A Self-Contradictory Argument on Global Inequality
The other day, Tyler Cowen attempted to inject some nuance into the debate over inequality with a piece in the New York Times. In his piece, Cowen argues that even as inequality within most particular nations has increased in recent years because of capitalism and free trade, it has in fact decreased massively on a global scale. Although the conclusion that inequality is increasing in most nations even as it is decreasing globally seems counterintuitive, it is actually a very simple concept to grasp – for instance, immigrants to the United States improve their quality of life substantially (and thus marginally decrease global inequality) but in the process create greater inequality within the US. Similarly, unequal economic growth in countries like China may exacerbate the difference between rich and poor within China, but still create enough growth at the bottom that the gap between those at the bottom in China and those at the top in the world’s wealthiest countries decreases. Cowen argues that this does not mean inequality is an issue unworthy of discussion for purposes of national policy, but it does mean that discussions of inequality should be prefaced with an acknowledgement that inequality has actually been decreasing on a global scale.
Daniel Little attempts to push back against Cowen’s argument. (H/T: Andrew Sullivan). Little argues that focusing, as Cowen does, on the reduction in inequality across the global population misses the point of arguments about inequality. Instead, Little argues that what matters in discussions about inequality is inequality within and across nations, which Cowen concedes has been increasing. In other words, says Little, concerns about rising inequality have to do with concerns about the effects inequality has within societies, which function as discrete political and social units – no one cares that global inequality is decreasing as long as it is increasing in their own society, and the effects of inequality are experienced only within a society.
Those effects, says Little, include “allowing the bottom 40% [within a country] to stagnate.” This in turn, says Little, means that the quality of life for that bottom 40% is less than it could or should be given their country’s economic position, that the bottom 40% in the future will not be as productive as they could or should be due to relative lack of education or healthcare, and that it “undermines the perceived legitimacy of our economic system,” all of which collectively present a “political problem of the first magnitude.” He further suggests that it undermines social wellbeing as a whole.
While acknowledging that rising inequality within a country can be a problem in and of itself (rather than just a symptom of other problems), I find Little’s argument that it is universally a “political problem of the first magnitude” in any society where it is present – to the point that decreases in global inequality are irrelevant – to be highly unpersuasive, and indeed self-contradictory.
To be sure, in many nations or situations, it may very well be the case that rising inequality means that the bottom 40% stagnates, and all or almost all of the growth is concentrated at the top. But that is not automatically the case, and that is the entire point of Cowen’s argument. If it were the case that inequality amongst the world’s population was irrelevant, and inequality “across countries” were all that mattered, as Little seems to claim, then we would not have had even the “moderate” success in reducing extreme global poverty that Little acknowledges.* Moreover, in an era where there has on the whole been massive acknowledged economic growth globally, it is paradoxical to claim that inequality across the world’s population substantially decreased while economic growth and opportunity for the poorest people in the poorest countries stagnated.
For instance, Little places his greatest emphasis on the growth of inequality within China, where inequality has grown massively since 1984, when it had a Gini coefficient of only .28 (on a par with the relatively equal, but prosperous countries of Scandinavia), reaching .55 by 2010. Yet it was China’s relative equality that was associated with economic stagnation – prior to the increase in inequality, it was an economic backwater in which quality of life improved not at all in most of the country for 40 years. In other words, China was relatively equal in no small part because virtually no one was doing well. In retrospect, it seems hard to imagine how China could have achieved massive growth without at least some significant increase in inequality given the extremely low baseline from which it began.
That doesn’t mean that China’s economic growth has been ideal, and it is certainly possible that the relatively unique manner in which that economic growth has occurred has caused more inequality than necessary, benefiting the poor less than it hypothetically could have. But it’s extremely difficult to argue that it hasn’t benefited the poor in that country substantially. While Little argues that inequality is nonetheless a problem because it is associated with “social disadvantages,” that doesn’t seem to be the case across-the-board, and certainly in the case of China, the preexisting social state was hardly something many people would like to return to.
Moreover, if the reduction of global inequality were irrelevant compared to the increase in intra-country inequality, as Little seems to insist, then global social unrest would be reaching unprecedented levels. This, however, is not the case, despite recent headlines about Ukraine and Israel. To the contrary, political and social violence has been decreasing rapidly on a global scale since the 1980s.
None of which, again, is to say that rising inequality is never a significant or important political problem. Certainly, as Little cites in both posts linked above, there is reason to believe that in many instances, rising inequality causes social problems and acts as a destabilizing force. But it cannot pass without note that all of the data Little cites for support of this position is data from OECD nations – in other words, it is data from nations that have already achieved a comparatively high baseline standard of life and social and political stability.
These are nations at the pinnacle of the global economy, who presumably have much to lose and little to gain from enabling increased inequality. They are, more importantly, nations whose elite drive globalization which, while it may significantly reduce global poverty, likely reduces opportunities for economic and social growth amongst the lower and middle classes of their own nations. Simply put, it seems likely that, in OECD nations, rising inequality will be associated with something akin to economic stagnation for the lower and middle classes even as the rising inequality in OECD countries “pays for” economic growth in developing countries, thereby reducing global inequality and extreme global poverty. For OECD countries already at the pinnacle of the global economy, it is not difficult to imagine how internal rising inequality, resulting in relative stagnation amongst the poor and middle classes of those countries, could threaten to at least partially undermine the political and social order that has historically allowed them to thrive.
These potentially negative effects of rising or high inequality need not be limited to OECD countries, either – certainly Latin America has had its share of inequality-induced troubles over the years. But those are cases where the inequality involved was particularly extreme, where political and economic power was so concentrated in the hands of a small number of people that “stagnation” amongst the lower classes was effectively official policy.
But that brings me back to the point of all of this: rising inequality is a “first order” political problem only insofar as it is, in fact, paired with intra-society lower and middle class stagnation. Looking at the net decrease in global inequality, as Cowen does, shows that for much of the world what is happening for the lower classes is not stagnation but rather unprecedented economic growth. Focusing on intra-country rising inequality as a “first order problem” in and of itself in all situations thus diminishes the reasons it is an important problem in specific situations while also potentially threatening to undermine tools that have greatly succeeded in reducing global poverty.
*Calling the reduction of extreme global poverty by 50% and the removal of over 1 billion people from that state in 20 years a mere “moderate” reduction strikes me as a pretty massive understatement, but I’ll take Little’s characterization at face value here nonetheless.
The significant decrease in global inequality is certainly a good thing. I’d be more impressed with the strongest proponents/politicians of the current model, which i’m not suggesting you are, if they actively campaigned on the platform of ” this will help really poor people in other places if the bottom half of this country is stagnant.” Of course that isn’t an argument that will get anyone elected. If policies that are helping other countries be less poor are enacted here it is because they were sold as helping us or more likely helping our companies get rich which will trickle down.
I think there is a either or kind of fallacy that gets displayed often in discussions of inequality. Sort of, the way we have done it so far has helped a lot of people therefore any other option, which is usually strawmanned and simplified can’t work. There are only two choice, the current system or some bad one. However i’m not really sure why plenty of things people want to do about inequality in this country would harm the improving prospects of people in other countries. To pick a easy target, providing UniHC for Americans is not going to doom a million poor Africans to poverty. But improved banking regs, which i know is thick contentious topic, that decreased the chances of another great recession is not going to kill poor Asians. Or more libertarian friendly, which i in general agree with, decreasing the crony capitalism in the US, simplifying the tax code, cutting corporate welfare could all lead to less inequality here and abroad.Report
I think you are dealing with several issues here.
1. Most people are not internationalists/globalists. I don’t mean to say that they are isolationists but most people seem to believe in the nation-state as the maximum form of government and do have emotional/tribal attachments to their nation and fellow country people in some sort of psychological way. This is going to get them to value the welfare of their country over the welfare of another country and their countrymen over the wealth. I mentioned this many times but it is really only some on the left and libertarians that go for completely open boarders. Most people seem drawn to at least some forms of protectionism via the nation-state.
2. Tyler Cowen and other academics are think about this much more abstractly than most people. Obviously a function of their training but also a function of ideology and cognitive bias. A person working part time for no benefits who remembers their dad’s factory job with benefits is not going to be thinking about rising wealth in Bangladesh and probably never will. Same for the college student with a burden of student loan debt and an underpaying jobs. They are primarily concerned with their own situation and the seemingly unending misery of it. Economic talk about rising wealth might be true but it is not something that they care about and for a presumably very comfortable economist to mention it probably doesn’t help.Report
I get all this, which is why I acknowledged that it can be a major problem in particular cases. My objection is to the claim that inequality increases are always bad and always associated with stagnation amongst lower classes. This simply isn’t true even if it is true in the specific case of the US. Littles claim – and the claim of many activists on this issue – is that rising inequality is a global problem rather than just a local one.Report
Littles claim – and the claim of many activists on this issue – is that rising inequality is a global problem rather than just a local one.
I think it depends on the metric. Poverty, fairness, (likelihood of) democratic institutions… all that stuff. I don’t think it’s unreasonable to for a person to assert that a rising curve of global wealth in the hands of fewer and fewer people is a problem. Am I wrong about that?Report
That would be fair, but Cowen’s point is that this is not what’s happening – if you look at the world as a whole without regard to borders, inequality is decreasing substantially for the first time in memory. The only way to draw the conclusion that global inequality is increasing is to look only at intra national metrics and then aggregate those metrics, which is what Little is arguing for, and which I argue makes no sense whatsoever.Report
Fair enough point. I’ve heard Cowen’s point before but it seems more like rhetoric than anything else. Cowen is showing is biases and basically saying that people shouldn’t care about income inequality in the US but is being a bit too cowardly to say it out right.Report
@saul-degraw
Cowen is showing is biases
And you’re not?Report
@dave
I certainly admit to showing my biases. I suppose this makes the issue whose biases are more objectively correct. Is Cowen right? Or is Snarky right below?Report
Mark, I just want to complement you on your tasty new gravatar. I approve.Report
Thanks for clarifying that Mark. I’m gonna reread the post. A bit more carefully.Report
Mark,
I re-read the post and the accompanying linkies, including the one Cowen bases his argument on. Wrt that, I thought this quote was interesting (referring to the first graph in cowen’s linked to paper):
But after the global median, the gains rapidly decrease, becoming almost negligible around the 85th–90th global percentiles and then shooting up for the global top 1%. As a result, growth in the income of the top ventile (top 5%) accounted for 44% of the increase in global income between 1988 and 2008.
Here’s my question: If the top 1% of the globally wealthy account for 44 percent of total global increases in income over the time frame, how is the claim that income inequality is increasing incorrect? THe paper cites no data inconsistent with that claim, at least as I’m reading it (layman!). What would be the metric for determining whether 44% of global income increases accruing to the top 1% indicates a decline in inequality? Something like total wealth, or prior realizations of income gains, or … etc?
Sure, the data presented establishes that the lower 50% have seen increased incomes, but only as a result of the decline of the the 70-90 percentiles. How does that establish that global income inequality is declining?
I ask that seriously, btw, and not snarkily. I’m really not seeing the argument against Little’s broader point, or that Cowen’s thesis is even correct.Report
The nation-state problem and representative democracy does explain a lot about why people talk about income inequality in the US and I think rightly so.
We are seeing gilded age levels of wage stagnation and wealth differentiation in the United States? Why shouldn’t people care about their own situation and that of their fellow country people? Should the contract employee without benefits be totally cool with their situation because of rising wealth in Bangladesh? I don’t think so.Report
Now, consider this in the context of support for open borders…Report
Sure but
1. Open Boarders is probably not going to happen in our lifetimes.
2. What percentage of the world really wants open boarders?Report
Very few do, for the reasons you describe. It’s a relatively popular concept here, though.
Anyway, I was referencing one of your previous comments.Report
I think a lot of people would be for borders that are quite a bit more open then now but not completely Open.Report
Sure, and I think that I am among them.
Worth pointing out that a lot of the arguments used for more open borders (if accepted) actually justify extremely open borders.Report
This is a very on-point observation, Will.Report
@saul-degraw
Why do you keep spelling ‘borders’ as ‘boarders’?Report
@mad-rocket-scientist
Something deep in my subconscious.Report
@saul-degraw
Come kind of issue with living in a boarding house? Of are all political boundaries made of planks of wood in your deep subconscious?Report
@mad-rocket-scientist
I did have an unrequited crush on an Australian girl when I lived in Japan and in a boarding house with her. Ah Rosie….Report
@saul-degraw
+1!Report
Of course, IS rising inequality in the US paying for rising standards of living elsewhere? That’s sort of a key question — is our inequality actually helping the world, or just screwing us (as it were)?
Even then, trying to make the case “You guys have to put up with your rich overlords so the folks 5000 miles away can be better off” is a pretty hard case to sell, but as far as I can tell no one is really making it.
They just conflate things. “Sure, it’s worse off HERE, but it’s better everywhere else! How can you complain!” as if the link between the two is rock solid.
As best I can tell, the money that could have been used to increase my income didn’t go to Bangladesh, but to the board. And in the last decade to the finance industry, which lit it all on fire, which I’m sure helped Bangladesh somehow. 🙂Report
Morat, meet the concept of the invisible hand.
With properly constructed institutions it is possible to create a system where people pursue profits and gains (and avoid losses and expenses) in ways which enrich others. Some guy named Smith wrote about it in the 18th century if memory serves.
A billion people got better lives as a board got rich helping to make it happen. Another set of stockholders (Sears) lost wealth by missing out on the opportunity.
And by the way, the Buffets, Jobs and Gates are not our overlords. If they are, then we need more overlords as they are the ones improving the world.
And things are not worse off here, either. Wages are up for working families (even as family size decreases) by fifteen to twenty percent (if memory serves), income taxes are lower, transfer payments are higher and substantially more are retired.
So, people here are better off (but less than our spoiled asses would like to take for granted absent any understanding of the miracle of material progress)
A billion plus people in developing nations are substantially better off due to entrepreneurial capitalism.
Successful capitalists are richer than ever creating the material gains for fellow humans.
And this is a bad thing because of what? Because you are envious of people richer and you and want to call them your overlords?
Progressives have no concept of progress. None. Pure counterfactual magical thinking. Your worldview is completely and totally absurd and if implemented would lead to the very destruction of prosperity.
Good intentions and a warped worldview is the recipe for global catastrophe.Report
@roger, go to the vast swaths of the country and tell them things are better for them, when they’re Dad paid for college for all of his kids while allowing Mom to stay at home then got a pension while their stuck working a low-wage no-benefits job and their kid has to take out $40,000 in loans even to go to the state school.
I’m guessing it won’t go too well. The fact people can buy HDTV’s and iPhone’s cheap is inconsequential when they can barely afford health care and the price of college is skyrocketing out of control.Report
@roger It is clear you love the marketplace, but there’s a certain amount of (what I would consider to be) mythology in your valorizing of the win-win advantages of the “free market.”.
1. A billion people making more money does not necessarily equate to a billion people living better lives. “Traditional” village life is probably more consistent with human nature and happiness. And many of the Chinese and Indian peasants that are now sewing clothes or assembling widgets are doing not because it’s a more fulfilling life, but because they are no longer free to live as they once had.
2. Although it is now okay to admire Bill Gates, because he seems to be pursuing good works, let me remind you that he built his empire in the most rapacious way possible, using market dominance to smoosh the competitors that did the actual innovating (e.g. NetScape, Sybase, WordPerfect, PC Tools, Digicalc, Borland, Novell, etc.) Jobs and Buffet are smart people, but do you really think that they would not have done precisely the same thing that brought them to riches had their rewards been in the tens of millions instead of the tens of billions?
3. Wages are NOT up for working families, particularly in the bottom 60% of the economy: household incomes are up by marginal amounts, mostly because we transitioned from single-earner to dual-earner norms.
4. Income taxes are marginally lower for the middle class and lower, but the total actual income is lower: they receive fewer protections and benefits, the portions of their income devoted to “necessities” (food, medical care) is higher, and their health is poorer. I will grant you that the picture is complicated by both advances and retreats in the last 30 years. but the overall picture is not one of happy expansion of opportunity.
5. In the sunny, happy version of market adulation, the rich are rich because they are inventive, risk-taking, and productive. There are equally-plausible explanations of their increasing wealth that posit that they have merely gained leverage over other sectors of the economy in a way that allows them to be more extractive . For all their “risk-taking”, how many lose it all? How much of their vaunted “innovation” consists of moving production to places where it costs less?
I’m not trying to be Snarky (hehehe), but these sunny narratives of untrammeled progress due to “free enterprise” are both simplistic, and–in large measure–untrue.Report
Facts and reason? Meet deaf ears.Report
So, to sum up: You still don’t have any proof that stagnant wages in the US are contributing to greater prosperity globally (ie, we’re paying for their uplift), and we should just shut up and accept that markets are perfect and good and this is the best of all possible worlds?
And it’s because of envy and ignorance?
Sounds a bit…cultish.Report
Sure, until the traditional village folk want to bind your feet or cut off your clitoris or brand you as an untouchable.
The first part was a little hokey, but now I just think that you are just pulling everyone’s leg. Are you going to tell us next that all those black Americans who left sharecropping and headed north to factory jobs were just doing it because they were no longer free to live the happy pastoral lives that they once had? I mean, I bet if you ask any of those old timey black folks they will tell you that they were happier then. Those were simpler times when a man knew his place.
This is in an interesting sentence for a lot of reasons. It is especially interesting for someone like me who is two generations removed from field work. If you are talking to the “vast swaths of the country” whose father worked a job that allowed him to put multiple kids through college without financial aid and whose mother stayed at home, chances are that you are talking to someone whose level of wealth and income is significantly above the national median. You are right to say dad, instead of mom, because it was most likely a man who was able to get to that position. And you might as well complete the picture and say white dad, because if you’re talking to someone who feels nostalgic for some imagined post-war era there is a good chance that person is white. There are reasons for that, which all of you economic nostalgia types conveniently leave out.
This thread is proof that progressives are nostalgic for an economic era that never existed in the same way that conservatives are nostalgic for a moral era that was never all that moral.Report
@roger , it’s been a while since you actually read Wealth of Nations, isn’t it? (Assuming you ever actually have.) Smith invoked the famous “invisible hand” metaphor exactly once, and that was to argue for import tariffs as a means to encourage domestic manufacturing as opposed to more heavy-handed command and control measures.Report
Truth be told I have never read Moral Sentiments, and I never finished the Wealth of Nations.,, the ending was rambling and pointless to the modern reader. That said…
Smith uses the term “invisible hand” at least twice in his writings:
“As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”
An Inquiry into the Nature and Causes of the Wealth of Nations par. IV.2.9
This was of course preceded by his writing on moral philosophy:
“The produce of the soil maintains at all times nearly that number of inhabitants which it is capable of maintaining. The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.
The Theory of Moral Sentiments par. IV.I.10
And also this, where he bats around the idea:
“The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security is so powerful a principle that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.”
The point is that Smith hit upon and popularized a brilliant idea. That it is possible for people to pursue their own interests and in so doing also promote others interests. It combines a bit of early positive sum thinking along with the idea of emergent order and design. Truly fishing brilliant.
By the way, the invisible hand concept later helped to inspire Darwin to come up with the similar idea of natural selection. Smith and Malthus begot Darwin.Report
Evolution (EVILution) demonstrates the problems when things are left to their own devices without a central planner.Report
Jaybird,
Suboptimal design, with billions of failures for every success? 🙂 (Seriously, evolution has produced marvels but few of them can be considered an ‘optimal’ design).
Seriously, that is how it works. Slowly, with most everyone going extinct. Economically, we tried that but the Depression/Boom cycle was just too painful when there were tools to soften it.
And we got tired of all the poor cluttering up the place, looking untidy and occasionally having revolts.Report
Evolution (EVILution) demonstrates the problems when things are left to their own devices without a central planner.
Every 60 million years or so, almost everything dies.Report
I really want to hear more on how being a pre industrial peasant was the bees knees.Report
“I really want to hear more on how being a pre industrial peasant was the bees knees.”
Well, it WAS often a-pollen.Report
Pretty sure JB was being facetious, Morat.
I certainly was not intending to state than economic progress should just evolve. Material progress depends upon institutions and world views which channel personal interests into the greater good. These institutions themselves may evolve culturally (cultural evolution differs markedly from biological), or they may be designed. Usually it is a mixture of the two.
The Great Depression was not a failure of free markets. It was the result of regular economic cycles combined with bad institutional changes followed by even worse institutional responses. I would liken it to trying to put out a fire with a truck full of grease.Report
I was trying to get a “you’d think that the left would prefer GMO” joke eventually but couldn’t land it.Report
Jaybird, I wish you could have landed that trophy fish. You’d feel a lot better about yourself. Of course, Roger’s invocation of the invisible hand wrt Darwin is something that even he (Roger) concedes is a mistake. One that he hisownself said Darwin regretted, since using the natural “selection” to characterize his views implied an end-design. Rather than, you know, naturally occurring processes.
Oh, well. Mockery is so damn easy, no? And fun!Report
If we could have a truly progressive comment section, only the right people would be mocked.Report
And more mockery.
Thanks for making my point.Report
@snarky-mcsnarksnark
A billion people making more money does not necessarily equate to a billion people living better lives. “Traditional” village life is probably more consistent with human nature and happiness.
That might be more convincing coming from someone who wasn’t, like me, a privileged American. I’m reminded of a story one of my undergrad profs told about when she spent a year in a village in India that lacked running water and electricity. When the women of the village expressed envy of her life in America, she tried to persuade them of the specialness of what they had, and how much they’d lose if they developed. They looked at her askance, and saidd, “You got your chance, why can’t we?”
Nor did this American prof who so admired what they had, in contrast to America, decline to return to the U.S., and choose to stay there.
So let’s be careful that we’re not just romanticizing others’s poverty.Report
@james-hanley I’m not celebrating poverty, but noting that we who live in industrialized societies don’t live lives that are unquestionably superior to those of indigenous tribes or traditional cultures. We have (much, much) higher incidences of anxiety and stress disorders, and mental illness. We are more separated from one another, and are lonelier. As consumers, we are propagandized into a constant state of dissatisfaction. And we’re kinda fat.
Sure, non-poverty beats poverty eight ways around the block. And living in the slum of some city is going to be miserable no matter what country we’re in. But there is such a thing as human nature, and small-scale life satisfies parts of it that industrial life simply does not.
I was simply arguing that simply equating income with quality of life was–in itself–inadequate.Report
Snarky,
Can you name more than 1000 people that you know?
You still live in that traditional village, even if it’s in a big city.
[Autism, on the other hand, appears to be a fairly modern epidemic. At some point, those people were “quiet but normal”]Report
I was simply arguing that simply equating income with quality of life was–in itself–inadequate.
Dude, *ABSOFRIGGINLUTELY*.
But that’s something to talk about when we’re discussing the upper levels of Maslow’s hierarchy. When we’re talking about self-esteem, or friendship, or spirituality, it makes absolute sense to look at the houses that are twice as big as the ones we grew up in though they have half the people, the silly “keeping up with the Joneses” rituals that leave everyone vaguely resentful, the Babbitry.
We’d be better off making do with less, hanging out with friends more, making bigger meals for more people and eating with them, and quit trying to be entertained by the new and the novel.
I completely and totally agree with this. Jeez louise do I agree with this.
I just have no idea how to create a policy that will result in more of this sort of thing and do not trust anyone else to make such a policy… because I suspect that that’d result in me being forced to hang around people I don’t like that much and, worse than that, feed them (all in the name of some silly social control idea that sees my introversion as a flaw at the same time that it tells me that I need to spend more time close to home).
But I am a rich white dude who watched “The Razor’s Edge” unironically. I have enough air, water, food, shelter, and security.Report
The Economist’s Ryan Avent has a different response to Cowen:
“Let Them Eat Cosmopolitanism”
I think he downplays the estent to which trade barriers are the policy aim of people concerned about intra-societal inequality, but I don’t think he’s wrong to corrct for an overreprestation of same by those making the global-context argument.
The issue is, do we believe in a purely global context for all considerations of comparative material circumstances? Do we also support living-standard support for the relatively poor-off in rich societies? If the former, then why/how the latter? If there are exceptions to the former that the likes of Cowen believes in in order to support the latter, then they’re/he’s just stuck making the same arguments for why the global context shouldn’t be seen as the full picture – why the relatively poor-off in rich societies who are actually fairly well-off absolutely should receive aid from the absolutely well-off alongside the absolutely poor-off – that those that make a more fully-embraced case for addressing rich-world inequality also have to make.
I don’t really see how the anti-nationalist/absolute-standardist view of material circumstances isn’t an all-or-nothing proposition. If you want to U.S. to do a bit to help their relatively poor-off but not yeah-much, the justification for doing that much rather than focusing all efforts on the absolutely poor-off isn’t any stronger than it for doing a bit or somewhat more. I’m actually not sure where Cowen comes down on that.Report
I think there is a natural tension here that a lot of people don’t want to admit. Pure arguments often tend to be catchy, but it’s hard to be really consistent on them until or unless you’re willing to argue that we shouldn’t talk about subsidizing college over here while children in Africa have access to a pittance of what we do, or alternately justifying genocide abroad if it were advantageous to us.Report
Thanks for the Avent link – that is a much better argument that with some quibbles, I largely agree with. (Amongst my quibbles is that I think Avent understates the extent to which activists oppose globalization). I do think Avents main point about inequality concerns in the US being about more than nationalism is correct for instance.
It is Littles argument that bugged me.Report
Hey, man. Nice Gravatar.Report
Love that gravatar.Report
I had some serious reservations with mr Avent’s post. I almost responded yesterday in the Economists comments section. Here is what I was going to say…
Avent writes:
“Mr Cowen’s piece therefore rests on something of a straw argument: the idea that egalitarianism as a political force in America is fundamentally opposed to globalisation.”
Progressive ideology, masquerading as egalitarianism, is indeed fundamentally opposed to globalization, capitalism and the inequality inherent in free market outcomes. As such it is intent upon eradicating effective capitalism by turning into something which is perceived as softer, gentler and generally superior. If profits contribute to inequality, and inequality is a problem, then it is a short step to begin the benevolent war on profits and wealth. Piketty is pretty much the current poster child of this way of thinking.
Avent then himself begins straw manning against Tyler for supposedly disregarding the role of safety nets and redistribution within developed nations.
I have read him for years and am not familiar with Tyler having any qualms with effective social safety nets.
Avent then writes:
“A generation of global integration has been very good for the world’s developing economies. In light of that, the most important question, to me, is how best to maintain broad public support for openness and integration.”
His solution is more wait for it…. even more redistribution. I will let that pass.
What I would like to point out is that if we really care about “broad public support” for global capitalism, then I would suggest the first place to start is to stop bad mouthing it. Indeed, a pundit such as himself should take a lead in spreading the worldview.Report
I like global capitalism. I like global unions too. Nothing like the words “Global Strike” eh?
But, hell, I’m progressive. Maybe you ought to rethink what Piketty’s saying?
As-near-as-we-can-get-it Equality of opportunity is necessary in order for Inequality of Results to have any meaning. If Jughead Walton (not his real name) can be ten times as rich as you, without doing a dag-nab thing in his entire life — and more importantly, getting rewarded for being a conservative goldbricker — that’s money that ain’t in your hands. In the hands of someone doing something better and wiser and more risky with the money.Report
Sounds like a Scrooge McDuck vision of wealth stored in big private vaults and guarded by gnomes.
Most people put their money in banks (which lend it) or invest it in ideas with a potential for possible long term gains. In other words, mr McDuck is supplying the capital necessary to create the infrastructure, products and jobs of our children.Report
Ah, yes,and we’re all so thankful he’s there there to supply capital. I mean, if he hadn’t collected it all in one place, it might have been spread out among thousands of people!
Or something.Report
Most people put their money in banks (which lend it) or invest it in ideas with a potential for possible long term gains. In other words, mr McDuck is supplying the capital necessary to create the infrastructure, products and jobs of our children.
Ever considered that, like any other market, the market for investment (for finance in general!) can suffer from supply and demand issues?
I wonder what the economy would look like in such a bubble — way too much investment money, chasing too few good investments. How would the economy meet such a demand, a chase for ever increasing returns on more and more capital? (Seems like I recall such a bubble not to long ago….and indeed, it was fueled by debt. The rich lending money to the poor, so the poor could buy houses, which the rich could use as investment vehicles….so surprised that didn’t work out).
Moreover, what would happen if such a thing cycled on itself — more and more wealth going into investment, rather than being spent? Hmm. I mean, just as a guess — you’d see demand fall for anything but necessities (and of course, for good investments). So what would be worth investing in?Report
You are changing the subject, Morat. Nobody here is arguing for regulations which allow bankers to loan unsecured funds to low income people and then get the government to bail them out.
Address the arguments.Report
You mean you don’t see how supply and demand with investments works? Or you don’t see the relevance to wealth inequality? The financial failures are merely a recent example of the problem.
You were praising the wonders of investment, and how it raises all boats. I just pointed out a potential failure mode — one directly on point given the topic is wealth inequality.Report
I assume boom and busts are somewhat inherent in our market system. Seems to be a steady part of a regularly improving trend pretty much since economics began.
I think rewarding investors who make stupid loans is a bad idea and will make the cycles worse and the growth less.
Now why does this have anything to do with global inequality? To the extent inequality is as a result of cronyism, I am against it. But that makes me against cronyism not inequality. Similarly I am against bail outs which reward stupidity and regulations which require loans to go to people who can’t afford them.Report
It’s like you’re deliberately ignoring it. Let me try again, boiled down:
The poor and middle class are capable of consuming all income they earn. (The poor lack choice, for the most part, forced to spend it on necessities. And the middle class has, rather obvious from our last credit driven recession, run into a serious crunch in it’s ability to consume more than the necessities.)
The wealth are not capable of consuming all they earn, so they seek to place excess earnings in investments. (Yes, the middle class can invest, but the vast bulk of that is in 401ks and even then it’s a pittance).
As income inequality worsens, the middle-class has less excess money to consume — but the rich have more to invest. As this cycles, the rich seek more and more investments for their money — and the poor and middle class have less with which to consume.
So what happens to a market when there is excessive amounts of demand? In this case, an excessive demand for places to invest.
Couple that with an economy with decreased consumption. And ask yourself “What would that look like?”Report
Morat,
I am engaging with you and definitely not trying to avoid or evade the topic. In a world where there is more capital than opportunities I would predict a lower risk adjusted return.
And let me clarify that creating productive opportunities to capitalize upon the potential productivity of middle class’s Americans is itself an economic opportunity. Solving it via economics involves the use of profit and loss. The opportunity to make big bucks is the incentive for people to take the risks and use their ingenuity in new ways.
The cure for economic stagnation is not caps on positive sum interactions (which is effectively what a cap on profits is). Just sayin’Report
Roger,
Giving money back to the middle class enables risk takers to make MORE profit, not less. They’re actually pretty damn good at liberating money from the middle class.
(I’m not for banning all profit, or even capping it).
Are you familiar with the FIRE economy? With how health care got classified as a Growth Industry? How WallStreet magically tied “stable industries” to “growgrowgrow!”, through analyst recategorization (and stock options of CEOs)?
Lack of investments means folks will CREATE new investments out of stable industries. And then pass the bag before the whole scheme implodes.Report
Roger,
What you get is an investment bubble — just like you get bubbles in ANY market with excessive demand. Given stagnant wages, what you get is even worse — as demand rises, supply actually falls.
The whole shadow market in unregulated CDO’s grew to feed trillions of dollars of investment money demanding returns. It wasn’t regulation or lack of regulation — it was high demand and limited supply, and the market responding in a very classic pattern. Whether it’s tulips or pig bellies or high-return investments, this happens when you have too much money seeking too few goods.
Unfortunately, the crash didn’t actually relieve the tension because the ‘crash’ was in the finance industry which means the knock-on effects were too broad — letting it all burn would have destroyed far more than just invested wealth. (You know, 1929 style).Report
Focusing on intra-country rising inequality as a “first order problem” in and of itself in all situations thus diminishes the reasons it is an important problem in specific situations …
One might say the same about focusing on international growth — it diminishes the reasons intra-country inequality is an important problem in specific situations. What’s missing from the “hey look over there — China’s poor are becoming less so” distraction is a plausible argument that the level of intra-country inequality we have is necessary for poor countries to escape poverty. That free trade and liberalized immigration results in some increased inequality is clear, but the argument that steps taken to alleviate such effects would somehow impoverish poor countries amounts to so much trickle-down hand waving. It may be true that international reduction in poverty through free trade and immigration causes some inequality, but Cowen makes only the feeblest attempt to establish that the latter is somehow a necessary condition for the former.
It is difficult to establish how much of the current rise in intra-country inequality is due to free trade and immigration and how much is due to other factors, such as a positive feedback loop of ever richer people achieving ever higher degrees of regulatory capture. Since you raised this same issue and others in the previous post, I’m surprised to see you endorsing Cowen’s attempt at a distraction, all while criticizing Little’s.Report
I have an equally contradictory reaction to this analysis: Great for the world, bad for most of us
To the degree that many people in the world are being lifted from sub-subsistence to subsistence (or better) that’s great:. starving to death is no fun. And even if you’re on the bottom within your country, if your income is rapidly rising, your subjective quality of life is getting better, and that’s good too.
But for those of us that were way on top before, like just about everyone from the countries of people contributing to this blog, the pressure’s on. Now that income, and technology, and education are becoming available to more people in the world, there will be more programmers, accountants, engineers, writers, and laborers that can do what you do for much less money. I know it’s complicated, but one important reason for the stagnation of income for almost everyone but the financier class over the last 30 years is that we’re all more replaceable.
Even if every single citizen in a country is safe from starvation and medical catastrophe, I believe that it’s harmful to a society to have gross inequities in income and power. Current trends are all pushing in a direction in which these inequities will be exacerbated (including, as mentioned above, globalization, the financialization of everything, and the rise of fundamentalist political ideologies and parties justifying these inequalities).
America has, for most of its existence, identified itself as a relatively classless society, at least through the 90s. De Tocqueville admired the social levelness and mobility of America, and their embrace of the notion that “all men are created equal.” But the last 30 years have seen 1% of the population inhale an astounding “93% of the economic growth, while the lowest 60% have stayed virtually stagnant. (The disparities are even greater when considering total wealth: the top 1% has about 9 times as much in assets as the bottom 80% combined. And the wealthiest 400 families have more assets than the poorest 50% of the country.).
I know I’m plowing old ground here. But I think it’s an unmitigated social disaster.
Even if allowing the growth of a plutocracy is ultimately more economically efficient or contributes to greater absolute growth, I believe it leads to a diminution in quality of life. We are social animals, and we are genetically adapted to live in communities. We were all raised on notions of community and opportunity that are no longer true. The years between WWII and 1980 were a complete historical anomoly, in which income growth mirrored (and even exceeded, by a bit) productivity growth. That has stopped now, and if you’re in the bottom 95% of the population, it has become something of a zero-sum game.Report
@snarky-mcsnarksnark
I agree with pretty much all of this. The top 5% largely got so rich in the last 20 years because they are somewhat insulated from the effects of globalization whereas the rest of us are not.Report
The exact opposite is more likely, Mike.
Entrepreneurs, executives, superstars and capitalists both created and *capitalized* upon the opportunities inherent in globalization and new technology. For this, they created massive wealth for themselves and others (including a billion previously third world laborers).
Profits are the scores of the game of capitalism. Huge new opportunities emerged over the past twenty years for improving the human condition. We experimented and discovered ways to improve economic efficiency and material outcomes of the human race. For this unprecedented advance, those that were successful reaped large scores. Those unsuccessful lost money (see the stockholders of Motorola and Sears).
To recap:
Those earning a spot in the top one percent got big rewards for seeing opportunity, creating potential solutions, taking risks and fulfilling their visions. Those not successful failed. Those that were successful saw huge rewards while improving the average condition of humanity.
This led to the greatest improvement in living conditions in the history of the human race.
