Morning Ed: Economics {2016.03.01.T}
Adam Ozimek asks if economics study actually changes minds. Tyler Cowen says yes.
As it turns out, if you make it more difficult to form a hospital, fewer hospitals are formed. Relatedly, rural hospitals are shutting down delivery rooms.
Never mind the curse of the lottery winner. What about the curse of the neighbors of the lottery winner?!
Cafe Hayek says we’re richer than the Rockefellers. Barry Ritholtz says no we are not.
Dylan Matthews reports that giving poor people money is good for the recipients and maybe not so good for those around them, but it’s unclear. Relative wealth and relative income are tricky.
Eric Morath argues for a five-tiered federal minimum wage. Better than a single, aggressive minimum wage, but I’d prefer this be dealt with a lower levels of government. On the other hand, Oregon may be overdoing the minimum wage hike in general.
FastCompany has an article about how and when Google started taking design seriously.
What we can learn from capitalism by looking at the mushroom industry.
The Rockefeller debate: Back in the days of usenet, there was a similar argument on whether the average person today is wealthier than a Russian noble before the emancipation of serfs. The people who argued for wealthier pointed out the greater access to superior goods like television, air conditioning, and superior medicine. The skeptical ones argued that it is really incomparable because you can’t really make a good comparison between an average middle class lifestyle in the early 21st century and having vast estates worked by serfs doing your bidding.
Its really part of the debate on what wealth is and whether inequality of wealth is important. Cafe Hayek’s argument is that the only thing you really need to do to increase wealth is to increase absolute wealth. Even if the 1% a disproportionate share of the wealth, the increase in absolute wealth will increase standards of living for everybody. The other side argues that you also need a wealth redistribution mechanism because if the wealthiest enjoy a disproportionate amount of the wealth, they will have more power than the rest of us and this could eventually lead to decreased living standards.Report
The other side argues that you also need a wealth redistribution mechanism because if the wealthiest enjoy a disproportionate amount of the wealth, they will have more power than the rest of us and this could eventually lead to decreased living standards.
At current levels of inequality, the kind of problems that arise from this sort of thing must already be in evidence. What would you say are the big ones?Report
Real estate. Government policy.Report
With real estate, you only have so many units. If 2n people want to live in n units, a bunch of people are getting priced out no matter what the income distribution looks like.
“Government policy” is pretty vague. Which government policy?Report
Sure, some people are going to get priced out regardless. But what happens when one person can afford the sort of space where otherwise four people could live?
There’ve been some studies on the ways that government policy addresses the needs of those with money rather than those without. On both liberal issues and conservative ones from immigration and trade to preferential tax policy. I need to flag one next time I see it as this tends to come up. But it stands to reason that the degree of inequality would play a role in this.Report
You’re probably thinking of Gilens and Page (PDF)? It gets cited a lot in the media, which leaves out some pretty big asterisks. Most notably, their proxy for the opinions of the “elite” were actually people at the 90th percentile of the income distribution. Not even the whole top decile, just the 90th percentile.
It also doesn’t demonstrate that there’s actually a problem. What specifically are the policies that were enacted that the “elites” favored and the median didn’t? It doesn’t say. Maybe it’s for the best. Maybe the median preferences look a lot like Donald Trump.
I was talking to some economists the other day who said that the paper has some other methodological issues, but I don’t know enough about statistics to evaluate those claims.
Anyway, this is still really abstract. Are there any concrete examples of bad policies caused by the rich personally having too much wealth?
But what happens when one person can afford the sort of space where otherwise four people could live?
That’s a fair point, though I question how much of an issue this is in practice, and I question how much it would change with any non-insane inequality-reduction policies. We’re already taxing the rich at rates approaching or exceeding 50% in some jurisdictions; to cut their incomes in half again would require jacking the rate up to 75%. And to get the numbers to free up a lot of real estate, we’d have to hit the upper middle class, not just the truly rich. There’s a lot more low-hanging fruit in building more and abolishing rent control.Report
Brandon,
I care more that we have effective transportation for the displaced, than who lives where.Report
One shouldn’t confuse the recognition of a problem with the belief in a particular solution (and vice-versa), nor for that matter the belief in any solution at all. I believe money in politics is a huge problem, but it’s one I have no solution for whatsoever (at least, no solution that isn’t worse than the problem).
