Just how committed are you to fixing inequality?
Quoth the Alzheimer’s Association:
In 2013, Alzheimer’s will cost the nation $203 billion. This number is expected to rise to $1.2 trillion by 2050.
The “nation” they refer to is just the United States. There’s a lot more suffering across imaginary lines in every direction. Additionally, I don’t know if this includes the costs associated with unpaid caretakers, which don’t have dollar signs attached but still have real, economic value, and the figures perhaps don’t include the tremendous suffering associated with the debilitating disease, which probably exceed the strict economic costs. There are preferred ways to die.
Given this, we ought to be willing to pay significantly more than the strict economic costs of Alzheimer’s for a cure to the disease. And keep in mind that these are annual costs. So, we would be justified in paying a growing amount each year for a cure that works each year.
A willingness to pay for a cure, however, has consequences. If we know someone has the cure and we pay her for it, she would become the wealthiest person in the world within five months, even if she collects only the estimated US-based economic benefits. Keep in mind that we would still be enormously better off for her contribution. But it’d be a jaw-breaking blow to economic equality.
Of course, we could be “greedy”. We could just pay her $20.3 billion per year. Even then, she’d still reach the top 0.1% income percentile almost instantly and become the richest person on the planet within 4 years. The rest of society, though would get to enjoy the “consumer surplus” of saving $203 billion in economic costs while paying only a trifling $20.3 billion. Inequality would still increase, but less so.
This frugality, however, could be a problem. What if our cure-maker believes that developing the cure will cost $21 billion. That is a bit more than what we wish to pay her but still much less than the economic costs of Alzheimer’s. She wouldn’t be able to justify developing a cure, and we’d be stuck with the full costs of Alzheimer’s as a result of our stinginess. It’s almost literally penny-wise and pound foolish. If we were wiling to let Zuckerberg $17 billion off a way for people to goof off while at work, the cure to Alzheimer’s deserves better.
Such situations do need to be kept in mind when staring down inequality. The billionaires of this world mostly got there by providing modest bits of value to very large numbers of people. Often the value seems astoundingly modest, as in the case with the $57 billion Amancio Ortega of Zara. But clothing costs are real, even if they are less poignant than Alzheimer’s costs.
Of course, Zuckerberg and Ortega have probably already done what they were going to do for us. If we went French Revolution on them, I don’t see much of a downside. The big question is how much are we willing to let people benefit from future innovations? Do we want to combat inequality by paying less at the risk of not getting some solutions at all, or do we go ahead and pay up and protest inequality with words alone?
Photo credit: The Onion
Passive Aggressive Haiku.
If passive aggressive sentimentality was stylized into a poetic device, you’d get the headline to this post. Really, it’s an amazing piece line of writing.
“Just How Committed Are You to Fixing Inequality?”
Take a loaded question along the lines of “Have you stopped beating your wife yet?”, but pack it with something vague, (yet oh so positive!), like “fixing inequality”…
And you get: Voila! “Just How Committed Are You to Fixing Inequality?”
I’m just a Free-Verse guy myself…so here goes:
Take a Glittering Generality
And pack it inside a Loaded Question.
What do you get?
You get the sound
Of-One-Hand-Clapping.Report
My editor writes the headlines! I just work here.Report
Don’t be silly, Vikram. Pharamceutical companies spend more on advertising than on R&D. And they only make penis pills and me-too drugs, anyway. Besides, all the real research is done by the government.Report
This is an issue, but it is a separate one from how willing one is to compensate those companies.
Whether research ought to be done by the government is also something people can debate, but again resolving that doesn’t mean you resolve the trade-off I write of without issue.Report
Oh, I didn’t really mean any of that. I just thought I’d get all the usual left-wing silliness out of the way at once.Report
Among my biggest hypocrisies is using sarcasm myself while never getting anyone else’s.Report
There is the solution of the government deciding to take money away from the Military and drone-development and spending it on the NHI and non-profit research universities instead of Genentech and Merck.
This essay was underwhelming. It seemed like a very typical defense on income inequality from the business/libertarian prospective.
The value point is one that is hotly debated among various people on the left though. This is currently a hot issue in the Bay Area because many people feel young techies rich on social media are pushing out long-term residents and the not-rich. We also have a lot of bio-tech startups that do actual research. I don’t think San Franciscans complain about them. They dislike being priced out by makers of Candy Crush Saga because they think it does not provide value. A cure for Alzheimer’s would be seen as providing a lot of value more universally.
