And the reason I’d rather look at well-being than inequality is that inequality doesn’t necessarily mean anyone’s getting worse. It can, but it doesn’t necessarily mean it. And not all the consequences of inequality are terrible. If my wealth–as measured in actual purchasing power–increases every year, but Bill Gates’s wealth increases faster than mine, our inequality grows, but I’m better off. I think my being better off is of considerably greater importance to me than his being once again even more better off. It’s the distinction between absolute status and comparative status, and I’m interested in the former way more than in the latter.
And all those rich people buying all that stuff that we can’t afford? That eventually becomes the stuff we can afford. And I’m very serious when I talk about things like titanium knees. Yes, you need insurance, but insurance can afford to pay for them now, where once upon a time they were too high end for most people’s insurance. And the change in quality of life, for average non-rich people, mind you, is dramatic. Within a matter of days they go from crippling pain to being able to walk pain free. I’m going to stake a claim that it requires wealth disparities for these things to happen.
Is there a wealth inequality that’s too great? I think the question is not well phrased. Is there a wealth inequality in conditions where the less well off are still gaining in material well-being that’s too great? What would it look like?Report
Murali,
For sake of discussion (although I have to go to bed now), let’s assume that well functioning markets require certain government activities, which include ensuring fulfillment of contracts (or adequate compensation in lieu of), protection of property rights (including some level of IPR; let’s say at a minimum if you draw a clever cartoon character and I start making movies with it, I can’t pretend you actually drew it), regulations mitigating negative externalities, and some infrastructure that otherwise falls victim to the collective action problem of free riders.Report
Is it possible that the political elements of these sectors might have something to do with their increase in prices? Can we actually broach that, or does the conversation just have to be about how markets are screwing these things up and government needs to fix the problem?
Where did I say that markets were “screwing these things up” or that “government needs to fix the problem”? I didn’t and I don’t. Please argue with what I say and not what you imagine I might say, okay? I’ll try to extend you the same courtesy.
On the other hand, “Is it possible that the political elements of these sectors might have something to do with their increase in prices?” I understand why you would be ideologically inclined to go down that road, but I have to reject it. Not because it goes against my own ideological inclinations but because the data just doesn’t seem to support it. I’ve gone over this before but for your benefit I’ll do it again:
A graph of CPI in the healthcare sector will run parallel to the general inflation curve until… 1973 where it sharply bends upward. It’s just one mostly straight line until that year and then another mostly straight line from there on out at a different slope (2 1/2 times the rate of general CPI). The graphs for the Legal and Financial services run parallel to the Healthcare line on both sides of that date. They overlay each other just neat as can be. Education has the same pattern but the slope after 1973 is closer to 3 than 2 1/2 (I have no idea, even speculatively why that is.)
So for your conjecture to hold, you would have to imagine that either there’s a single governmental/regulatory intervention that affects all these sectors in exactly the same way, or even worse, separate causes for each that somehow end up having exactly the same effect. It’s not, strictly speaking, impossible, but it seems really unlikely to me.
There’s a couple other data points to consider. Productivity and median wages rose in parallel post WWII until… wait for it… 1974, when they started to sharply diverge with productivity maintaining steady progress and wages faltering. And then also, and I sincerely hope that you can see past your ideology to seriously consider this point, we maintained an overall balance of trade, neither surplus or deficit, post WWII until 1975 at which time we started running a constant and growing deficit.
My provisional hypothesis is that the U.S. economy experienced a kind of phase shift due to abandonment of the Bretton-Woods accords by Nixon in that year. The aim of BW was to maintain stable currency relationships among accord participants. Exchange rates were set by fiat with the dollar as the world “standard” which in turn was pegged to the gold at $35/ounce. The IMF was created in that time to facilitate all this.
Now I’m not claiming that BW was superior to floating currency exchange, either instrumentally or in some normative sense. Just that pre- and post- 1973 are radically different regimes and it shouldn’t be any great surprise that the shift had some major effects.