I am inclined towards agreeing about the median and Trump. But it is what it is, and to an extent Trump may be fueled by it the relative insulation from the policy-makers.
Regarding real estate, most of the solutions I might offer would involve build-build-build or encouraging development in places that there is more room to expand, but (a) those are things I am inclined to support anyway so the relationship between that solution and this problem is probably suspect, and (b) it’s actually kind of hard to implement these policies precisely because it’s not a problem for those with the most amount of influence.Report
It also doesn’t demonstrate that there’s actually a problem.
Well, one person’s problem is another person’s solution, yeah? If what constitutes a problem is (eg) an inconsistency within a formal theoretical scheme, a state of affairs is viewed as a problem only relative to a theory (or framework). Which theory or framework do we pick?
That’s one of the problems with identifying problems.Report
Lee,
You can’t put a pricetag on intelligence. Or on longer life. But if you had to put a pricetag, it would be a lot larger than “there are ten dirtgrubbers who I don’t see, who work for me.”Report
Right, the comparison of the wealthiest individuals of another time period, with “ordinary” individuals today is largely advanced by substitution of goods for servants. And it was the servants who essentially experienced the inconveniences that later improvements ameliorated. The washing machine is a great advance, but Rockefeller never had to do his own laundry, make his own bed, drive his own car, cook his own meals, etc. Robots will move the situation towards a more perfect substitution, but I’m not sure that the freedom that servants, serfs or slaves provide is ever entirely replaceable. The technology can improve, but the wealthy can order someone else to deal with it.Report
Some of the goods that replaced servants were invented because servants were becoming too expensive or were considered unreliable. The dish washer was invented by a society lady that got tired with servants breaking her fine dishes and glassware. She immediately realized its commercial potential but it took several decades for her idea to get off the ground for social and technical reasons. The hard water that most people had access to was horrible for washing dishes and women actually liked the chore because it was seen as more relaxing compared to doing the laundry.Report
Lottery Winners: Keeping up with the “lottery winner Jones” is a bankruptcy future. Wow. Err, rich dudes, move away.
Cafe Hyaek: Society is indeed vastly richer. I prefer comparisons to the rest of the world in current time. Americans, of all strata are VASTLY wealthier than the rest of the 99% of the world. We are the 1% of the globe.
Mushrooms: Still waiting for reliable access to morels. Damnit, I don’t want to have to pick them and fend off the gangs.Report
Americans, of all strata are VASTLY wealthier than the rest of the 99% of the world. We are the 1% of the globe.
To pick something bigger than a nit… The US plus Canada is about 5% of the world’s population. The EU, with comparable standard of living, is almost 7%. Japan, Australia. South Korea? Taiwan? Call it 15% of the world’s population is in countries almost entirely comparable to us. The list gets longer if your all-strata cutoff for the US is, say, the back-country parts of the big Indian reservations, or rural Appalachia. Yes, the US is rich — but if the poorest Americans count as “rich”, at least 15% of the world is as rich, and the actual percentage is probably higher.Report
Ok, so substitute 85% instead of 99%. My point, rather poorly made it seems, is that excluding the first world, the poorest Americans are still much wealthier in material goods that the vast second and third worlds.Report
Is there an inequality floor above which we have a moral obligation to help others rise?
Or is the point to make sure that, relationally, everybody in a particular area feels some kinship with everybody else in a particular area?
I have to admit, these inequality discussions always feel like people are saying “don’t compare those people below me with me! Compare me to the people above me!”Report
Jay,
I agree with your last paragraph. It strikes me similarity. As to your other questions, I can see an argument for helping others in a particular area, namely the nation state. Everyone outside that? No. More of a political decision vs moral, as I recognize no moral obligations to help my fellow man anywhere.Report
As little as I like Trump, this is glorious.Report
There were some weird things that happened to the Irish vote following the Kennedy election.Report
I thought the mushroom article was going to be about industrial mushrooms for biodegradable packing materials.
The expressed sentiment in the article about how mushroom hunters should not be paid is a disturbing one that seems to pop up across the political / philosophical spectrum. The justification varies, but the end is the same. I suspect that it is a very selfish idea being wrapped up in some manner of justification, but still.Report
The lottery winners and cash giving stories seem to spring from similar issues of “why them and not me?”