So we should…. Get upset about it and demonize the agents of progress. Huh??Report
” The top 5% largely got so rich in the last 20 years because they are somewhat insulated from the effects of globalization”
On the contrary, the top 5% are more engaged in globalization than anyone else, and that’s how they got rich(er).Report
Roger / Kolohe,
What I am talking about is that the wealthy are not competing with the wealthy in other countries for jobs. Many American workers are.Report
Mike,
you’re assuming the rich have jobs.
http://robertreich.org/post/91880951615Report
I agree with @kolohe
There is a theory on the left that one reason we are seeing rising income inequality is because there is a global class of plutocrats that has more in common with each other than their fellow countrypeople. They don’t spend time with anyone but themselves.Report
There are a lot on the liberal side who think inequality has grown largely because the .01%/big business has far more access to the levers of power so they have been able to get laws that preferentially benefit themselves at the expense of wider prosperity. That a powerful group can bend laws to their own benefit is not an argument, that at least in theory, libertarians and conservatives are against. In fact they often make that very argument themselves in support of their own positions.Report
Mike,
Capitalists, executives, entrepreneurs and such compete with each other for profits. Most entrepreneurial ideas fail. Most past successes are later replaced a la creative destruction.
The one percent of any given year are those who a) try and b) succeed. Those who try and fail don’t show up that year, as zero profits or billion dollar losses is not worthy of membership into the class. Those in the class this year are constantly threatened with getting kicked out next year by so done smarter than them with a better idea for human well-being.
Profits play an essential role in economics, acting as incentive, reward and signal for opportunities to enrich fellow human beings.
Inequality of results isn’t bad. Inequality is essential. It is a necessary. It is good. No. It is great. We owe our lives and well being to it.Report
Roger,
allowing goldbrickers to get richer based on other people’s smarts and not their own is exactly the opposite of what you’re saying, though.
For inequality of results to mean something, we need (as close as reasonable) equality of opportunity. That means not stacking the deck with wealth.
“Born on third base and thought he scored a triple”Report
Greg,
Those on the left would love to believe that the gains of those with higher incomes comes completely from privilege seeking and cronyism.
Truth is there are two paths to prosperity. A zero sum path, which includes taking from others and using force and deception to gain unfair privilege. This we both agree is a problem
The other path is a positive sum one as illustrated by the invisible hand. The entrepreneur makes big bucks solving needs and improving the lives of others. Certainly there is a zero sum competition between producers, but it is a positive sum competition to see who can cooperate and produce the best value. We both should agree that this latter type of wealth is good.
Yes we agree that we should have less of the former and more of the latter. Considering the steady and increasingly rapid pace of global prosperity, it is pretty clear that the last few decades have seen more of the good type of wealth and less of the bad type of wealth than ever before, on net.
The tell tale sign of positive sum activity is the increasing size of the global pie. The reason Tyler is correct (indeed he is making the same argument I have for the last several years on these pages) is that we need to look at the total pie. Never, in 13.8 billion years, has as much prosperity and wealth been created as in the last two decades.
Sure there are still some exploiters in the works. Let’s continue to root the, out. It is simply wrong to mislabel the one percent as scoundrels. Another sign of progressive ideologies absurdity.
Seriously, how can any ideology mislabel the best two decades ever as some kind of problem? When your ideology uses sleight of hand and egalitarian misdirection to make human advance into a problem, can I suggest you consider a new ideology?Report
@roger I’m an astronomy nut so i do have agree that if you look at the last 13.8 billion years the last 20 has been the best. The early era of galaxy formation was not a good time to be around.
You are really making a speech here more than anything else. I think there is quite of bit ideological blindness among all sides when talking about inequality. Saying the rich exploit the levers of power is not a view that is inimical to liberals, libertarians or conservatives. But if a liberal says inequality in the US is to a significant degree due to the rich working that lever we get a lecture about invisible hands. It is great if globally the poorest are getting a bit better. That really is. The question is does inequality in the US have to grow for the poorest in Bangladesh to do better. I’d say no. We can fix much of what leads to inequality here which will not hurt others.
To be clear i don’t think the rich manipulating the system for their own good is the only reason for inequality, increases in technology certainly is part of that.Report
Kim,
Why on earth would I care that someone use inherited wealth to enrich human prosperity via a positive sum process?
You are making the mistake of shifting life into a strictly zero sum competition. If every rich brat used their parents wealth to invest in new ideas, which improved the lot of life for the rest of us, then I say hallelujah! In a positive sum game I want more gazillionaires, not less. I want every rich brat to grow their fortune ten times for their future brats.
Rich brats do not harm me on net if they are playing by the rules, they benefit me. It is important we ensure they play by the rules. This is true for everyone, not just the rich. For example the middle class needs to not seek privilege by outlawing competition for their wages too.
Our enemy is rule breakers and exploiters, not winners.Report
Roger,
Risk averse people do NOT choose positive sum games. Positive sum games are HARD, and you often LOSE — you said so above, I won’t quote.
So, um, part of the game is incentivizing positive sum games, yes? Can I suggest a reasonable wealth tax (capital gains tax at the same level as income tax)? And a fairly steep charge on inheritance, as well?Report
Greg,
I agree in many parts, but…
“The question is does inequality in the US have to grow for the poorest in Bangladesh to do better. I’d say no. We can fix much of what leads to inequality here which will not hurt others.”
You are clearly assuming inequality of outcome in a market based system is a problem in need of fixing. That idea does not hold up to any serious scrutiny. In reading everything I can on inequality over the past few years I have yet to ever read an even half way convincing argument that justifies this foundational belief.
Major arguments:
1) they will use their wealth to buy undue privilege in politics. This argument is a mess. How many more gazillions does Gates and Buffett need to afford political influence? Why are the special interests of the wealthy somehow less worthy than that of powerful collective groups, or of other non wealthy interest groups? Is ten gazillionaires better or worse than two gazillionaires? Why?
2) hierarchies make people below feel bad. So? Are we gonna eliminate all hierarchies or just income based ones? What abut intelligence, political influence, looks, sexual success, skills at sports or world of Warcraft?
3). The wealthy take from others. Either assumed and not actually true, or true and the real problem is taking, not income itself.
There are other arguments (arms races and such) but the above are the major arguments, and they are just silly.
So, why should you or I worry in the slightest that someone got rich by investing, capitalizing or managing an entrepreneurial endeavor that contributes to the betterment of humanity? Indeed, if we are good, wouldn’t we celebrate it?
Profits are essential to markets, and profits (inequality of outcomes) act as the scores for success in enriching the lives of others.
From this it follows that worrying about something which is not a problem and trying to fix it is quite likely to make the world a worse place. Here be dragons.Report
Kim,
I agree. If we are going to collect taxes from somewhere, capital gains and inheritance should certainly be on the table. I would be especially careful on the first though as it is effectively a tax against entrepreneurial activity. It may be counterproductive, leading to more inequality and lower standards of living for the average.Report
Roger,
Have I not mentioned nuclear power plants lately? Kochs bought some for pennies on the dollar after they got Walker elected, ya know. Firesale prices, for publically built power generation.
Again, getting rich ain’t nobody’s problem. It’s what happens afterward that is a problem. Risk averse people in charge of a growing share of Worldwide Wealth? That’s a drag we oughtn’t afford.Report
Roger,
I think “putting capital gains tax at the same level as income tax” (same brackets), is fair enough.
Hope nobody’s suggesting 90% tax rate or anything utterly crazy.
‘Sides, creating businesses is fun because it gets you new toys, not because you get to be a CEO (being a CEO is boring!).Report
Roger, i only have a few minutes and you wrote a lot. Nobody is against profits. Profits are good. I’m greatly puzzled that you don’t think rich people having undue influence isn’t at least a potential problem. Or at least that is the way that reads.
This may be to far off the point of your comment, but if you look at graphs of where wealth has gone over the last few decades and see more and more being concentrated in the hands of the very few while broad stagnation for pretty much everybody else in this country that suggests something odd is happening. That odd thing could be just technology but i doubt it. There is no reason more people couldn’t’ be getting richer in this country while globally the poor doing better. It is not good for capitalism itself to have rules bent to profit the very few.
As an aside, i wonder if part of the reason the poor are doing better globally in the last two decades is partially due to the end of Cold War.Report
@roger , you’ve got a good TED talk going there. All well-rehearsed, enthusiastic, and sunny optimism. But do the facts really bear out your premise? A study by Equilar, as reported in Bloomberg BusinessWeek, CEO pay is essentially random when correlated against measures like stock performance. And by “random” I mean a p-value of .01. So the notion that the masters of the universe in the c-suites are somehow earning their fortunes by the creation of value is highly questionable.Report
Road,
You ever find a real entrepreneur, you’ll find someone who isnt’ CEO of a single company. Starting businesses is fun, running them is a chore. Why not create a system that runs itself?
[Um. The owner showed up.” “You mean he’s not mythical?”]Report
I think we should pass a law that the average CEO in America cannot make more than one tenth the average NBA starter.
Oops. They don’t!
Never mind.Report
I look forward to VORP evaluations for CEOs.Report
But you haven’t made a case that the rules are bent, or more accurately are more bent today than yesterday, and that is the primary cause of income inequality. You simply want to assume it.
And if you did prove it, then you have not made a case against inequality, you have made a case against rule bending and I will join you in your battle against rule bending.
Greg, I am fully with you against rule bending. However you are just assuming the problem and solution. Inequality implies rule breaking and thus we should address inequality. Wrong. Inequality does not imply rule breaking. During an era of unprecedented global expansion and prosperityI would assume massive wealth opportunities. And lo and behold here they are!Report
Roger,
one can be pro-tightening the restrictions on rule-breaking, even if there’s no change from before, or even if there’s less rule-breaking.
It is my understanding that the amount of private (as opposed to FBI-sponsored) blackmail is up dramatically. That’s a bit of a supposition, but do you really see someone blackmailing Friedman? How about Hayek?Report
@roger
I think we should pass a law that the average CEO in America cannot make more than one tenth the average NBA starter.
Wow, I have seen some intellectually dishonest arguments in my time, but that’s got to be one of the top ten.
Yes, tell us how the relatively small number of people able to start an NBA somehow get paid more than an average of all CEO pay.
Let’s all pretend the amount of pay that the guy who runs the hardware store takes home is relevant to this discussion at-
Hey, wait, fuck, you almost tricked me again. We weren’t talking about CEO pay at all.
We were talking about INCOME INEQUALITY, which has fuck-all to do with CEO pay, except that some CEO pay is contributing to income inequality.
Guys, please don’t let Roger get away with his implicit claim that all the super-rich are making their money from running companies. They aren’t, in fact, it’s a very distinct minority. Some of them may own companies, but the ones that actually run the companies are a very very small list.
And, I must point out, that list does not include Bill Gates or Warren Buffet. Gates is rich because he owns a lot of a very profitable company named Microsoft, and Buffet is rich because he’s very good at investments. (So good, in fact, that he runs an investment firm, but he’s rich because of his investments, not the firm.)Report
“2) hierarchies make people below feel bad. So? Are we gonna eliminate all hierarchies or just income based ones? What abut intelligence, political influence, looks, sexual success, skills at sports or world of Warcraft? ”
If the hierarchies view ordinary people as assets under management, I reserve the right to burn it down. Twice, if need be.Report
DTC,
Dude, go climb back under your rock. I didn’t bring up CEOs; your fellow progressive team members did. I am not making some subversive or implicit claim that inequality is concentrated within top executives, that would actually be Mr Picketty’s schtick. Seriously!
I really struck a nerve with this analogy didn’t I? I have to remember this one — progressives really get pissy when you point out basketball players make substantially more than the average CEO. It fouls up their narrative.Report
@Roger
I didn’t bring up CEOs; your fellow progressive team members did.
Earlier, @Roger
Entrepreneurs, executives, superstars and capitalists both created and *capitalized* upon the opportunities inherent in globalization and new technology.
Capitalists, executives, entrepreneurs and such compete with each other for profits.
Conclusion: Roger does not know what an executive is, or that a CEO is one.
I really struck a nerve with this analogy didn’t I? I have to remember this one — progressives really get pissy when you point out basketball players make substantially more than the average CEO. It fouls up their narrative.
The ‘average CEO’ is sheer nonsense to talk about. There are *dozens* of millions of CEOs out there. They probably average an income below the poverty line if you consider how many defunct business still technically exist.
And you have decided a sane comparison of that nothing is to, basically, a very small subset of the highest paid people in the world.
But, hey, let’s turn that around. Do you know that an average CEO of S&P 500 company is 12,000 times the average world pay? 12,000 times.Report
@roger :I really struck a nerve withthis analogy didn’t I? I have to remember this one — progressives really get pissy when you point out basketball players make substantially more than the average CEO. It fouls up their narrative.
It might if it were true. From USA Today we find that that the average NBA player makes $5.15 million per year over an average career span of just under five years. Meanwhile, from the Associated Press as reported in Think Progress,
Report
Appalachian Dave,
So, I give a comprehensive list of the major constituents of the one percent as reflected in my understanding of the group and you give me a minor subsegment of one of the groups (the one currently popularized in Picketty’s book) and say I am trying to pull a fast one on the po’ gullible progressives and switch the topic?
Total fail.
Oh, by the way, where is your statistic on the exploitative average salary of an NBA starter compared to the average worker. To quote Madonna, “I’m waiting….”Report
@roger
So, I give a comprehensive list of the major constituents of the one percent as reflected in my understanding of the group and you give me a minor subsegment of one of the groups (the one currently popularized in Picketty’s book) and say I am trying to pull a fast one on the po’ gullible progressives and switch the topic?
I can’t even figure out what you think is going on anymore. Here it is, to make you less confused:
1. We were talking about income inequality and how the top 1% of the population were sucking up all the income gains.
2. You started talking about ‘Entrepreneurs, executives, superstars and capitalists’ and how they earned that money.
3. It was pointed out that CEOs pay has almost no connection to any sort of performance, which makes your claim that ‘executives’ earn that money rather stupid.
4. You make an inane comment comparing CEO pay to basketball stars. (Which has basically just been demonstrated to be nonsense.)
5. I point out that not only is this inane, but that your list of 1%, as included up in #2, was actually wrong. The 1% are not mostly CEOs. (And are not entrepreneurs or superstars either, although I didn’t say that. They are capitalists, but only because everyone is a capitalist.) Or, as I explain, at least, they’re usually not rich *because* they’re CEO. The super-rich are rich because they *own profit-making things* and collect rent and profits from those things, not usually because of their job as CEO.
6. Your rebuttal is that you weren’t the person who brought up CEOs.
7. I point out you did bring them up.
8. You…admit you brought them up.
You made a list of the 1%. That list was ‘Entrepreneurs, executives, superstars and capitalists’. My point is, ignoring ‘capitalists’, which everyone is, that list is nearly entirely wrong.
Yes, executives of profitable companies are also there, as are superstars. But that is a tiny fraction of the 1%. (You realize the 1% is three million people, right? How many superstars do you think there are? Or executives of multi-million dollar companies?)
The largest fraction of the top 1% is there because they own things. Stocks, entire businesses, apartment buildings, etc. Period.
Oh, by the way, where is your statistic on the exploitative average salary of an NBA starter compared to the average worker.
I find it very baffling that you assume I’m in favor of the salaries paid to NBA starters, or that everyone is in favor of them. I don’t even understand what you’re trying to do there.
I think the NBA should probably pay *all* their workers more, but start at the bottom. They should probably start with paying their owners *less*. (Actually, they should start by stopping operating as a weird trusts that extort cities into building stadiums for them with threats of moving. That’s probably more important. We’d be a lot better off if cities owned sports teams, like the Packers are owned. Granted, I don’t know much about how the NBA works.)
But, then again, you probably don’t understand that no one objects to CEOs being paid well…we object to them being paid *disproportionately* more than other people at the same company.Report
DTC,
My term “capitalist” was intended specifically to refer to people making profits off “owning things.”
We are also talking past each other on CEOs. I was referring to all CEOs in America. Progressives usually prefer to talk about the top 200 or 500 corporate CEOs. Two different groups with only a small bit of overlap.
I still fail to grasp why elite athlete and superstar performer salaries don’t gain the same ire from progressives as evil fortune 500 CEOs who make decisions that make or cost billions. I have no idea how much they should make, but I can certainly understand why competition would ensure they make a lot. Money spent getting an expected better CEO is money well spent (adjusted for reality and uncertainty).
My point is simply some of you have an alarming sensitivity to this issue. It is like a funny bone for progressives. Mentioning CEOs or Kochs is always a sure fire way to stimulate a progressive.
I will no longer discuss anything related to CEOs (or Kochs) on this thread.Report
Roger,
well, if you’re calling a mulligan, we might as well discus the Waltons next.
*snort*Report
@snarky-mcsnarksnark
I’m with Snarky on this. And I’d add that not only does a growing plutocracy lead to a diminution of quality of life, it is fundamentally unsustainable.Report
Tell that to the billion people no longer starving on two dollars a day.Report
Roger,
yes, I’d be glad to tell the 100 million of them about the planned genocide.
third world fucking problems, ya know?Report
@kim
You aren’t helping anyone when you talk about stuff like “the planned genocide”. You sound like a paranoid loon.Report
Whot, I need pie charts?
Pretty rich coming from a guy living in a country now storing children in kennels.
[Seriously, ain’t gonna bother me none if you don’t believe me. Truth’s still truth, ya know? Might bother me more if I figured you’d be able to do dick-all about it.]Report
@kim
Whot, I need pie charts?
No but a bar of soap for your foul mouth would be nice.Report
Dave,
https://www.google.com/search?q=demographic+armageddon+pie+chart&rlz=1C1CHFX_enUS575US576&espv=2&es_sm=93&source=lnms&tbm=isch&sa=X&ei=vO_PU6GUN5azyASn84DgAw&ved=0CAgQ_AUoAQ&biw=1680&bih=949
(no, I didn’t click on any of these. Link’s a joke.)Report
The “billion people no longer starving” will not be the ones rising up against the plutocracy. You haven’t been reading your newspapers. It’s the vast middle that’s getting more and more upset about bearing the brunt of how the game of capitalism is currently playing out.
Capitalism does not require plutocracy to function and the world’s poorest do not have to starve so that regulations can be written that control for regulatory capture and collusion – market perversions that are only available to the wealthy.Report
Scott,
“It’s the vast middle that’s getting more and more upset about bearing the brunt of how the game of capitalism is currently playing out.”
That is because you and the progressive machine are preaching this economically illiterate crap to them 24 hours a day. Despite this, my reading on the issue is it is pretty much a non issue to the average guy or gal, who judges equality by their neighbor or brother in law.
And nobody is arguing for plutocracy, cronyism or regulation gaming. You are assuming these are necessary for inequality.
A (rule bending cronyism) = B (unequal wealth). A is bad, therefore we should stamp out B.
Try again.Report
Roger,
I don’t need anyone to tell me that the middle class is getting screwed. I know a guy who has a Masters Degree, and works long hours, and still makes less than his daddy did with a High School Degree.
An’ he’s middle age.
His daughter will be lucky to afford a house by the time she’s forty, if she goes to college now. and that’s without the car.Report
Roger – Didn’t that 20 year period you constantly cite as the best ever follow directly on the heels of 20-50 years of policy which included many policies I think you’d label progressive, or at least liberal? New deal, high income taxes, regulations, unions, government safety nets, entitlements, hell, at least some of those water rights you apparently realized you knew absolutely nothing about yesterday? I mean, your constant refrain is that we need a problem solving system in a constant state of discovery and experimentation in search of what works best, right? And it seems to me (and it seems like you agree), that we’ve got a pretty good one going here? We can’t really claim we’ve optimized our results, because who knows; but we can certainly claim results that you are comfortable stating are the best 20 year period in the last 13.8 billion years.
So your vitriol, when anyone mentions another potential experiment that they think will work, or is perhaps worth trying and your certainty that only you know the experiments that will bear fruit, and that anyone who wants to monkey around with minimum wage, or higher income taxes, or lower inequality (notice, not “no” inequality”, that strawman you constantly trot out), whatever else it is that you are certain won’t work, is, to me at least, misplaced. I mean, if only our master planner was as confident as you, you’d probably agree to let him/her rule, right?Report
There is this concerted effort, not just by Roger, but many others on the right and neoliberal group to tell us that we all have a sweet deal going, and we should be grateful and joyful over it, and stop fretting that we aren’t making out as well as the 0.1%.
I could point out that their arguments invariably revolve entirely around econometric measures, but lets put that aside for the moment.
To continue the thought I had on the other thread, the 1% and the rest of us are locked into a highly active relationship- we all are being asked, every day and every year, to perform active deliberate actions, to the benefit of each other.
Every week my pay is docked to provide a court system which protects WalMart, Roger, and everyone else here. I pay for your contracts to be enforced, property to be protected, insured, and so on.
Likewise, you do the same.
As others here have pointed out, this all happens according to a system which is artificially constructed, rules that exist only by our consent and agreement. This is the social contract that drives anarchists batty. But is IS a contract- WalMart literally is asking me and everyone else to protect their property, and we (so far) have agreed.
What obliges us to give our consent? I mean, lets accept for the moment Roger’s argument that we are better off than 20 years ago. But lets also say that we notice that we are much less better off than the global 0.1%.
Can’t we say that we aren’t happy with the deal being offered us? Isn’t it legitimate for us to say we want to renegotiate a better, perhaps even New Deal which is more advantageous to us?Report
Roger –
All those middle class folks out there worried about their tenuous hold on the American Dream are just gullible rubes. Spare me.
That is there significant, pervasive regulatory capture and cronyism is evidence that there is a plutocracy. (The poor don’t have the means to purchase a Congressman.) I state that this plutocracy is growing and therefore unsustainable. Then, you point out that a billion people don’t want to hear about that. I’m not the one here making assumptions.
I say: A (rule bending) does not = B (unequal wealth), yet B untethered from discernible, measurable return on value is strong evidence of A. A is bad, therefore we should stamp it out.
You’re saying: B is always good, so we should never do anything about A for fear of some unintended consequences that might hurt B.Report
Switters,
This gets back to the point of this essay. We have a global situation with global gains. If you think taxes and unions and mandatory benefits and RubeGoldbergian regulations (care to guess how many times I have to flush a toilet in California?) are a driving part of the economic gains of the last twenty years, then I would indeed have to disagree. Indeed, I think a great case could be made that they have caused capital to flee to greener pastures. Thus the impacts are slower growth for workers in countries and states fouled up with progressive nonsense, and faster growth in the rest of the world.
Oddly, my interpretation also kind of matches the facts.
So, what was your point again?
As for experimentation, a good rule of thumb is to survey what works and what fails and do variations on the former while trying yo avoid the latter. Repeating mistakes isn’t creative problem solving it is insanity.
My point is not me as master planner it is for less master planning.Report
Oh, LWA, you are not even beginning to grasp the full extent of my views.
There is nothing inherent in the nature of the universe which guarantees us american standards of living let alone modest annual raises. These are the results of institutions and world views, one of which is known as markets (science, democracy and others are also important).
Absent relatively free markets it isn’t just that incomes won’t grow, it is that we won’t have any incomes at all. Indeed, absent markets, you and I would probably never have been born at all, our great grandparents would have died in Malthusian poverty like the ten thousand generations that came before them. (The pre market state of affairs is one tenth the number of people living half as long making one twentieth to one hundredth the per capita standard and quality of living)
Progressives aren’t biting the invisible hand which feeds them. They are biting the hand that birthed them and gave them the standard of living necessary to sit around and bitch all day about the hand.
Inequality is essential to markets. Profits are not something the one percent take from the great masses. They are the rewards for enriching the lives of fellow humanity. Demonizing extreme profit gained via positive sum activities is effectively demonizing the prosperity engine which keeps us alive, wealthy and progressing.
I repeat my case. The last twenty years are the best ever for humanity. They are so in great part because entrepreneurs and capitalists have taken risks to create new technologies and products which have enriched humans by forming huge cooperative networks. Profits were the incentives to take these risks.
The previously privileged top ten percenters (workers in the developed world) have seen their relative growth rate slow in part due to the increased competition of the truly impoverished (and part due to the counterproductive policies of progressives).
The fact that you are trying to rally the masses to gather pitch forks and steal from the capitalists is absolutely wrong. There is no excuse for it. I am saddened that people are so callous.Report
Scott,
So, the last twenty years of unprecedented improvement in the human condition in those places getting access to free markets is not sufficient proof of the benevolence of profits? How about the basic literature of economic theory on the role of profits?
I don’t care if you understand or not. What worries me is that you are, like LWA and Saul and fellow progressives pushing to use the coercive power of the state to get your way. If you are going to use guns to get your way, please take the time to make sure you are right.
The burden of proof is actually higher for those of you preaching coercion. And yet you guys are incapable of making any good arguments. No wonder you view force as your friend. Logic certainly isn’t.Report
Yeah I hear you Roger. We all do. What you like = what is responsible for the economic gain. What you don’t like = what is responsible for threatening to turn the world upside down and seize up the economic engine that’s otherwise always managed to keep chugging along. Why, because you said so.
And here us progressives are arguing for complete equality and against the idea of profits. Right, I mean those are the points you continue to respond to.
Look, I don’t argue that taxes, unions, mandatory benefits and RubeGoldbergian regulations are what we’d point to when coming up with the cause of economic gain in the last 20 years. But your constant refrain is that these things are necessarily going to destroy it. And yet here we are, with all of those policies, and you screaming about how great the last 20 years have been. The sky is always falling, has been for 50 years, with your type. Yet, like you said, despite all that, we can still point to the last 20 years as the best in 13.8 Billion years.Report
Switters,
Your causality is backwards. I have dedicated much of my life to studying the topic of progress. I like progress, and view it as a good thing. In my studies I have identified factors which contribute to progress. In the economic realm these include things like institutional property rights, freedom of interaction and constructive competition, and the role of prices, profits and losses as incentives and signaling devices.
In no case have I argued it is so ’cause I said so. I explain my logic carefully and am usually accused of writing way too much not too little.
“And here us progressives are arguing for complete equality and against the idea of profits. Right, I mean those are the points you continue to respond to.”
Of course progressives DONT argue for complete equality and complete eradication of profits. They argue for more equality and fairer profits where fair is a relationship to what others earn or is subjective. I am not arguing against complete anything. I am arguing on the dangers or costs of incremental changes as well.
“Look, I don’t argue that taxes, unions, mandatory benefits and RubeGoldbergian regulations are what we’d point to when coming up with the cause of economic gain in the last 20 years. But your constant refrain is that these things are necessarily going to destroy it. And yet here we are, with all of those policies, and you screaming about how great the last 20 years have been. The sky is always falling, has been for 50 years, with your type.”
We are in an era of unprecedented economic growth, truly miraculous. Markets are an essential part of that prosperity growth. Anti market rhetoric and thinking are threats. In countries, states and cities where this thinking (progressivism is one current label for one brand) dominates, growth and prosperity are threatened and reduced. I have data if you want to see it.
They won’t destroy growth and prosperity unless they become ascendent everywhere. This is a possibility. The best defense against it is education pointing out the folly and potential costs of progressive and anti market ideology.Report
Roger,
I didn’t posit causality. I was mainly pointing out the absurdity of your claims that progressive ideology is going to destroy everything. It hasn’t yet. It won’t. Although it does appear you now claim you were only trying to push “our” buttons with these hyperbolic claims. I am not against institutional property rights, freedom of interaction and constructive competition either. Big proponent, in fact. I just realize its not so simple that I can swoop in anytime someone is having an economic discussion, repeat the mantra “institutional property rights, freedom of interaction, constructive competition, role of prices and losses as incentives, creative destruction”, then exit stage left and claim I’ve solved the problem, if only those morons would listen to and believe me. I don’t think, and quite honestly I don’t think most progressives (although I could be wrong), are as opposed to these things as you think they are, but the devil is in the details. IMHO, details you’ve historically refrained from providing. The water rights thread the other day was a great example. Your high level mantra simply failed to provide any insight. Introducing pricing meant fishing with someone’s pre-established property right.
I get that there are dangers to incremental changes. Incremental dangers though. Not the sky is falling because democrats want to tax the wealthy at 39% instead of 36%. Your proposed solutions have incremental dangers too. Although you seem loathe to admit it. And I get the global prosperity is important. But some of us have other values we’d like to see our society elevate, even if at risk of reducing the rate of gain of global prosperity.
And despite all this, I agree that we are in an era of unprecedented economic growth. Unfortunately, you go straight back to speaking in broad generalities. “Anti Market Rhetoric and thinking are threats”. What does it even mean? In the water rights thread, who was doing pushing anti market rhetoric and thinking? Those in favor of unilaterally altering others’ pre- existing property rights in water by modifying rights and altering the pricing, or those who wanted to protect those property rights by maintaining the admittedly rubegoldbergesque system, that has evolved primarily as a hybrid market/legal response to an infinitely sticky wicket over the course of many many years. As soon as that part of the conversation got started, you disappeared, and all we were left with was your mantra. (Apologies if you’ve since re-engaged and I missed it).
The bottom line is, at a high level, I’m generally on board with markets. I think most people are. But I can’t just scream that at a problem, or during a disagreement, and expect it to go anywhere. Neither can you.Report
@switters,
My discussion has been primarily at the level of how to frame this issue. That is also how I read Tyler’s post and Mark’s as well. Some of us are suggesting that framing a global phenomenon on local snapshots is missing the forest for the trees. In addition, there is a discussion going around on such issues as whether/in what ways inequality is a good or bad thing, the role of profits and property rights in economic growth and so on.
I wrote a lot yesterday, so I might have written some recommendation somewhere or other, but I don’t really remember making any substantive efforts to lay out any recommended changes. That was deliberate on my part. It is kind of off topic IMO. (In your comment you both accused of not making any suggestions and making suggestions leading to bad outcomes, so I am kind of confused which it is, though I assume the former is more representative of the general discussion).
So, back on topic, we are discussing world views and the importance of world views and institutions built upon these world views as they play out on the issue of material progress for various constituents (with three major groupings).
My guess is that I have written as much in the comments as anyone, so insinuating I am doing a mantra and exiting is disingenuous. Certainly I could write more, and in truth have extensively in previous discussions with these very same people. Indeed to some extent we are anticipating each other’s arguments.
And while we are at it, sorry for the hyperbole. Though it is telling that LWA did go on and suggest the very thing I warned against (confiscating the wealth, property and profits of the wealthy). I guess I get a gold star for seeing that one coming.
Let me restate my framing again, at the risk of upsetting you for speaking in generalities.
1) The last twenty years are,despite rhetoric to the contrary, the greatest ever for humanity. Please do not tell me there is no rhetoric to the contrary. The mantra from progressives has in general been to ignore the world wide trends (I have been mentioning them for several years to the consternation of progressives) and playing up within borders inequality. If everyone now wants to pretend progressives all recognize how awesome the past twenty years are, then I am fine.
2) I am offering that an understanding of the role of profits is that it is an incentive/reward for creating, identifying, or fulfilling an opportunity for positive sum games within a market system. I don’t think anyone has disagreed directly, though comments from progressives continue to reflect a lack of understanding what that means. I know most people think profits are bad things greedy people take, but I assume the commenters here are above this.
3). During the past twenty years there has been massive and unprecedented capitalization of various opportunities for profit as new technologies were created and old ones were destroyed, as global supply chains were build along with risky entrepreneurial efforts, most of which failed miserably, but some of which succeeded unimaginably well to the profit of those creating or funding the successes.
4) A billion people previously excluded from markets have joined them at the benefit of the third world worker. More climbed out of poverty by this process than ever before.
5). First world workers now face increased competition from third world entrants. We all gain by better quality and price and selection, but supply and demand has held down wage growth for those at the higher end of the global scale. Progressive policies, as discussed previously, have almost certainly contributed to the stagnation by making the employment of first world employees relatively less attractive to their competitors (which includes not just developing nations but automation).
Thus all parts are intricately connected. Higher profits and inequality for entrepreneurs and investors, lower wage growth for the middle class in the west, and unprecedented global increases in overall prosperity and third world living standards.
The take aways from this framework are as follows. Beware assaults (minor or major) on profits and inequalities of outcome as it is part of the engine of worldwide prosperity.
Is there any part of this world view or the take-aways you disagree with? Do you have any facts or observations which bring it into question?
If so, please feel free to jump in and offer your insights.Report
Roger,
I don’t think that you can point at any American policies and say that they’re responsible for the last 20 years success (taking as a premise that the last 20 years have been successful).
Given that, why does it matter what sort of American policy we’re talking about, so long as we don’t muck with the greater system?Report
Roger,
In the past 20 years we have seen sovereign nations bought and sold. Is this positive sum? Does it continue to be so after a 2 hour riot?Report
I have a problem with the dominant inequality narrative in that it is imprecise and aggregates a lot of different threads into one narrative. More precisely, there are two trends that people focus on most.
One is that the super rich are pulling ahead from the merely wealthy. Another is that there is a certain amount of stagnation at the middle and lower-middle class levels. Lots of people seem to think that the former is somehow causing the latter, but I have yet to see a convincing argument that is the case. Rather, it seems more likely that there is a set of trends, events, phenomena, etc. that are causing both. this is important, because if we are wrong about causes, then we end up treating the symptom instead of the disease.
And most people focused on this issue seem pretty solidly focused on the very wealthy, which implies that if we could somehow stop them from making so much money the middle class would somehow magically stop stagnating. This leads me to believe that much of the focus on the inequality isn’t really about a stagnating middle class at all. It seems to be much more about the merely wealthy trying wrest control and assert themselves against the super rich.
I don’t have so much concern for the very wealthy, not much at all actually. I do, however, worry that the economy and everyone else will end up as collateral damage in the war between the merely wealthy and the super rich.Report
Productivity keeps on going up, but wages are stagnating.
This, traditionally, is because of wage-theft — the improvements in “how much Work you can do” is not getting passed on to the laborer, but instead to someone else.
Apologies if I have the terminology wrong, this isn’t my field of expertise.
I worry, more than anything, about the ongoing dissolution of our society. When the superrich do not interact with the rest of us, it becomes very easy for them to make the argument: “so what if they’re underwater? We’re just fine!” (and, from there, you get the “let’s not ameliorate human-generated global warming, it won’t affect me”).Report
The productivity story depends on what exactly is driving productivity. If productivity is going up because workers are more skilled, then something is wrong if their wages are stagnating. If, however, productivity is rising because of better equipment and technology (ie more productive capital), then you would expect most of the gains to be going towards the owners of that capital.
My sense is that both are happening. There is a class of highly skilled workers who are making lots of money, because they are economically valuable to the firms that employ them. And there is also a class of stagnating low-skilled workers whose marginal productivity is pretty low.
Meanwhile there also appears to be a whole missing level of semi-skilled and skilled manufacturing workers, perhaps because parents, educators and politicians started pushing anyone with a modicum of intellectual promise towards college and white collar work and away from manufacturing and the trades.
In my opinion, the key to helping the low-skilled workers (a class which may continue to expand as more and more jobs become automated or off-shored) lies in helping those people to attain more human capital and not in taking punitive actions against the super wealthy.Report
jr,
my bias is as always towards risktaking, and away from goldbricking.
http://robertreich.org/post/91880951615
Thus, I’m highly in favor of inheritance taxes, and modestly in favor of capital taxes (capital gains should be taxed at the same level as income, at the very least).Report
The problem with looking for “skilled manufacturing and trades” is that skilled manufacturing workers look increasingly like computer programmers, and skilled trades workers will never be price-competitive with Jose who hangs around in front of Home Depot.Report
Jose who stands out in front of Home Depot is not in skilled trades. Jose that has a company (or his own) truck is.Report
It seems like you are using Jose the day laborer as some sort of symbol of the global wage floor, which is odd.
Go to Home Depot and try to get one of those men to move for less than minimum wage. Probably not going to happen. If you are looking for someone to do purely laborer type tasks, you may be able to low-ball a few guys for $10 an hour. If you’re somewhere the demand is high or you need skilled labor (carpentry, drywall, etc.), you’re probably talking more like $15 and up.Report
@jr
Your whole post sounds to me like it’s just about right, but I wonder about the low-skilled workers and whether we should be so blithe about them not capturing the gains in their productivity simply because they didn’t produce those gains. Unskilled labor has generally done nothing to contribute to its own marginal product since before the industrial revolution. The increased productivity has always come from “manna from heaven” events like new and better tools that they had no part in inventing or purchasing. But low-skilled laborers have generally gotten a real piece of the growth, or they’d still be living a pre-industrial quality of life.