In particular I believe that these disparate growth rates in CPI in different sectors is something of an illusion. Or not really an illusion but a mathematical artifact of how we figure CPI. If you have real deflation in some sectors due to productivity growth and outsourcing while other sectors don’t experience that deflation due to simply not being amenable to those influences, WHILE at the same time we have a monetary policy that’s geared to maintaining a small rate of positive overall growth in the money supply and hence modest inflation overall (since real deflation sucks, leading to contractions), it’s inevitable that the sectors that don’t experience are going to necessarilyappear to be experiencing real inflation over and above the general rate.
And why aren’t healthcare, legal, and educational services amenable to those deflationary pressures? Because first, of all they’re services and not goods that can be imported from low wage countries and second, because they’re in the nature of handicrafts. A doctor can see only so many patients in a day, a lawyer can adequately service only so many clients, and a teacher can only manage so many students. If education could see productivity gains commensurate with what we’ve accomplished in manufacturing or agriculture you would have class sizes of two or three hundred kids. That may be okay for a college lecture but it ain’t gonna work for third-graders.
Anyway, that’s my theory and I’m sticking to it. And note that it’s not a particularly partisan story. It neither blame unions nor bemoans their loss (I see declining union rolls as an inevitable consequence of outsourcing, not the cause). It doesn’t blame government regulation as we generally discuss it, but it does implicate government handling of the monetary system. And I’m not really implicating trade either. Trade is a great thing can enriches us all. The problem is the way we’ve managed the dollar, or perhaps let it be managed for us as the de facto world reserve currency, has allowed a trade imbalance to persist for decades that should have been self-correcting according to standard theory. It’s not for nothing that I read an article a few weeks back where the Chinese government was doing everything in its power to avoid their currency becoming a world reserve coin. They understand the dynamics there and what it’s allowed them to do to our economy.Report
@rod-engelsman
That comment is OG, dude!Report
I sincerely hope that you can see past your ideology to seriously consider this point,
That’s nice. You jumped into this conversation with a pointlessly snarky comment, and now you throw out this. After that there’s no point responding–any disagreement I have has been pre-emptively defined as being just a product of my ideological blinders. That’s not an invitation to serious discussion. And yet you complain that I wasn’t fair enough to you. Perhaps I wasn’t, but you don’t have much of a leg to stand on, my friend.
There’s a lot to discuss in your question, and I’m not going to pretend I have some easy answer to all of it. But since this conversation started badly on both sides and appears to be continuing that way, I think I’ll engage in a rare exercise of wisdom and exit. You and I don’t have a bad history, and I’d rather not start developing one now. Maybe another day we’ll both be nicer.Report
Rod, what if it’s something more basic than monetary policy. What if it’s the confluence of a few straightforward factors:
1. Domestic labor-intensive industries.
2. Inelastic demand.
3. Health care costs.
In other words, where #1 & #2 exist, #3 is the huge driver? When an industry isn’t labor-intensive or the labor needn’t be domestic, it deals with the rising costs of labor (again, health care) by outsourcing or automating.
When demand is elastic, they find ways to reduce the number of people because their survival depends on it, or fewer people take advantage of the service but those who do will pay for the people.
But where labor is intensive and domestic, and demand is inelastic, there is nothing to prevent the natural inclination of institutions to expand (personnel-wise), and the rising costs of health care keep costs shooting upward. (Some don’t hire more people, but can still raise prices because others are and just keep the profits for themselves or pay within the industry gets higher.)
It’s probably a bit more complicated than this. But basically, what makes the most sense to me is that there are basically a few checkboxes, and if you check all of them for a particular industry, you get rising costs with little check on them, and one of the big reasons for the rising costs is health care for the employees.
(I haven’t had my morning coffee, so I might not be explaining myself well.)Report
Rod, just wanted to say that this is a really great comment that’s worthy of rescuing to the Front Page. (As is this comment
… gush about how much better things are now and then attribute the entirety of that progress to “Markets”, as if technology and social morality hadn’t also advanced since then. (As well as ignoring that markets existed way back when as well.).”
which provides a nice counterpoint to the main focus of debate on these and similar topics.