I am unconvinced by the Cafe Hayek argument. It seems too clever by half. The argument is exactly the kind of slatepitch that gives economists and/or libertarians a bad name too many because it seems to ignore reality. Yes, Rockerfeller did not have chemotherapy. He still was the world’s first billionaire, owned multiple estates, and traveled the world in luxury. The Cafe Hayek piece was exactly what I meant when economists and neo-liberals seem blind to anger and rage. “Look look guys! HD TVs! Why are you angry that your income has decreased by 25 percent and your pension is gone?”Report
When it comes to the premise of how relational goods produce more (or merely as much) happiness (or unhappiness (however you want to define such things)) as absolute goods (that is to say “better than the guy next to me” vs. “stuff like clean water, temperature control, etc”), I’m always unclear as to what conclusions I’m supposed to see as automatically precluded from the argument.Report
@jaybird
There are obviously subjective elements to relational goods. I never really feel car envy. My mini-cooper is good for me. OTOH there are things that I like here that people say “Why do you need or want that?” I once made an off-hand comment to my girlfriend about wanting to own a Wayne Thieubaud painting and she said “Why do you need to own one? Why can’t you be happy that his paintings exist?”
That being said this is the conversation that I imagine the Cafe Hayek crowd wants people to have:
Bob: How is it going Jim?
Jim: I just got laid off after 38 years because the plant is automating. Stacey just got diagnosed with cancer and we lost our insurance. The only job I could find only gives me 15 hours a week and pays a third of what I made as a foreman at the plant.
Bob: Well you know Stacey’s chemotherapy is something Rockefeller did not have and she can also watch her HD TV while your medical bills and debts mount into infinity before she dies an agonizing death from a lack of pain medication in a shelter because your bills became insurmountable and you lost everything to repo men.
Jim. That’s true. I guess those Cafe Hayek folks are right and I don’t have anything to be mad about. We are really richer than Rockefeller.Report
Saul,
“I saw it once. Why would I want to see it again?” — this is what happens when you know someone with a photographic memory… the image is still stuck in their brain years later.
(It’s different, however, to see the same painting in a different exhibition, of course. The lighting’s different, so the painting is different).Report
You have to admit Jim is being selfish concentrating on things he once had and he no longer has. Someone else has his things now and he should feel happy for them.Report
The internet is one thing that you have that Rockefeller did not. And it means that you don’t have to have these imaginary conversations in your head about what you think other people might believe. You can just ask those other people.Report
Regarding the comparison of our wealth today compared to previous generations.
We could just as easily use that logic to justify a massive confiscatory tax on capital gains.
If I confiscate 90% of your capital gains, you are still wealthier than you were, right? And you are still wealthier than 99% of the world, right?
So what are you complaining about?
Enjoy your big screen TV, which Rockefeller never had.Report
We could just as easily use that logic to justify a massive confiscatory tax on capital gains.
On the contrary, I would say that the key takeaway lesson here is that long-run growth is extremely important, and that it’s crucial that we not do anything to interfere with that process. Since investment is what drives long-run growth, a ninety percent tax on capital gains is just about the worst tax you could levy. There’s a reason even France and Scandinavian countries don’t do stuff like that.Report
Something that was pointed out to me in 2004ish, 2005ish.
I wonder if it holds up today as well as it did then.
1980: Jimmy Carter said “America will need to eat its vegetables.”
1984: Walter Mondale said “America will need to eat its vegetables.”
1988: Michael Dukakis said “America will need to eat its vegetables.”
1992: Bill Clinton said “Who wants a beer?”
1996: Bill Clinton said “Who wants another beer?”
2000: Al Gore said “America will need to eat its vegetables.”
2004: John Kerry said “America will need to eat its vegetables.”Report
Very interesting interview Balko did with a professor who is studying the effects of insurance and police policy / behavior.Report
De Blasio is making NYC great again. You can pee in the streets again.
http://observer.com/2016/03/you-wont-get-arrested-for-public-boozing-or-urinating-in-manhattan-anymore/Report
Am I reading this correctly that the change is that instead of arresting you, they just fine you? Meaning they don’t waste resources booking and jailing people who are committing nuisance crimes but they still punish those crimes? I’m not seeing the problem.Report
Piece contextualizing an All Writs Act decision regarding unlocking an iPhone in New York
I don’t much like Darrell Issa, but he’s been strong on the San Bernardino caseReport