If that’s not happening as much now because low-skilled people are easy to find all over the world, that’s just an economic reality, but I’m not comfortable with the oft-stated position that there’s no reason for them to get a piece of the action simply because they didn’t create it.Report
“Go to Home Depot and try to get one of those men to move for less than minimum wage. ”
He makes minimum wage (plus a bit) paid in cash.
I don’t pay taxes on that, I don’t have to buy him safety gear, I don’t have to give him mandatory breaks, I don’t have to contract for a certain minimum number of hours and pay in advance, I don’t have to ensure that the workplace is non-hostile and has a diverse workforce in which all the employees’ backgrounds are respected and considered valuable. I don’t even have to buy him lunch.
Maybe his hourly rate is the same as anyone else’s, but he’s still cheaper than hiring domestic; because hell, who’s he going to complain to? The first thing they’ll ask is “where’s your green card”.Report
@jim-heffman
You don’t have to do any of that stuff, no, but you better offer a prayer or two that he doesn’t fall off your ladder and wind up with a spinal cord injury.Report
Well said, JR.
My second guest post for the old League was on the zero sum fallacy. The obvious logical mistake here is that people assume that if some got way ahead and others didn’t, then the winners must have gotten a share from the losers. Classic zero sum fighting over a static sized pie.
Over the past twenty years, the world economy (the pie) has probably doubled or more in size. The doubling process is not automatic. It requires entrepreneurial activity, creativity and risk. With big risk and opportunity comes big rewards for those lucky and skilled enough to succeed. Hence huge gains for the ever changing group labeled annually as the one percent.
I will slightly contradict the narrative in one detail, though. There is an essential element of competition in the larger positive sum game of economic progress. With globalization and technology, the pool of competitors for wages has increased at an amazing pace. There are now close to a billion more people competing for jobs. In a way, the one percent made money in part by creating the global markets which have contributed to a lower growth rate for wage earners.*
It is absolutely essential that we take Tyler’s global perspective in understanding this situation. The greatest gain in human prosperity ever, large profits to capitalists, superstars and executives and the relative stagnation of middle class incomes in developed nations are all intricately interconnected. Three parts of an interconnected whole.
* the takeaway from this fact though is actually that we need MORE profits in the future to create and capitalize upon opportunities involving developed nation labor. Again, the solution is the exact opposite of the progressive ideology.Report
Lots of people seem to think that the former is somehow causing the latter, but I have yet to see a convincing argument that is the case.
What would a convincing argument look like, to you?Report
A reasonable mechanism that explains how the effect happens and the empirical data to back up the claim.Report
You can find that stuff, you know. There are econ guys who study inequality, who get published in journals and everything.
I’m seeing a lot of confirmation bias on this thread, on the part of all parties, is what I’m saying.Report
@patrick
A cite to the econ literature to show the econ guy what you think he’s missing in his field’s literature might move the discussion forward.Report
To Patrick’s assertion, most any of the work of Amartya Sen on welfare economics. IANAE, but as I recall, his Nobel Memorial prize was given mostly for his work showing that some of the fundamental assumptions upon which competitive market results depend aren’t satisfied in the cases of severe or extended poverty, so other-than-market actions are required.Report
Michael,
I don’t think @j-r was asking whether safety nets are necessary, but whether the wealth growth at the top is causing stagnation at the middle and lower ends.Report
My (admittedly limited and possibly flawed) understanding of Sen’s work is that it has little to do with safety nets; it basically says “a rising tide lifts all boats” is only true under limited conditions. And that conditions under which it is not true can not only exist or be created, but are stable in the sense that the situation will persist unless the rules of the game are changed.
Conservatives dislike Sen because he says that some of their basic assumptions about how the world works are wrong. Liberals dislike Sen because he says that some of their favorite policies treat symptoms but not causes. And many economists dislike Sen because he says there are a lot of situations where the elegant math has assumed away the problems it’s supposed to explain.Report
Michael,
Good point. That’s a better statement of Sen than I hinted at.
It’s still, however, not the question that I think j-r asked.Report
James,
Wrt to that last comment, I’ve a question: It seems to me that j r, in his initial comment generating this subthread, is suggesting or implying that any attempts to restrict the economic growth of the super rich (I think that’s what he called them) will have negative effects on the economy in it’s entirety, obviously including the middle class (and those who are championing the types of policy changes or whatever that favor their interests). If so (and I don’t know that it *is* so), then it seems to me that he’s alsosaying that the only way to realize certain types of economic gains for the lower economic classes of folks *requires* massive (and massively disproportionate) economic gains realized by the wealthy.
My question: is there any theoretical basis to believe that *the only way* to lift the poor out of poverty requires that the the super rich (top 1% say) realize something like 44% of total global income gains?
And I don’t mean this trivially, but … is the answer that “it appears so”.Report
Stillwater,
Here’s his actual comment:
I think that’s a far cry from saying “any attempts to restrict the economic growth of the super rich … will have negative effects on the economy in it’s entirety” (my emphasis). My read is that he’s saying it’s a possible outcome, and if we’re not careful in how we approach rectifying growing inequality, a dangerously likely one. Nothing in it indicates to me that it’s a necessary or inevitable outcome.Report
OK. Fair enough. I read him as making a bit more of a strenuous objection, but I agree with you that he’s quite likely not.
Nevertheless, it seems to me that there is a sentiment expressed on these blog-pages to the effect that curtailing or reigning in the profit potential of the very rich will necessarily have deleterious effects on the economy. My question was focused more at that angle of things. Perhaps I’m wrong in even perceiving that line of argument, tho it lurks in seems to be frequently lurking in the background in these sorts of debates.Report
That perception could be accurate. And it could be that such suggestions are in part a response to a perception that some of those critiquing the super-rich aren’t careful about focusing on ideas that won’t harm the economy. Whether that perception is accurate or not is probably a matter of perception.Report
James,
I wasn’t really responding to j r, simply to your criticism — no, that’s too harsh — your suggestion that Patrick should cite sources for his assertion that economists study and publish on distribution and inequality. Sen is clearly an example of such, and won a Nobel for the work. It goes back farther than that, of course. The second welfare theorem is a statement that it may be necessary to do a lump-sum redistribution of wealth if you want a competitive market to deliver a constrained optimum. Even Adam Smith made repeated hand-waving arguments that businesses probably had to be constrained for the social good, which is at least an indirect redistribution.
[Caution: math jargon ahead] I did the first year of a PhD econ program after a 25-year career analyzing and modeling complex systems of several sorts. I never saw a bunch of academics who seemed so determined to convince 30 shiny new graduate students (me being somewhat less than shiny) into the limited view that the world was “a concave function on a closed compact set” no matter how far that (sometimes obviously) deviated from reality. Maybe it was just the school I was at.Report
Michael,
But in the context, Patrick’s assertion was much more specific than that.
I suppose Patrick’s meaning could be limited to his precise words, that there are published articles about inequality. But that wouldn’t really be a response to j-r’s actual question, which wasn’t about whether people study inequality, but the much more focused question of whether any researcher has established, with “a reasonable mechanism…and…empirical data” whether the superrich pulling even further ahead is the cause of stagnation at the middle and lower levels.
As nobody, I’m sure, doubts that there are published articles studying inequality, I was asking Patrick not if he had a cite to any of them (a trivially easy task), but whether he had a cite to any that answered j-r’s much more precise request.Report
An interesting fact about worldwide leveling of rising incomes, and trading less inequality here for less inequality there: The slightly-less poor people in China do not appear to be able to vote in or even influence our elections.
Income inequality, in itself, isn’t really a bad thing per se. It just very very easily leads to very bad outcomes. For example, the consolidation of political power in the hands of the wealthy, which then use that power as a way to get more wealth.Report
Eh. At least our wealthy don’t use tanks or machine guns.
Politics: better than gunfire.Report
” The slightly-less poor people in China do not appear to be able to vote in or even influence our elections.”
Well, at least not conclusively proven to have done soReport
This feels like an argument over how the deck should be stacked.
Should this Group X compare itself to Group Y or Group Z?
If they compare themselves to Group Y, they have reason to feel good about their status. If they compare themselves to Group Z, they have reason to feel bad about their status.
Which seems to have the implicit conclusion of: if they feel good then I don’t have a moral obligation to change things but if they feel bad then I do.
All we have to do is figure out how to stack the deck.Report
I love you @jaybird , but this sentence encapsulates the difference in our outlooks as strongly and succinctly as any I could think of.
Society is a conststruction. We decide on “rules” for society that are consistent with the things we value. If we valued broad-based prosperity, we’d pursue policies more like those we followed from 1936 to 1980 (tighter regulation of manufacturing and commerce, the encouragement of unionization and “alternative” centers of political power, tax policy that discourages the accumulation of great wealth, etc.)
You, on the other hand, seem to believe that there is something “natural,” “moral,” and “right” about the market. It too is a construction. As a model, it tends to be pretty efficient at the allocation of physical resources, but completely blind to moral consequences.
For myself, I favor whatever system best promotes human happiness and flourishing. I suspect that that would be a system that strongly incorporates market mechanisms, but that also creates a set of “rules” that shifts incentives more in the direction of broadly-based prosperity and personal (personal!) autonomy.Report
You, on the other hand, seem to believe that there is something “natural,” “moral,” and “right” about the market.
Not exactly, it’s more that the people who explain to me that they need to change things for the betterment of us all usually end up doing things that, while they might be “natural”, strike me as “immoral” and “wrong”.
It’s not that doing nothing is “right”… it’s just that the taking of the reigns usually involves doing “wrong” and will eventually violate a hell of a lot of personal autonomy in the name of protecting it. An exercise of paternalism that creates perpetual adolescents rather than adults capable of being their own paters.Report
I like and agree with your final paragraph, Snarky. Perhaps we could tussle over what these rules are, but in general I agree completely.
The last twenty years has been the apex, the absolute pinnacle of the desire expressed in this paragraph. Never before have so many real live human beings seen their lives improved as we have seen in the last two decades.
So before we make it even better, let’s first understand why it is going so well now. Second let’s not undue what is working. My take on progressive ideology is that it is attempting to reframe success as failure and then replace what is working with what has never worked.Report
Oh, yeah, I meant to say that too. I love the last paragraph. My original comment had a section on the importance of the individual and then I re-read your last paragraph and saw that that section of mine was superfluous.Report
Roger,
Do you really think concentrating money in the hands of the (en)titled rich has EVER actually worked out?
Self-made men are nearly never from the rich, you know. Hell, Romney’s father came here with practically just the shirt off his back. Carnegie didn’t exactly start rich either.
I don’t have an axe to grind against the robber barons, or the entrepreneurs.Report
Good point. What kind of country have we become!? We definitely need to return to the policies of the WW2 and post-WW2 era. For one thing, there are far too many women and minorities in the workplace, and some of them even in positions of relative authority. And don’t get me started on all the Indian engineers working at my job, working on Chinese-made computer equipment and driving Japanese cars. We didn’t use to have any of that!
We ought to just start another world war that reduces the rest of the world to rubble and ensures that the United States once again contains 50 percent of the world’s manufacturing capacity.Report
And as for globalization…again I feel I must point out that the US requires a certain minimum level to function in, whereas countries that have not yet risen out of poverty do not.
You cannot just throw up a shack here in the US to live in. You cannot sleep under bridges or in public parks or beg on the street. There are no public sources of food you can scrounge from.
A person with no money at all in China might be living in a shack on a rice paddy with no material goods, but that system works. It’s thousands of years old, and it will continue to feed him.
A person with no money at all in India might live in a shack in an illegal shanty town, scavenging trash from a landfill. It sucks, but that system works, at least a little.
If some American companies slightly raise either of those guy’s standard of living by putting him in a tiny dorm in a city somewhere where he works to make DVD player 12 hours a day, and remove some American from the same job…the American cannot move to a rice paddy and take up substance farming. He cannot even erect a shack in some random location and freely wander a landfill.
Other countries, countries that have large amount of people that have not made it into the modern economy, have *some way those people survive*. (Obviously, or they’re be dead.) Those countries have a modern economy, but they also have a place and people that *still* operate outside the economy.
This country does not have such a place, and does not have any people like that. It’s not possible to live in modern American without money. All of American has a modern economy. In fact, all of American has always had a modern(1) economy.
Actually, I lie. We did have that once, or at least, the Native Americans did. You’ll notice the current distinct lack of Native Americans roaming the countryside killing deer and gathering maize and berries, *despite* their suffering from huge amounts of poverty. Why? Because that system is not workable anymore.
But, a bright note, at least America has a nice strong safety net that none of the exact same people that are moving jobs offshore want to take away. Right?
1) Modern for the time, at least. Strong land ownership laws, almost exchange of goods is done using currency and at retail stores, banks are used to hold money, etc. Obviously it looked somewhat different in 1776 than in 2014, but the basics were there already.Report
So neither the urban homeless nor Appalachia exist in your America?Report
I think that DavidTC would say that urban homelessness is an example of the system not working. In fact the system and private property owners seem to make it really hard for urban homeless to get a good nights sleep or even the working poor. The mother who got arrested for letting her child play in the park is an example of an unworking system. Property owners and governments who put up little design tricks to make it hard for the homeless to sit and/or sleep is an example of an unworking system.Report
“So neither the urban homeless nor Appalachia exist in your America?”
Where do you think Sit-Lie Laws come from?Report
I *live in* Appalachia.
I’m sure in Appalachia there are some illegal squatters living in ramshackle shacks deep in the woods, with no electricity, living off deer and a vegetable garden, who’s only interaction with modern society is when they walks into town twice a year to buy ammo.
I am equally sure that’s like 1000 people, max, in all of Appalachia. Probably closer to 100. It is not the 1930s anymore. The roads go everywhere. I suspect there’s almost nowhere without a public road within three miles. There are some national forests, I guess, where those guys could be located.
And I’m *certain* that life would not be a viable solution to some guy who finds himself out of work at the DVD player factory. He’s supposed to track down some land owned by an absentee owner, and haul some plywood out there for a shack? And learn to hunt? Really?
There are poor people here, a lot of poor people, way too many poor people here. But I promise you, they’re poor people operating in within the normal economy, trying to fix the radiator of their crappy car so they can work three jobs at once to pay their rent. We’re not operating some sort of ‘deerskins for rhubarb’ barter economy where people put up shacks wherever they want, we have real banks and roads and everything. Why, just the other day I saw someone wearing those fancy ‘spectacles’ on his face that all them city folk have, which I think he needed to read his iPhone.
And, as Saul explained, urban homeless is exactly what I *was* talking about. The very very poor in developing countries are people who never entered the modern economy, and hence *have food and shelter in some other way*. There is some system that already exists, and has probably existed since before the modern era, to provide those people food and shelter.
We do not have that here. There is no real ‘pre-modern economy’ for people stay in (Barring obscure rare example like Appalachian mountain men), but more important there’s not any to go back to when the jobs go away.Report
To paraphrase David and Saul, in places like India, China, and elsewhere its still possible to live the life of substinence level farmer in a way thats impossible in the United States. You can drop entirely out of the modern economy and live somewhat. In the United States, you can’t.Report
I’d like to know how many people in developing economies “drop out” of the developing economy and go back to subsistence farming. My impression is that absent war (where everyone winds up in refugee camps anyway, and not farming), rural emigrants stay in the assorted favelas of their nation’s (or neighboring nation’s) urban centers, trying to scratch out of living catch as catch can. (and in China, are considered illegal immigrants in their own country) But most often stay anyway, as the opportunities for their kids are still better than they are in the countryside.Report
The thing is, the urban & rural poor in America still exist and endure.
The ‘system’ works as well for them as it does for the rural poor of the bottom billion, by your definitions of the system working.Report
I’d like to know how many people in developing economies “drop out” of the developing economy and go back to subsistence farming.
No one does that. In any country.
The question is are we better off if they *leave* subsistence farming and enter a modern economy, causing someone already in the modern economy to lose a job and…what?
It’s akin to asserting that God coming down and reassigning ownership of a car from someone who had a car, to someone who didn’t, is completely neutral.
It’s…uh…not. The person who had a car was operating their life with a car. The person who didn’t have one was managed to get by without one. (To be clear, I’m not saying this is anything to do with *deserving* a car or a job, just that people who have a car are, statistically, likely to need a car, whereas people who don’t have a car often don’t.)
Lifestyles are not fungible. People do not magically swap places where jobs disappear from one location and move to another. People who had those jobs depended on them, whereas people who did not have that job, by definition, did not depend on that job.
And, yes, it is easy to end up being pro-privilege there, to argue that no one should ever lose anything. But all too often I see people arguing the reverse, that it’s fine to take everything away from people because it will relieve suffering elsewhere. That’s, uh, not fine in my book.
(Although I’m never sure why anyone gets to pretend this is ‘neutral’ anyway. It’s not neutral. Corporations are keeping more money, and paying workers less. That’s something we should oppose *anyway*. You want me to support offshoring, *let’s have them pay actual American wages*, or at least American wages minus additional costs. Which would not only be *more* helpful according to the logic here, but would also open those places up as *markets*, which means we wouldn’t have to choose between jobs there and jobs here…we’d soon need factories both places. But, of course, that will never happen, because none of this is about helping anyone.)Report
You cannot just throw up a shack here in the US to live in. You cannot sleep under bridges or in public parks or beg on the street. There are no public sources of food you can scrounge from.
… Where the hell are you from?
Any unincorporated place hereabouts will let you put up a shack. No building codes to enforce, after all.
Folks sleep under bridges and in public parks, begging on the street for food in my city. Yours isn’t that much cleaner, I’d figure. (Pittsburgh’s actually got relatively few homeless. It gets cold in the winter here).
Public sources of food are generally dumpsters, where restaurants throw out food that has been sitting too long. You’ve never heard of dumpster diving?Report
“You’ve never heard of dumpster diving?”
Restaurants that permit it can be subject to liability. There’s a law that protects them to a certain extent, but only if they donate the food to a charity and do it with some degree of organization; simply throwing food in the dumpster requires that it be destroyed or rendered inedible. See http://www.law.cornell.edu/uscode/text/42/1791Report
Any unincorporated place hereabouts will let you put up a shack. No building codes to enforce, after all.
And no property ownership either, apparently.
Where the hell are you from?
Or are you so stupid as to think the shacks I’m talking about are erected by property owners? No. In those countries, with their lack of a modern economy, property laws suck and a lot of land is unowned or owned by the government which exercises absolutely no control over it.
Those shanty-towns aren’t built by property owners. Uh, duh.
Incidentally, while unincorporated place might not have *zoning*, it is *states* that have building codes, and, yes, all states have them. Pennsylvania follows the Uniform Construction Code, which means a lot of ‘shacks’ would not be allowed for human habitation. Does *your* shack have plumbing, or electrical outlets every six feet of wall?
(Apparently, jurisdictions in Pennsylvania can opt entirely out of state building code and make their own, but I see no indication that Pittsburg has done so, and I rather suspect that even if they did, it wasn’t to make things a free-for-all.)
Folks sleep under bridges and in public parks, begging on the street for food in my city. Yours isn’t that much cleaner, I’d figure. (Pittsburgh’s actually got relatively few homeless. It gets cold in the winter here).
In Pittsburg it is illegal to panhandle within 25 feet of an outdoor eating establishment, 25 feet of an admission line, 25 feet of the entrance to a place of religious assembly, within 25 feet of money dispensing areas, and 10 feet of a food vendor or bus stop. Or panhandle during non-daylight hours.
It is also illegal to sleep in public parks, which is why Occupy Pittsburgh was located in a private park. (Privately-owned parks that the owners have given control of to the government accidentally end up in a legal limbo in a lot of places, with laws saying they ‘must be open to the public’, but none of the restrictions of government-owned parks. This is why Occupy often used them, pointing out there was no law against using the park however they wanted, including erecting tents and sleeping there. And Occupy doing this has resulting in quite a few jurisdictions noticing that weird legal loophole and fixing it.)
And, of course, it’s always been illegal to sleep under bridges, everywhere. At least, bridges of public roads. I don’t know in what universe you think it’s legal to sleep on the right-of-way of roads, but it’s not.
What I think you’re asserting is that the laws are not often *enforced*.Report
David,
People build houses without proper plumbing and electricity when they want a cabin in the woods. Not a house in Pittsburgh (hence why I mentioned unincorporated).
Pittsburgh’s been through quite a few fires, so our building codes and fire departments are kept pretty much up to snuff.
I suppose I’m saying that folks don’t enforce them… sure.Report
In New Jersey there is no such thing as “unincorporated place[s]”. Every piece of land and water is part of some municipality. Even federal land such as Sandy Hook and Fort Dix.Report
America never really even had a system like that even during the First Gilded Age. Our cities had massive slums but nothing nearly as informal as the favelas or Brazil or other shanty towns. There was too much money to be made off rents and law and order to allow for true shanty towns.Report
Part of that is because, to our great benefit, we introduced very good system of property ownership and registration as soon as this country was founded, and we continued it until the bankers didn’t want to bother with it and invented MERS and screwed everything up.
Erm, I mean, we continued it *to this day*. TO THIS DAY!
It seems almost trivial to people who live in this country, but having unclear property titles is something that makes modern economies *much less* inefficient. The idea that you can just go somewhere and find the owner of a location is astonishing.
Other countries just have property laws slapped together over centuries and unclear titles all over the places, but we were clever enough to have well-defined property laws and carefully document titles, where people throughout the history of this country could actually find and purchase land without worrying that someone was going to come along and challenge their ownership of it.
But this was back when we had an economy. Since we got rid of that, the backs figured, hey, why do we need clear titles anyway? In an ideal world, isn’t everything just owned by the banks, and in an even more ideal world, aren’t all the banks one corporation? So, really, don’t we already own everything anyway, practically speaking? Let’s just put it all in one shitty spreadsheet.Report
Well, that’s what happens when your country is founded by a bunch of lawyers.Report
But speaking of shitty spreadsheets … don’t do this. Seriously. Don’t. Do. This.Report
Burt is correct. That is much better done in Powerpoint.Report
Its also because we are from the common law tradition and common law always had a bit of an obsession about property compared to other legal traditions. The English peerage wanted their estates passed down intact. Like us British cities had slums but not shanty-towns.Report
Nope, there’s nothing enticing about “micro” and “soft”.Report
@davidtc
having unclear property titles is something that makes modern economies *much less* inefficient.
You mean clear property titles, right? #confusedReport
@scarletnumbers
You mean clear property titles, right? #confused
Having unclear triple negatives is something that makes modern sentences *much less* antidisefficient.
And, yes, I suspect that is what I meant. Or, to phrase in a non-insane manner: Having clear property titles is something that makes modern economies much more efficient.Report
When I worked for that large software company in the Pacific Northwest, I was talking to an H1B’er about what he was going to do when it contract expired (the terms were such that he had to wait at least three months before being hired by the company again. He said that unless he found something ahead of time, he would be on the first flight back to India to wait.
I expressed sympathy, but he would have none of it. Because in India, living is inexpensive (and something about health care). He honestly felt like he was better off than I was, because I would be taking my mandatory vacation where cost of living was, by his standards, exceptionally high.
I think DavidTC is largely right here. Because our country has money, it costs a lot more to participate in society (which the Appalachian option deprives you of).
This is actually something I think about when people propose policies that make living in the US (and participation in broader society) more expensive, which a lot of regulations do. I don’t oppose them solely on that basis, but I consider the angle not-unimportant.Report
@will-truman
There are all sorts of things that make life expensive in the U.S. and other western countries. It is too easy (but not necessarily untrue) to say that regulations make life expensive.
I think there is a lot of speaking across when it comes to regulations. I think a lot of regulations do make life safer and healthier and have increased to life expectancy. Is it worth living in a cheaper society if it means society is exponentially more dangerous? A very minor version of this is when people complain about safety regulations at playgrounds and then they are countered by someone with unfond memories of burns from a metal slide during the summer.
We might have reached a point where life is expensive in the United States and the West in general because it is hard to make society less expensive. This might have nothing to do with regulation or is not completely to do with regulation. It could just be that people are largely use to life X and we are not willing to decline.Report
I don’t disagree. Regulations are something that a government has more direct control over, however, and that’s one reason why it comes to mind. Again, that doesn’t make regulations bad. A lot of things are worth added cost. But I do bear in mind the added cost, as even small things add up.Report
I tend to see this as binary in this country, your skill level/motivations either meet or don’t meet minimum wage requirements. All ones and zeros. In other countries without minimum wage, we could see 0.5 or 0.25 people still working at the level they see suitable to survive.
In the Great Depression people adjusted down to 0.1 or something along those lines. Now everything below one is about a safety net.
In other countries someone who is a 0.5 can pay a 0.25 to help them with tasks. I swear its like the poor can’t even legally be in the service of the poor in this country.
Its like half of the economy is missing, and non productive rent seeking has filled that half of the void. In response to that we keep getting this “nothing to see here move on” mantra with CPI, GDP, and non existant inflation.Report
Nonsense!
I can still hire 0.5 of the poor to kill the other 0.5.Report
A person with no money at all in India might live in a shack in an illegal shanty town, scavenging trash from a landfill. It sucks, but that system works, at least a little.
Oh, really?Report
My mom spent a week in Mumbai’s red light district (apparently the second largest in the world) over a year ago (she’s going back next spring I think). It’s a shanty town, it’s a system, and it works. It’s also at the extreme end of human misery and human cruelty. And while it is extreme, it is not so extreme that I can imagine anyone choosing anything even a little bit like it. I know those women are extremely grateful to get the hell out of there. And it was, in many cases, the working system of extreme poverty in India that got them there in the fist place.
I’m not going to go searching the comments for whatever privileged as fuck asshole said what you quoted in that comment, ’cause frankly, I don’t want to know, but I know that if someone said that in response to something I said, “fuck you” would be the nicest thing I could say in response.Report
This is the wacky thing about this point of view wrt inequality:
It allows for shrugs for people scavenging trash while, at the same time, feeling outrage for stagnant wages in the middle class in the US.Report
Malnutrition of children in India cannot possibly be solved by offshoring.
Malnutrition in India is, as far as I am aware of, due to social problems, both income inequality and gender inequality. Children are malnourished because women are malnourished because women are not important. And the amount of vegetarians in India is not helping anything.
Malnutrition is not caused by lack of money in India in a general sense. Malnutrition is caused by extremely poor families, and unless you think offshoring will provide half a billion jobs so that extremely poor families don’t exist, it seems rather unlikely offshoring can possibly solve malnutrition.
If anything, that’s going to make things *worse*, due to inflation and inequality making food more expensive. Yeah, let’s all praise ourselves over a small minority of people we’re paying $2 a day that are raising up the economy, and let’s ignore the fact that *over-nutrition* is now a problem in India…while a third of the country slowly starves to death. Let’s all pretend it’s not some of the people we’re paying $2 a day buying and eating excess food.
What we’ve actually managed to do in India is offshore our damn income inequality. I’m not say it’s contributing (much) to the existing problems in India, but it sure as hell isn’t helping people get food.
Or, to put it another way: India’s GDP has risen threefold since 2000. Please point to the decrease in malnutrition for that time period.Report
Cushy Mumbai shanty town:
Well-oiled red light district system:
Content resident:
@davidtc
Malnutrition is not caused by lack of money in India in a general sense. Malnutrition is caused by extremely poor families,
I wonder what cures extreme poverty? Maybe economic development? It worked in China, anyway.
and unless you think offshoring will provide half a billion jobs so that extremely poor families don’t exist, it seems rather unlikely offshoring can possibly solve malnutrition.
India doesn’t need to import all its jobs. As our offshoring creates jobs, the increased income helps create other jobs. It also enables people to afford to send their kids to school, instead of needing them to work picking trash from dumps, or their young daughters as prostitutes, which sets them up fir better future prospects. And certainly every impoverished person who gets an offshored job has better prospects for keeping their kids fed than they otherwise might have.
If anything, that’s going to make things *worse*, due to inflation and inequality making food more expensive.
An interesting theory. Perhaps you can show me where in the world making jobs available has actually made the poor worse off.
Or, to put it another way: India’s GDP has risen threefold since 2000. Please point to the decrease in malnutrition for that time period.
It’s not malnutrition specifically, but it is a graph = of declining poverty.
The biggest problem you face in trying to persuade anyone about your arguments, David, is that the empirical evidence around the world contradicts it.Report
@jaybird
Your argument, like Roger’s and Tyler Cowans, seems to be that we should look at the entire global population as a whole.
That is, rising wealth in India is a good thing, even if it comes at the expense of stagnating wages here.
Suppose we go with that argument?
If we consider ourselves a global society, that the good of people in India is joined with the good of people in London, then doesn’t it suggest that we establish a common set of rules and regulations worldwide?
As I mentioned below, most nation-states erected a set of property rights, along with rules for how they were defended, as a contract- we defend your property, you contribute to a social safety net.
What we have now is rights defended without any contribution. A contract between a New York firm and a Chinese supplier is enforced, and both get their property defended, yet neither are asked to contribute to either one of the societies.
As I have also suggested, what if the 99% went Galt? Suppose we up and one day refused to defend the property rights of the 1%, and negated all their contracts?
Or more realistically, set conditions for doing so- for example, no contracts with Chinese firms are enforced, unless the Chinese workers are compensated better.
the logic against minimum wage laws are usually that the firms will flee to lower wage countries- but if we truly consider ourselves a global society, as yu suggest, then it makes sense to erect a global set of laws and regulations.Report
LWA, it actually comes down to me not understanding that if we’re going to care about relative inequality, why drawing the line at the water’s edge is the obvious place to draw it.
It seems just as reasonable to look at the whole world. If we want to draw a line, and, sure, we might want to draw one, I don’t see why the coastline needs to be the place we stop.
What we have now is rights defended without any contribution.
I’m not a big fan of rights being dependent upon contribution.Report
LWA,
You assume we can agree on a common set. My experience with your line of thinking is what you really mean is applying first world standards to third world countries, effectively negating their comparative advantages. If you think Bangladesh is gonna agree to $13 an hour minimum wage and a carbon tax and the protection of the local snail darter, then you are just fooling yourself.
If I assume everyone agrees to the common standard of NO regulation, I would be similarly delirious.
Rules and regulations have their place, but as with everything in life they have tradeoffs and costs as well as benefits. In reality the relative benefits and costs are subjective and depend upon the circumstances of the individuals and locales. The optimum expected regulatory cost benefit in Bangladesh is absolutely inconceivable to a spoiled Westerner like you and me.
There is also the fact that nobody knows what the perfect regulatory scheme is for tomorrow, how it needs to change over time, how it differs by individual values and such. Therefore, in a complex adaptive system of experimentation, the last thing we would want is a single monopoly on rules and regulations. A monopoly eliminates constructive competition, value differences, contextual differences, benchmarking and experimentation.
“…what if the 99% went Galt? Suppose we up and one day refused to defend the property rights of the 1%, and negated all their contracts?”
Gets you excited just thinking about it, huh?
Absent capital investment, property rights and incentives to invest in positive sum opportunities you would see the economic collapse of civilization. You would not just end all growth, you would create a worldwide catastrophe which would lead to most of our deaths.
Seriously guys. There are consequences to actions, and destroying property rights and profits would effectively pull the foundation out of seven billion people’s standards of living.
You guys mocked me for teasing you all on the threat of progressivism. Here it is exhibit A. Is anyone willing to defend the horror that would develop absent effective markets (which require profit and property rights)?Report
And for the record, I think a libertarian anarchist “utopia” would lead to similar disaster.Report
It’s not malnutrition specifically, but it is a graph = of declining poverty.
Yes, India has had rapid economic success since 1991. Which is basically exactly what I said. (Except I decided to start from 2000, for no real reason except that was an easy point to work from.) India is the third-largest economy in the world by purchasing power parity.
What I pointed out is that this didn’t actually seem to reduce malnutrition that much. Huge amounts of economic growth, but somehow more malnutrition. Citing a chart that proves India has much less people living in ‘extreme poverty’ just means that someone is defining ‘extreme poverty’ oddly. Maybe it’s them, maybe it’s me and that’s some technical term I was misusing, I have no idea.
The point is, even with all that economic growth, malnutrition has not gone down.. Malnutrition in India is perhaps the best example of a rising tide *not* lifting all boats I’ve ever seen.
So there are really only two options:
1) All this economic growth hasn’t made it to a *huge* section of the population, i.e., we’re exporting our income inequality.
2) Extreme poverty has nothing to do with malnutrition, and hence can’t be solved with economic growth, and hence offshoring can’t help there.
I honestly have no idea what is true. But if 25 years of epic economic growth hasn’t stopped malnutrition and in fact let it get worse, than another 10 years isn’t going to fix it.
And, of course, you’re wrong in a completely different way: India’s economic growth has nothing at all to do with offshoring *anyway*.
Only about a fifth of India’s GDP has anything to do with exports, and a third of that is petroleum-based stuff that couldn’t possibly been ‘offshored’ to India. That leaves…about 10% at most that could have shown up from offshoring. And in reality it’s probably closer to 2%-3%, because India has quite a lot of outside trade inherently.
The exact same thing, or the exact same thing slowed down by 3%, would have happened in India even if Western companies hadn’t offshored to there. India would be at their late 2013 economic level instead of mid 2014.
What is driving India’s growth was opening themselves to outside investments and trade, and most of all, getting rid of their central planning.
It’s got nothing to do with Western companies relocating factories there, and Western companies could *stop right now* and not make any noticeable dent in India’s economy.
An interesting theory. Perhaps you can show me where in the world making jobs available has actually made the poor worse off.
Offering a tiny fraction of the poor a job is not ‘making jobs available’ in any meaningful sense. The Western world cannot purchase enough stuff from India to lift India out of poverty. It doesn’t have enough people, and the few people there can’t keep buying things when they don’t have jobs because all the jobs are overseas.
Only India can lift India out of poverty. And it *is*.
Hooking India’s market into the world without much thought, however, while it has produced rapid economic growth, has resulted in food prices going slightly haywire (As food is now being bought and sold on the worldwide market), and a large fraction of India lived very close to the edge. So it’s not ‘making jobs available’ per se, but at least some of India’s malnutrition problems right now are attributable to the entire system of free trade, of an entire country trying to lift itself slightly too fast.
Granted, stopping offshoring wouldn’t stop the problem there, but it wouldn’t make it worse either.Report
Wendy’s has reintroduced their pretzel-bun burgers and chicken sandwiches.Report
That’s some kind of metaphor, right?Report
No, it is a reference to the author’s avatar.Report
It’s also worth asking whether the negative consequences of inequality are a result or an associated symptom.
It’s easy to convince people to die storming the Bastille if they’re starving. It’s a lot harder when they’re sitting on the couch eating cheap potato chips and watching “The Bachelorette”.
Historical inequality wasn’t a problem because some people had more than others, it was a problem because the people on the low end were dying. Dying in the near term, not “heart disease and diabetes”, not “bad education leads to higher chance of criminality”.Report
Inequality is not evidence or a cause of the broken economy.
Inequality, however, is pretty clear evidence that the economy doesn’t need to be broken. It’s proof this isn’t some sort of weird recession we don’t understand, it isn’t some sort of magical downturn that have kept wages stagnate.
If I go to the library, and they’ve got half a dozen crappy books and all the patrons are wandering around trying to find something to read, well, maybe they’re not a very good library. They’re poorly funded or something. Perhaps no one will shop them books, or all their books were recently damage in a fire. I might demand the library is funded more, or I might just accept that I’m not getting a book.
But if I go there, and the same half a dozen crappy books are on the shelves, and everyone wandering around trying to find something to read…but it turns out the library actually has books, but a single guy at a table has literally taken 80% of the books and stacked them up and won’t let everyone touch them…yeah, suddenly this doesn’t like it’s a *library* problem anymore, it looks like that guy is an asshole book hoarder.
The American people have become increasingly clear we’re actually living in the latter universe.Report
Hoarders? Okay there Stalin.
“if I go there, and the same half a dozen crappy books are on the shelves, and everyone wandering around trying to find something to read…”
Is that the case? Or is it that anyone who wants a book, gets a book? Maybe not the book they believe would be perfect, but no patron has to hear “sorry, we haven’t got any books at all today”.