Just my opinion, of course. And that’s not to say I disagree with many of the points and arguments James has been making, either. It’s a complex issue.Report
then attribute the entirety of that progress to “Markets”,
For the record, this “entirety” business is not something you’ll be able to find a record of me ever saying. I can’t speak for others.Report
One of the biggest “problems” with health care is that we’ve gotten so much better at it.
In the early 1900’s, life expectancy of a 20 year old was merely another 45 years.
Today? it’s a full 65 years. That is: in the early 1900s, if you made it to 20, you could reasonably expect to die at 65. Today, if you make it to 20 (a *LOT* more likely, by the way), you can reasonably expect to die at 85.
We are extending people’s lives and removing from the game many of the acute things that killed us… and we’re finding that, having removed the acute things that used to kill us earlier, we’re spending a lot of money on the chronic that kill us later.
And we’re complaining about cost.Report
I seem to be the resident cheerleader of free enterprise, but I would totally disagree that the entirety of progress comes from markets.
I would define progress as widespread cumulative net problem solving. Markets work as self amplifying complex adaptive problem solving systems and obviously contribute enormously to our improved well being. Science is another self amplifying complex adaptive problem solving system, in another domain. Technology straddles the two and also has progressive institutional features.
We can also learn to improve institutions (markets and science are themselves institutions). Finally there are also progressive possibilities in culture itself.Report
To add on to Jaybird’s comment, a large proportion of our health care spending, by some accounts as much as half, is spent on end-of-life care; not for everyone’s end of life care, but for a small proportion of them who have chronic diseases and are experiencing multiple organ failures. Those costs get socialized, whether through insurance or medicare.
So one–not the only, but one–significant factor in the increasing cost of health care that’s pricing some folks out individually is that collectively we can afford, and have chosen,* to spend quite a bit on the illest of the illest.
I’m not saying we shouldn’t (although I do have my doubts); just that it’s important to recognize that not doing so is one route toward some lowering of costs. But it’s one that–depending on one’s values–may or may not be seen as an acceptable method.
____________________
*To the extent that it makes any sense at all to speak of a collective as having “chosen.”Report
Markets work as self amplifying complex adaptive problem solving systems and obviously contribute enormously to our improved well being.
What proportion of “our improved well being” is attributable to markets, would you say?Report
I am now going to say something which seems to contradict what I just wrote. ALL OF IT.
What? Didn’t I just adamently deny that our well being is due ENTIRELY to markets? Yep.
The reason I say “all of it” is kind of complicated. But here goes…
The problems with cultural progress is the ever present threat of the Malthusian curse. If population grows faster than the rate of progress in agricultural, pastoral or hunting/gathering societies, then no net gain is possible. Said another way, the rate of progress must not just be positive, it must be positive AND faster than the headwinds of the Malthusian curse. Otherwise all you get is more people at the same near subsistence level. I am simplifying a bit, and setting aside that there are other headwinds such as exploitation.
But here is the next piece… I believe absent markets that we would not have solved problems faster than nature and man have created them. Markets are thus like an essential part of the foundation. Absent markets, problem solving within the domains of specialization and exchange would not have been fast enough, and just as importantly, market progress feeds into and amplifies science, technology and institutions.
If Malthusian and man-made negative forces are faster than the positive problem solving processes, the net result is simply more people at the same basic standard of living.
Thus I suggest, but cannot prove, that free enterprise* is a necessary, but not sufficient cause of advancing prosperity.
* not that it is necessary everywhere, just some places. Non market societies can then draft on the solutions generated by markets.Report
While you’re making an entirely theoretical argument, it looks as though you are making a causal, which is to say empirical claim, which should be falsifiable. I wonder, can you give us some data that specifically indicates the causal relation you’ve theorized? I don’t mean correlational data, because these are incredibly complex socio-cultural systems in even larger, more complex global socio-cultural systems, with multiple layers working on multiple time scales. If you can’t give me some non-correlational data, can you at least tell me what sort of test might be possible to falsify your theorized causal relation?Report
Odd comment suggesting i ended by saying it was something which “I suspect but cannot prove.” As with most complex issues in social science, I am not making a falsifiable, empirical claim. I am at best arguing a case and offering an eplanation. I could certainly argue it more robustly, but that would probably take a chapter or two in a book.
To prove it, someone would have to be able to isolate market based growth separately from all other sources of growth including the effects of market based growth on the other interdependent growth factors. Then they would have to be able to supply what the net population growth would have been in this alternative reality with subjects capable of sometimes changing behavior in the face of feedback.
What is less debatable is the suggestion that for prosperity per person to increase, you need to increase total gross prosperity faster than the decreases caused by Malthusian forces*. This is a mathematical claim, albeit one that is hard to define.
So, as I said, I am suggesting this and cannot prove it, though I could argue it more thoroughly if anyone is interested. Is anyone?
Honestly, I am not even sure anyone would disagree. Perhaps we should start there. Of if they do disagree, why and what alternative explanation would they offer?
* interesting fact is that even Malthus argued that people could adjust behavior (in good and bad ways) to avoid the Malthusian curse.Report
Roger, it would be odd if you hadn’t used precisely this claim basically as a cudgel against any argument from your left for some time ’round these parts. If you merely suspect it, then, well that’s all I need to know next time you use it as your kill shot in a discussion about labor or wages or whatever.Report
“If you merely suspect it, then, well that’s all I need to know next time you use it as your kill shot in a discussion about labor or wages or whatever.”
LOL
So the next time I argue that demand curves slope downward, my argument is only correct if I am first able to prove my self advertised unproveable assumption that — absent free markets — per capita posterity would still be at subsistence levels. Um, yeah, that sounds fair to me.
But yes, if I ever say to you that the effect of interference with wages is that this will send timey wimey shock waves back into the space time continuum and result in the negation of all per capita gains in living standards over the past 250 years, then yes, feel free to remind me.
I suspect what you really mean to argue is that because I admit that I cannot disprove something via a historial counterfactual that I can no longer make any claims on prosperity and free markets. If you read what I have written carefully, you will see this does not necessarily follow either. Right?Report
No, the next time you use “the market is responsible for all of this increase in standard of living and wealth” argument.Report
I do not believe all progress comes from markets as per my original comment above. Not at all.
Consider the difference between necessary and sufficient…
Would it help if I provided a mathematical example? Let us say you take five steps forward and four steps back. Over time you will progress forward. All my statement means in this analogy is that I SUSPECT BUT CANNOT PROVE that markets make up more than one out of the five steps forward and that absent markets we would not have made net progress at all.
Is that a better explanation?Report
Is that a better explanation?
Yes.
I think you’re possibly temporally correct at some points in history, but I suspect, myself, that overall in the course of human history 9 of the steps forward come from technology and markets contribute 1, possibly 2.
Contributing backwards steps pressure include, in no particular order, inherited wealth, institutional racism or sexism, immigration restrictions, tariffs, emigration restrictions, social conformity, organized religion, cultural expectations, caste systems, intellectual property law, monopolies, government regulation, rent seeking, and inertia, just to name a few.Report
Agreed. I summarize the negative factors under four headings:
1. Malthusian forces
2. Exploitation (using coercion against a fellow human)
3. Culture (can also work as a positive force) and
4. Incumbents (locking in privilege against others)
Note my categories overlap completely with your examples.Report
It’s worth noting that non-market economies have access to all the same technology as market economies. And yet they have consistently failed to achieve anywhere near the same level of prosperity.Report
Brandon, honest question here: does China qualify as a non-market economy?Report
My impression is that it’s more a market economy than not, these days, but I don’t know much about the details of Chinese economic policy.Report
A question for the economists (credentialed publicly or in their own minds) out there:
Relating to James’ & Rod’s discussion above of the competing “tropes” of increased, or at least not as much decreased as claimed, buying power of the non-wealthy classes and the related idea that much of that increased buying power relates to a limited set of rapidly-evolving products arguably mostly clustered around non-essential or luxury facets of life (entertainment, portable hi-fi real-time person communication or computing, etc. [‘essential’ is certainly in the eye of the beholder here, but I digress…]) — a question about inflation:
Being that it has been said that much of this increased buying power is related to items a person can’t eat or live in or drive or that eventually produces a professional credential, is it reasonable also to wonder whether it has been (sufficiently) accounted for in official measures of inflation? I.e., if the U.S. CPI “basket of goods” doesn’t sufficiently keep up with how much more computing and connecting power can be bought for $100 or $200 for the hardware and $100/mo for the data (or what have you), then is it possible that in some sense (though perhaps not in an important sense from a monetary policy perspective, as there continuity of comparison, not representation of the world as it’s being experienced, may be the primary imperative), common measures of inflation may be considerably overestimating a “true” economy-wide inflation level in which prices of comparable goods are compared over time?