The promise is not that you get the perfect book; the promise is that books are available.
And making there be some kind of Equitable Book Distribution Board doesn’t solve the problem of one guy hoarding most of the books. In fact, it makes it worse, because now there’s one guy–the EBDB–who’s hoarding ALL of the books, and you have to get on his good side if you want to get a book at all.Report
The promise is not that you get the perfect book; the promise is that books are available.
I think you have failed to notice what an *analogy* is. And also that, uh, I have no idea what ‘promise’ you’re talking. The actual, non-analogy promise in American society is if you work hard you will get ahead, so the analogy is more like ‘The promise is that you get the book you deserve’. (Which, again, is an analogy, so it’s pretty stupid to try to argue what is ‘really’ going on there.)
I think you also failed to read my first two paragraphs, where I mention that inequality is not the problem per se, but it is certainly making people look at their own economic problems differently.
You can argue they shouldn’t be upset that that guy is sitting there with all the books, but my point wasn’t any sort of moral judgement of blaming him for the distribution of books…I was simply pointing out that’s what people *see*.
So they’re going to think differently about how to solve the problems in a universe where the economy is crappy except for a few people who have massive amounts of money, vs a universe where the economy is equally crappy for everyone. (Whether or not that different thought is *correct* is not actually relevant to my point.) The latter is clearly some sort of accident no one wants, and the former is…not clearly that thing.Report
“I think you also failed to read my first two paragraphs, where I mention that inequality is not the problem per se, but it is certainly making people look at their own economic problems differently.”
So, as Jaybird said elsewhere, it’s less about inequality per se than it is about perceptions?
“I was simply pointing out that’s what people *see*.”
So it’s not so much that people are rich, it’s about the idea that they’re rubbing people’s noses in how rich they are?
Because maybe the solution to that isn’t redistributive wealth confiscation. Maybe the solution is high fences, private schools, and plenty of bullets.Report
What matters less is the reality of inequality rather than the perceptions inequality. During the mid-20th century, Cuba was statistically one of the most well-off and prosperous countries in Latin America. Its citizens were better educated nad better off materially than every other country in Latin America except Argentina and maybe Chile and Brazil. That didn’t stop the Communists from taking over because many Cubans felt they were suffering under Batista.Report
So would changing perception be sufficient to solve the problem?Report
Does this rock exist? [Kick!] Ouch!Report
It should but changing a person’s economic perceptions is not easy.Report
I do admit to finding perception problems to be in a different category of problem than “moral problems for which I am personally responsible”.Report
“It should but changing a person’s economic perceptions is not easy.”
I keep trying though. World views are critical. Human prosperity and flourishing are greatly the product of correct world views and institutions. There is nothing more important than eradicating the growing intellectual virus called progressivism. It is the second greatest threat mankind has ever faced.Report
@roger – “There is nothing more important than eradicating the growing intellectual virus called progressivism. It is the second greatest threat mankind has ever faced.”
And people say Kim says wacky things.Report
“Doctor Johnson calling Doctor Scholl!”Report
So, Jesse, you don’t think ideas and world views are important?
Or you don’t see the danger of an ideology which calls itself progressive but which is clueless toward how to bring about progress? An ideology which pretends forward (last 20 years) is backward (inequality!).
Obviously I am just pulling your guys’ chains here. My intent is to get you guys to rise up and either logically defend your views and beliefs or to admit you can’t.
The progressive worldview is the default thinking of most intellectuals and academics. However, it is a logical mess, based upon a dysfunctional social science model, an absurd concept of human nature and biology, a dystopian economic system and as expected it has an abysmal track record.
But I could be wrong.Report
Roger, i have no clue what version of progressive you are referring to. In the US at least liberals/ progressives are almost all market believers. Oh sure lots of us are suspicous of big business to some degree and think crony capitalism and regulatory capture are bad. The actual socialists on the left in the US are hard to find and pretty pissy about it.
You are strawmanning pretty hard here. Who here has said the gains made by the third world poor are bad? Nobody is saying everything about the gains in the last couple of decades are bad. Just that in the US our policies have resulted in a lot of stagnation among most people. Stagnation that is at least partly due to policies pushed by they richest for their own benefit. That stagnation is not inevitable or necessary to create an economy that lifts most peoples boats.Report
If you assure me progressives are pro market and view inequality of outcomes as an essential and good part of properly functioning markets, then I stand corrected, Greg. My bad.Report
This is that strawman people were talking about. I consider myself progressive (and most of my friends are to some degree), and I’m not against inequality of outcome; neither is anyone I know. It is, to some extent, necessary to provide incentive for competition. What I am against is staggering inequality of outcome.
A thought experiment: picture a society of 1000 people. In this society, there are 10 “elite” jobs and 990 people who exist basically to support those elite jobs. In this scenario, the 990 non-elite jobs each make $10,000 per year, but end up paying all of it to the holders of the 10 elite jobs, which each make about $1,000,000 per year (a dollar in this society is worth about the same as a dollar in modern America). Let us also assume that this society is a perfect meritocracy: everyone starts out with an equal chance to get one of those elite jobs, and the 10 most deserving people always get them. If the #762 person builds up his skills such that he’s better than the #10 person, he gets the #10 person’s job.
Even with a perfect meritocracy, is this degree of inequality acceptable?Report
Jesse,
If Roger stops strawmanning for a moment, we discover that we concur in policy, and where’s the fun in arguing about that?Report
Would you guys quit saying “straw manning” without reference to the passage in question? It risks just being a way to waive off the conversation.
It would be more appropriate to point out specifically what I said and how it does not reflect progressive views. If you do this, and convince me I will gladly retract the statement and I will learn via the dialogue.
As above I was “pulling people’s chains” with the hyperbolic threat of progressivism. That isn’t a straw man, it was a schoolyard taunt as clarified above.
The substantive points which I actually made in this subthread are as follows;
1) progressives do not understand or even recognize progress as illustrated by the way the last twenty years are conventionally framed (if they do understand it, they seem to be pretty disingenuous)
2) the progressive view is the default way of thinking for academics and intellectuals. It is current political and intellectual correctness.
3) progressive ideology is rooted in the scientism of the standard social science model and absurd economic theories (a mix of mercantilism, Marxism and folk economics)
4). All else equal, progressive policies have a bad track progressive record. They tend to lead to cities, states and countries with lower economic growth and/or standards of living.
Feel free to challenge me, correct me or ask for clarification or exceptions. I am open to changing my mind on any of these topics.Report
Adam,
Your model is grounded in the static, zero sum model I am criticizing. Why are they making $10,000 or $1,000,000 per year?
The appropriate hypothetical is to assume one thousand people come into this world with nothing, zero. They will starve to death, die of thirst and disease and exposure within days. Thus they have to solve these problems. The group discovers that they can solve infinitely more problems better cooperatively via division of labor and exchange and mass production than they can autonomously.
Depending upon their productivity, the aggregate total wealth can differ from zero (death to all) to infinity (there is no conceptual physical limit to utility).
In a model of voluntary exchange and property rights, it is possible for someone via skill, insight, risk or luck to come upon a productive idea which enriches themselves and others. She can then exchange the fruits of her idea to others. She can offer employment to potential producers. She can offer opportunities for middlemen to deliver it. She can sell it to everyone else for a positive sum gain — consumers gain utility she gains currency. She can then invest her profits into new ideas, some of which fail some of which don’t.
If she makes a gazillion dollars and enriches others lives via the process then I am happy for her and everyone else in our group.
It is critical incentives and institutions be constructed which support positive sum economic activity as above. Entrepreneurial activity must be promoted as it is the driving force of material improvements. Limiting her income at the expense of net positive sum gains is nothing more than cutting off ones nose to spite ones face.Report
Roger,
Frankly, I don’t care about your arguments. You’ve agreed with me about my solutions, which are reasonable and not likely to interfere with productivity enhancements. Maybe that makes me not a progressive, suddenly?
I like progress, I can probably talk progress better than you can, because I’m not going to default into “that’s progress” when most of the time it’s probably not.
The drone is progress, at least, once it stops flying into potholes and never coming home. Large companies delivering boxes of dead rats is not progress, but when they fix the system bugs, and they actually deliver food efficiently (without busted chips), that’s a new business model, with cool new logistics. Yay progress!
I can tell you all about wage-theft. Even ethical wage-theft if you like. ’cause I know a lot about that too.Report
Here is where there is a problem for all of you who do think that income inequality is a problem that needs a definite political solution: most people don’t really agree with you. Income equality is an issue that makes the biggest splash among the chattering classes. The median voter is more concerned with objective measures of economic growth (employment, wages, inflation, etc.).
I think that the reason for this is a bit of a disconnect related to the super rich vs merely wealthy divide. The six-figure creative class worker who lives in Park Slope and drives the Prius with Obama sticker imagines himself as being one of the good guys, while he also imagines the seven-figure investment banker living in Greenwich as the bad guy who probably drives an SUV and voted for Romney. Of course, to the poor or working class guy both of those guys are just rich guys; he doesn’t make that distinction between the super rich and the merely wealthy.Report
You mean like Nate Silver? Know enough people in Wall Street, you know that their lives suck more balls than most techies. Techies got hours, Wall Street has job-enforced bills.
Any man that works for a living is, most probably, doing something positive sum.
It’s the gaffers and the drowsers and the goldbrickers that are the enemy.Report
Proof please that most people don’t agree that income inequality does not matter. Note that there could be otherways of referring to income inequality like being concerned about income inequality like anxiety of access to healthcare, job quality, quality of life, etc.Report
JR- If the objective measures of growth were all doing better, likes wages and full time employment, etc, inequality wouldn’t be that big of deal. The problem is wages have stagnated for decades. Inflation is low which is good but a lot of people are having trouble finding full time jobs.Report
@saul-degraw,
See pages 13, 20 and 25 (http://www.pewglobal.org/files/2013/05/Pew-Global-Attitudes-Economic-Report-FINAL-May-23-20131.pdf).
Concerns about job prospects and the cost of health care are not the same as concerns about income inequality. They are concerns about objective measures of well-being. You could argue that the super rich are bidding up the cost of everything else, but that is where we go back to what I just said. The super rich are generally not competing for goods and services in the same markets as the poor and working class. Rather, they are competing with the merely wealthy, which is part of the reason that the merely wealthy see income inequality as a bigger issue than the poor and working class.
@greginak,
I return to what I said in the firs comment that I made on this thread: these are two separate issues. If you want to argue that the rise of the super rich is causing the stagnation of the middle class, i’m all ears but skeptical. More likely that both are being caused by some other set of phenomena, so that going after wealthy may feel good but it’s not going to solve the stagnation problem. And if we go about it in a self-destructive manner we may make the situation worse.Report
jr,
The wealthy want more money pushed to the lower and middle class.
Why?
Because they’re good at extracting wealth from folks. That’s an easy to understand, if risky, problem. And they’re risk takers.
The SuperRich (By which we mean the Kochs and their ilk) are risk-adverse people who would rather get all the money (and all the marketshare). They do this by wage-theft, among other methods (getting gov’t property for pennies on the dollar is nice too, ain’t it?).
I like the wealthy folks, because they’re productive people enhancing things for everyone.
The superrich have this nasty little habit of taking any collective action problem, and shouting, “TURTLE!” (in short: I’m wealthy enough to deal with consequences).Report
So your answer is yes, that degree of inequality is fine, because the people who are making $1,000,000 per year have done so by making other people better off by $1,000,000 per year each. Is that an accurate statement of your position?Report
@adam
Not only is inequality fine, but in the above case it is highly desirable. The richer she becomes, the more the rest of us benefit.
What is your concern?Report
I think a lot of the discussions use terms like “free trade” and “open borders” which really need a bit more critique.
For instance, are the borders currently open, or closed?
Do we have free trade, or not?
The answer is that borders are currently open to some things, closed to others; trade is currently free for some things, restricted for others.
In general, capital and goods are allowed to flow with minimal restrictions across borders, while labor is highly restricted. For example, I can set up a factory anywhere in the world, using capital from anywhere, and ship the finished goods anywhere; yet workers are required by law to remain fixed in place, with few exceptions.
Capital and producers of goods are encouraged to collaborate across borders, forming associations and binding legal agreements and enforceable laws to their own benefit, often with little or not input from labor. For example, NAFTA, GATT, and the WTO override and supersede local laws and control, and were crafted with very little input from the workers who are obliged to obey them.
Yet what if workers from various countries join together and form laws and regulations governing global workplace conditions, global wage laws and the like? This is prohibited, or at least strongly discouraged by those who currently hold the reins of power.
Corporations are allowed to form tight restrictions on how they compete with each other, and form alliances in which they collaborate- yet labor is prevented from doing the same. For example, there are laws against “unfair competition” between producers in different countries- I can’t, by law, sell stuff for whatever I choose, anywhere. Yet there is no such concept as “unfair competition” when it comes to labor.
What it amounts to, is that instead of a level playing field, of free and informed consenting individuals, what we have is a tightly woven thicket of laws which favor capital over labor, written by and for the benefit of those who hold power.Report
Drop the ambiguous conspiracy crap, LWA.
Developing nations workers are the major winners in labor competition. The reason the billion gained (no longer starving and seeing half their kids die) is that the playing field has become more even between the workers in the first and third world.
Previously we used our privileged position of being born in a developed nation to have an advantage against human beings of the developing nations. Global trade networks and technology (themselves the product of capitalism) have changed this.
A labor union is a cartel. For a global cartel to work, you would have to convince those living off two dollars a day to refuse a job paying substantially more so that you can afford your new Playstation. Expect them to flip you a particularly appropriate finger.
A minimum wage is going to privilege developed nation workers and screw the “third world man”. Same with environmental restrictions. Same with standardized occupational safety regulations. Same with everything progressives rant about.
You don’t want an even playing field. You don’t have solidarity with them. They are your competition, and you want to neutralize them. You want them poorer so you can be even richer.
Your goals and methodology are either absurd or morally unconscionable.Report
In the next 20 years, there will be 50% jobloss worldwide. Will you fall on your sword then? Seriously, the world grows better alarmingly quickly. What when we have no use for the third world at all??Report
Any ambiguity about the self-interested inside dealing of those who crafted international trade laws was purely unintentional, I assure you.Report
Roger – If I incorporated my union an employee-owned services company and we sold labor/services to other companies only under contracts granting us exclusivity with respect to the type of labor/service we specialized in, would you continue to label it a Cartel?Report
How did you know I call it “my sword”?Report
I would call it a cartel if it involved….
“….a combination of independent commercial or industrial enterprises designed to limit competition or fix prices.”
As you may guess I am against cartels. Not only that, I think a cartel of all workers, current and future is a logical contradiction. Like a square circle.
If you root out what a cartel is and how it “succeeds” you would see that you cannot have a worldwide labor cartel. The whole ideas of union solidarity is bogus. Workers don’t compete with management, they cooperate with management in production. They compete with other workers current or prospective. The fact that Marxists were able to convince you guys of the opposite is kind of sad.
Workers of the world unite as we square all the circles!Report
Roger, that comment reminds me of Blade Runner, “That’s the spirit!” Once in a while you let your true colors fly. And good on ya for doing so.Report
Standard Roger. Instead of responding to a direct question, you quote a definition. Try answering the specific question without speaking in broad generalities about what hypothetically may or may not be a cartel? I have a company,of similarly skilled say…, auto workers. We only voluntarily contract with automobile manufacturers who promise to procure auto workers exclusively via my company. Is my company a cartel? Or tell me Im a Marxist again, if that’s the type of conversation you prefer to have.Report
Switters,
Actually, you can see by the above that my comments in general through this post have been pretty specific. I gave a definition because I did not understand your case. It lacked info so I provided a broad definition so you could answer it yourself.
The Marxist comment was actually thrown out to the broader peanut gallery. It addresses the point frequently raised by several commenters that we need worldwide worker solidarity. All based upon a bad framework. If you don’t share this view then consider it superfluous.
With the into you have supplied me, your company in absolutely no way is a cartel. You are describing voluntary contracts. Not sure what your point is though.
.Report
@roger,
Thanks for answering the question. I don’t feel passionately one way or the other about unions, similar to my feelings about corporations or any other institution humans use to group together. But you said unions are cartels. I think this is inaccurate.
So what I am trying to do is tease out the difference you see between my hypothetical corporation and a union? Not saying there aren’t any, so I’m willing to listen. .Report
And just to clarify I have no problem with voluntary unions. I think they are a great idea actually.
I have a problem with unions acting as cartels to restrict competition, usually via threats or force or law.Report
Roger, You have no problems with voluntary unions? Ok, so now were down to involuntary unions are cartels rather than unions are cartels, right?
What do you mean when you say involuntary union, or an other-than-voluntary union? And how do these involuntary unions restrict competition?Report
An involuntary union in our day and age usually uses the force of law to prohibit a company from hiring a non union worker, or uses force of law to require an employee to join against their will.
I am 100% in support of the freedom of employees to get together! voluntarily form a union and contract whatever terms and agreements the company or companies agree to. I am even ok in theory with the union stipulating that only union members can be employed, as long as the company agreed to these terms voluntarily (absent state coercion). I am ok with the union stipulating work conditions, wages, benefits etc, again so long as the company agrees. I am also fine with the union striking voluntarily.Report
Sounds like one of us mistaken then. I admit it could be me. But my understanding of closed shops was that they were based on voluntary agreements between a union and an employer, or group of employers. The agreement being that the employer(s) will only hire union employees. And that closed shops is essentially what right to work laws prohibit.
I am not aware of situations where the government forces an employer to only hire from a particular union absent an agreement between the employer and the union. Nor one where employees are forced by the government (vice an voluntary agreement between a union and an employer) to join a particular union. Are you?Report
switters,
there are the public unions. though arguably the gov’t is both employer and employee and adjudicator there.Report
I have learned to be careful with the closed/open shop dichotomy, as the open shops often involve state coercion in favor of employers (per other commenters on these pages who know lots more about the topic than me, including the one writing this post).
I agree with your clarifications/corrections. The state only enforces the contract. I have no problem with that, since we already stated that the company agreed.
The coercion is most prominently that the company cannot terminate or replace the employees choosing to unionize or strike (assuming the company has not already voluntarily contractually agreed not to do so). Mark or you can probably correct me further here, too.Report
And I think government employee unions are a terrible idea. Seems more like a rent seeking scheme to milk tax payers to me.Report
@roger,
I’m not willing to say gov’t employee unions are a terrible idea. But I’ confident I share many of your concerns. But like corporations who do business with the government, I am not sure what Iimitations I’d be comfortable placing on voluntary associations of employees who wish to negotiate as a collective rather than individually. I mean that’s exactly what Boeings and Lockheeds do.
One of my biggest issues with the strong pro market group is that corporations seem to get a pass from them where associations of labor, or groups advocating on their behalf, do not.Report
switters, you are bolder, braver and more badasser than I am. I gave up interacting with Roger right after the first thing I read by him:
[Progressive’s] goals and methodology are either absurd or morally unconscionable.
Another way of saying the same thing is that we’re either ignorant or evil. Roger said that to me once. {{He really did…}} And now again. I don’t know about you switters, but it’s pretty hard for me to have a discussion with someone who rejects your views out of hand as being ignorant or evil, then challenges you to defend yourself from his judgment. Why bother?
Especially when all of us progressivistas in thishere blog are big fans of markets and capitalism and private property.
I’ve been round and round about this with Roger for going on years now. And I can never really figure out what he’s arguing either, just like you mention in your comment. The only thing I’ve been able to determine, and I think this is pretty inarguable at this point, is that Roger really (like really!) hates progressives. I mean, they’re either ignorant or evil!Report
Whoops. This shoulda been dropped at the bottom of the page, linked to switters take down there.Report
For example, there are laws against “unfair competition” between producers in different countries-
And who is it that criticizes those laws?Report
No one who matters.
No, thats a serious comment.
Where are the million dollar endowments and think tanks and Presidential campaings fueled by powerful interests demanding and end to unfair competition laws?
Oh, I see plenty of that, vast powerful fortunes and figures dedicated to eradicating such scourges from the world like Social Security, Medicare and food stamps.
But campaigns to rid global trade agreements of things that benefit the rich and powerful? A blog post here, a quickly forgotten position paper there, sotto voce mutterings in the political world.
Show me where your treasure is, and there also your heart will be.
We know exactly what animates what political movement.Report
“Where are the million dollar endowments and think tanks and Presidential campaings fueled by powerful interests demanding and end to unfair competition laws?”
http://en.wikipedia.org/wiki/Net_neutralityReport
Jim,
step away from the libertarians.
What, you thought they had zero political power? ;-PReport
@jim-heffman
“Where are the million dollar endowments and think tanks and Presidential campaings fueled by powerful interests demanding and end to unfair competition laws?”
Yeah, but we just got that fight because the US telcom oligarchy decided to take on the US media oligarchy. It’s powerful US interest vs. powerful US interest.
I mean, no one important complained when telcoms throttled torrents.Report
The good news is that the telecom oligarchy and the media oligarchy will end up merging until they’re one oligarchy that can agree on what laws they’d like to have in place. Then we can all stop arguing over it.Report
It would be more productive if you pointed out any possible inaccuracies in my statements. Step on up to the plate and take some swings.Report
Sorry, comment to SW.Report
Roger, Ugh. I can’t even muster the energy to respond civilly to you anymore. I’ll leave at that.Report
Once upon a time, only the scholars and the scribes knew how to read and write. Reading and writing was worth stuff on its own, but there was also a scarcity premium that the scribes were able to charge on top of that.
Now we’ve got 99.99% literacy for persons age 15 and over having completed 5 or more years of schooling (that’s from Wikipedia, of course).
There is no longer a scarcity premium for reading/writing. AND WE ARE ALL SOOOOO MUCH BETTER OFF FOR THAT!!! ALL OF US!!!!
If there were a handful of people who explained that they wanted to go back to the old way where most people weren’t able to read and write because, back then, scribes were able to support a family, we’d see that as kinda creepy, right?
I suspect that there was one hell of a scarcity premium going on in the golden days.
Seriously, we’re better off for not having it. Even those of us who would have known how to read and write anyway.Report
Jay,
And you wonder why the rich scare me…?
Scarcity is the only way they can prove that they’re better than the rest of us.
They still haven’t forgiven us for Acadia.Report
I think a lot of people are misinterpreting Cowan. He’s not saying inequality isn’t a problem or that we shouldn’t do anything about it – in fact he explicitly says he’s not saying that in the article. Cowan, and the World Bank study he cites, are not trying to throw bricks in the political debate over inequality but are instead trying to do something important – diagnose the problem.
What most people don’t understand is that, to use a medical metaphor, inequality is not a disease its a symptom. Just as there are any number of things that can cause a headache (ranging from fatigue to brain cancer), there are many reasons why incomes might be becoming more unequal over time. Some will be a bigger problem than others, but that’s not the only issue because without knowing what is causing the inequality there is no realistic hope of improving living standards for those who are having a problem.Report
He certainly is saying we shouldn’t do anything about inequality. Implied in his piece is the notion that global growth depends on intra-country inequality. There’s no other reason for him to bring global reduction in poverty into a discussion of inequality. The “accept inequality or global growth gets it!” framing is central to his argument.Report
That was my read of it. Otherwise he just spent a chunk of the piece basically saying “Well, yeah, income inequality in the US sucks. But on an unrelated note, life is getting better for non-Americans, so you can at least take comfort that not everyone is getting screwed like you guys”.
If our rising inequality was paying for the rising equality worldwide — that’s a conversation to be had, a trade-off to be discussed. (A losing one, I think, in the real world. But a conversation). But you have to actually link the two.
I don’t think the runaway gains of the 0.1% here in the US and wage stagnation for everyone else are uplifting the rest of the world. I’m pretty sure my wage stagnation is powering the rising gains of the 0.1% here, which means the awesome news that Bangladesh is less poor is totally irrelevant.Report
“I’m pretty sure my wage stagnation is powering the rising gains of the 0.1% here, ”
I have laid out an argument which offers that the one percent are making gains by creating prosperity worldwide. I have, as above, even agreed that the one percent’s profits contributed to the technological boom and globalism which threaten the developed workers (with competition, which is fair game in economic institutions for good reason).
I would summarize it as such: the income returns of the top, the unprecedented growth in worldwide prosperity and the relative stagnation (lower growth rate) of developed workers are all completely intertwined and codependent. Attacking the inequality relationship causes the overall network to become less effective at the expense of all. Inequality is not the problem, it is part of the solution.Report
I’m pretty sure my wage stagnation is powering the rising gains of the 0.1% here…
Yeah, in part via the mechanism shown in this chart, where “hourly compensation” is median wage and all figures are inflation-adjusted dollars. It’s worth noting that this is the same mechanism driving the US Social Security funding “crisis”. The Greenspan Commission was working with data up through about 1975, and its recommendations (adopted by Congress) assumed that median wages would continue to follow productivity the same way it had since WWII. If that had turned out to be the case, the SS debate we would be having today would be how much to cut the payroll tax rates, because the forecasts would show the trust fund balance increasing forever.
The Greenspan Commission got longevity effects almost spot on, underestimated the growth of the economy as a whole somewhat, but grossly underestimated how much of future productivity gains would accrue to the median worker.Report
grossly underestimated how much of future productivity gains would accrue to the median worker.
overestimated?Report
Yeah.Report
@james-k
I agree with Clawback. By calling US/Western World income inequality a symptom and not a disease and saying the cause is rising wealth in the developing world, Cowen and other libertarians are essentially saying that people in the US need to make do with less.
Now maybe there is a good reason or good reasons for people in the US to consume less but as I noted to Will, just because wages are going down in the United States and other places does not mean that the cost of living is going down. New York went on a building spree during the Bloomberg years and this continues but the rent in NYC is going up. On the other hand, Tokyo went on a building spree and rents went somewhat down. It seems that the cost of rent/housing can sometimes defy the laws of supply and demand. A lot of people seem to use NYC apartments as a form of wealth hiding via forming LLCs that own the property. I think the only thing that will decrease the cost of living in the SF Bay Area is a Tech 2.0 bust but there is seeemingly bottomless pit of venture capital to give to apps meant to solve the social problems of 20-somethings. We seem to live in an age of huge capital but low ideas.
It seems to just be very hard if not impossible to make life more affordable when it comes to things like education, housing, and healthcare especially because no one wants to take a loss on property and banks can sit on foreclosed property until they recoop their loses or make a profit on it.Report
“Cowen and other libertarians are essentially saying that people in the US need to make do with less.”
I challenge you to compare a typical low-income life in 2012 with a typical middle-class life in 1972 and claim that, forty years on, we have less.Report
Jim,
The better question:
how much longer in the timeline until the purchasing power of the dollar hits 0.Report
Tokyo housing market went kablowie. It is not to be emulated.
Please, if you don’t believe me, ask Krugman — that’s his field.Report
James K,
What most people don’t understand is that, to use a medical metaphor, inequality is not a disease its a symptom.
You seem to be suggesting that global growth and poverty reduction require increasing inequality. Cowen is apparently arguing that global inequality is in fact decreasing, yes? If so, what’s that a symptom of?Report
@clawback @saul-degraw @stillwater
No, you’re still not getting it. The point is that there are any number of things that could be causing inequality and we need to find out which one(s) it is. Just as your doctor can’t do much to treat a headache unless they know what is causing the headache.
The problem is that you are reading Cowan through the lens of the politics of inequality, which I shall summarize thusly.
Cowan’s piece is not engaging in this debate (and the article he cites certainly isn’t). What he’s doing is one of the fundamentals of analyzing complex data (and inequality is very complex) – looking at the problem from multiple angles by looking at different treatments of the same data. The key is to work out the cleavages in the data – which groups have things in common and which are different. That’s the first step in figuring out some testable hypotheses and then ultimately figuring out what is going on and what can be done about it. Until then all the political stuff is just housing in the dark.
If you’re interested, I can outline what I think are some of the insight we can pick up from this, but that will have to wait until after work.Report
He may be looking at the problem from multiple angles, but the overwhelming focus of the piece in question is on the specific angle of international growth.Report
@clawback
Yes, because a World Bank study recently came out looking at that angle. The entire piece was about that specific article. Cowan was highlighting a novel contribution to the literature, which a perfectly normal thing that academics do all the time.Report
@snarky-mcsnarksnark
Re: Village Life
This is where my inner-libertarian and capitalist kicks in. I notice that the far left and far right both seem to have a crush on pastoral utopianism. The ideal village might look a bit different but the end goal is essentially the same. People on the right tend to go for something that looks like Tolkien’s shire and people on the left for something that is more of a commune. But in the end they are all small communities where everyone sort of joins together and nothing ever goes wrong. These are Potemkin villages that look more like a ren fair than like reality.
Yet this is all very unappealing to me and I think it is very unappealing to many other people. It all seems stiffingly boring. For better or for worse, I like big cities and all the options that they offer in art and culture and I don’t see NYC or even SF existing on a communal line.Report
Reality isn’t the cherry orchard, either. Except if you live in Russia.Report
Saul,
Imagine for a moment how much more art and culture would be available if the power and money wouldn’t by default end up in very limited control structures. Those control structures are very expensive overhead for the narrow benefits they provide.Report
@citizen
I am not actually sure that this is true. At least the culture that I tend to like.
The culture that the Internet and kickstarter tends to (but not always) produce tends to be of high-geekery and fueling of the constant nostalgia machine. It is a fan-drawn episode of Sailor Moon or 70,000 dollars for potato salad. It is not people trying to create the new version of Cashiers Du Cinema (which gave rise to the French New Wave) or even Dogma 95 (and I don’t even like Dogma 95 very much or Lars von Trier but he is at least an interesting provocateur). There are some great artistic projects that get self-produced via kickstarter.
The pastoral culture is very basic and would seem to me to be like a Ren Fair. It would not produce Shakespeare, Chagall, Rothko, Cezzanne, Picasso, Serra, Ginsberg, O’Hara, Murakami, Kafka, Fitzgerald, Rembrandt, Chekhov, Brecht, Truffaut, Kurosawa, Goddard, Eames, Tennessee Williams, ee Cummings, Joseph Cornell, and many many others. Art and culture needs the cities. I can list hundreds of names of artists who I don’t think would exist in the age of the Internet and Kickstarter. The internet crowds seek comfort, not challenge. The Internet largely seemingly seeks to allow people to constantly relive the feelings of watching Saturday Morning Cartoons.Report
Saul,
Seriously, have you read Encyclopedia Dramatica?
The internet is full of provocateurs.
Besides, where else will you find a COCK RAMPAGE!?!
(courtesy of Oglaf — NSFW, guys, seriously).Report
@kim
Encyclopedia Dramatica is precisely what I am trying to avoid. Encyclopedia Dramatica is nothing more than Barbarians at the Gate seeking to destroy what they don’t understand and using “humor” as a mask for their absolute contempt for everyone except themselves and anything that strives for something greater than a base reaction.
“Socialist in economics, liberal in politics, conservative in culture.”-Daniel Bell
Seems like a reasonable rule, at least most of the time. Sometimes gatekeepers are good.Report
So, Saul, you believe that free speech ought to be curtailed by the whim of the government? You think that people ought to be arrested for making fun of other people?
You know precious little about psychology, for all that you’re a lawyer. Science doesn’t always happen in little laboratories, you know?
Ethical wage-theft occurs when you can make a job fun enough that people will do it for free.Report
While I wouldn’t curtail anybody’s right to free speech*, I have to agree pretty strongly on Saul’s assessment of ED. It’s cultural trash. (By contrast, I think Uncyclopedia is a hoot and a hollar. In places, at least.)
* – and I don’t see any indication that Saul would curtail ED’sReport
“The pastoral culture is very basic.”
Have you ever thought of what happens when you subtract pastoral culture from cities?Report
Will,
Both you and saul lack the intellectual principles (and the daring) to get yourself banned from other countries. I’ll say that much about ED, they take freedom of speech seriously, and to a level that most people do not.
Were they to go to Australia, they’d be arrested on sight.
Provocateurs indeed, but also experimentalists, learning about the greatest puzzle of all — the human mind.Report
@citizen
I do not deny the need for rural spaces or green spaces in cities. This does not make pastoralism an ideal though. I am all for the triumph of cities. That being said, I can also appreciate time in the country.Report
Ha, I was thinking wine, bread, cheese and coffee, amongst other arts of the city external.
Subtract a few of those and cities could become less civil.Report
@saul-degraw
Like you, I have a great deal of difficulty understanding the appeal of the pastoral life. And I think history backs us up here. People tend to abandon the rural idyll en masse the very instant they are offered an alternative. People flocked to live in literally Dickensian conditions in the cities because it was better than living is The Shire. In fact, even when not actually presented with an alternative, a substantial number of people chose outlawry or living wild in the hills to agriculture. This leads me to believe that, rather than being some natural state of humanity, pre-industrial agriculture was pretty much the Worst Thing Ever.
This is partially why my inner-liberal is so fond of broad-based welfare systems. I want to enable a cosmopolitan society where people aren’t utterly beholden to the people that happened to be nearby when they were born.Report
My guess is that serfs weren’t forcibly bound to the land because they liked it so much.Report
@mike-schilling
In much the same way that slaves weren’t chained because the slaves were really into steel jewellery.Report
@j-r @patrick
“What would a convincing argument look like, to you?”
Buried in all the comments above, some of us have made our arguments on why our understanding of economic theory and empirical trends is such that the one percent are not taking from the average western middle class.* I could repeat and elaborate, if anyone is interested.
I would love to hear what your (or Morat’s or anyone else’s) logical argument is for the opposing view.
In my opinion you have to build a case that as a class they are getting rich via zero sum activities.
* that said! I agree completely that any member of the one percent using cronyism, fraud, theft etc is indeed taking from the rest of us. However, the target of this ire is these people and their actions not everyone in the one percent. It is usually bad form to throw out babies with the bath water.
In addition, I have repeatedly suggested that the one percent have in many cases enriched themselves via the technology and globalization which have in effect caused relative stagnation with skilled western labor (while enhancing global prosperity and the rest of the world)Report
@j-r and @patrick
Note I moved discussion down to bottom for ease.Report
It seems to me that the data involved here are insufficient to draw the really broad conclusions that everyone wants to arrive at, and conveniently they’re arriving at the conclusions that they typically arrive at anyway, which makes me suspicious.
I’m not so much making a constructive argument here as poking holes in dikes.
It seems to me that the “globalism has pulled a billion people out of poverty” line is making a fundamental attribution error. Virtually all of those folks live in two countries, India and China, and there are very complex socioeconomicpolitical factors involved that make simple conclusions hard to draw with any credibility.
Both China and India are still pretty corrupt. China, in particular, is a terrible poster child for market protagonists. China’s economic might seems far more coupled to technology and politics than simple market economics, to me… the central planners over there made two decisions in the wake of T-square: encourage foreign investment and build a crapload of power plants to feed manufacturing needs. This enabled Western capital to adjust their risk assessments to where “moving production to China” was cheap enough to warrant the risk involved in moving ops somewhere where the native politicians *could nationalize your factory with the sweep of a pen* wasn’t a deal breaker.
These are capital-friendly reforms, certainly, but that’s not at all the same thing as market-friendly reforms.
India is so utterly different from China both in terms of how the country works and how they got their niche access to globalism’s banquet that lumping them together as “yay market” evidence seems.. quite frankly… embarrassingly silly reductionist. India’s high level of educated English-speaking folks and two fat data connections to the U.S. along with a huge surplus of basically free backbone fiber thanks to the dotcom boom and bust probably are much bigger factors than any particular market reform in India, which (IIRC) hasn’t really done a thing to their economy that hasn’t been reactive. Folks outsourced support to India because the labor was cheap and the bandwidth was there to push the data, so the risk was very low. Most of that backbone fiber was originally paid for by companies invested in by middle class 401k money who went bankrupt when the bust happened, and AT&T bought the fiber for $0.05 on the dollar. That’s not genius market reforms in India, that’s just dumb luck.
Anyway, neither China nor India is directly generalizable, and neither of them have hardly anything to do with market-based reform, and they certainly have fuck-all to do with political or policy decisions very relevant to the local U.S. economy.