Or do I just have a category error here, where I am thinking that inflation as a concept is meant to say something about actual purchasing power across an economy over time, when in fact, it is just meant to give information about how the money supply (or something) is interacting with (for calculation purposes, a certain “basket” of) goods in the economy to create price trends, and that the ability of units of currency to command goods other than those representing “goods in the economy” (i.e. goods not in “the basket”) for purposes of the calculation is just pretty much unrelated to the calculation (and the concept of the value being calculated), and so this obviously won’t reflect all the (changes in) facts about a currency’s (or a person’s or class’s) purchasing power over time?
I would appreciate if I could have this moment of conceptual confusion cut short.Report
I don’t think you have a category error. I think your just confused because you see two things going on in our inflation calculations that you can’t easily reconcile, and that’s because in fact they’re not easily reconciled.
Our inflation calculations do say something about purchasing power, but not everything about it. If the cost of items we buy goes up, then our inflation calculation reflects an actual decline in our purchasing power. If the costs goes down, the inflation number reflects an actual increase in our purchasing power.
But many economists think we overestimate inflation in two ways. One is as you suggest, improvements in quality. If I can buy better quality for the same amount, my purchasing power has actually gone up; or if that gadget got cheaper as it got better, then my purchasing power has gone up more than is reflected strictly by the numbers.
Another way is through the shift to substitute goods. On an industrial scale, this can be a shift to one material to another, as the beverage can industry shifted from tin to aluminum. On the consumer scale this is often discussed in terms of shifting from beef to chicken when the price of beef goes up. If beef prices increase, so people shift to buying chicken, they still get plenty of protein, so their purchasing power hasn’t declined as much as just the change of beef prices might suggest.
But we can object to these. If you’re ambivalent between beef and chicken, then substituting one for the other is fine, but what if you like beef, and don’t really like chicken? Then doesn’t a price-induced move to what for you is a lesser-quality (in taste, if not in nutrition) food actually reflect a decline in purchasing power? And what if you don’t want all that increased technology, but can’t buy anything less? For my part, I’d like to be able to buy a newer car with a manual transmission and hand-crank windows–I just pulled a door panel on one car to put a piece of wood in there to hold up an electric window that stopped working, slides down on its own, and isn’t worth the cost of fixing, and am now being hit with an $1800 bill to fix the automatic transmission on another car, and these are items I don’t even want in a car! Or think of Alan Scott’s $300 cell phone comment.
These critiques tend to be “liberal” critiques. You won’t hear them as much from conservatives. And I think if we stick seriously to the concept of subjective value, then as a matter of intellectual consistency we can’t simply dismiss them. The problem is that we can’t measure subjective value very directly, whereas we can measure price directly, and for “objective,” or perhaps I should say “technological” quality, we can at least estimate it better than individual quality.
And for making official determinations of inflation, we’re kind of forced to use the more measurable things. Which is fine as long as we remember we’re not including in our numbers that which we can’t measure…but once we remember that, what can we really say with any certainty about that which we can’t measure?
Additionally, the choice of what to include in the basket of goods is not objectively determinable, so it’s always a bit political. If there’s actually a large scale shift from beef to chicken, should beef remain in the basket or not? Energy prices seem obviously an important thing to consider, but in the short run there’s enough volatility that it’s not clear they actually reflect real changes over time.
In a nutshell, probably the only thing about inflation measures that the economics profession is in full agreement on is that despite its value it’s inevitably problematic. And I think you’ve essentially recognized where the problem lies.Report
… and then there’s shadowstats. Which actually makes money because our official measures are inaccurate.Report
If there’s actually a large scale shift from beef to chicken, should beef remain in the basket or not?
Complicating things more, it’s hard to tell to what extent such a shift is driven by changes in preferences vs. changes in relative prices.Report
Brandon,
Yes. I meant to say that. Thanks for covering my ass.Report
I don’t recall any adjustment to the CPI that increased the rate of change. It has always seemed to be the opposite which would decrease the amount of cost-of-living wage and benefit adjustments for many employees and retirees. Pardon me if my cynicism is showing but it is difficult not to suspect ulterior motivation. Large political contributions work in mysterious ways.
Yeah, I know I play both sides of the court don’t I.Report
Dale,
Hmm, that’s interesting. One the one hand I’d note that the nature of technological change would tend to push the rate of change downward, just as we’ve seen, and I’m not sure what would tend to push it upward other than–at least for the present period–energy costs. What else would tend to push the rate of change upward? I doubt I’ve thought of everything here.
But on the other hand, let’s follow the money, as they say. Who benefits from ensuring the rate of change is always adjusted downward instead of upward? Obviously government agencies like the Social Security Administration, because it reduces COLAs (that’s been one of the inflation calculation arguments–if we are, as some economist say, overstating the rate of increase, then we can solve some of our looming shortfall problems by using a lower rate of increase to calculate COLAs without diminishing the real purchasing power of seniors (I’ll leave it to others to decide how big or small that “if” in there is). But of course SSA isn’t giving political contributions. So who in the private sector? Do pension companies doling out defined benefit contributions use government figures for COLA adjustments? If so, are they giving substantial amounts in political contributions? Who else in the private sector would benefit?
I’m serious about that, not being snide. But there’s a small problem in that the decision on how to calculate inflation isn’t being made by Congress, but by unelected folks in the public agencies. So if there’s outside pressure on them it’s probably happening other than through campaign contributions (which isn’t an implication that therefore it’s not happening–agencies do get lobbied and pressured by organized interests on the rules they make).
I haven’t explored that question, but it seems worth exploring.Report
James,
my understanding was that it was presidential contributions, not congressional. And that every president has mucked with it, with the exception of the Sainted Carter (he of Notorious Impracticality).
If a president has any agenda whatsoever, he’s going to want to get the costs down on SS (etc) because that gives him more money to allocate.Report
I believe that it’s a point of contention among economists. The bottom line, really, is that hedonic adjustment is hard, and there’s no objectively correct way to do it. It depends very much on what your preferences are, and since preferences are heterogeneous, so it’s literally impossible to do the adjustments in a way that makes sense for everyone.
For example, if beef gets more expensive and chicken gets cheaper, does that mean there’s been inflation, or not? Well, if you like beef and hate chicken, prices have gone up for you. If you’re roughly indifferent between them, or if you strongly prefer chicken, prices have gone down for you.
So does the CPI overstate or understate inflation? It almost certainly overstates it for some people and understates it for others. You can come up with some kind of average, but an objectively correct one is impossible in theory and even harder in practice.Report
Weird. I had not read James’ comment at all, yet we chose exactly the same example.Report
Shadowstats has one that is “objectively” helpful at making money.
(aka when the Feds started dicking with things, folks said, “we NEED those numbers!” and paid people to keep making ’em).
note: thank the feds for keeping the data in the small print.Report
Brandon,
Probably because it’s so heavily used by economists that it’s become a tiring cliche. 😉Report
Oh, and inflation measures actually exist for both of those purposes. That’s why we have the “core inflation” measure, which excludes energy and food prices, which can fluctuate wildly for reasons unrelated to monetary policy.Report
When I went to STEM college, it cost me roughly 1.6X a year’s worth of minimum wage work per year. I was able to put myself through college with roughly 4X a year’s worth at minimum wage of debt by working part time and having some scholarship income. My first job out of college (actually worked it during college) paid about 3.5X minimum wage. I worked 40 and got paid for 40. Mortgages were about 2X the interest rate you got on a checking account. Granted, banks were paying high interest rates at the time (WIN!) because of inflation but still.