To the extent that we reduce barriers on capital moving internationally, we will see capital move internationally until a risk event occurs that makes capital leery of leaving the US. That’s good for the global economy, and by extension that’s good for the US economy because ours does well when everybody else’s is doing well.
But if China had nationalized one major factory in 2003, or if the U.S. hadn’t invaded Afghanistan and the Pakistanis had kept their missing war with India going instead of getting dragged into US-Afghan messes, we might not be having this conversation at all. Admittedly, I’m the guy on the blog obsessed with exception scenarios, so there’s my bias talking, but I see this globalism thing as a study in how money moves in response to incentives, and not much else.
In any event, there’s a return on capital factor and a decrease in goods prices factor when it comes to “who benefitted here in the US”, and structurally speaking I thing it’s pretty clear that the accrued benefits for capital were more awesome, but that’s based on my own normative evaluations, and I don’t expect they will be shared by allReport
A lot of the assumptions people are making about those countries are based on things that affect us, but do not actually affect those countries much.
India’s high level of educated English-speaking folks and two fat data connections to the U.S. along with a huge surplus of basically free backbone fiber thanks to the dotcom boom and bust probably are much bigger factors than any particular market reform in India, which (IIRC) hasn’t really done a thing to their economy that hasn’t been reactive.
No. As I pointed out above, probably less than 3% of India’s economy can be attributed to American and European countries offshoring to them. Only about 1% is offshored services. 1% of an economy cannot fix it. What happen in 1991 was that the government fixed their economic system and stopped hindering the market. *That’s* what made their economy boom, not offshoring or exports. (I have no idea how any market reforms *after* that went, maybe that’s what you’re talking about.)
Offshoring is a big deal *from our point of view*, so it’s easy to think it’s the majority or even an entirety of the reason for what’s going on in India, but if it had not happen *at all*, India would be almost exactly where it is right now.
China, in particular, is a terrible poster child for market protagonists.
China is an example of how a planned economy can get rich by selling to a free market. All those people celebrating at Chinese people being pulled ‘out of poverty’ have need to remember the fact that communist countries go away because of *crappy economies*. Every single one, throughout history, has collapsed due to their crappy economy. Except China, because we’re *holding their economy up*. This means we are, directly, responsible for more than a billion people living in communism.
Good job, globalization!Report
For the record, the risk event occurred, in 2007, and a whole bunch of capital fled the international market, and the commodities market, and the investment market, and hid its tail behind Treasuries. Where it would almost certainly still be cowering if we hadn’t floated a three trillion dollar loan to the global economy. On the backs of the US taxpayer, who I might add are not typically capital class folks but wage class folks. So, another big boon for the investment class. Of which I am a member, so I’m not complaining, but still.. that’s a spade, not a club or a diamond or a heart.
So yeah, pretty sure that the global economy still owes a whole bunch of its current state to the US’s willingness to socialize risk, and not much at all to China’s eagerness for foreign companies setting up shop (not to mention everybody’s willingness to ignore the externality of pollution)Report
If government reforms in 1991 were responsible for India’s success, I’d suspect the existence of a graph showing an inflection point in a GDP growth curve or something.Report
Specifically to David: you may be right that India’s market reforms in 1991 were necessary to set the table, but my reading of the world bank data on GDP growth in India is that there are multiple other factors involved. I don’t know enough about the makeup of India’s economy to make real assertions here with any authority, but based upon the dips and the coincidences with the world economy, my half-assed guess would be that market reform in India opened the door for foreign capital, but the foreign capital is the important thing. Which doesn’t detract from the overall point of my comment.
Again what I see here is people interpreting the data in the most convenient way, instead of doing the work to challenge their assumptions. In that respect, it’s only a marginally interesting comment threadReport
@patrick
Thanks for actually taking a shot at explaining your beliefs. Refreshing.
Unfortunately the debate isn’t over whether china or India have implemented ideal markets. It is on whether people in the developed world have gained economically due to the increased albeit imperfect expansion into the global market. The answer here is an undeniable yes. Worldwide prosperity has increased at an unprecedented pace in great part due to globalization.
This same globalization has increased the supply of labor. Supply and demand affect wage rates just like everything else and as expected wage rates are pulled toward equilibrium causing both downward pressure here while creating opportunity and upward pressure in developing nations.
Similarly, the capital is experiencing profit and losses as it capitalizes on the opportunities of globalism and technology. Some people are making big profits on the opportunity and creating a better world in the process.
The parts are interconnected. That is Tyler’s point and mine as well. One side of the debate is looking at the entire system. The other side is pretending global effects can be ignored.Report
“Some people are making big profits on the opportunity and creating a better world in the process.”
Agree with the first part. The second part has yet to be demonstrated.
(Which gets back to the confirmation bias mentioned earlier…..I mean, “better world” seems to have a very narrow economic definition here that ignores other, possibly more important factors.)Report
Profit and loss within a market system act as incentives and signals to identify, create or fulfill opportunities for positive sum mutual gains.
Granted one can also make a profit via zero sum activities such as theft, fraud or the restriction of competition.
I assume we agree we are for the former and against the latter. To the extent the latter is true, the appropriate response is to be united in our opposition to it. It makes no logical or moral sense to rail against both types of profit due to the actions of the exploiters. It is the equivalent of condemning all Asians because some Asians stole from us.
I can empirically prove that millions of people have made (and lost) big bucks investing in jobs, factories, new products and such which have contributed to the improved prosperity of the last two decades.
Wealth, middle class relative stagnation and the unprecedented global rise in total prosperity are interconnected parts of a global whole.Report
@patrick
I don’t know enough about the makeup of India’s economy to make real assertions here with any authority, but based upon the dips and the coincidences with the world economy, my half-assed guess would be that market reform in India opened the door for foreign capital, but the foreign capital is the important thing.
Oh, yes, foreign capital is an important thing. I won’t dispute that at all.
That’s not the same thing as offshoring, though. Or even imports from India.
I want to make it very clear what I am saying here: If no American factory had closed and been relocated to India, if no American companies used Indian call centers, if cheap goods had not been imported from India to America…India would, economically, be in essentially the same position it was in. Maybe slightly worse off, but we’re talking knocking off a quarter percent growth each year.
That is all I’m saying. Nothing else.
India needed foreign *capital*(1)…that doesn’t mean it needed to compete with American workers. The injection of foreign capital actually allowed them to build *their own* economy, a self-substaining cycle that is still in a positive feedback loop. That would have happened regardless.
At bit of evidence: The recession of 2008 had less effect on India than people who think it’s all ‘selling to us’ would expect. Yes, the government ran into problems, but the industrial base kept increasing.
(Which gets back to the confirmation bias mentioned earlier…..I mean, “better world” seems to have a very narrow economic definition here that ignores other, possibly more important factors.)
And those economic definitions aren’t actually true, on top of that. As was pointed out by various people above, (although some of them did it accidentally), the standard of living in India has not gotten any better for the vast majority of people. Everyone keeps talking about the mean, no one seems to notice the median has not moved at all, or that huge portions still suffer from malnutrition.
And it’s not just confirmation bias…it’s the idea that the stuff that *affects us* is what is causing the changes in those countries.
Guys…India’s economy is operating balls-to-the-wall and will continue to do that whatever the hell we do. They’re having a goddamn industrial revolution times five thousand. They have two billion idle hands that would like a real job, and want to buy a house, an easy chair and a big screen TV. (Although, like I said, this is somewhat uneven economic development.) And unlike the US, their rich people aren’t attempting to make money with absurd ponzi scheme based on thinly-sliced mortgages, but are instead attempting to operate companies that to *manufacture and sells goods and service to make a profit*, a very strange idea that America stopped doing in the 80s when the rich realized that screwing around with stock prices was more fun.
India does not need us. So people cannot make the moral argument that American protectionism would hurt India.
(And as I pointed out in my other post…American protectionism would, in fact, hurt China. So, there we’re helping propping up a repressive authoritarian government. Yay us!)
1) Technically, they didn’t need foreign capital. The government could have just, you know, printed money and invested in various projects. Outside investments made it a lot faster, though.Report
Confirmation bias is probably something we should save until both sides have made thorough arguments and responded in good faith to objections.
I can’t re read every comment but my refreshing comment to Patrick was that it was refreshing to see an actual substantive comment on the issue at hand. I have laid out my take on the issue several times. Usually the counter attacks from the left are on non relevant issues. When I address these the other sides seems yo disappear into the woodwork without ever substantively countering my framework
Yes I could be wrong as could Tyler. But to spend three days on the topic and never address our framework head on, and then plead confirmation bias starts to sound like one side using it as a rhetorical and defensive trick.Report
WHen Patrick was talking about people interpreting the World Bank study and Cowen’s article along entirely predictable lines, my guess is that he included you in that group. I mean, his comment was a response to you, no?
For my part, I’m still not clear on what Mark is arguing here, or what Cowen is arguing there, or what the WB study Cowen cites is getting on about. Seems to me that the data in the WB article doesn’t lead to any conclusions about rising inequality perse, but rather that it makes demonstrably clear that the increases in income by the bottom 50% result from reductions in income by the 70-90% ranges. The top five percent say increases in income over the time frame of 44%!!111!11!1! …. !!1!1
If Cowen wants to argue that inequality between the lower 95% of the world population is decreasing, that’s one thing. But his argument – apparently! – was that global inequality *full stop* is decreasing. Nothing in what I said has to do with confirmation bias.
Also, I think it’s perfectly appropriate for Patrick to point out that factors other than market forces and the role inequality plays in realizing certain outcomes, especially given that all the rest of us have been arguing about the causal connection of precisely those two things. That he also says people are interpreting the data along entirely predicable lines is noteworthy as well, and your response simply begs the question against him.
Seems to me anyway.Report
You disagree with everything everyone says and if you disagree with me you prove I am right.
This is a silly rhetorical trick, and is unworthy of either of our time.
Let’s move on.
Laser focus time ….
Do you disagree with the framing of the problem which I have repeated five or six times in three or four days:
The rise of inequality in the US, the relative stagnation of the middle class in the US, and worldwide increase in prosperity due to global markets over the past two decades are interrelated parts of a whole?Report
Roger, I’ve disagree with your framing for three years now. Why do I need to do it again?Report
Please clarify the error in the framing. Laser focus….Report
Roger,
That’s a pretty standard move on your part. One I anticipated, actually. I think I’ll bow out now and let have the last word. Unless something substantive *in this discussion* arises. I’ll respond to that. But not any challenges to offer views which I’ve presented to you dozens of times, which you’re somehow forgetful of in this particular moment, for this particular discussion.Report
No SW,
You did the usual drive by shooting. You (and Switters before you btw) tried to shift the discussion from the issue at hand to me. When I try to get back on topic you bail. Obviously I can’t even point it out without being somewhat guilty of it. Point is, let’s talk about the issue not about me. Doing otherwise risks resorting to bad rhetoric.
Last chance to enter the discussion…Report
“When I address these the other sides seems yo disappear into the woodwork without ever substantively countering my framework ”
Then maybe don’t look at it in terms of “sides.”
One reads things like:
“Never before have so many real live human beings seen their lives improved as we have seen in the last two decades.”
or
“Progressives have no concept of progress. None. Pure counterfactual magical thinking.”
And one might conclude that you’re not putting forth an argument so much as you are proselytizing for a certain point of view. For his part, Cowen makes that clear in his piece:
“In other words, the true egalitarian should follow the economist’s inclination to seek wealth-maximizing policies, and that means worrying less about inequality within the nation.”
Of course they should!Report
JP,
There are clearly (at least) two sides to this issue — or ways to frame the issue. We are trying to use the dialectic process to evaluate how best to frame the issue. I won’t pretend otherwise, nor did Patrick’s comment which I was responding to.
The statement on improving world standards of living is an empirical statement which can easily be fleshed out and validated or invalidated. I have previously linked to international studies which define this phrase in terms of people rising out of poverty, and average per capita living standards. Are you suggesting this is not true? Please explain. Do I need to re link to the studies? Why are you and fellow progressives not aware of them and hyping them if you guys are so up on human progress?
I wrote half a dozen separate comments clarifying the progressives don’t get progress comment. The focus has clearly been on the issue of economic progress.
Understanding economic progress requires a reasonable familiarity of the basic principles and fallacies of economics. I am not suggesting we need to be able to write an economics text book. None of us can. But it does include understanding the role of profit and loss, property rights, supply and demand, the seen and unseen (secondary and tertiary effects), incentives, the positive sum potential of the invisible hand and such. It includes understanding how markets actually work as opposed to populist, Marxist and or mercantilist interpretations, which have long been thrown into the dust bin of intellectual ideas. And yes, I can interpret how LWA and some others on the left think of profits. The confusion is crystal clear.
Let me restate my issue… If profits have ANY positive effect on worldwide per capita standards of living, and profits have ANY contribution to inequality in the US, then we need to be careful in how or if we address inequality in the US, as addressing the one percent could easily cause unintended consequences to worldwide living standards.
Does anybody disagree? If so, how?Report
James, here’s an example of the type of lurking sentiment we were discussing upthread:
If profits have ANY positive effect on worldwide per capita standards of living, and profits have ANY contribution to inequality in the US, then we need to be careful in how or if we address inequality in the US, as addressing the one percent could easily cause unintended consequences to worldwide living standards.
Profits, and extraordinary inequality, and increasing inequality, and so on blah blah blah are necessary to raise the poor out of poverty.Report
If you define poverty as not having sufficient food, clean water, shelter, etc, then profits will, in fact, result in poor people having more and more stuff.
If you define poverty as a relationship to the rich, profits make poverty worse and will continue to do so.Report
That misses the point of the discussion James and I were having.
Well, it doesn’t miss the point. It intentionally changes it.Report
Here’s a thought. Insofar as libertarianism relies on cultural changes to be realized (an uncontentious assessment, in my view), why not include within that set of changes an alteration in the cultural value of money and equating monetary success with intrinsic personal value? Why not promulgate the view that self-interest includes more than monetary and material rewards, and emphasize those values as part of being “libertopia”?
Crazy, I know. But I can’t let go of it….Report
SW,
Logic check. Your conclusions don’t follow from my statement.
I did not say profits or extraordinary inequality were necessary. I said if they have any contribution at all, then we need to be careful if and how we address them.Report
I said if they have any contribution at all, then we need to be careful if and how we address them.
Which accords them an extra-special status which includes meeting burden of proof to alter or subvert. A burden which cannot be met, according to your views. That amounts, for practical purposes, to a necessary condition. A demonstrated one at that!Report
Still,
You ascribed necessity to Roger’s statement where I don’t think he did. He said “if” and “could,” not “is” and “will.”
Thus, a difference of perceptions.Report
James,
Roger is all about ideological advocacy. If he says “if” and “could” while rejecting every other “if” and “could”, then we’re talking about “has” and “will”.Report
I’m troubled by where my thoughts on the importance of homogenization for sustainable culture take me. There’s no shortage of bad examples of various “traditions” from any/all cultures that make us want to say “no, you shouldn’t do that anymore”.
Circumcision, arranged marriages, and that’s without getting into the risible stuff.
It’s easy to fudge and say “well, we want the fun parts of your culture… the songs, the dyes, the fabrics, the music, and the drinking games but leave the weird patriarchy bullshit over there” and tell other cultures that they should pretty much be Epcot versions of themselves once they move here…
But that seems weirdly patriarchal in itself. Homogenous.
I find comfort in the whole “when you let persons be themselves, everybody is better off, especially them” but emergent culture is something that I don’t have a firm grasp on.
Anyway, I was trying to make a meta point about the dialectic. If you define things one way, the answer is obviously X. If you define things the other way, the answer is obviously Y. The argument should be over the definitions. Once you have those, the solutions obviously follow.Report
why not include within that set of changes an alteration in the cultural value of money and equating monetary success with intrinsic personal value? Why not promulgate the view that self-interest includes more than monetary and material rewards, and emphasize those values as part of being “libertopia”?
If that’s what people value, a libertarian would say let them pursue it. Let’s just be crystal clear that putting other values above material gains will in fact mean a diminshment of material gains, which is going to hit some folks a lot more than others. We just have to hope they share that value. I suspect, though, that it’s more likely to be the middle class that shares that value than the lower class*, so there is a non-zero probability that we will be foisting the cost of our values off on them.
________
*”simplifying” one’s life, and de-emphasizing material goods strikes me very much as a middle class phenomenon, a phenomenon of those who are materially well off enough to limit their materialism without pain. I’m not criticizing it–it rather describes me, actually.Report
You are pouring it on even thicker than usual SW.
I do not believe increasing inequality is necessary. Flat out. I can also envision many scenarios where per capita worldwide incomes increase and inequality drops or stays about the same. It kinda depends.
I cannot envision how current living standards could continue today absent profit. Indeed, eliminating profit is effectively the same as eliminating property and would probably lead to disaster. It would probably lead to more inequality too. More than one way to become unequal.
Not that anyone currently involves in the discussion is suggesting we should.Report
The argument should be over the definitions. Once you have those, the solutions obviously follow.
In an intellectually perfect world with uniformity of values…Report
Not that anyone currently involves in the discussion is suggesting we should.
THen what are you arguing about? If not the substance, I mean.
Suggestion: Ideology?Report
We just have to hope they share that value.
But James, lots of people don’t share the value that you’re assuming. Materialism might in some sense be a necessary condition for human flourishing (as Jaybird would say, remember Maslow’s hierarchy!) but it’s certainly not the end goal of that flourishing.Report
Stillwater,
I don’t share your view.Report
I know. That’s why you’re a libertarian and I’m a liberal.Report
Stillwater,
And we don’t forbid people from minimizing their chase after material well-being to focus on other values. (Well, we shouldn’t. One of my beefs is zoning regulations that set minimum home sizes, which is in fact a constraint on the pursuit of non-material values. But libertarians, being the shining lights of political virtue that they are, tend to oppose such rules.)Report
And another drive by…
Thanks SW for clarifying what I really mean after my three attempts to stress that I really do not fucking mean that.Report
Roger,
We’ve had lots of discussions about these types of issues before, no? You know exactly where I stand on them – at least if you read the thousands of words I’ve written in the past to you, in response to your questions and arguments. That’s a fair assessment, yes?
What I find altogether unsurprising is that in *this particular* context you would challenge me (again!) to offer my *specific rebuttal* to your views, after all we’ve been thru together. 🙂 I won’t do it, since every other time I’ve taken the time to respond to you it’s had no impact in altering your views of what I think or why I hold those views. From your point of view, “progressives are either evil or ignorant”. Remember?Report
And again, conversation loops back to being about me. It gets old. I really am not that interesting.Report
No, you’re not that interesting. Which is why I don’t respond to you personally anymore.
Maybe I’d change my mind if you treated people as individuals rather than isms?
Oh, I don’t know. You’d prolly still be pretty damn uninteresting.Report
Roger’s point is true actually- our living standards, both worldwide and domestically, HAVE risen. How much, depends on what time frame you want to analyze.
His point, and Cowen’s and others, seems also to be that we should be happy with it, and not be bothered by the unequal rising of the very upper class.
So why ARE we bothered by it? Is it pure envy, unjustified greed on our part?
A case can be made that extreme inequality distorts the political process, which has been made elsewhere so I won’t repeat it.
But even if we can get around that- why does the existance of extreme inequality seem to be a moral, not just political problem?
You have wealth, they say, so you should be happy. If you aren’t, your unhappiness is unjustified.
Or rather, we shouldn’t be angry at the 1%, but use our dissatisfaction to goad us into working harder, smarter, being more energetic to gain more wealth, and then become satisfied.
Using wealth as a proxy for human flourishing is another idea that has, as Roger put it, been cast into the dustbin of history. But it seems to be the underpinning of Cowen’s analysis.
We talked about this a bit in the 30 hour workweek thread- if Maslow and Keynes were correct, shouldn’t we all be out spending loads of time meditating or painting or otherwise actualizing our selves?
We obviously aren’t. And for that matter, neither are the millionaires. Or even the billionaires. In fact, they seem to work harder than anyone. Why?
Something is eating at us. Something is stirring anger and fear and resentment in us. It isn’t that we are hungry or ill clothed or poorly housed. Its something else, and proposing, as Cowen does, that the charts and graphs tell us our dissatisfaction is unjustified is laughably obtuse.Report
LWA,
You do not need to be happy or content or anything.
It is good, all else equal, having a reasonable grasp on the world. My argument is that a proper understanding or framework on cause and effect with economics would do us good.
There are definite problems in the world and things can always be better even for those that have it good. However, the meanest, nastiest type of problems are the complex ones where we frame them wrong. Indeed some can be framed so that efforts to fix, within that frame, make it worse though in a non obvious way. It is essential for human progress that we constantly be on the look out for these traps.
I agree that economic standard of living is not the only important thing for flourishing. It is one very important thing. Others include freedom, respect, status, self actualization, health, wisdom, longevity. Your comments are especially funny when directed to a guy who dropped out of working five years ago to dedicate my life to other than work. I surf, paint, read, travel and try to learn about progress and progress traps. Saying that, I used to have fun at work to. I just wanted to flourish in new ways after thirty years.Report
There’s a lot of tension between culture and what would make most of us happy, I imagine.
I know that my idea of what I’d like to do for a year or forty if I could get away with it would involve video games, weed, and high-end takeout. “Every night?” “Every goddamn night.”
Instead, I have a 40-hour a week job, a house in the suburbs with a well-used kitchen, and clean urine.
Maybe I’ll hit the lotto.Report
Jaybird,
You’re really telling me that you wouldn’t work if you hit the JackPot? Just be a consumer?
I have a hard time believing that, but I don’t know you, afterall. I’ll have to trust that you’re being about, but I have a hard time believing that someone as intellectually engaged as you wouldn’t feel a real personal motivation to do something productive with your time.
That’s why I’ve never understood retirement, actually. Makes no sense to me.Report
@roger
I notice that your list of things to pursue didn’t include solidarity. Which is really that one that should be discussed.
Solidarity, group identity, triball affiliations, the stuff that Jonathan Haight talks about may or may not be important to you.
But they are deeply important to most of us- and I think its the underlying cause of the anger at the 1% pulling away from the rest of us.
Because they are, literally, pulling away. For the 1% and especially the 0.1%, live in a very different world than you and me. It isn’t that they have more money. They live in a world with a different set of rules and consequences than we do.
Even if we, for the moment, presume that they behave like angels- that disassociation from the rest of us is frightening, and should be.Report
Maybe I’ve just had an exceptionally lucky run of really awesome 3 and 4 day weekends.Report
That’s why I’ve never understood retirement, actually. Makes no sense to me.
Retirement means I get to do the research, code the software, and write the stuff that’s important to me. At sane hours of the day.Report
For what it’s worth, I would certainly do things that other people would regard as “work” if I won the lottery, but it certainly wouldn’t appear to be “work” from inside my own head.
Well, unless I won the big lottery. A hunner’d million dollars and I’m taking my aptitude test result dream job of “philanthropist”.Report
Roger, if you have a blind spot it’s conflating “government action” with “master planning”, or “government action” with “top-down design”. Neither is particularly accurate.
I mean, the thread on water in California brought out your “master planner” critique, but if there ever was a master planner in California WRT water systems, he’d do what North suggested: change to realistic pricing and call it a day.
He (or she) certainly would *not* design California’s water rights system, which is much more of a bottom up (or at least, middle out) design system than a top-down one.
But I digress.
You look at the data here and say, “yay market forces”, but a credible (but also erroneous) interpretation could be “yay master planning” (wrt China).
This isn’t about bottom up or top down. It’s not about market forces. It’s about capital liquidity and the power that this represents.
At least, that’s how I see it, from a systems perspective.Report
@patrick
Again the topic is being spun way off. If memory serves, I gave one or two comments on that post, followed by a series of responses to people dishonestly taking what I said deliberately and rewriting it to say the 180 degree absolute opposite of what I said. It was pretty offensive actually.
My comment was that pricing and market mechanisms need to be a greater part of the solution and that top down planning was leading to the absolutely absurd Rube Goldberg contraption which Francis described and which is continuing to get more complicated and less effective at solving the problem over time.
I stand behind this statement. That said, can we get back to THIS topic?
I have never believed that complex adaptive human systems such as science, politics or economics are strictly bottoms up phenomena. I have said so every time the conversation comes up. I certainly am not arguing that globalism is a completely decentralized process, and indeed I fail to see why you are bringing it up here.
It seems way off topic.Report
a credible (but also erroneous) interpretation could be “yay master planning” (wrt China).
A comment, not an argument. China’s initial development was–as it has been with all developed/developing countries–labor mobilization, getting people off the farms and into factories. You get great initial growth when you do this en masse. Up into the ’70s there were people writing about how productive the Soviet economic system was because it’s GDP was growing faster than the US’s was. In the 80s it was all about the Asian Tigers, and some secret they must have. But the only real secret was getting people into factories to produce goods (which were internationally competitive because of the initial low cost of the labor).
Very simply, an authoritarian system can do that very well. It doesn’t take an authoritarian system to do it, but because of their ability to tell people that they will leave the farm and go to work in a factory, authoritarian systems are well suited to make it happen, and to speed up the process.
But at some point you reach the end of that process, and then you require productivity increases to keep your GDP improving. Authoritarian systems are less capable of that, because they tend to reward cronyism and achievement of brute numbers of units produced, rather than efficiency increases. Market systems do a much better job of rewarding efficiency, rather than just numbers produced (case in point, GM, which produced more vehicles than any other auto manufacturer in the world, but lost money on most of their units other than trucks, and went bankrupt because of it).
But China’s government is trying to straddle that, and make the transition from command-and-control to market economy without losing political control, which is no easy task. And there are two not-so-secret issues for China’s economy today. One is that its authoritarian economic methods are now putting it in a bind, as unprofitable state-owned enterprises borrow money from banks that they can’t pay back, putting China into a growing debt crisis. The other is that underneath all that the role of an actual market economy has been growing in China for a couple of decades now.
Which is to say, to treat China as either just an authoritarian system or just as a market system is to miss the complexity of what’s actually happening there.
Which, as I say, was not an argument against what Patrick was saying, just a comment riffing off of what he said.Report
I pretty much find James spot-on, here.
One big problem with authoritarianism is that it conflicts directly with economic growth, because at some point you have to admit that giving up some control over the money leads to more economic growth, and the consequence of that is the less authoritarian you get, the faster your economy grows, but of course the consequence of *that* is the faster your economy grows, the quicker your opponents gain leverage and the faster your authoritarianism erodes.
Russia and China are both pretty big economic engines going through this process right now. It’s fascinating but also terrifying.Report
@roger
“then we need to be careful in how or if we address inequality in the US, as addressing the one percent could easily cause unintended consequences to worldwide living standards.”
Of course we need to be “careful.” One should endeavor to be careful in implementing any policy.
Maybe I’m just not getting the message, but it seems like the ultimate point in Cowen’s essay (and your comments) is not that we need to be “careful” in addressing income inequality, but that we shouldn’t even make the attempt.
The “rising out of poverty” stats are being used to bolster that argument, which is fine, but it’s not very convincing if one suspects that the global rise out of poverty can be attributed to other factors besides mere profit-seeking.Report
Agreed we need to be careful. And before addressing inequality we need to first understand the role of inequality in markets. The pros and cons of inequality, including how it may help the poor. Indeed we need to understand how our current standards of living depend in part to inequality and profits.
I do scratch my head at the concept of “mere profit.” Like saying breathing requires mere oxygen. What role do you see profit/loss and inequality have in the rise of standards of living over the past 250 years? Do you think, considering Malthusian pressures we (worldwide) would be above the eternal rate of approximately two or three dollars per day in standard of living? Why?Report
“The pros and cons of inequality, including how it may help the poor.”
See…this is where I get off the bus. I could never move myself to say, “Inequality can help the poor.” Inequality can provide the necessary environment for individuals to escape poverty, sure, I’ll grant that.
But if we’re talking about The Poor, the faceless, penniless masses, then they’re defined by the inequality, not “helped” by it.
Again, if I’m to understand Cowen correctly…and maybe I’m not…he’s saying that capitalism “helps” the poor while inequality doesn’t “hurt” them, so continue the capitalism, even if it results in inequality, because long term, big picture it has a desirable result.
It’s the kind of argument that an economist would make after looking at some charts, but it’s just not very persuasive if applied to the context of people’s lives.Report
@james-pearce
James, I really think your comment here perfectly encapsulates the crucial sticking point on this issue in the minds of many of those on the left.
How do profits of entrepreneurs, capitalists and the one percent help the poor? Again it comes back to the role of profits in economic theory.
The role of profit is to encourage people to conceive of and implement ideas which can potentially benefit themselves and their fellow man. If I build this product, create this process, build this supply network, implement this cost savings idea, construct this factory, etc etc, I hope to make a profit delivering a service or product to someone who also gains. The positive sum outcome is revealed by the fact that it is mutually voluntary. Both parties expect to gain.
How do the poor gain via profit?
First, They gain to the extent it lowers the cost, improves the quality, or creates new goods and services.
But how do the poor get money to buy these goods and services? They too can become small scale entrepreneurs (at first), offering their services, artistic abilities, to fulfill the needs of fellow human beings (lemonade stand, hair styling services, dog sitting services, etc etc)
Much more frequently, they get a job in the global network of building these products and services, delivering them, selling them, servicing them, repairing them.
Prosperity comes from building networks of human cooperation to use our natural abilities to fulfill more human needs better and more efficiently.
The billion people rising out of extreme poverty did so primarily by no longer being subsistence farmers and instead becoming workers in global networks. Workers who also compete with Americans for jobs by the way.
Attached is a link to a free online e book on the principles of economics written by Gwartney and Stroup. Please take the time to read the first brief thirty pages on the ten key principles of economics. Numbers 8 and 9 on the role of profits and the invisible hand are especially appropriate.
It would take less time to skim the thirty pages than to write a response. I encourage everybody to to so. These are the principles and foundations which you will see reflected in comments from me and many others of the “other side” of this debate.
http://books.google.com/books?id=3S6TBjhhwvEC&printsec=frontcover#v=onepage&q&f=false
I am going to repeat, if one side of this debate sees no real value in profits for the poor, and the other side sees it as essential to the improvement of the poor, then we will make no headway in understanding until we iron out this issue.Report
Here is an even more concise summary of the ten principles discovered via Google (an idea which benefits us and which made huge profits btw).
http://heartland.org/policy-documents/ten-key-elements-economics
The website gives a brief paragraph or two on each, which oversimplifies a bit, but certainly is a quick intro to the often violated or ignored principles of economics. Here is the list:
1. Incentives matter.
2. There is no such thing as a free lunch.
3. Voluntary exchange promotes economic progress. [Sounds like something I would write!]
4. Transactions costs are an obstacle to exchange.
5. Increases in real income are dependent upon increases in real output. [sounds like Jaymes]
6. There are four sources of income growth.
7. People earn income by helping others. [ I would add in properly functioning markets]
8. Profits direct businesses toward activities that increase wealth.
9. Market prices bring personal self-interest and the general welfare into harmony.
10. Ignoring secondary effects and long-term consequences is the most common source of error in economics.
Btw, I would quibble with the oversimplification as written on numbers 6 and 7. For example you can clearly also make money by exploiting people. But, in essence agree.
In our discussion of Mark and Tyler’s thoughts I would argue we are really spinning a debate around differences on these foundational principles. That is where the real debate is.Report
If only Econ 101 was indeed the secret that explained everything in the universe, Roger….if only.Report
@james-pearce
That was not a very nice comment, James.
I don’t think economics explains everything, just as I don’t feel biology explains everything. Certainly it helps explain things within the domain of economics, and that is what we are discussing.
I suggested what is pretty obvious in this discussion. Some progressives do not share my underlying assumptions on the nature of profit and the invisible hand in economics. I threw out ten principles, and you were obviously offended. Sorry.
My hope is that you or others can tell me why you disagree with these principles, or how you agree with them and come to the conclusions and opinions you espouse.
My offer is in good faith. Certainly someone could disagree with one or all of them.Report
9. Market prices bring personal self-interest and the general welfare into harmony.
I disagree with this. Like Coca Cola cares what it’s products do to the general welfare? Or R.J. Reynolds? Nothing but blather. In every instance, it requires regulation to force that kind of harmony on the marketplace.Report
No, Roger, James’ comment was completely fair and accurate, and phrased about as kindly as it could be.
Econimcs only studies the allocation of resources, and as such can only speak to how they are efficiently ordered, or not.
Thats entirely different than being a normative rule for how society should be ordered.
Its like the point I was making elsewhere, implicit in the argument is the fallacy that wealth is a proxy measurement for human flourishing.
Again, telling us we have gained wealth over our grandparents isn’t addressing the source of dissatisfaction.Report
If I was offended, it was over the demand to “refute these ten points…or you don’t have a point.” I apologize if that came across as a snarl.
And yes, we are talking about this in the context of economics. But it’s not just about economics. It’s about people’s lives.
As Patrick says below:
“And I have to say, if you’re a poor dude and you’re hearing somebody saw how awesome it is that some guy in Aruba isn’t as poor as he used to be so let’s continue this economic policy that lets Mitt Romney earn another 200 zillion dollars a year because taxing capital gains is bad, I don’t expect that you’re going to be saying anything other than, “Yeah, let’s pick a policy that lets that rich guy get the shit end of the stick for a change.””
You’re not going to change that guy’s mind by citing economic theory.Report
@james-pearce
That clearly was not my quote. I asked if you agreed or disagreed with them to flesh out the possible disagreement as it relates to the issue at hand. I meant to be constructive, and it may be per Zic’s response.
Patrick’s quote is again, WAY off topic. I agree completely that the guy hurt by economic change could give a rats ass about the economics of it.
We are discussing how to best understand the framing of the relationship between profits, inequality and world prosperity. The framing is important for an intellectual understanding as we seek to address the issue. Included in this, is the guy in Vietnam whose family depends upon the new factory funded from past profits with the hope of future profits.
A rational discussion will at least consider the welfare of all participants. No? It will consider the immediate and the secondary effects (point number 10). No?Report
@lwa
My argument is not that we should shut up because we are wealthier than past generations due in great part due to markets.
My argument is not that facts can be or should be considered absent values.
My argument is simply that we need to gain an intellectual grounding on the relationship between profits, inequality and local and global prosperity.
As we do so, values and other than economic or empirical trends surely pay an important part.
I simply do not believe what you think I do. I am trying to discuss the framing of this issue.Report
@zic
9. Market prices bring personal self-interest and the general welfare into harmony.
Zic writes: “I disagree with this. Like Coca Cola cares what it’s products do to the general welfare? Or R.J. Reynolds? Nothing but blather. In every instance, it requires regulation to force that kind of harmony on the marketplace.”
Thanks for responding, Zic.
I agree with you in almost all ways.
I agree that point number 9 as written assumes people know what is better for their welfare. In the case of gambling, booze, cigarettes and such they may be wrong about their own long term interests. This would be an exception to the rule and worthy of a separate topic. I don’t remember if the authors addressed it in the original book. I would.
I also agree with you that this principle does not work by forcing producers to think about general welfare at all. That is why it is called an invisible hand. With proper institutional parameters (prop rights, rule of law, enforcement against cheating, open competition, etc) the concept is that workers, employers, producers, investors , journalists, distributors and such can pursue THEIR OWN INTERESTS and the interests can be channeled into constructive endeavors.
As someone who designed products for consumers, I constantly had to battle off top execs who wanted to build what they wanted (The CEO once asked me why we weren’t building insurance products for all the people with private stables). I had to constantly remind them that the only products we could sell lots of at a profit were ones that consumers wanted and valued and which cost us less to produce than they would willingly pay. The invisible hand aligned my companies interest and the welfare of consumers. If the CEO had had his way, we would have wasted millions designing a feature none of our customers had any need for. The invisible hand would have spanked us with losses.
Finally I agree as above that properly aligned markets require proper institutions. These can be in the form of or be supported by rules, regulations and laws.Report
“I asked if you agreed or disagreed with them to flesh out the possible disagreement as it relates to the issue at hand. I meant to be constructive”
Was it? It seemed like a diversion to me. I had hoped that I had accurately paraphrased Cowen’s point on global prosperity, demonstrating that I at least understand the economics enough not to be sent to read Gwartney and Stroup on “the ten key principles of economics.”