Nowadays? My alma-mater costs ~65K/yr. That’s about twice as much in min-wage-hours worked. Starting salaries in my field are still about 3.5X minimum wage so the real cost of college has at least doubled (and there’s literally no way working a burger-flipping job part-time at school is putting a dent in that). Mortgages are now at 40X the interest on a checking account. You work 50 or 60 and get paid for 40. The effect on projected income and long-term savings is much higher.
Yeah, 2013 equivalent of me can buy more shiny crap now, but the real buying power hasn’t grown much, and if I had more time I bet I could prove it’s shrunk. And prospects are worse than that metric shows.Report
the real buying power hasn’t grown much, and if I had more time I bet I could prove it’s shrunk.
I’d take that bet (but who gets to define the time frame?). So here we are, at an impasse, both with unproven assertions we want people to believe. That’s the internets for ya.Report
http://www.thenation.com/blog/175880/week-poverty-90-percent-workers-arent-getting-bupkis#Report
Yeah, but at least I have some numbers that I didn’t pull outta my butt. And I get to define the time frame (which I did). Me, vs. 2013 me.
Explain to me, using the numbers I provided, how even at parity purchasing power (which I don’t believe 2013 me has) 2013 me is better off than (or even on par with) 198x me. You can even pick any value for x where all my preconditions are valid (STEM tuition ~10K/yr at a top tier school, checking/savings interest rates at roughly 1/2 of mortgage rates)
I didn’t even bring housing or transportation costs into the equation.Report
No Public,
So all my numbers are pulled out of my butt, and you get to unilaterally define the time frame?
All you did there was signal your lack of interest in any real conversation, and I’ve had enough of that already, so thanks, but I’ll pass.Report
James,
What’s so wrong with the timeframe? If you want, you can assert that a different timeframe has more validity?Report
Kim,
Pro Tip: Never play games with someone who begins by pre-emptively accusing you of cheating and follows up by saying they get to write the rules. Or if you do, be sure to place some insurance bets against yourself. 😉Report
J@m3zSo all my numbers are pulled out of my butt, and you get to unilaterally define the time frame?
All you did there was signal your lack of interest in any real conversation, and I’ve had enough of that already, so thanks, but I’ll pass.
I didn’t say anything about you, or your numbers. All I said is that I was using numbers I didn’t pull out of my butt. But feel free to pass if you think it’s unfair to use a real-world example.
No, not “but still.” The ratio of nominal mortgage rates to nominal checking account rates is not a meaningful metric
Except, you know, to people who have a checking account (and little in the way of investments). Like most people. And who might be thinking about a house some day. Like me in the 80’s/90’s. Which is who this comparison is about.
I’m not interested in theoretical people. I’m interested in real people (or useful analogues of same). If 2013 me came out of college this year, would his prospects be better or worse than 198x me? Would his purchasing power and likely class boundaries be better or worse? Would he be in a better position at 50+ for retirement than I or a worse one?
I understand that it’s easier to talk about bigger things but I just wanna know if 2013 me is going to have a better or worse life/career/death than I am.Report
Mortgages are now at 40X the interest on a checking account.
–this is a bit of dirty pool. Roth IRAs are the current way to save for a mortgage.
So use the right numbers. It’ll still look bad, I’m sure, just not /as/ bad.
You work 50 or 60 and get paid for 40.
–but you’re spending(apparently) a little less time on housework and caring for kids (sources cited when I was talking with Roger).Report
Mortgages are now at 40X the interest on a checking account.
–this is a bit of dirty pool. Roth IRAs are the current way to save for a mortgage.
So use the right numbers. It’ll still look bad, I’m sure, just not /as/ bad.
You work 50 or 60 and get paid for 40.
–but you’re spending(apparently) a little less time on housework and caring for kids (sources cited when I was talking with Roger).
Yield is what, just about 1% for CDs these days? If you’re looking for guaranteed yield for small investments I don’t know what’s better than that. So OK, it’s only 4-5X and not 40X.
The bottom line is that back when you could get something in a checking account. It wasn’t a lot, but it was better than nothing. Now, it’s not. You have to tie up money for a long term, subject it to potential penalties, or put it in a higher risk investment to do anything useful with it. That kinda sucks if you don’t have much liquid cash and you’re eventually going to want a house some day. And it sucks more now than it did then.
And I don’t know about you, but I haven’t seen any drastic improvements in time spent mowing, painting, cleaning, doing laundry, or cooking since the 80’s. That’s pretty much a wash.Report
Dude, they have washing machines that are also dryers now and even the ones that aren’t are a *LOT* better than the ones I grew up with. Most of the painting enhancements have been in the paints themselves (a paint that you only needs touching up every three years is better than one that needs touching up every two) but there are those paintbrushes that you see on the television as “changing everything”. As for cleaning or mowing… there have been marked improvements in tech for both. (Are we talking vacuums? Steam cleaners? Swiffer sweepers? Those little steam guns?)
As for cooking, there have been improvements in microwaves since the 80’s but I’ll assume that you’re just talking about taking ingredients and making food out of them. This comes down to discussions of ingredients. It’s easier for me to make a salad with five or six ingredients today than it would have been in the 80’s. My store has pre-diced peppers, pre-diced onions, pre-cut cheese cubes, and any number of kinds of leafy greens in a bag. Throw them together in a salad spinner and go nutso. We’ve had advancements in dessert technology when it comes to cookie dough (pre-measured squares of dough that need only to be put on a tray and baked!) and there have even been improvements on Hamburger Helper kinda meals. Check out the “Skillets” in the freezer section. Seriously. Heck, they even have “dump this entire bag into your slow cooker” bags that let you come home to a fully cooked meal.
But if you want to use fresh ingredients and put them together yourself, yeah, it takes about as long as it ever did… but it will do that in the 40’s as well.Report
Yield is what, just about 1% for CDs these days? If you’re looking for guaranteed yield for small investments I don’t know what’s better than that.
Try an apples-to-apples comparison. The yield on a 30-year treasury bond is currently 3.7%, compared to 4.5% for a 30-year fixed-rate mortgage.
Long-term interest rates are different from short-term interest rates. So, for example, currently one-year treasury bills have a yield of 0.12%, while 30-year treasury bonds have a yield of 3.7%. Why? Well, right now short-term interest rates are extraordinarily low—roughly zero. But they’re not going to stay there for 30 years. You’d be crazy to buy a 30-year bond with a yield of 0.12% per year, because interest rates are almost certainly going to go up long before the bond matures, and then you have your money tied up in a bond yielding 0.12% when the market rate is 4%.
So why would you expect a bank to do what you wouldn’t do yourself? If you want to lock in a mortgage rate for 30 years, you’re going to have to offer more than the current anomalously low short-term interest rate. And that’s not even taking into account the risk of default, which is why you can’t get short-term loans at sub-1% rates.Report
Mortgages were about 2X the interest rate you got on a checking account. Granted, banks were paying high interest rates at the time (WIN!) because of inflation but still.
No, not “but still.” The ratio of nominal mortgage rates to nominal checking account rates is not a meaningful metric, for a number of reasons, including:
1. If you even care what the interest rate on your checking account is, you’re doing it wrong.
2. Given constant real interest rates for mortgages and checking accounts, the ratio between them approaches one at high rates of inflation and approaches infinity at low rates of inflation. For example, if we assume that checking accounts always have a real return of -2% and mortgages a real rate of 3%, then the ratio will be 1.5 at 12% inflation and 51 at 2.1% inflation, even though the real returns (and the spread between them) are constant.
3. The relationship between short-term and long-term interest rates is complicated and depends largely on expectations about future interest rates.
Yeah, but at least I have some numbers that I didn’t pull outta my butt
Questionable, but even assuming that all your numbers are correct, your conclusions are still only as good as the quality of your analysis, which is lacking.Report
“If you even care what the interest rate on your checking account is, you’re doing it wrong.”
… Do you REALLY think that taking out loans from yourself is a good idea? Is this a good part of a functioning financial system?Report