Then having demonstrated an understanding of the point, I attempted to make my own, which in a nutshell is this:
Using “wealth-maximizing policies” to spur global prosperity works on paper, works in theory, but when it comes to people’s lives, it completely falls apart. It’s not so much that it becomes “the few profiting off the many” as it becomes exactly as Patrick put it, “Sorry, dude, but that guy over there needs it more right now.”
Who is supposed to be comforted by that? Who wants to live like that?
Maybe “wealth-maximizing policies” are not the only way to increase global prosperity, or even the best.Report
@james-pearce
Odd considering I provided a one page oversimplified link and even summarized the ten points, several of which continue to separate our views.
I have been arguing how to frame this issue for four days now. To call this a diversion is a bit rich now.
Final case in point. You are framing it as an issue involving two of the three representative parties. You just violated principle number ten. To argue that a middle class dude here’s opinion counts and ignore the guy lifted out of poverty over there is to frame the issue incorrectly. You have focused on the seen and local effect and ignored the unseen and distant effects.Report
@roger
I suggested what is pretty obvious in this discussion. Some progressives do not share my underlying assumptions on the nature of profit and the invisible hand in economics. I threw out ten principles, and you were obviously offended. Sorry.
My problem with the general assumptions is not that I disagree with them at some abstract 50,000-foot level. You and I are probably in agreement. However, when we start drilling down into the details and start discussing how markets actually work in practice (ergo – not discussing “problem solving institutions” but discussing the US capital markets – say equities), the reliance on broad assumptions is fatally flawed because it glosses over the real-world nature of transactions.
Unfortunately, I don’t have time to really dig into this but looking at this from my corner of the finance world –
1. No issue
2. No issue
3. Yes, but this says absolutely nothing about the manner in which voluntary exchange takes place and whether or not regulations are necessary in order to give participants comfort or faith in the system. This is way too in the clouds for my liking.
4. Not to the extent they increase transparency or protect participants via the rule of law. There are plenty of capital markets throughout the world with far fewer regulations than those in the US and UK. You’ll also find that investors require higher risk-adjusted returns simply by going there.
There are regulations that fall within your definition and yes, they do increase costs.
5. Most of the time but not always (I think this is where people raise concerns about the finance industry – at least parts of it).
6. I’ll defer without knowing what four you are speaking of.
7. Way too broad for my tastes. For example, while you can make that argument for the investment banking divisions of Wall Street firms that go out and raise capital for their corporate, not-for-profit, government, etc. clients, the same can’t be said for the trading mentality. If you want to say they’re helping people because of the fact that the exchanges are voluntary, so be it. However, traders love to brag about how much they’re screwing over people.
8. I am okay with this so long as the risk incurred by companies in pursuit of their profits are non-systemic in nature. In other words, if a firm takes too much risk, blows up and goes out of business with minimal collateral damage outside of the owners and creditors of a firm, I’m ok with this. However, if you’re looking at industries or firms which can create a situation where a firm’s failure can have systemic consequences, especially in markets where the systemic consequences occur as a result of a small groups of people pursuing their own interests in an uncoordinated fashion, then I don’t see why this assumption has any value outside of an abstract point.
9. Which begs the question of how we get to market prices which achieve these goals and whether or not self-interest by itself leads to negative consequences.
10. Likewise, avoiding the details is a very common error among people that prefer to engage in abstract discussions. It’s not that I disagree with you in principle (really, I don’t), I struggle to find ways to apply your points in situations involving real world markets.
As you know, I am neither a progressive nor someone that believes that increases in global wealth is a zero-sum game. You seem to point at those people as your foil in these discussions. However, I am neither.Report
@dave
Thanks for the reply. I agree in most ways with your comments. I also agree a small library could be written on each with exceptions, caveats and such. Indeed I will bet the economics literature does include a small library on each.
My point is that many of these discussions turn on non shared foundational beliefs. A Darwinian and a Creationist can talk past each other all day.
Many of the discussions and disagreements here really do revolve around around completely different understandings of what the role is of profit and inequality within markets, or the extremely counterintuitive concept of the invisible hand, or the zero sum fallacy, or the tendency to look for seen and immediate effects and to ignore unseen, secondary or longer term effects within an adaptive system. These are not imagined foils. I can point to repeated examples.
Having discussions on inequality and economic growth with people not aware of these general foundational concepts (they don’t have to agree) is pretty much an effort in guaranteed futility. At the minimum, assuming the “creationists” are right (after all they always could be), it behooves them to understand what their opponents believe. It can move the discussion forward.
My major theme for the last five days has been foundations and frameworks matter.Report
@roger
Earlier in the thread, I mentioned how it seemed like you were proselytizing for a certain point of view. I was going to say you sounded like a free-market Evangelist, but that seemed unkind and unfair to both the free-market and Evangelists.
But then you directed me to the Gospels (the “free online e book on the principles of economics written by Gwartney and Stroup”) and proceeded to list the Ten Commandments (your ten principles).
Now you’re telling me I “violated principle number ten?” Shall I now burn in hell?
Myself and others have pointed out flaws in your arguments, but this seems to be too much a matter of faith for you to really be able to take that in. Instead, you keep insisting that the argument comes back to your terms, ignoring this essential point:
“Maybe “wealth-maximizing policies” are not the only way to increase global prosperity, or even the best.”Report
@james-pearce
I have clearly and repeatedly stressed that I think proper framing of issues is critical for understanding an issue. It is not academic. We really are discussing the welfare of humanity. This is just a blog discussion, so we don’t need to take it too serious, but ideas matter. Really they do.
If you want to dismiss foundational principles as gospels then go right ahead. I believe them only to the extent that I see them as accurately reflecting the complexity of economics. Indeed they kind of are oversimplified heuristics to counterbalance the conventional biases of people. The benefit of laying them out is to reveal my beliefs, allow you to easily and directly refute them, allow others to learn from them. If this pisses you off, then so be it. Personally I think you are offended, and for this I apologize. Take it for what it is worth.
“Now you’re telling me I “violated principle number ten?” Shall I now burn in hell?”
Real constructive, James. That added value.
Where is this flaw in my argument? So far I have heard only caveats and exceptions which I myself broadly agree with and which I referenced several times when I introduced the concepts.
“Maybe “wealth-maximizing policies” are not the only way to increase global prosperity, or even the best.”
Let me be real clear, as you seem to be getting confused. I DO NOT FISHING BELIEVE THAT WEALTH MAXIMIZING POLICIES ARE THE ONLY WAY TO ADDRESS GLOBAL PROSPERITY.
If your counter to me is something that I do not believe and have repeatedly denied, then you kind of have no counter.
This is the point in an intellectually honest discussion where you either reach deep and come up with a real objection, or you start to come to the realization that Tyler and I are framing the issue much more accurately than you have previously wanted to admit.Report
A separate point-
Roger refrenced a drumbeat of messaging that we should be unhappy, as the explanation for why the 1% are so unpopular.
Truer words were never spoken!
We are all, each and every one of us, bombarded 24/7 by messages from every angle that tell us to be unhappy with our current status- our car, our house, our hair, teeth, and clothing, are all inadequate.
Of course this isn’t what Roger meant. Because in the conventional wisdom, this sort of unhappiness only leads to good things.
It leads to people working harder, smarter, longer hours in hopes of making more money and buying that car.
But can it be so easily compartmented? Once we whip up a frenzy of sexual and material lust, what makes anyone think we can constrain it from spilling over into anger at those who have infinitely more?
What happens when, after working madly and scrambling to grab the carrot at the end of the string, people find out, as Elizabeth Warren did, that the game is rigged, and the ball will never fit thru the hoop, the milk bottles will never fall over?Report
So now I am an advocate of consumerism? That is a new one on me.
I am the guy that jumped of the carrousel.Report
@lwa
“We are all, each and every one of us, bombarded 24/7 by messages from every angle that tell us to be unhappy with our current status- our car, our house, our hair, teeth, and clothing, are all inadequate.”
really? that sounds awful. do you live in a tv commercial?Report
Do you imagine it is possible to be unaffected by them?Report
I’ve purchased more music, books, and movies because of the Mindless Divers than because of any commercial in the last 10 years.
When was the last time you shopped at Wal-Mart, ate at Mickey D’s, had a bowl of extra-sugary cereal, or *AND HERE IS THE BIG ONE*
Clicked a banner ad?Report
Do you imagine it is possible to be unaffected by them?
Hell, I can’t imagine letting them make me feel inadequate.Report
@lwa
“Do you imagine it is possible to be unaffected by them?”
uh yeah? obvs? especially now. i curate so hard my palms have hair on them. i curate like i’m mad at it.
more seriously, i work in marketing. every week hundreds of thousands of people remain incredibly unaffected by my attempts to put some zazz in their razzmatazz.
now *that* is demoralizing…Report
Regardless of anecdata, or personal sworn testimony about resistance to fads, fashion, advertising or peer pressure, it works.
Advertising works, peer pressure works, and our purchases and attitudes towards goods and wealth are shaped by primal forces of sexual desire and group belonging.
Its that gnawing feeling of hunger for status and prestige that I am talking about.
We like to imagine that it only leads to a productive and happy outcome, of hard work and achievement.
Sometimes it does. But it also can and does lead to anger and envy and irrational rage.
Which was Roger’s point, actually.
Except his argument appears to be that with enough charts and graphs and well reasoned logic, the teeming billions bristling with rage at the 0.1% can be persuaded that they just need to work a little bit harder because the distribution of wealth is earned, and pretty much everyone deserves what they possess.Report
it just works! (unless it doesn’t!)
but assuming people will be reasoned out of a belief they were never reasoned into is dumb, to be sure.
is “the .01%” (and the related package or memeplex if you will) merely an example of good advertising?Report
For everyone following this thread,
Once again LWA encapsulates the conflict in framing the issue.
“Except his [referencing me] argument appears to be that with enough charts and graphs and well reasoned logic, the teeming billions bristling with rage at the 0.1% can be persuaded that they just need to work a little bit harder because the distribution of wealth is earned, and pretty much everyone deserves what they possess.”
The full argument is one billion previously impoverished making unprecedented gains, while the middle class in developed nations see relative stagnation, while a subset of capitalists, entrepreneurs and such gain large profits. These are three moving and interconnected pieces in the machinery of the unpredecedented improvement in prosperity seen in the last generation.
I never said middle class should be grateful, nor even that the billion seeing huge life changing gains should be grateful. I didn’t say anything about deserts. I am laying out how to frame a global economic system.Report
the teeming billions bristling with rage at the 0.1%
A well turned phrase. No evidence that it’s true, but I doubt the author is concerned with such details.Report
Cosign with @james-hanley. The people most likely to be bristling with rage at the 0.1% are the other 4.9% of the top 5%. As i said in another comment, I’ve seen very little indication that people at the median income level hold such a disaggregated view of the wealthy.Report
[looks out window]
teeming – check
billions – check
bristling – check
rage – check
Afraid this one checks out, Professor.Report
And just why are they outside your window, Glyph?Report
NO COMMENTReport
Jr,
I don’t even think it is the five percent. I think it is the people who can gain politically by demonizing the one percent and their followers who are enraged, (along with people who are framing the issue incorrectly (IMO) and see the one percent as being harmful on net to world prosperity).
This is about power and politics and framing.
What really gets LWA is that the masses aren’t mad like he is. That is why the pitch fork argument is so laughable. The guys handing out pitch forks are trying to use the crowd as an argument.Report
The guys handing out pitch forks are trying to use the crowd as an argument.
I think you mean that the guys trying to find someone to hand out pitch forks to are trying to use the crowd as an argument.Report
Roger and jr,
The rest of the 5% wants a more positive sum game. I’m all for that. How about you?
Of course most folks haven’t run into a Koch or a Rooney, or any of the other really powerful people you do NOT want to piss off. The 5% are more likely to run into the folks who deliberately maim themselves in their perpetual quest for beauty (yes, it’s actually a good idea to be able to identify them on sight. as I said above, grudges).Report
Or people making a living off selling pitch forks. Perhaps Zic could add this as an example of the invisible hand not aligning with general welfare.Report
“Of course most folks haven’t run into a Koch or a Rooney…”
They say if you run into the Buddha on the road you should kill him. I think the Buddhists are right on this one.Report
@roger
Down here.
Unfortunately the debate isn’t over whether china or India have implemented ideal markets.
Actually, my point was that the market argument itself was a red herring, but I agree, yes, that neither China nor India has implemented ideal markets and that’s not the debate.
It is on whether people in the developed world have gained economically due to the increased albeit imperfect expansion into the global market. The answer here is an undeniable yes.
I agree, to an extent. That is, I agree that the marginal gains for the middle class (in the US) have at least arguably outweighed the marginal losses (my liberal friends’ beliefs notwithstanding) and I agree that the marginal gains for the upper class (in the US) have hugely, no… astronomically outweighed the marginal losses. Mostly because labor is plummeting in value but service is not. And capital is not.
I don’t agree that the marginal gains for the poor (again, in the US) have been all that zawzome, as the goods they buy are cheaper but the jobs they can get are less so. So globalization, for these particular folks, has actually increased their dependency on the welfare system, which is something you and I both agree is a bad thing, I think. But that’s my take on it.
Worldwide prosperity has increased at an unprecedented pace in great part due to globalization.
Worldwide prosperity has increased at a fairly predictable pace entirely due to capital liquidity across national boundaries, which has something to do with globalization but it’s the true root cause, iff’n you ask me. The root cause is the reduced barriers on moving money around.
Which is fine, for what it is.
But the benefit is pretty much entirely reaped by those that have money to move around.
I mean, to the extent that this is the way that things ought to be, in the long run, that’s not that big of a problem.
But then, I’m not an economist, so what do I know.Report
Worldwide prosperity has increased at a fairly predictable pace entirely due to capital liquidity across national boundaries, which has something to do with globalization but it’s the true root cause, iff’n you ask me. The root cause is the reduced barriers on moving money around.
There’d be no gains to moving money around without the rest of globalization, such as reduced trade barriers and reduced shipping costs from containerization. And it’d be hard to do as much with those without being able to move money around. It’s pretty hard to disentangle the various elements and say it’s due to just this one thing or the other.
But the benefit is pretty much entirely reaped by those that have money to move around.
If you’re talking globally, you’re really downplaying the growth in the developing world. And that includes not just places where there’s been good GDP growth, but even in Africa where GDP growth hasn’t happened yet, but low cost medicines are saving more lives than ever, and education is becoming more common and rapidly changing lives (birth rates beginning to level off as women gain more control over their reproduction, etc.). All that is part of globalization, which isn’t just economic, but is a cultural and political process as well.
If you’re talking just about the U.S., you’re downplaying the value of inexpensive goods for the American poor, who for all their continued struggles with economic security do in fact live in greater material abundance than ever before.Report
There’d be no gains to moving money around without the rest of globalization, such as reduced trade barriers and reduced shipping costs from containerization. And it’d be hard to do as much with those without being able to move money around. It’s pretty hard to disentangle the various elements and say it’s due to just this one thing or the other.
What? International business has been around longer than the East India Company, back when tariffs and trade were something fought over with blood and fire, rather than just guys arguing over a conference table. C’mon, James, you know that.
If you’re talking globally, you’re really downplaying the growth in the developing world.
I am not talking globally, I pretty specifically said “in the US”, I thought.
When it comes to the geopolitical reality, the fact that US policy has benefited the rest of the world is great.
When it comes to the political reality, the fact that US policy has provided great benefits for the rest of the world and some major benefits for some members of the US body politic and less benefit (or even, arguably, a detriment) for some, the question that the folks at home are asking are: hey, uh, it’s great that we are helping other folks out elsewhere, how come the benefits are accruing disproportionately at the top here at home?
And I have to say, if you’re a poor dude and you’re hearing somebody saw how awesome it is that some guy in Aruba isn’t as poor as he used to be so let’s continue this economic policy that lets Mitt Romney earn another 200 zillion dollars a year because taxing capital gains is bad, I don’t expect that you’re going to be saying anything other than, “Yeah, let’s pick a policy that lets that rich guy get the shit end of the stick for a change.”
Those that are arguing that this is a “liberal battle cry” are rather missing that bit of nuance, I think.Report
What? International business has been around longer than the East India Company, back when tariffs and trade were something fought over with blood and fire, rather than just guys arguing over a conference table. C’mon, James, you know that.
Yep, and it was effective only to the extent it could effectively cross borders, whether through trade caravans across the middle east or through colonization so the trade became de jure internal.
I am not talking globally, I pretty specifically said “in the US”, I thought.
Not explicitly in the part I quoted, but I thought you might be, so I’m happy to be set straight on it.
how come the benefits are accruing disproportionately at the top here at home?
Well, we’re still trying to sort that all out, right? I think we’re in a time of major structural readjustment. In the past, those have been tough but have worked out for the low end, even if their benefits trailed those of the high end. Right now times are tough, and we’re trying to figure out–and endlessly arguing over–whether this time is different or will follow the same pattern as in the past.
And I have to say, if you’re a poor dude and you’re hearing somebody saw how awesome it is that some guy in Aruba isn’t as poor as he used to be so let’s continue this economic policy that lets Mitt Romney earn another 200 zillion dollars a year because taxing capital gains is bad, I don’t expect that you’re going to be saying anything other than, “Yeah, let’s pick a policy that lets that rich guy get the shit end of the stick for a change.”
Yeah, but that’s about politics. It’s not about the actual economics. We can talk about either, legitimately. But when we talk about them simultaneously, it’s easy to get them mixed up together and create confusion and inclarity.
It’s also worth pointing out that many people see the grand era of globalization as a process of increasing economic integration as already beginning to draw to a close. Not that globalization as a fact of economic integration will actually reverse, but that the easy pickings of reduced costs in third world countries are disappearing–labor costs are increasing in many countries, diminishing the relative cost advantage; in other states where labor is still cheap, political uncertainty or corruption/red-tape kill the cost advantage; and in some of the states that have begun to really develop internal demand is–as predicted–growing so that production is beginning to shift to meet domestic demand, reducing production for export.
My friends in the business expect an increasing amount of on-shoring in the next decade or two, although they expect that, like declining crime rates, it won’t be well-reported, so most people won’t be very aware of it.Report
You’re seeing this already in IT, the on-shoring bit.
The tricky bit, really, is that we have several service sectors that have been somewhat insulated from the economic stagnation that has affected production sectors due to globalism downward pressure. You can move manufacturing jobs overseas, you can’t move the emergency room or the fire department.
So you have people who have lost blue collar jobs who have been looking for jobs forever who look at their local teacher’s union or their local fire department and say, “I just agreed to raise taxes to pay for kids’ education and the first response was to give those folks a raise!??! I thought I was going to be paying for books and computers and class size reduction!” The fact that the teachers have been stagnant for ten years and probably deserve a raise with the cost of living increase in their local area is sort of lost when you have gone through two job losses and a real reduction in pay over the same decade. Kinda hard to be thinking about how people ought to be doing when you feel like you’re going backwards.
I dunno, I feel better about the ability of the economy to adapt than I did three years ago, but I feel decidedly less better about how people feel about what’s happening (regardless of what is actually happening), which makes me gun shy about what they will do when they hit a voting booth.
Regardless of how good you actually have it, if you don’t feel that it’s that good, there’s a lever there for a political engine to push on to get your vote. And I’m not just talking about the Left, here.Report
I just was listening to the Owner of one of the fastest growing consumer electronics (audio/home theater) companies in the US on how it is no longer making sense to off shore. He went there to save money. The savings are no longer there so he is bringing production back home.
He threw out “yeah America” platitudes, but was quite honest that his decision was made based upon profit and loss.Report
“Not that globalization as a fact of economic integration will actually reverse, but that the easy pickings of reduced costs in third world countries are disappearing–labor costs are increasing in many countries, diminishing the relative cost advantage…”
Indeed, Chinese manufacturers are already starting to build factories in Africa.
“My friends in the business expect an increasing amount of on-shoring in the next decade or two, although they expect that, like declining crime rates, it won’t be well-reported, so most people won’t be very aware of it.”
Also, it’s not going to be “everyone goes back into the factory and starts doing what they did twenty years ago”. It’s going to be more like “there used to be two hundred guys working drill presses and bench lathes, now it’s one guy dumping pellets in a feed hopper and one guy pulling finished parts out of an extruder and clipping off the sprues”.Report
I agree with James’ comment above.
I will add one other perspectives. First, beware confusing fluid statistical groups based upon outcomes with set defined groups. The one percent is a statistical abstraction. They are not necessarily the same people every year. Indeed the data I have seen is that it is a constantly shifting group. Indeed the way you get into the group is often via ruthlessly knocking someone else out.
Someone was in the top one percent as they cashed in their profits on Sears or Motorola in the past. Today they may have lost a fortune as someone else enters the top class by creatively destroying those companies via Amazon or Apple.
Trillions of dollars of losses have been experienced during the past twenty years by members of prior years one percent. Even more profits have been generated (thank God, or we would be screwed now), however, as one years class rises they often do so at the expense of their predecessors.
My guess is that more money has been lost and more creative destruction had occurred during the last twenty years than ever before. Capital does compete with capital, and the winners constantly knock out past winners.Report
Via Tyler Cowen, a quote from Mark Frank.
Report
If it’s truly as random as all that then the argument that taxing these folks at a higher rate is a matter of injustice (as opposed to something that leads to bad consequences) is a weak argument, right?Report
Not that I really see marginal tax rates as primarily a matter of justice, but to play devil’s advocate, perhaps because so few people stay up at those levels for any length of time, it’s unjust to take more from them because it’s their one, short-term, shot to get themselves set up from life. If they were likely to continue at that level year after year, taking more from them would be less harmful to them, no?Report
Depends on whether or not you really believe in the discount rate, I suppose.
If it’s true that every additional dollar is worth less to folks than the previous dollar, then one can argue that taking $1,000,000 away from a ten-millionaire is far, far less unjust than taking $1 away from a ten-thousandaire.
But I find justice arguments only mildly interesting to begin with 🙂Report
There used to be a thing called “income averaging”, where you could spread an outlier across (I think it was) five years, to reduce the marginal rate. It went away in 1986 as part of tax simplification.Report
@patrick
“If it’s truly as random as all that then the argument that taxing these folks at a higher rate is a matter of injustice (as opposed to something that leads to bad consequences) is a weak argument, right?”
Focusing just on your initial phrase. There as a world of difference between fluid and random. Super Bowl victories and World Series are fluid too. They are not random.
As to justice, I can certainly envision extremely just ways to argue for progressive taxes. I can also envision ways which are both progressive and not harmful consequentially.Report
James,
The people that actually hurts a lot are authors, because they get lump sum payments that are intended to last for years.Report
@kim
The people that actually hurts a lot are authors, because they get lump sum payments that are intended to last for years.
…that makes little to no sense.
There is nothing, structurally, that requires that system to exist. Publishing companies are not fly-by-night operators that authors need to get their money out of in case they fail. Nor have authors been locked into decade-long contracts via unions or something and now no one can easily change them. Nor is there any real reason for the publishing companies to *want* to operate that way that I’m aware of.
If what you are truly describing is actually a problem, the industry could trivially fix it with a snap of their finger by giving the option to stagger payments.
There might actually *be* industries that must operate that way, but publishing isn’t one of them.Report
David,
you’d be surprised at how often “that’s how it’s always been done” keeps stupid business models going (like real estate agents! you need both parties consent to remove them from the equation around here).
But, more importantly, advances on royalties make really good PR.Report
Relevant.Report
Also relevant:
http://www.forbes.com/sites/nathanlewis/2014/07/03/the-income-inequality-debate-is-not-about-income-inequality/
“I find that today’s concern over “income inequality” is motivated primarily by the recognition – correct, I believe – that many are becoming wealthy today in ways that do not benefit society as a whole, but rather impoverish it.”Report
The difference is that my link provides some explanation about the nature of inequality, while your link is just a moralistic rant.
Moralistic rants are exciting to a certain type of person. Others of us find them boring and generally pointless.Report
I actually agree with the basic spirit of JP’s link. I agree there is way too much rent seeking, cronyism and such. I would quibble over some of his examples, but not most.
But we are not disagreeing on the moral culpability of those using zero sum activities to generate wealth. Everyone here seems to disagree with this type of behavior.
There are also thieves and deadbeats and rent seekers in the middle and lower class (the author references some). It would be wrong to thus berate the lower and middle class. It is a logic error to incriminate a class based upon the actions of independent members.Report
“Moralistic rants are exciting to a certain type of person.”
Yes, the type of person who will be entirely unpersuaded by the economic arguments.Report
@james-hanley
And which type of argument moves the needle and changes the structure of society?Report
LWA,
What’s more admirable, just moving people through moralistic arguments that move them emotionally, or making arguments that have better factual grounding?Report
Roger,
Oh, it was ok up through the “rentier society” comment, and I thought I was going to be in agreement. But then it turned into a rant about people who don’t provide any actual social value, a claim that wasn’t actually supported with evidence or logic, we just all know it’s true so no such support is necessary, right? It’s basically an argument based on not understanding what role these particular people play and assuming that therefore there’s no value to it–argument from incredulity.Report
But we are not disagreeing on the moral culpability of those using zero sum activities to generate wealth. Everyone here seems to disagree with this type of behavior.
E.g. trading shares of non-IPO stock? Other than a possible second-order effect of helping determine the price for a possible new issue, this contributes nothing, any more than winning a bet on a horse race does.Report
Who would buy a stock they couldn’t sell? Why would a company or the shareholders care about dividends or profit if it didn’t affect the price?Report
But we are not disagreeing on the moral culpability of those using zero sum activities to generate wealth….
“E.g. trading shares of non-IPO stock?”
How is that zero-sum? If two parties agree to make the trade, each must see a gain to him/herself from it.Report
James,
Good point. I agree with the spirit of attacking “rentiers”. I do not necessarily agree with all his examples, and I agree with your observation he is making an argument from incredulity in many of those cases. I was going to originally write that I have no idea what a bunch of those financial people are doing to make money either. That doesn’t mean they are “rentiers.” I just didn’t want to start another subthread on rapacious financial tycoons who supposedly all look and act like Charlie Sheen. Oliver Stone economics.Report
@james-hanley
Which is more admirable?
Moralistic rants, of course!
No, I’m serious. This cuts to the heart of our difference. I see the goal of society as satisfying the desires and aspiration of its members. Chief among these aspiration is the desire for a Just Society, a right ordering of power and relationships.Report
LWA,
You think I don’t believe that societies are to satisfy the desires and aspirations of their members, be just, and have a right ordering of power and relationships?
Well, it wouldn’t be the first ridiculously false thing you’ve said on this page.Report
But what exactly does that mean? If you had asked southern whites what a right ordering was a hundred years ago, they would have given you an explicitly white supremacist answer. If you ask many social conservatives that question today, many will tell you that a just society is one that reserves the institution of marriage for opposite-sex couples.
The lesson here is that our moral intuitions are often just plain wrong.Report
” I see the goal of society as satisfying the desires and aspiration of its members. Chief among these aspiration is the desire for a Just Society, a right ordering of power and relationships.”
That doesn’t necessarily mean “everyone has the same number of dollars”, though.
Maybe what it means is “you keep what you make, unless we absolutely need some of it”.Report
I agree mostly with that rant, except that it uses entirely the wrong words.
‘Stealing’ is a completely useless word to use in that context, as is ‘grifting’. What is going on is not a crime, and trying to frame it in the context of criminal actions is counterproductive, because people who don’t see the problem will reflexively say ‘That’s not criminal, that’s perfectly legal’. (And then it confuses the issues by talking about actual criminal actions of graft, which, of course, allows the right to reflexively say they oppose that too, and claim it is in fact government spending that allows such things.)’
Generally, making moral arguments by using *legal* terms is something best avoided. I mean, I’m sure I’m hypocritical here and have done it, but it’s something that incredibly easy for the other side to shoot down. Stealing is *illegal*. What those people are doing *isn’t*.
It’s why I use terms like ‘The people who own everything, and take a cut of our productivity while we work for their companies and live in their houses and buy food farmed (by others) on their land. and they do nothing but have little pieces of paper saying they own all that and we have to pay them for it’, which is easy to understand.
The author understands the structural problems fairly well, but is not talking about it any useful way. Nor does he offer any solutions.Report
@j-r
Yes, what does Justice mean?
We have talked about this, haven’t we? That there isn’t a fixed idea that can override individual biases, yet we all seem to agree that there must be a moral norm somewhere that can guide our decision making.
Ultimately, what [functionally] constitutes a just ordering is whatever we can agree on. The purpose of philosophy is to persuade the rest of us as to why your vision of it is preferable.
What Roger and others are doing here is trying to persuade us, using econometrics. I’m pointing out the inadequacy of that argument.Report
What Roger and others are doing here is trying to persuade us, using econometrics. I’m pointing out the inadequacy of that argument.
What is your argument that’s more adequate?
I mean, given that the billions aren’t actually bristling with rage, as your vision seems to call for.Report
What I think is more adequate, is to measure the current outcomes of our society, to our shared aspirations.
Right now, there is a very widespread dissatisfaction with things- I notice (with a certain amusement) that the term “crony capitalism” once the parlance of only Chomskyite leftists, its now commonplace on rightwing blogs.
Populism is a ragged diffuse entity, containing everyone from Sarah Palin to Bernie Sanders. It always has been actually- every revolution contains warring factions who have only a common enemy that binds them.
But the common theme is that there is a rising elite, an aristocracy in all but name, that manipulates the “level playing field” to their advantage.
This is what I meant by society should accommodate the aspirations of its members, and reflect their ideas about a just ordering.
If people believe, even intuitively, that the order is unjust, then a problem exists that calls for a moral, not econometric response.
To convince me, and many others, that 85 people owning half the world’s wealth is somehow a just outcome, requires a bit more than language about positive sum interactions and property rights.Report
What I think is more adequate, is to measure the current outcomes of our society, to our shared aspirations.
Yes, always back to that, a cute rhetorical trick by which you repeatedly pretend there is a consensus, that you are part of it, and your critics aren’t. It’s a convenient way you avoid actually making a positive argument about your vision of the just society.
And what follows isn’t an argument, but mere rhetoric about dissatisfaction, and again you duck the heavy lifting of outlining and defending a real vision.
Your reference to crony capitalism is especially ironic, given that you rejected my proposal to ban the granting of rents by government, which is such a fundamental element of crony capitalism.
In the end, LWA, repeatedly referring back to “society” is both a cowardly way to avoid thinking for yourself and a dangerous game of accepting as just whatever the masses happen to like at any given time. Your continued insistence on the masses as the standard would have put you in the southern racists’ camp in the Jim Crow era, only turning against it once society as a whole had. It gives you no basis for ever arguing that a popular revolt against wealth had gone too far. While you’re surely only thinking of things like higher marginal tax rates and stricter capital controls, your standard of “society agrees” commits you to total appropriation of wealth, nationalization of all resources, if that’s where the mass goes.
It’s not actually a standard, but an unstandard. It’s the reason why I criticize you sp harshly. You have no actual structure of beliefs (not that you have ever articulated), but are just a follower of the mass, wherever they go. And you appear to take pride in that mindless follower position, repeatedly critiquing anyone who would try to persuade the masses to another direction through logic and facts.
You are the embodiment of what Arendt meant by “the banality of evil.” You’re not evil-minded, and you have no desire to harm anyone, but you have made the will of society your lodestone, so you must follow it wherever it goes, perhaps with regrets about what is necessary, but society has declared that this is the just ordering of society, so who are you to argue?Report
Well of course there is a consensus- there is a consensus that racism is wrong, that children should be protected, there are a million separate moral precepts that are widely shared and agreed upon, even by the most bitter political factions.
In fact, you make reference to this shared moral order implicitly, when you bring up the specter of slavery and the Holocaust- you namecheck things that are so widely reviled, that they make handy argument supports.
I think you are being rather binary- you seem to posit only two poles, one of blindly following whatever the majority says, or standing apart and setting out a purely individual perspective on moral norms.
Both are ridiculous, on their face. The first of course, delegates pure authority in the group, but the second is equally fallacious- it delegates sole authority in the individual.
I mean, look at your own language- you write with this fiery moral air, without hedging or equivocation.
By what authority do you speak? Did God reveal this to you, or did you read a convincing discourse on why racism is wrong? How did you come to this conclusion, and how can we join you?
Specifically, how should we react to James’ moral pronouncements on slavery- are they of a higher moral order than James’ opinions on taxi medallions? How could we possibly know?
Its all personal revelation, like if you suddenly decided that shellfish is morally reprehensible- you leave the rest of us without the ability to share in your vision, or even compromise with it.
There doesn’t seem to be any room for discussion, compromise, and persuasion here- The idea that we can put forward different norms, and rank them according to ones which can tolerate compromise (like shellfish eating) and things which are primary (like slavery).
It is a problem, without easy resolution, this question of legitimacy. We know from experience that even consensus can be wrong- But so is individual revelation.
I am left perplexed as to how you could possibly envision resolution of conflict, aside from everyone just retreating to their individual sphere of influence.Report
You miss the point, LWA. You treat society’s concensus as the just because it is society’s concensus. This means society cannot be unjust. So you have no moral basis from which you could ever critique a social concensus as unjust, or even just wrong. Indeed you repeatedly deride those of us who do, on the basis that we’re out of touch with the concensus. So in a segregated society, you’d have no basis for being a leader in critiquing segregation.
If we are to take your arguments seriously–if there’s not something you’ve not told us to date–you just take your moral lead from what you perceive to be the social consensus, and have no moral center of your own.
And most amazingly, you seem to think that is the only intellectually justifiable position, despite thousands of years of moral philosophy arguing against it.
You would undoubtedly be a concentration camp guard, just so long as society told you it was right. Because you have no moral theory that would position you to stand for what is right, because your arguments say there is no “what is right” except what society says.Report
@james-hanley
“You would undoubtedly be a concentration camp guard, just so long as society told you it was right.”
I see Dr. Freud has been taking his cocaine today.Report
James P,
Read my point above about the banality of evil. As I said there, I don’t think
LWA is evil in the sense of wanting to hurt anyone. But one of the things Hannah Arendt noted was that there were concentration camp guards who felt oppressed by their work–they weren’t what we normally think of as evil, they didn’t want to kill lots of people. But it was what they were told to do, as their part in society. They couldn’t, intellectually, challenge society’s expectations.
Despite LWA’s lack of actual evilness, he’s consistently made his argument that justice is what society says it is, and has mocked those who would challenge the social consensus. He also expressed his disbelief that anyone could resist the messages of society telling them what they should try to be.
There’s nothing in anything he’s ever said that indicates he could find a moral, internal, basis for standing against the social concensus. He wouldn’t enjoy being a concentration camp guard; he wouldn’t delight in herding people into the ovens, and it likely would be psychologically traumatizing to him. But as Arendt showed, it was these go-along-with-society’s-consensus folks who did in fact fulfill these roles despite the stress they felt.
Hell, I’d much rather deal with a wild-eyed leftist whose economic ideals are wholly opposed to mine. At least I know there are conceivable social concensuses that s/he would fiercely oppose. With LWA’s argument that justice is what the social concensus says it is, then on his own terms there is no conceivable social concensus he could justify opposing.
I know it sounds outrageous to say, but follow his logic.Report
Enough with the polarity.
Societal consensus alone can’t determine legitimacy.
I suppose there are different gradations of moral positions- what I referred to in the alternative between liking shellfish and disliking slavery.
Social Justice, by the way, involces several different approaches to determining a correct course of action.
The first is revelation- that internal moral compass that you are referring to.
But since revelation can be different, and by its own internalnature doesn’t allow outside investigation and examination, we need something else.
That something else is discussion and debate- its what philosophers do, once they have reached agreement on a priori assumptions.
This is where we use logic and moral reason- pointing to things outside our own personal frame of reference.
The third is finding common ground and compromise, by establishing things that can be negotiated, versus moral absolutes.
Its this entire process that creates legitimacy- where we aren’t torn between imposing our own personal revelation, and absolute surrender to the group.Report
Well, LWA, when you put it that way, you’ve put yourself in a position where you can no longer so simplistically sneer at those who critique the supposed social concensus. I look forward to you no longer doing that.
Heh, who am I kidding.Report
Am I a monster if I never really fully bought/got Arendt on the BoE anyway? That in any case it seems like a topic to reopen and discuss, not just refer to as if she (following LWA’s point) received a True Revelation on it?
It’s ultimately (I don’t want to say “just,” but to an extent that’s what I mean) a semantic question, isn’t it? What’s the threshold we want to use for this particular word/label? For whatever reason (good reason, probably), she wanted to be able to say that the conscripted guard at Auschwitz had some moral-essential identity to (not complete, not equality, but some essential identity to) Hitler or Eichmann. Otherwise what’s the purpose of insisting that Label X applies to both? I’m by no means throwing down the gauntlet against this view, just wondering if we should consider it as settled as we seem to. (Or maybe we don’t?)
It always seems to me that on this point there is simply a sixty-year consensus of accepting a particular Authority’s view on it, and a very understandable inclination not to say that any given Nazi is any less evil morally than the current consensus on how evil he was says he was. And I’m not saying he’s not that evil! I’m just wondering whether the question should be closed in the way it seems to be at present.
What’s really probably going on is that I’m just not aware of the state of current academic discussion on the question, so to some extent this is just a request for a free tutorial from someone who knows better.Report
Why would the question be closed? I find Arendt persuasive, and I think any debate has to seriously address her arguments, but it’s an intellectual question not subject (so far, at least) to dispositive empirical test, so how could it be closed?Report
…I studied it in high school, but now reading a bit in the S.E.P., I recall that she developed the concept not to show the guard’s evil, but indeed to establish or solidify understanding of Eichmann’s evil in the first place. Eichmann, whose deeds on the surface apparently (I’m not really sure) to her seemed to initially strike some as not (that) evil, perhaps because it was suggested he wasn’t so interested in making sure the policy was to cleanse and exterminate the Jews, but simply in most efficiently carrying out whatever the policy was to be.Report
It could be closed in the sense I mean if dissenters 1) are outliers and+but 2) they’re not seen among holders of the majority view just as outliers, but as morally deficient or backward and are ostracized. Possibly it could even be effectively closed in the way I mean merely if holders of the minority view are very small in number and seen as a negligible fringe even without all that other moral freight. But certainly with it.Report
…Come to think of it, in what way other than something like that are any academic questions ever closed? What else would it mean for an academic question to be closed?Report
“There’s nothing in anything he’s ever said that indicates he could find a moral, internal, basis for standing against the social concensus.”
Well, he has been arguing a moral case against the social consensus of “wealth-maximizing policies,” so maybe you don’t really have much cause to call him a Nazi after all.Report
Count the money: none added or subtracted, no additional resources created, no value added. If A buys a publicly traded share from B and later sells it to C, this is identical (any transfer fees aside) from B selling it to C. Any profit made by A is directly subtracted from the profit that would have been made by B. That’s a simple arithmetic identity. Yet A’s profit is tax-advantaged compared to other, positive-sum sorts of income, e.g. converting labor into goods.Report
Oh, you’re only counting money, not value?
And people think economists are the ones who make that mistake.
Why does A buy a share from B? Because he values it more than the cash in his pocket. Why does B sell the share to A? Because he values cash in his pocket more than he values holding the share. Ergo, positive sum.
Maybe you don’t think that’s doing enough value creation, but that doesn’t make it zero-sum.Report
Unless A and B are interested in controlling the company (an exceedingly unusual case), A buys stock he thinks will go up while B sells stock he thinks will go down. (To be more accurate, include the dividend in that calculation and factor in opportunity costs, so “up” and “down” are relative to other investments. That doesn’t change the logic.) It’s a bet, just like betting on a football game. You can use the same logic to “prove” that it’s positive-sum (I won’t bet unless I value the chance to win more than the money I’ve risked), but add it all up and placing bets doesn’t make the world as a whole any richer.Report
No, Mike, it’s not just about the stock’s future payoff, but about the opportunity costs for the buyer/seller. The buyer doesn’t have a more valuable use for the money he spends on stocks, but the seller has a more valuable opportunity that holding the stock prevents him from accessing.
You’re looking at the payoffs much too narrowly.
doesn’t make the world as a whole any richer.
But that’s got nothing to do with whether it’s positive sum or not, so you’re adding in an irrelevancy. I suspect that’s the standard you really want to get to, and if so, then just go there, but don’t muck about with the nonsense about zero-sum exchanges.Report
No Mike,
The purchase of a stock is an investment. I assume my investment in this stock will lead to X risk adjusted rate of return as part of this overall portfolio. When I sell, it is because I believe my money is better placed elsewhere, and when someone buys they are making the same decision. In no way is this an expected zero sum transaction. It is an expected win/win which after the fact can be any possible outcome (w/w, w/l, l/l), but which is contributing to a larger system.
Yes, the original capital was obviously intended as positive sum with the money raised for some kind of capital investment. However, the resale of that stock is also an essential part of the property rights necessary to get anyone to buy it in the first place.
The fact that dividend and earnings streams, past and expected, contribute to the relative value of the stock also acts as an incentive and a score. It keeps management focused and aligned on the interests of the owners.
Certainly there is risk. This does not making trading stocks the equivalent to gambling. It is part of a complex positive sum process.Report
but…but…but that’s what Dan Akroyd said in “Trading Places”…Report
@james-hanley
The buyer doesn’t have a more valuable use for the money he spends on stocks, but the seller has a more valuable opportunity that holding the stock prevents him from accessing.
By that logic, *nothing* voluntarily done is zero-sum. Even giving someone change for a dollar isn’t zero-sum.
Maybe that’s what you intend, but if your logic has resulted in phrases other people are using having no meaning at all, you’ve basically started arguing semantics, not the true or falsehood of claims. You can’t just assert there are no such things as zero-sum voluntary transactions and expect people to go along with that.
To actually address the point: Trading stock is a zero-sum transaction, *even if you include opportunity costs*, because now the buyer has *lost* exactly the same opportunity costs. He might not have currently *had* any specific other opportunity in mind, but he still has opportunity costs in where his money is. Before, the universe had exactly X amount of money and Y amount of stock, afterwards the universe had exactly X amount of money and Y amount of stock. Zero sum.
Voluntarily exchanging money for goods and services is always a zero-sum game. Or, rather, the concept of the ‘sum’ is not very relevant there. The economy as a whole is not zero-sum, but it’s the *generating* things that is the not-zero-sum part, not getting rid of them via trade.Report
>>doesn’t make the world as a whole any richer.
But that’s got nothing to do with whether it’s positive sum or not,
Then when someone tells me that the net result of positive-sum transactions is that we’re all better off because they’re, you know, positive sum, he’s full of it? Good to know.Report
“By that logic, *nothing* voluntarily done is zero-sum. Even giving someone change for a dollar isn’t zero-sum.”
I hate have a big lump of heavy metal coins in my pocket. I’d rather have a nice slim flexible dollar bill that folds up easily and doesn’t ruin the line of my suit. Meanwhile, he can use the quarters to do his laundry, because the machine doesn’t accept bills.
And that is how giving someone change for a dollar is a positive-sum transaction.
“Voluntarily exchanging money for goods and services is always a zero-sum game.”
By that logic I can eat a dollar bill and get exactly the same amount of nourishment as I’d get from a cheeseburger (although if I’m buying a one-dollar cheeseburger that’s quite possibly true.)Report
@davidtc
Maybe that’s what you intend, but if your logic has resulted in phrases other people are using having no meaning at all, you’ve basically started arguing semantics, not the true or falsehood of claims. You can’t just assert there are no such things as zero-sum voluntary transactions and expect people to go along with that.
No one is specifically saying that voluntary transactions CAN’T be zero sum. However, absent force, fraud or deception, that can not be determined on an a priori basis if people are volunteering to transact. If you disagree with this, the burden is on you to provide examples. In the several billion dollars worth of real estate transactions that I’ve worked on over the course of my career, I’ve never seen one deal where both sides didn’t believe they were gaining from it. If that evidence is too anecdotal for you, then I apologize, but I’ll go with my experiences on this one and my knowledge of how buyers and sellers think.
To actually address the point: Trading stock is a zero-sum transaction, *even if you include opportunity costs*, because now the buyer has *lost* exactly the same opportunity costs.
The buyer buys the stock because he/she believes it’s the best place to allocate capital. How is this a loss? If anything, there’s an opportunity loss if the buyer DIDN’T buy the stock and that should be factored into any analysis of other investment opportunities.
He might not have currently *had* any specific other opportunity in mind, but he still has opportunity costs in where his money is.
Usually cash, treasuries or marketable securities and what interest rate is that sitting at?
Before, the universe had exactly X amount of money and Y amount of stock, afterwards the universe had exactly X amount of money and Y amount of stock. Zero sum.
At t=0 this is true but anyone that has more than a first-grade understanding of how people view investments is that they view them over a longer time horizon. The value isn’t based on what those are worth today but what they will be at some point in the future (of course, this includes whether or not those investments are priced at market but that adds a whole new level of complication).
Voluntarily exchanging money for goods and services is always a zero-sum game.
The only reason you say this is because of the way you define zero-sum and I categorically reject your definition root and branch. You fail to take into consideration 1) qualitative value and 2) future value in your version.
The economy as a whole is not zero-sum, but it’s the *generating* things that is the not-zero-sum part, not getting rid of them via trade.
We’re talking about transactions not the economy as a whole and economic growth is most definitely a function of positive-sum transactions. I don’t know why this is even being disputed. This looks like a bad combination of meta and folk economics. Ugh.Report
If you stop and think about this for a few moments, I think you might see why this is obviously wrong in a number of ways. For one thing, if it were true, then people would hardly every buy anything or trade anything. When we exchange one thing for another, we do it because we value the thing we are getting more than the thing we are giving; this generally happens because we have more of the thing we are trading.
For instance, if I give a dollar for a cup of coffee, it’s because I have multiple dollars in my pocket, but no coffee. Likewise, the guy at the store has more coffee than he can drink and, therefore, would rather have a dollar.
Also, the principle of the conservation of mass ought to be a guide here. In an economy, nothing new is ever really “generated.” Rather different inputs are combined to make new outputs. A furniture maker buys wood from a timber farm, because he knows he can combine his labor with the raw wood and produce something of greater value than the sum of the wood or his labor would get separately. If value is created in that process, then it follows that value is created in other exchanges as well.Report
The buyer buys the stock because he/she believes it’s the best place to allocate capital. How is this a loss? If anything, there’s an opportunity loss if the buyer DIDN’T buy the stock and that should be factored into any analysis of other investment opportunities.
The bettor bets on the team because he/she believes it’s the best chance to win. How is this a loss? If anything, there’s an opportunity loss if the bettor DIDN’T bet on the team and that should be factored into any analysis of other investment opportunities.
It’s exactly the same logic. It’s purely an accident of history that large parts of the economy aren’t based on football pools.Report
A furniture maker buys wood from a timber farm, because he knows he can combine his labor with the raw wood and produce something of greater value than the sum of the wood or his labor would get separately.
Likewise, by combining his labor with the share of XXX Corp he buys at $10 , he creates something of greater value, which he can now sell at $11.Report
Ok, this is simply too rich!
Folks constantly tease me for bringing up the zero sum fallacy and suggest that I am using it as a foil. I get further teasing on laying out foundational principles.
Here is a picture post card example of my very point. I will let Jim and JR and Dave handle it, as they are doing so quite well, but seriously, does anybody get a sense that either Mike or DTC have fully grokked the concept?
Mike, DTC andReport
@mike-schilling
“But that’s got nothing to do with whether it’s positive sum or not,”
Then when someone tells me that the net result of positive-sum transactions is that we’re all better off because they’re, you know, positive sum, he’s full of it? Good to know.
No, you’re confusing positive sum with whether a third party also benefits. If two people make an exchange that benefits them both, without harming anyone else, then net aggregate utility is increased. That “we’re all better off” (emphasis added) bit is not what we’ve been saying, but is just a red herring you slipped in there.Report
Not a red herring at all.
Say you have a motorbike and I’ve always wanted a motorbike, so I buy it from you for $100. A few weeks later I fall off it and break my arm, and you miss having it, so I sell it back to you for the same $100. Two voluntary, positive-sum transactions, each increasing utility on both sides, and we’re back where we started, except for my arm being in a cast. And the reason I have a broken arm instead of a skull fracture is the coercive, zero-sum transaction that forced me to wear a helmet.Report
Voluntarily exchanging money for goods and services is always a zero-sum game.
So why do you pay rent or a mortgage? Why do you buy food? Are you not better off for doing do? If you are, your side of the equation has improved in value, has it not?
And if one side of the equation increases in value, the only way it can be zero sum is if the other side if the equation decreases in value. But why would the other party to the transaction take your food money if they were going to lose by the transaction? Even if they were completely neutral– ambivalent–between holding onto the food or receiving the money, the exchange would be positive sum because you are better off. All it takes is gains to one party and no loss to the other to make an exchange positive sum.
This provides another answer to the “making change” example. If you find 4 quarters more useful at the moment than a dollar bill, then if I am ambivalent between holding a dollar bill or holding 4 quarters, the exchange will be positive sum.
It’s also possible that I take pleasure in helping someone out, so making change for you when you need it gives me utility. The more true that is, the more likely I am to respond favorably to change requests, and the less so, the less likely I am to do so.Report
Mike,
You’re a sports fan. If you’re a smart one, as you’ve given reason to believe, you understand that a manager’s decision shouldn’t be judged by the outcome but by whether it was the best tactical choice before the fact.
The same thing applies here. The broken arm was an unknowable prior to the exchange. Yes, sometimes the world doesn’t work out as predicted. But that’s a particular instance, not the norm, or we wouldn’t make such echanges. We make such exchanges because we accurately expect that they normally work out to our benefit.Report
I will reply to everyone at once:
It’s certainly possible to define zero-sum to mean ‘anything that does not leave either party worse off’. In fact, that’s the correct definition, and I should have just said that. Sorry, I’m pretty tired today, and rereading that, I managed to basically say I agreed with Mike’s definition, instead saying I just dislike talking about market transactions that way. (1)
But, anyway, people have started arguing semantics. Which is a valid thing to argue, but misses the original point. And if people want to argue semantics, well, people have said ‘All voluntary transactions are positive sum by definition, or at least believed to be positive sum. You mean some net benefit to society.’ and, @mike-schilling, just go with that and stop talking ‘zero-sum’. What *you* mean is ‘net benefit’.
Mike’s *actual* point was that there was no benefit to the economy at all to people moving stock around. Clearly there are expected benefits to the people *doing it*, or they wouldn’t do it. But it accomplishes nothing at all. It does not increase societal wealth.
And, as I pointed out, moving stock around is *actually* zero-sum, even though it’s not expected to be. No, opportunity costs don’t change that. The people who own the stock purchased it, and regaining their lost opportunity costs doesn’t make the transaction ‘helpful’ to them. That’s rather like claiming ‘stopping stabbing yourself in the arm with a pen’ is ‘health care’. They didn’t ‘gain’ opportunity costs, they stopped already having spent them.
The only reason two people engage in a voluntary transaction in the stock market is because *one of them is wrong*. Even if, for example, both people know the price will go up, but the seller need to turn the stock into cash for some reason, that just means the seller was wrong when he bought the stock earlier or failed to sell it earlier. Someone, somewhere, is wrong in every stock transaction, because stock trading *only* moves money from person to person.(2)
1) The idea of ‘sum’ in this context, is a silly abstraction that makes very little sense once dissected. It oversimplifies the system to where we’re operating some sort of barter economy, like Barnes and Noble is sitting there considering how ‘useful’ each copy of a book is to it vs. how useful money would be, whereas we don’t want to give up our precious precious cotton rectangles. That’s not how decisions are made in the modern world. Here, we generally make things we have *no use for whatsoever* except to trade away, and we trade it for something that has *no use whatsoever* except to trade for other things. Money, when it’s not possible to exchange it for things, literally has no utility value, and neither do the things on the store shelves have usually any utility value to the store except to trade. Which, logically, makes all purchases ‘infinite sum’. But that’s not where wealth comes from, wealth comes from making things, not exchanging them. The entire concept is broken and confused. Adding wealth to the system is relevant, talking about opportunity costs are relevant, the ‘sum’ of the market is not relevant.
2) I am lying there. Dividends *do* exist, and are an entirely reasonable reason to own stock. As would be exercising corporate control. It’s stock trading *only* in anticipation of the stock price changing that merely moves money around.Report
Actually, that is exactly what they do. It is called inventory management and cash management and I guarantee you that Barnes and Noble has a large staff assigned to each task.
Also not true, which is why there is such a thing as comparative advantage.Report
“you guys are just being picky and arguing semantics and you’re missing the broader point here” (goes on to provide multiple paragraphs narrowing down and qualifying his original statement so that he can claim he wasn’t wrong)Report
The only reason two people engage in a voluntary transaction in the stock market is because *one of them is wrong*. Even if, for example, both people know the price will go up, but the seller need to turn the stock into cash for some reason, that just means the seller was wrong when he bought the stock earlier or failed to sell it earlier
So my mom owns a chunk of GE stock she got in lieu of cash compensation when she worked there. GE stock is great, consistently a market beater. And she sold a chunk some years back so she could add on a room to her house so it would be big enough to host the extended family on Thanksgiving and Christmas, which has been a great delight to her year after year.
By your argument, my mom “was wrong when [s]he bought the stock earlier” or because she “failed to sell it earlier.”
Could you please explain to me what her mistake was?Report
I think this thread took a really irrelevant turn with zero-sum terminology. If I understand correctly, @mike-schilling ‘s basic point was to bring up trading non-IPO stock as an example of something that serves no real economic or socially useful purpose beyond what might be attributed to gambling on sports. Perhaps he believes that is true for (a) anyone trading stocks on the secondary market, or perhaps (b) limited to speculators, day traders, etc
Is one of these your position, Mike?
Proposition (a) can be refuted quickly. Say I own some stock, but find all of a sudden I need cash, to pay some big hospital bills that just turned up or to buy a house. The secondary market provides me a quick and easy way to convert my stock to cash. If I had an opportunity to buy stock in a IPO but knew I had to hold on to it forever, I would be much more reluctant to buy it and would certainly buy less than I would with a ready secondary market. This seems so obvious, you must mean (b).
But proposition (b) founders, too. A lot of stocks are “thinly traded.” At a given time, there aren’t a lot of buyers or sellers with outstanding orders. So a professional class of traders, willing to buy or sell if they feel the price is right, serves to provide liquidity in the secondary market.
Now I can think of several objections. “Market makers (professional traders associated with an exchange) are necessary, but not the same as day traders and speculators who really add no economic value.” But they do add liquidity. And maybe to them, it really is the same as betting on sports games. But they are providing an economic function. “Most of the speculation involves stocks that are heavily traded and do not need additional liquidity.” Possibly true. But then what – is some regulatory authority going to decide which stocks can and cannot be bought and sold for speculative purposes? That is an epistemological absurdity.
Finally, the libertarian in me wants to defend sports gambling as a valid, economically meaningful pursuit, but I’m not going to go there today.Report
@james-hanley
So my mom owns a chunk of GE stock she got in lieu of cash compensation when she worked there. GE stock is great, consistently a market beater. And she sold a chunk some years back so she could add on a room to her house so it would be big enough to host the extended family on Thanksgiving and Christmas, which has been a great delight to her year after year.
By your argument, my mom “was wrong when [s]he bought the stock earlier” or because she “failed to sell it earlier.”
I said *one* person is wrong, not that every person has been wrong once. Moreover, I said that about stock *transfers*, not original stock purchases.
The person who was wrong in the reselling of the stocks was, of course, your mother, who would have made more money if she had held on to them. You want to take issue with the word ‘wrong’, okay, it’s not always a losing gamble, sometimes people lose the bet suspecting they are going to lose, or even not *caring* if they’re going to lose.
But your mother *lost money* in that transaction. If she had not sold, she would have more valuable assets in the future. I’m sure she understood that, and was weighing her opportunity costs against a room. But she still lost money by selling.
Issuing stock, meanwhile, is something else entirely. Companies *generate* stock, and hence can’t lose money when issuing it, as far as I know. No one loses there, except possibly other stockholders. (Not due to the transaction per se, just via dilatation of stock.)Report
@j-r
Actually, that is exactly what they do. It is called inventory management and cash management and I guarantee you that Barnes and Noble has a large staff assigned to each task.
I’m not entirely sure what you’re arguing. Are you trying to make some comment about how both cash on hand and inventory can, for example, serve the purpose of getting loans? Or corporate valuation?
I don’t think that’s really ‘utility’ outside of ‘can be exchanged for money’, but I’ll entertain an argument that it is, if you want to make it.
There’s a reason we treat ‘inventory’ different from ‘capital goods’.
Also not true, which is why there is such a thing as comparative advantage.
Comparative advantage is when some entity is better at *creating* things than some other entity. I’m not sure how your objection there works.Report
@major-zed
I follow (if not completely agree) with your logic up until you discuss regulations. I’m not opposed to people trading stocks as a form of gambling, I just don’t want to be told that it’s economically productive. An example I hadn’t brought up before is automated trading algorithms that try to arbitrage the normal random fluctuations in a stock. If I invent a better one (go, me!), all I’ve done is take some money away from another algorithm; it’s a pure transfer, I’ve had no effect on the economy as a whole.
As for libertarians and sports betting, someone pointed out to me once that libertarian SF writers tend to have names like A. Middlename Lastname (e.g. L. Neil Smith) , so I wrote a bit of the libertarian Great Gatsby. Its hero is Meyer Wolfsheim, who showed the White Sox how to maximize their earning power.Report
The person who was wrong in the reselling of the stocks was, of course, your mother, who would have made more money if she had held on to them.
But my mom wanted the room more than she wanted the money. How could it be a mistake to choose what she wanted more over what she wanted less?
You’re thinking only in terms of dollars, not utility. That’s the root of your error. If you look only at monetary gains, yes, my mother could have made more. But if you think about utility, you can see that my mother gained utility by choosing the home addition to the monetary gains.Report
@major-zed
Proposition (a) can be refuted quickly. Say I own some stock, but find all of a sudden I need cash, to pay some big hospital bills that just turned up or to buy a house. The secondary market provides me a quick and easy way to convert my stock to cash.
That refutes nothing. The only reason you didn’t *already* have cash is that you put it in stocks.
You’re sorta making the argument that *safes* are a net gain to society.
‘If I buy a safe, and put all my money in it, when I need money, I can spend a tiny amount of effort and get it from the safe!’
Putting your money into something, and then taking it back out of something, is not indicative of any sort of net societal economic gain. Neither is the ease with which you can open the safe, aka ‘liquidity’.(1)
If I had an opportunity to buy stock in a IPO but knew I had to hold on to it forever, I would be much more reluctant to buy it and would certainly buy less than I would with a ready secondary market.
Firstly, pointing out that stock market accomplishes almost nothing, economically, does not mean anyone want it to be banned. Mike’s original point is that it seemed almost surreal to *privilege* that act with lower capital gains taxes instead of privileging *economically useful* activity like making and selling a chair. No one said anything about stopping it.
Second, those of us who object to how the stock market currently operates usually want it to operate *differently*, not not operate at all.
Specifically I (at least) would rather that the entire point of stocks were dividends, not hopes that the stock prices would randomly move in whatever direction you wanted them to move. Ownership of a company should be because people want a cut of corporate profits, not random whims.
1) And I feel I must point out that claiming stocks are ‘investments’ and should be taxed as such, and then worried about liquidity, is insane. Jesus Christ, how long does it take to sell *any other investment*? How long does it take to sell a house? A bar of gold? A baseball card?
People should either admit stocks are a casino game and they want to be able to keep moving their money from bet to bet, or stop whining about how literally the most liquid investment on the planet might become slightly less liquid. Actual investments can sometimes take, *gasp*, an hour to sell! Crazy, I know.Report
@davidtc
Comparative advantage is when some entity is better at *creating* things than some other entity.
No, that is incorrect. That could work as a loose definition of absolute advantage, but it is not close to an accurate definition of comparative advantage.
Comparative advantage is the ability to produce a good or service at a lower opportunity cost than someone else, even if you are better at producing it than the other party is.Report
@davidtc
Comparative advantage is when some entity is better at *creating* things than some other entity. I’m not sure how your objection there works.
Actually, that is absolute advantage. Comparative advantage is when you are better at making widget A than you are at widget B. Then even if the other guy is better at making A than you, it is still better to devote all your manufacturing to A and then exchanging some of the surplus A for B. The law of comparative advantage is about how specialising and exchange creates a pareto superior situation. That is creating wealth.Report
@james-hanley
But my mom wanted the room more than she wanted the money. How could it be a mistake to choose what she wanted more over what she wanted less?
I didn’t say she make a mistake. I originally said that someone in every stock transaction had to be ‘wrong’ (By which I meant they have bet wrong), but I corrected that.
Someone in every stock transaction just has to lose money, but they can do it *knowingly*, so they aren’t ‘wrong’ per se. (If I expect a sports team to lose, but bet on them anyway, and they lose, I didn’t really bet ‘wrong’.)
I said she *lost money* by selling at that time. She did.
You’re thinking only in terms of dollars, not utility. That’s the root of your error. If you look only at monetary gains, yes, my mother could have made more. But if you think about utility, you can see that my mother gained utility by choosing the home addition to the monetary gains.
You cannot hobble yourself and then unhobble yourself and claim to gain utility. You cannot stick money in a safe and then take it out of the safe and claim you made money.
Your mother had almost all that utility *from the start*, because she could have just accepted *money* instead of stock.(1) She also gained some extra utility because the prices went up, due to her betting correctly.
1) Of course, it’s likely that she got the stock at a discount, so in reality, she couldn’t have just accepted money. But being paid in weird ways does not really change my point.Report
Depends on how you define “wealth.” If I have barrels of strawberries–enough to feed my family and enough that I’m sick of strawberries, and you have lots of loaves of bread–enough to feed your family and enough that you’re sick of eating bread, we can exchange strawberries for bread and both end up better off.
If you define wealth as “pounds of strawberries + loaves of bread” in our closed economy, our trade created no wealth, but me growing more strawberries that I don’t want to eat creates wealth. If you define “wealth” as some metric of the value we ascribe to those loaves of bread and pounds of strawberries, our trading of existing strawberries and bread creates wealth but our creating of more of the same commodities for our own consumption doesn’t.
If you and I want to trade strawberries for bread but we’re unable to reach each other easily, a middle man who will carry strawberries and bread back and forth between us makes all three of us better off without creating any new strawberries or bread.
There are clearly things happening in this economy beyond the actual creation of physical goods that are making the participants better off, and any metric for “wealth” or “income” that doesn’t capture those things doesn’t tell a very useful story.Report
I stand corrected about ‘comparative advantage’, which is indeed about opportunity costs of an entity making one thing vs. making another thing, not about how well two different entities make the same thing.
And…I still don’t know what j r was trying to say about it.Report
@troublesome-frog
If you define wealth as “pounds of strawberries + loaves of bread” in our closed economy, our trade created no wealth, but me growing more strawberries that I don’t want to eat creates wealth. If you define “wealth” as some metric of the value we ascribe to those loaves of bread and pounds of strawberries, our trading of existing strawberries and bread creates wealth but our creating of more of the same commodities for our own consumption doesn’t.
That actually is how wealth works in economic, from what I understand. What you are talking about measuring is something else.Report
@davidtc
I didn’t say she make a mistake.
Come on, David, read your own words.
The person who was wrong in the reselling of the stocks was, of course, your mother,
And, no, my mother would not have had the same utility if she’d just taken the cash in her paycheck and held it all those years. It wouldn’t have gained value in the same way allowing her to do as much.
You are still conflating money and utility, you didn’t know what comparative advantage is and you don’t understand how it relates to creating wealth through exchange, and earlier you got the concept of zero-sum wrong. I think it’s fair to say that you don’t really have an understanding of these basic economic concepts.Report
“If you define wealth as “pounds of strawberries + loaves of bread” in our closed economy…”
That actually is how wealth works in economic, from what I understand. What you are talking about measuring is something else.
That’s how GDP is measured. We often use it as a proxy measure for wealth, because it’s a lot easier to measure than wealth. But you’ll search far and wide before you find an economist who thinks GDP actually equals wealth.Report
@troublesome-frog
a middle man who will carry strawberries and bread back and forth between us makes all three of us better off without creating any new strawberries or bread.
I have a friend who worked in the shipping industry as, I liked to say, a matchmaker, matching ships that needed goods with goods that needed ships. Once when he was trying to explain to some others why his middleman role wasn’t economically wasteful, he was groping for words and I had one of those rare moments where the right terms struck me at the right moment, and I said, “you reduced transaction costs,” to which he responded with a yell, “that’s it!” And yet we had a heckuva time persuading the others that reducing transaction costs actually created wealth. There must be something counterintuitive about that idea, because I find lots of people struggle with it.Report
Let’s talk about a world in which we simply measure the number of strawberries and loaves of bread. If strawberries derive some of their value from the fact that one could trade for them and convert them into bread and bread derives some of its value from convertability into strawberries (let’s assume we have a yardstick called “dollars” to measure that value), then a person who increases the ease of conversion back and forth between bread and strawberries (say, some sort of a transparent market with a shipping service) can potentially increase the total value of the stock of strawberries and the stock of bread without creating either strawberries or bread.
So whatever metric we use for national income, it should be a little more nuanced than a raw count of strawberries and bread loaves.Report
@james-hanley beat me to it.
Matt Yglesias had a good thought experiment a while back on whether the fact that we can hire Chinese folks to assemble our iPhones cheaply is wealth-enhancing for Americans. His argument was this:
Imagine a machine that takes iPhone parts and a little bit of precious metal in and churns for a few days, producing assembled iPhones by magic. It costs a few bucks to run, but it assembles and tests those complex devices and puts American iPhone assemblers out of work. Most people would say without any hesitation that the invention is a wealth enhancer.
Now imagine that the machine is really just a mechanical Turk that ships the parts over to China along with the precious metal and uses the metal to pay some Chinese assemblers to build the iPhones. Nothing has changed from our “black box” perspective, so how do we go from “great new wealth producing invention” to “destroyer of American jobs and impoverisher of the American people”?Report
Then read @murali ‘s comment. He says it quite plainly.
As for the other thing. Here is what you said:
And that is just wrong. That is exactly how corporations make decisions in the modern world, based on the opportunity cost of their various decisions. Barnes and Noble does sit there an consider the opportunity cost of keeping ten copies on Book X on the shelf versus keeping twelve. Too few books and they miss a chance at a sale. Too many books and they may end up with unsold inventory.
Further, Barnes and Noble, and every other corporation, spend a lot of time trying decide what to do with its cash. They want to be liquid enough to pay their costs, but holding too much cash means that they miss out on the opportunity costs of investing.
The fact that all value is essentially exchange value does not mean what you think it means. Obviously, I don’t know you, so maybe you know a lot more about economics and corporate finance than I do. However, they way you are describing these concepts is just plain incorrect.Report
Anyway, I want to go back to the “convertability” topic for a moment and talk about stock again. If you think of stock as a stream of payments that come from a company’s profits, that’s a good way to start thinking about what makes stock good to own. But if you buy the stock (or build the company) and you’re stuck with that stream of payments forever with no way to convert it back to dollars immediately, it loses a little bit of its luster because it carries risk. If you know that if you need cash, you can sell the claim on those future payments to somebody else who would rather have an income generating asset than cash, you’re better off even though the company and its ability to produce dividends is unchanged. In fact, even in a world when all stock grows in value along a predictable trajectory, the ability to trade it when your preference for cash vs stock changes is a net positive. No need to invoke trading losses or gains.
So if you create a way for people who own companies to convert shares of companies into cash, you’ve increased the value everybody derives from owning and starting companies in general. That’s wealth creation in the same sense that increasing convertability between strawberries and bread creates wealth for the owners of strawberries and bread.
Once those conversions are easy and have a transaction cost near zero, you can certainly make the argument that further fiddling with those transactions doesn’t really create any meaningful wealth, but the wealth created in the jump from “no stock trading” to “enough stock trading” (for some reasonable definition of “enough”) generates quite a lot of very real value for all involved.Report
@james-hanley
Christ, I’m sick and tired of people quoting a single sentence, and then ignoring literally the next sentence which explains what means.
I very clearly said that by ‘wrong’, I meant your mother ‘lost money’. That was very, very clear. I even said that ‘wrong’ was not the best word to use to describe that, because in your scenario she had done it knowingly. So I said I would instead just say ‘she lost money’. And you’re still asking about her ‘mistake’, which is a word I didn’t even say.
And you’re pretending I don’t know the difference between money and utility. I am not conflating dollars and utility. I am, and have always been, talking about dollars. I have been very explicit about that.
I KNOW ALL VOLUNTARY TRANSACTIONS ARE DONE WITH BOTH PARTIES INTENDING TO COME OUT AHEAD, UTILITY-WISE. INCLUDING THE STOCK MARKET.
This is why people *do them*. Otherwise it takes a gun.
If you want me to talk about *utility*, here goes: In the case of the stock market, the only utility of stock is to turn it into money (Besides the exceptions I have already mentioned,dividends and control and whatnot, which I wouldn’t bother to mention again except I’m just waiting for *this* sentence to show up out of context) and thus, as there is somewhat an ‘objective’ utility value of stock, while both parties in an exchange intended to come out ahead, one of them *usually* didn’t.
In other words, one of the participants *probably* would have been better off doing nothing than being in any stock transaction. If their goal was to maximize money, *someone* lost. That is true of the stock market, and it is not generally true of other markets. Two notable other markets where people are commonly mistaken about outcomes like that are ‘fraud’ and ‘casinos’.
Of course, there’s not *always* a loser, because ‘ending up with X amount of money’ can have different utility in different circumstances for different people. If a person needs ten dollars for life saving medicine, it’s entirely worthwhile to sell $500 worth of stock for ten dollars. If a person become an industry regulator, they might be required to sell stock regardless of how much they’d like to hold on to it. Your mother wanted to build a room. A investor might see somewhere better to put the money. Someone else might have earned all the money they ever need, and wants to simply their life by putting it all into the bank. Etc.
Which is why I kept talking about dollars amounts instead of utility. I can speak in absolutes about dollar amounts, whereas I cannot speak in absolutes about utility. (It’s even hypothetically possible we’re in a version of Brewster’s Millions, and someone’s playing the stock market with the *goal* of losing money.)
It’s like I’ve never commented here before. ‘Dur, does DavidTC know anything at all about why people exchange money for goods and services? It’s not like he’s the one always comparing real markets to ideal markets or anything.’
Meanwhile, we’re got two other people quoting me saying ‘Voluntarily exchanging money for goods and services is always a zero-sum game.’ and ignored *the very next sentence* where I say ‘Or, rather…’ and explain I think the sum is not actually *relevant* (Which, duh, means I know it’s not zero sum.) and that’s a stupid way to think about things, because actual wealth generation happens earlier. No one cares if it’s not zero-sum. Sex isn’t zero-sum either, but doesn’t particularly help the economy.Report
@troublesome-frog
That’s why I specified non-IPO, not enough ownership to affect the company, etc. If you’re just picking the stocks you hope will go up and eventually selling them when you pick something else, you might as well be at the racetrack. You’re certainly doing less good in the world (by which I mean creating wealth, of course: what else is there?) than a coercive, zero-sum meat inspector who’s preventing people from being poisoned.Report
@j-r
And that is just wrong. That is exactly how corporations make decisions in the modern world, based on the opportunity cost of their various decisions. Barnes and Noble does sit there an consider the opportunity cost of keeping ten copies on Book X on the shelf versus keeping twelve. Too few books and they miss a chance at a sale. Too many books and they may end up with unsold inventory.
And yet, whenever they’re offered the amount on the price tag, they *always* sell the book to the customer that wants to buy it. They don’t sit there and calculate whether or not they’d rather leave it on the shelves.
Yes, they spend a lot of time and effort on managing inventory and cash, but I didn’t say they didn’t.
What I said was ‘[it’s not] like Barnes and Noble is sitting there considering how ‘useful’ each copy of a book is to it vs. how useful money would be, whereas we don’t want to give up our precious precious cotton rectangles. That’s not how decisions are made in the modern world.’
They decide to sell it. They already decided to sell it. That’s the entire point of it being on the shelf with a price tag. If they didn’t want to sell it, they would not have bought it in the first place.
They want to keep *no* books, as there is nothing they can do with books except sell them. (or return them) They want *all* money that people will give them for the books, regardless of where they plan to invest it.
The point I was trying to make is that talking about the ‘positive sum’ of a transaction is reasonable when both sides actually want both things. That’s basic game theory.
But game theory can get rather screwy when one side only owns the thing for the sole purpose *of* selling it, and I, at least, don’t like talking about it that way. (That’s not to say it’s *incorrect*, just that I don’t tend to think about it like that.) It seems to make more sense to talk about that in terms of supply and demand, because the cost of the book is not set by the utility of the book to Barnes and Noble (It has no utility except resell), but rather by the demand.Report
@davidtc
Pro-tip: when 3 other commenters are, in your view, it just might be your fault, not there’s. Parsimony, you know.
And pointing to your track record of commenting doesn’t help when you’ve made a series of foundational errors on this topic right here in this very page.
You want me to take you seriously? Show me that you actually know your stuff. It’s that simple.Report
“And yet, whenever they’re offered the amount on the price tag, they *always* sell the book to the customer that wants to buy it. They don’t sit there and calculate whether or not they’d rather leave it on the shelves.”
Or maybe they figure that negotiating individual prices for every transaction would wind up costing money (because prospective customers would either not want to wait in line, wouldn’t like the sense that they’re getting fast-talked into paying a higher price, or would do some fast-talking of their own and get too good of a deal) and so they take a fixed-prices policy.
And besides, they *do* negotiate prices, after a fashion. You know all those big coffee table books sitting on the shelf with a “$5” sticker on them? That’s price negotiation. That’s the seller saying “all right, you people don’t want these for $35? How about less?”
“It seems to make more sense to talk about that in terms of supply and demand, because the cost of the book is not set by the utility of the book to Barnes and Noble (It has no utility except resell)…”
Really? Because there’s a strong argument to be made that the utility of the book is as a loss-leader item to get people in the store and buy coffee and snacks.
I can grab a book off the shelf, go sit down in the coffee shop, read the whole thing, put it back on the shelf and leave, and nobody says “boo”.Report
Jim,
yep. twould be useful if people would actually understand the business model before talking about it.Report
Awesome article, James. Thanks for sharing.
For those interested it talks about consumption inequality and how technology can often reduce it. Also has some great points on positional goods and how reducing income inequality effectively pushes out into different types of equality.Report
That’s an interesting article, @james-hanley. I think it raises some interesting points, but fails in two ways:
First, let me address the differing costs of living:
1) The differing costs of living in different areas are nowhere near large enough to explain the skyrocketing inequality, and haven’t change enough over the last two decades to be much of a contributor to that.
2) The differing costs of living are not multiplicative: if the average cost of living in area A is $30,000 vs B where it’s $15,000, yes, someone making those amounts in each area at at the same ‘inequality level’, but someone making $60,000 in area A is not the same as someone making $30,000 in area B. Person A has $30,000 extra money, person B has $15,000. Yes, in some sort of abstract sense, if they were to immediately spend it in their community, they’d get the same amount of goods and services, but, uh, they don’t do that. People at higher incomes do not purchase twice as much rent and groceries and gas. Instead, they invest it in the stock market, which has exactly the same rate of return for them. Or they put it towards retirement and later retire to the same Florida community. Or they buy a new car, or luxury goods, which cost roughly the same amount everywhere. The cost of living is just the cost of living, it’s not the cost of ‘extra stuff and retirement savings’, which do not vary much.
Second, it seems to skip right over something that obviously sprung to mind: Even if income inequality is just *one* of the many sorts of social inequalities, wouldn’t we be better off if it *didn’t* amplify the other sorts?
I mean, yes, we all agree that New York’s rent controls have failed, and are mostly stupid…except, if we got rid of them, we’d be *assured* that the only people living in Manhattan were wealthy or influential people. Right now, they’re just *often* wealthy or influential people, but there are, indeed, some poor and unimportant people living there.
I don’t like the rent controls because I think they discourage new *supply*…disliking them because they don’t *entirely* accomplish what they’re trying to do seems a bit silly.
Likewise:
If taxing wealth made it harder to buy one’s way into these schools (e.g. by restricting donations), it would substantially increase the arbitrary power of admissions committees, which would promote different types of inequality. It would make competition from the use of family connections, for example, even more significant.
I am failing to see how this would result in *worse* outcomes. The assertions here seems to be that Ivy Leagues want to let in certain rich and powerful people, legacy families of alumni, but are currently being bribed to let in *different*, richer (although possibly less powerful) people. So we better not stop that bribery, because it’s…a social good? Huh? Someone’s going to have to walk me through that logic.
In reality, of course, once those schools stopped relying on donations like that, they’d not only stop catering to the super-rich new-money people, but they’d stop catering to their whims of their alumni so much (Which they only care about because of *their* money) and let in less ‘legacy’ admissions also. Yes, I guess, in theory, those universities might be staffed with people who are biased towards old money people, but ‘We should continue to let those schools be bribed so that different rich people get in’ is a very dubious ‘solution’ to that problem.
For example, if powerful people’s capacity to obtain more goods and services than us comes not from their wealth but from their political influence, social position, fame, beauty or charm, then it becomes much harder for the rest of us to attain equality.
There seems to be some sort of odd classification error going on here. There are, under the logic presented here, three sorts of powerful people: Those who are solely rich (type 1), those who are famous or have political influence or charm (type 2), and those who have both of those(type 3).
I have to dispute the idea that type 2 really exists. Yes, there are people with some sort of innate ability to get past any obstacle, to actually *use* that ability in any meaningful sense, to have ‘power’, they have to use that ability to generate wealth with it.(1) In fact, the ability to generate wealth is what we’re talking about in the first place when we talk about ‘powerful’ people.
I guess there are some ways that type 2s can have power without ‘generating wealth’, like the son of a Senator getting out of a DUI or something…but, uh, those are exactly the sort of things we *don’t* want people doing, so, no, we don’t want people to pull themselves up by the bootstraps so they can bribe police officers, or get no-bid government contracts.
This society is capitalistic. If you can’t turn power into money, and money into power, in this country, than it’s entirely likely something is going on that isn’t entirely aboveboard, or it’s just something that we don’t particularly care to let people do. E.g., the only reason that billionaires can’t buy the right to fly first class at any time, including on already full flights, is that *airlines don’t care to sell that service*, because all their other customers would get pissy about it.
1) Barring politicians, who we have freely given power to and are supposed to have power.Report
@davidtc
Let me start by saying that I agree the article didn’t tackle the 1% type inequality issue. So I don’t think he addressed all the issues of concern for your camp.
That said,
I mean, yes, we all agree that New York’s rent controls have failed, and are mostly stupid…except, if we got rid of them, we’d be *assured* that the only people living in Manhattan were wealthy or influential people
1. We’d be assured of no such thing.
2. Even if such an outcome occurred, so what? The non-wealthy can’t afford houses in Aspen or Bel Air, either. Is there a right to be able to get a below market price house in desirable location X? That is, is there a right to demand that someone else forgo potential gains so I can afford a house in some particular location?Report
@james-hanley
1. We’d be assured of no such thing.
Are you quibbling over the term ‘wealthy’ here, as in, the bar is too low? If so, yes, you’re correct, (Being able to afford non-rent controlled apartments doesn’t really make you ‘wealthy’ in Manhattan..and if we got rid of rent control, non-rent control prices would be lower) but I was just using the article phrasing.
I will rephrase: If we got rid of Manhattan rent control, we’d be assured that only people who can afford non-rent controlled apartments (*or* who had some sort of power beyond ‘money’ like fame.) would live in Manhattan. Happy?
2. Even if such an outcome occurred, so what? The non-wealthy can’t afford houses in Aspen or Bel Air, either. Is there a right to be able to get a below market price house in desirable location X? That is, is there a right to demand that someone else forgo potential gains so I can afford a house in some particular location?
I didn’t say there was such a right. I believe there is a right to affordable housing in a general sense, but, uh, probably not a right to get a house on a tiny island. That’s just silly. (Like I said, I think the entire concept of rent control is stupid and counterproductive, because it decreases supply.)
The article seems to be saying, (And I believe it is correct.), that the *goal* of rent control is to to keep the rich and powerful from monopolizing Manhattan apartments. That is the policy goal. Whether or not it’s a good goal (maybe?), or whether or not it accomplishes that goal (it doesn’t at all), does not change the fact it is the goal.
It’s a valid point that the current system is unequal, but it’s unequal in extremely random ways. People get apartments there that they’re illegally sublet from people who illegal sublet from a guy who had the apartment in the 60s, from what I understand it’s complete random chance who has the ‘right’ to a cheap, rent-controlled apartment. (I have never actually lived anywhere near Manhattan, so I am relying on what I have been told about this.)
It’s silly, yes. But the idea that this is some sort *societal inequality* we need to do something about, and we should ‘level the playing field’ by making sure that apartments instead accrue to to, uh, people with money, is a very dubious social justice argument. (1)
This article seems to be operating on the assumption that *everything except wealth* is an unfair way to judge people, because people can get richer, but can’t get new family connection or more charisma or a grandfather who had a rent-controlled apartment. The problem with this idea is in the actual real world, power and wealth are nearly identical, and power is almost ways exercised *via* wealth.
If you’ve got power to throw around in society but somehow don’t have wealth, and can’t get wealth, it’s pretty damn likely that something untoward is going on. Likewise, if you have wealth, but can’t get a certain kind of power, it’s probably because such power does not exist, or only exists in some weird exceptional situation.
1) Frankly, if I was given a bunch of special privileges I *had* to distribute to only a small fraction of society, I’d much rather give them out randomly than just handing them to the already privileged rich.Report
Are there any remaining arguments from “the other side?” Otherwise it looks like everything you have thrown out in the last few days has flopped. Saying as such, I encourage anyone disagreeing to speak up and set me straight.
This is a global issue and to understand it we need to consider the middle class here, the billion people rising to prosperity there and the role of profit and inequality on both the relative changes and on the overall increase in human prosperity . How we respond to this, if at all, is a matter of values and further debate. However we can no more grasp a global economy by seeing only isolated parts than we can understand an engine.Report
One of the things I really don;t miss about TvD was his habit of unilaterally declaring himself the victor.Report
Feel free to correct me or point out this argument that I am missing. Seriously, I would love it if we could actually get a degree of closure. Is there any argument that we didn’t completely dismiss?is there any disagreement you guys have which you have yet to voice?
From memory there was the markets are not perfect red herring. The markets are not just bottoms up phenomena red herring. The pitch fork red herring. The poor guy on the street doesn’t care red herring. The prosperity isn’t all that matters red herring. Now we have the voluntary exchange is zero sum red herring. The “Roger is a dick” red herring. And finally the “I just can’t imagine any good coming from profit” retort ( I don’t think it is a red herring).
My position is crystal clear and has been repeated about a dozen times and I am unaware of any substantive counter argument which has not been addressed, certainly I am biased though, so that is why I am asking you to please set me straight for some closure.
Thanks!Report
Is there any argument that we didn’t completely dismiss?
Oh, if your being dismissive is the measure of all things, you won.Report
No. I extend the honor of judging to you. Is there any argument that you guys have made that you feel we have not addressed? Perhaps you still need some help on the zero sum thingie?
Please let me know ANY objection YOU feel we did not address, or any new objection which you have been holding in reserve.
Come on Mr Logic… Let us see your A game.Report
Roger,
You did actually seem to be claiming victory there with your “everything you have thrown out in the last few days has flopped.” I used to give hell to a particular participant here for doing that, because it’s so damned infuriating. So, not cool.Report
@james-hanley
You mean other than the part where I first asked if there were any other arguments, or the next sentence where I encouraged them to set me straight? Or the next comment where I said Mike could be the judge?
Certainly I was drawing a line in the sand. You more than anyone should see the futility that comes with one side of the debate spending days rehashing one red herring after another, sometimes multiple times, and then next week the same discussion has the same asinine arguments — many of which would embarrass my high school logic teacher.
Sorry, James. We need some closure on these discussions. As I clearly repeated and stressed with Mike above I am fine with THEIR summary judgment. Let us hear it. Let them lay out a summary of the resounding logic of their position. Let them summarize their views (as I have my own, explicitly and repeatedly for anyone and everyone to tear down).
Please, Switters, LWA, Mike, Patrick, JP, or DTC, please summarize your concise position and let us know how it has faired through the last five days or so. As K Popper would say, put your theory out there boldly and subject it to scrutiny.
I may very well be wrong. By laying my ideas out into the light of the sun I hope they can be improved or revised. But don’t pretend you negate my argument by saying something I do not believe and then tearing that down, pretending you have settled the debate and then go on. It is intellectually dishonest, and we are being complicit in the bull shit by putting up with it.Report
Roger,
However much you want closure, you can’t get it by saying “you’ve failed, got anything else.” They can turn around and say the same thing, because you likewise have failed to persuade them.Report
James,
Unless you have any further contributions, in the pursuit of closure I am going to suggest we agree to disagree on the matter at hand. Please let me know if you disagree with this though.
Everyone,
On a more serious note, I am going to put down this newfangled internet thingie and go back to real surfing for the next few weeks. So, in pursuit of closure, I will not deadly be unable to respond to any comments after noon tomorrow. Note, this means any comments tomorrow afternoon are guaranteed “winners” where you will get last word. Hot dang!Report
Go crush some waves, dude.Report
Senior citizens don’t crush waves. At best we avoid be crushed ourselves while the teenagers show us how it is really done.Report
Roger,
Yeah, you can correct for your sliding away from my question above through your claim that Avent strawmans Cowen’s position on safety nets. The issue wasn’t “Cowen should support first-world safety nets and he doesn’t!” (whether Avent said that or not). It was, if we should accept a non-nationalist and global-absolutist understanding of poverty, then what is the justification for offering safety nets to people in the first world, who without them will still be quite a bit better off than the worst off in the world just because of the baseline level of material prosperity floating around them? Whatever wherewithal we have to cough up support for the poor here, shouldn’t we redirect any of it that raises the poor to a level that’s above just slightly higher than the living standards of the worst-off in the world (arguable everyone in the USA even without safety nets) to those who are still below that level? If we’re going to be globalist ands non-nationalist about it?
Point is, none of us actually is non-nationalist about this. It’s a complete and utter pose.Report
Sorry, Michael. I was not aware you had posed a question which I had not answered. I am not sure I disagree with you though.
I certainly agree that a global or historic view can put current American poverty into perspective. I am not sure this is a determining factor though in how I would structure social safety nets or progressive taxation. Although I am not a utilitarian, I would suggest consequentialist or utilitarian arguments on both.
Does this mean safety nets should be extended by Americans worldwide? Or reduced in the US to help people outside the US more in need? Not necessarily in my opinion. The logic is probably way off topic though.Report
On the contrary, the logic is precisely on topic. Which is why your football spiking is absurd (though, granted, I haven’t had time or inclination to try to get you to see why your exceedingly shallow consideration of my questions is so problematic for the “concise” essence of your position). But just because others didn’t press you on it and I didn’t either doesn’t mean that your football spiking isn’t absurd in view of your failure to see or deal with the significant problems that my questions pose for the for the precise combination of views you’re trying to espouse here.
I suggest you review the questions more thoughtfully and reflect on them. But I don’t really care whether you do or not.Report
Same back at you Mike.
Can you try to use your big words and explain what the hell you are talking about? Do we even disagree? On what?
What is your question?Report
I can, but I’m not going to. I’ve made a very small number of comments in this thread, and the substantive questions I’ve asked in them are IMO quite clear as pased, and also not very great in number at all.
You can reflect on them as much or as little as you care to.Report
…Oh, and I have no idea if we disagree. I don’t really know what you’re arguing. We disagree if my vague sense of your “concise” argument is actually your concise argument and you don’t think that fundamental elements of it are in very significant tension with one another. But I don’t know if my vague sense is accurate, and it doesn’t matter what it is since you can just state what you’re arguing and where it may depart from something I’m saying if that’s what you want to do.Report
Huh?
So we are not sure we disagree.
We are not sure what the other is arguing.
But you are pissed either way.
Stillwater agrees!
Thanks again for sharing.Report
I’m not pissed.
I’m not sure what you mean to be arguing (or to emphasize), but there are tensions (at least) among some of the positions you have taken in he thread (some of which seem not to appear in your “concise” versions).Report
…In any case, it seems like the one thing you’re not interested in doing is to just find my very few comments in the thread (there’s really like one main substantive one), read the questions in it, and go think about them hard for a while.Report
Roger –
Despite all you’ve said, I still couldn’t really summarize what your position is. So I decided to go back and read some of your comments. Your first comment (July 23, 2014 at 1:33 pm) discusses Smith, the invisible hand, rich people aren’t overlords, things are generally better now, which is all well and good, but then you cap it off by saying “Progressives have no concept of progress. None. Pure counterfactual magical thinking. Your worldview is completely and totally absurd and if implemented would lead to the very destruction of prosperity.” If that’s not an invitation to have a conversation, what is, right?
In your next comment (July 23, 2014 at 2:06 pm), you talk about Avent’s claim that Tyler Cowen is strawmanning, and you state “Progressive ideology, masquerading as egalitarianism, is indeed fundamentally opposed to globalization, capitalism and the inequality inherent in free market outcomes. As such it is intent upon eradicating effective capitalism by turning into something which is perceived as softer, gentler and generally superior. If profits contribute to inequality, and inequality is a problem, then it is a short step to begin the benevolent war on profits and wealth..” Maybe I’m hanging with a different sort of progressive, but “fundamentally opposed to globalization, capitalism and inequality”, a “war on profits and wealth”? I am not an isolationist. I am a capitalist, and I get that everyone will not be equal. But let the strawmanning continue, sure. Treating cap gains as ordinary income, pushing for marginally higher income tax for the wealthy or an estate tax does not equal opposition to globalization (like we are pure isolationists), capitalism (no free markets, yea) and the inequality inherent in a free market (yep, wanting to reduce inequality is the same things as being opposed to any of it).
Next I stumbled upon your comment (July 23, 2014 at 12:02 pm) where you wrote “Those earning a spot in the top one percent got big rewards for seeing opportunity, creating potential solutions, taking risks and fulfilling their visions. Those not successful failed. Those that were successful saw huge rewards while improving the average condition of humanity. This led to the greatest improvement in living conditions in the history of the human race. So we should…. Get upset about it and demonize the agents of progress. Huh??” Which, if I am being honest, isn’t so bad. But, just like you scream whenever a liberal talks about our evil overlords, liberals scream when you pen one of these “the successful are the agents of progress” screeds. Many are to be looked up to, sure, but those same agents of progress include those who collude to keep wages down (google, intel, Microsoft, etc.), bring the financial world to verge of collapse, dump toxic sludge all over our environment, and more often than not are not held to account in any way resembling justice. You can wash that all away by saying you don’t mean to hold up those people, you mean everyone else. But the bottom line is, just as they are not all evil overlords, they are not all angels of progress either. And plenty of the gains of the wealthy come not from competitive success, but from gaming the system. How much money did the high frequency traders make? How much do they still?
At which point I got to (July 23, 2014 at 2:33 pm) when you said “Those on the left would love to believe that the gains of those with higher incomes comes completely from privilege seeking and cronyism.” I mean, again with the strawman. Does someone believe that? Yeah, sure. Is that the person you want to talk with? Ok, go find them then, because I am not interested. You finally get to your first real argument about the piece discussed in the OP, stating “The tell tale sign of positive sum activity is the increasing size of the global pie. The reason Tyler is correct (indeed he is making the same argument I have for the last several years on these pages) is that we need to look at the total pie. Never, in 13.8 billion years, has as much prosperity and wealth been created as in the last two decades.”
At this point, I think I stumbled upon your main point. Few people argue that global prosperity is bad. I certainly don’t. Btu you don’t address the main counter, that inequality in the US is necessary for the engine of global prosperity to keep on chugging. And it doesn’t demonstrate that any action which may change, at the margins, how rewards are allocated will destroy that engine.
Fortunately, you soon thereafter (July 23, 2014 at 3:10 pm) respond to a question from Greg about whether or not inequality in the US has to grow in order for the poor in Bangladesh to do better with. Now, instead of explaining why global prosperity depends on inequality in the US, you simply dismiss inequality as a concern altogether, claiming the idea “does not hold up to any serious scrutiny.” While I think its reasonable to not be concerned with inequality, it is unreasonable to claim anyone who is should be dismissed. And that’s exactly what you do.
At this point, I gave up re-reading the rest of your posts. If it wasn’t for my awareness of the value you used to add around here, I’d of thought we were getting trolled. I was getting a little angry reconciling the self-righteousness in your most recent posts with the complete lack of civility or honesty included in the posts above.
Look, without speaking for the group, here is what I think. Global prosperity is great. Inequality, to a degree, is going to exist and is not by definition a problem, but it can become one. Whether that’s (i) because the peasants get their pitchforks, or (ii) the middleclass ceases to be, and with it America ceases to be, what many of those of us who live and vote here want it to be. It is possible that by nibbling on the margins with respect to tax policy, safety net design, just application of the law, any number of regulations, etc., we could come up with a system which reduces to some degree the inequality inherent in our system, without breaking the system or destroying the engine of global prosperity. See for example, the entire history of the world, when things were different than they are now, and progress, maybe slow and halting, continued. Advocating for this is not magical thinking and its not advocating the destruction of prosperity, regardless of how many internets you claim to win.
And, if I missed your point, can you repeat it.Report
And this “But don’t pretend you negate my argument by saying something I do not believe and then tearing that down, pretending you have settled the debate and then go on. It is intellectually dishonest, and we are being complicit in the bull shit by putting up with it.”
This is how you interpret someone not responding to you on the internet?
catch some waves brother.Report
My point, which I ended with in our last discussion was pretty simple.
The unprecedented economic advance of a billion people in the last generation,
The unprecedented economic worldwide gains of the past generation,
The relative stagnation of the middle class in developing nations of the past generation, and
The increases in inequality within nations in the past generation
Are Inter-related and interconnected parts of the same whole.
My point is that this issue requires proper framing to be understood. Do you agree or disagree?Report
Sure, interconnected and inter-related. But not necessarily required by, or dependent on, each other. And like lots of inter related and inter connected things in this universe, we know lots about certain types of interplay and lots of nothing about others. And like those interconnected things, not knowing it all shouldn’t, and doesn’t, keep us from messing around a little.Report
@switters
We are describing a complex adaptive system. The output of this system is the welfare of the human race. Billions of lives.
I wouldn’t suggest fiddling with the dials like a monkey at the controls of nuclear power station.
LWA, somewhere on this page, described with glee the idea of the masses rising up and taking the assets of the capitalists. On a more serious note, a professor Piketty — currently the toast of the left — is selling a brand of pitch forks which calls for globally taxing eighty percent of marginal income for the wealthy. Not to compare either with a monkey, but these types of actions would be expected to have major repercussions on investments here and abroad. It would affect the immediate and long term future of the human race, possibly catastrophically. I am sure you agree.
When progressive ideology starts highlighting and advertising that income inequality, profits, investments and human welfare — here and abroad — are interconnected parts of a complex decentralized machine, then I will begin to see it as less dangerous and more serious. In the mean time, I suspect it is all about power and politics and winning the hearts and votes of people necessary to sustain power for people who really don’t give a shit about human welfare.
Don’t get me wrong, I am a big fan of experimentation. If interested I could share some suggestions on how to experiment more wisely with no harm to monkeys.Report
Yes, I agree, we should not allow the equivalent of monkeys fiddling at the controls of nuclear power station. And now that we are speaking in absurdities, I’m sure you wouldn’t agree to encase the dials in a tamper-proof container and forbid any policy that may have any impact on the global economy for all time, right?
The bottom line is, not doing anything is just a different type of fiddling at this point. This engine that you continue to claim has resulted in the most prosperous 20 year period was fiddled with for years prior to that 20 year period, was fiddled with during it, and will be fiddled with after it. Our hands ARE ALL OVER IT. Me, I’m more interested in discussing specific fiddles. You seem to prefer raging at the machine, the machine in this case being the prosperity destroying lefties, that despite its best efforts, keeps coming up short in attempts to destroy the world.
You got an issue with what LWA said, or what Picketty said? Fine, bring it up with them or ask me what I think about it. But as we’ve been through before round these parts, if you just want to run around tarring groups with the ideas of any particular member, we can only be sure that we’ll all end up tarred.
And if your only point was that you wouldn’t describe a potential revolution with glee, or you think 80% marginal tax rate for the wealthy is too high, you could have communicated that in short order. And I would have agreed with you. A fair read of your comments on just this post, however, gave me the impression you were making a stronger point than that, although what that is, I am still not sure. Like maybe, DO NOT MAKE POLICY that affects the global economy or you will destroy it. Or Inequality resulting from a market is never bad. Or progressives are dumb. I mean those are things you said above. And if you think a majority of progressives would delight in a revolution, or jump at the chance to impose an 80% tax rate, I guess good for you. Keep fishing that chicken.
Yeah, yeah, yeah, progressives need to do x or you’ll continue to suspect its all about power and politics to sustain power for people who don’t give a shit. Great point. Politicians are craven. Political Parties are opportunists. I agree. So what. This is applicable only to progressives?Report
Switters,
Please read my last paragraph again before suggesting that I am against experimentation or change.
Here are some rules of thumb before fiddling… First understand the machine as best possible. Form competing hypotheses (preferably absent political influence) and test them empirically in controlled ways which guard against learning via catastrophe . Revise your hypotheses based upon their relative and absolute success.
The first step in this is what I have offered as my summary of the situation. We need to have a good, realistic, holistic model or framework of the machine.
When someone talks just about two parts of the machine and neglects the rest and they are clearly interconnected and interdependent (investments and profits are clearly related to global prosperity and the the incomes in the developing world in great part paid out of those investments), then they cannot be taken seriously. I wouldn’t let a mechanic work on my car if he pretended the left half of the engine doesn’t exist.
Yes we have fiddled with the machine over the years in countless ways. And guess what… The impacts of the fiddling can indeed be imperfectly compared. We have broad historic data on how mercantilist fiddling worked. We have data on how various versions of socialism and fascism worked. We have data on how different nations faired under different models. We even have data on economic performance by state and city within countries based upon the framework they are operating under.
And the data reveals things about which frameworks deliver the fastest growth, and which consistently fail, either absolutely or relatively. Links available upon request. And no, economic impact isn’t all that matters. But it matters a hell of a lot, and I am sure the millions of people who have starved to death under bad frameworks would agree if the fiddlers had not pissed on their graves.
Ideas matter. Frameworks matter.
Finally, I never said only progressive politicians are dangerous. They all are. Earlier I also specifically said that extreme libertarianism would be globally catastrophic too. Again we need frameworks and world views in great part to help us restrain and direct the actions of politicians.Report
Roger, unfortunately for you, you don’t come across as clearly as you think you do. And its unfortunate for everyone else too, because I think we could all benefit from your perspective. But you really seem eager to disagree and add hyperbole where its not needed. You’ve said lots of things in this one thread that simply can’t be reconciled. I could quote you again, and point them out, but your failure to address them last time tells me Id probably be tilting at windmills. Talk to people, not at them. Be charitable. Or if you can’t, just don’t engage.
You used to do that a whole lot around here. You seem….. angry whenever you show up these days.
And I’m not trying toReport
I am off after this, but since we are into constructive feedback, let me also offer some.
In virtually every comment thread, you have tried to turn it into a discussion about me. If someone wasted their time diagramming your comments, a significant and possibly even a majority of your prose is oddly about me rather than the topic.
I find endless conversations about conversations, though at times appropriate, get pointless after a while. Amusingly I recognize I can’t even point it out without being somewhat guilty.
The point is, when taken too far, it is a diversional rhetorical trick. Others here do it too, one to the point of almost qualifying as a stalker. Yesterday he even came out of the woodwork just to tag onto one of your “conversations about me.”
I promise to try to be less hyperbolic (scratch the stalker comment above) and to try to avoid broad generalities if you promise to try to keep the discussion on the discussion.
To quote the always irritating Bill O’ Reilly . “I will give you the last word.”Report
Is the last word “child molestor”?
oh, that’s two words.Report
Roger –
Yawn. You can’t even avoid the hyperbole when apologizing for it.
“In virtually every comment thread, you have tried to turn it into a discussion about me.”
I was talking about your ideas Roger, as I understand them, or the lack thereof, or the degree to which I think they fail to answer the mail, or sit at a level where few would take issue with them. You have posed quite the conundrum though. How to talk to someone about their ideas without referencing their ideas. Or the manner in which they communicate them. Or how that may affect others’ interpretations thereof.
“If someone wasted their time diagramming your comments, a significant and possibly even a majority of your prose is oddly about me rather than the topic.”
Well, isn’t that nice. A big fish you to Switters before you promise to try to do the very things you fail to do in the very same comment.
Peace brother. Have fun in the surf.Report
Without even getting into the weeds of the economics, the common sense Burkean admonition about not rashly tampering with the controls over the economy, somehow slides into “no taxes ever”.
I mean, no one is actually saying it that way, but it seems that virtually any proposal for higher taxes is met with virtually the same argument. “It will cause capital flight/ job-killing! Cats and Dogs, living together!”
Its never the case in reverse though- a proposal to slash taxes is never met with accusations of being a monkey at the controls.
Even when, as in Kansas, it appears that monkeys were in fact at the controls, and disaster is approaching.
Its this Atlas-like view of the rich, that the slightest adverse affect on them will cause the world to shudder on its axis, which is so absurd.Report
LWA,
you are acting irrational. Upthread, roger agreed that we might increase taxes on capital gains profitably.
If you’d bother to make an argument, you might have gotten him to agree to your side as well.Report
I didn’t see that statement- I was too fixed on ones like this-
” globally taxing eighty percent of marginal income for the wealthy. Not to compare either with a monkey, but these types of actions would be expected to have major repercussions on investments here and abroad. It would affect the immediate and long term future of the human race, possibly catastrophically”
Really? More catastrophe than 80% marginal taxes did in the postwar era, I guess.
He would have done better to quote Ronald Reagan, speaking in 1964 about the catastrophic effects of Medicare, which he assured us would lead to a world in which their grandchildren would wonder what it was like to be free.
I’m willing to be proven wrong, but I would hazard that the economy is a bit like the natural ecosystem- its the apex predators at the top who are expendable, while the grasses and plankton at the bottom are indispensable.
Wipe out every single lion in Africa, and the ecosystem would barely register a ripple- wipe out the grasses, and see it turn to havoc.
Confiscate every penny of the world’s 100 richest families and the economies would scarcely notice- reduce consumer spending by a third, and the world would plunge into darkness.Report
I didn’t see that statement-
And even when it’s pointed out to you, you proceed to ignore it.Report
@major-zed
If I understand correctly,@Mike Schilling‘s basic point was to bring up trading non-IPO stock as an example of something that serves no real economic or socially useful purpose beyond what might be attributed to gambling on sports.
Teachers, firefighters cops, unionized workers, and anyone with a defined benefit plan contributes toward their retirement via paycheck deductions. The proceeds go to the fund managers who invest the money on behalf of the future pension recipients and much of that goes to equities. If that is not a socially useful purpose, I don’t know what is. As far as economic value, it’s already been said that much of that is expectation-based.
Yes, people CAN gamble in the stock market, but the major financial institutions that have hundreds of billions conservatively invested in the market do a hell of a lot more work to understand where they’re putting their money. There’s also a lot more that can be done with the information provided via secondary market pricing that hasn’t been touched on here (think of information to the market and a signal for investors where to put their money to the extent firms look to raise additional capital – which happens all the time).
Then again, what do I know? I only work in the industry.Report
There’s a reason the industry calls that “dumb money”, isn’t there?Report
Yes, people CAN gamble in the stock market, but the major financial institutions that have hundreds of billions conservatively invested in the market do a hell of a lot more work to understand where they’re putting their money.
That is, they try to gamble intelligently, like a blackjack player who counts cards. They’re still placing bets on what will go up and what will go down.Report
You’re conflating risk and uncertainty. Lumping them together under the non-technical and value-laden term “gambling” both obscures the differences and implies a certain foolishness to both.
Your example of a blackjack player counting cards mitigates that a little bit, but not sufficiently for you claim to be seen as sufficiently accurate.
Or if we insist on using the term “gambling” for making decisions about the future, then in fact every decision any of us ever make is gambling, because all decisions are about the future, and the future is never perfectly predictable. But in that case, to call stock investments gambling is really to say nothing at all because it doesn’t distinguish them from any other types of decisions.Report
“Gambling” vs. not was Dave’s distinction. And it’s really not my point, which is that the stock market (IPOs aside) just pushes the same counters around while assigning them different values. It’s true that the result has signalling value, which is why they’re called “capital markets” rather than “casinos”. But all economic activity does, right? That’s Econ 101. Every time I go to Tahoe I’m signalling “more blackjack tables, fewer roulette wheels.”Report
James,
I’m comfortable with calling it gambling. It’s a better fit when you’re shorting, of course…
I’m also comfortable with being the house, in the gambling hall (that’s when you’re selling options for stocks you own– house always wins, that’s the rules.)
Gambling’s an okay metaphor when you run the risk of losing everything (or, say, 30% of your investment). It’s far less applicable to buying real estate.
Of course, we haven’t even started on the fiscal sense of buying a car. That depreciates constantly. That’s not gambling, that’s being in a Red Queen’s Race.Report
“Gambling” vs. not was Dave’s distinction.
Yeah, Dave made the distinction, you didn’t.
And it’s really not my point, which is that the stock market (IPOs aside) just pushes the same counters around while assigning them different values.
I’m not really sure what you think is the meaningful point, here. Why is this a meaningful point? You were careful to distinguish from IPOs, which I think you do see as valuable, but would IPOs be as valuable without the ability to later push these counters around? If not, then pushing counters around is a critical element of the machinery, and even if it did nothing else it would create value by making the machinery functional. That seems to me to be far more significant than whatever point you’re making.Report
“There must be something counterintuitive about [wealth creation through reduced transation costs] because I find lots of people struggle with it.”
It’s the same thing as intellectual property rights. You can’t pick it up and carry it around and put it in a box, so it must not be real. I can’t go to a store and say “give me five dollars’ worth of reduced transation costs”.
They’re also obvious–in retrospect. Of course those goods should have gone to that shipper. Of course it’s less expensive to build a pipeline than ship crude oil by rail. Of course that sequence of sounds is pleasing. Improvements in efficiency, as with intellectual creations, often seem less like an invention and more like “well, duh“.Report
I think you may be onto something there.Report
There is an old argument, particularly popular in Germany in the 19th century (in the intellectual movement that emerged from Romanticism and Idealism), that humanity exists for a few creative geniuses, a few great men (it was always men, of course), who by their creative will, enabled and unleashed by the work and organization of the whole of a society and culture, make the world a better place for all of us. Our lot, our destiny, those of us who are non-geniuses that is, is to toil so that they might have the freedom to perform acts of genius.
Good to see a little bit of the 19th century German aristocratic sentiment in contemporary American conservatism.Report
@chris
Pardon me if I’m misunderstanding you, but are you implying Tyler Cowen is a conservative?Report
Not Cowen, no.Report
OK, my bad.Report
You forgot to say “and white men, of course”. If you’re going to ad-hom, please do it properly.Report
When I was in high school, there was a ropes course behind the school. (This was when ropes courses were big.)
As it turns out, the ropes course was used solely by the… I forget the official term for the kids. I think we call them “at risk” today. The kids who were most likely to be sent off to juvie were the ones who were constantly on the ropes course.
I always resented that I played along and followed the damn rules all the damn time and studied and did my homework and the ropes course seemed like so much fun and so valuable… and, nope, the bullies got to use it.
I suppose the argument is that they needed it more.Report
There’s a Jewish myth that there are thirty-six righteous men (I guess they’re always men) in the world, for whose sake God forbears from destroying it and the rest of us. No one knows who they are; in fact none of them knows that he’s one of the 36.
In the modern American version, they’re easy to find.Report