We had a debate about this article on a friend’s facebook post:
http://venturebeat.com/2013/08/21/4-toast-why-the-tech-industry-is-ruining-san-francisco/
I was one of the peopled defending the 4 dollar piece of toast and said it was a very good piece of bread and worth the four dollars. At one point I talked about how humans value aesthetics and this matters. My primary outlet for this is I tend to buy clothing that is more on the expensive side than the Zara/Gap/H&M/Dickie’s side. I also tend to think of higher-end clothing as being better for the environment. There is a book called the Cost of Cheap or something similar that covers this. My views on aesthetics prompted this response from a complete stranger
“your last few comments really highlight the issue. while you are spending money to support aesthetics (somewhat ameliorated if the profit went primarily to hands of people involved in the creation of them rather than to corporate CEO’s, and paper-pushing middle-men), people around the world are desperate to survive. people are getting pushed out of San Francisco because rent has inflated in accordance with the market, rather than being controlled and regulated as should any infrastructure element of society. housing, food, and water really ought to be excluded from the normal (insane) behavior of market capitalism. the inflation which comes from speculators looking to profit ruins everything for everyone (but themselves). the UK deregulated its transport system and the price leaped up…they are now in the middle of allowing banks to take over ownership of NHS-run hospitals.
a quick fix that no one would like (except the people who are actually facing conditions which I will call ‘serious’) and which will never happen would be for people to just take a year off from rent. no one pays rent for a year. no one can kick anyone out for a year. anyone can move out of their own volition (absence of duress) regardless of prior contracts. ‘owners’ could still make choices about who they let live in ‘their’ property. we could give it a shot. all mortgages would be on moratorium as well.
if we did try it, I think San Francisco might become awesome again (but of course we won’t, because SF is run by the same profiteering capitalists as the rest of this sad, doomed world [btw, if you think I’m being sensationalist, read up on the children who work for pennies a day breaking rocks in Mozambique, or the economic collapse in Spain…or watch American Idol if it’s still running]). people might rent to people they want to survive, rather than people who just have the cash. artists, musicians, writers, etc., would perhaps survive a little better. the prices of everything would go down as overhead dropped by like 50-70%. banks would get pissed off, sure…but fuck banks. seriously…fuck people who ‘create’ money as debt and then take real shit when you can’t give them back their imaginary money.
of course, we could also revamp our entire concept of property as being something that you are able to profit off of above a certain percentage of initial investment. for instance, set a 125% profit limit. you buy a building. once you’ve recouped the expenses from buying it plus an addition 25%, you no longer own it. you are given the 125% of initial investment, and the property becomes part of the commons.
or we could just keep doing the same thing that leads inexorably to a small group of insanely wealthy people, and shit tons of slaves, wage-slaves, slaves to entertainment, slaves to aesthetics, and a dwindling, relatively privileged middle class. because that’s the way it’s going now.
as long as human needs are part of the market, all it takes is for the money-men at the top to skew the market, buy up the spoils, and make us all pay through the teeth.
of course…we could just all switch to a different currency. that would sure mess up all of their plans.
check out Sacred Economics by Charles Eisenstein, or Positivemoney.org for some ideas about what kind of changes are possible that won’t just make your coffee cheaper, but might actually give people around the world some hope and a chance of survival.”
The short of it seems to be that some people on the left are anti-aesthetics because they think it leads to poverty and inequality. We have talked about this kind of anti-consumerism before and this is where I become more of a squish. I would like to think that Engineered Garments and R by 45 rpm and Paul Smith shoes can exist in a world with more just economics and everyone having access to dignity and decency. Same with 4 dollar pieces of toast made locally. But perhaps I am wrong and my unwillingness to settle for an ugly pair of Ecco shoes is part of the problem.Report
It seemed like a very typical defense on income inequality from the business/libertarian prospective.
Let it be noted that the first post of mine to get the L-word thrown at it said that I didn’t think much bad would come out of murdering the founders of two companies and distributing their wealth among the rest of us!
—
Regarding the value of aesthetics, I think I tend to be on your side of the debate.
(That said, I thought Ecco shoes weren’t exactly cheap.)Report
Killing then might skew the incentives a bit for would-be entrepreneurs in the future.Report
Not exactly cheap but cheap is comparative.
A few months ago, I bought a pair of Paul Smith shoes I had been coveting. The original sales price was 620 dollars but they were half off for 310 dollars. I “justified” the purchase via new job and a friend’s upcoming wedding. Here are the shoes:
http://www.saksfifthavenue.com/main/ProductDetail.jsp?PRODUCT%3C%3Eprd_id=845524446561498&CAWELAID=1818000882&cagpspn=pla&site_refer=GGLPRADS001
I was chatting with another friend via IM. Other friend tends to wear cargo shorts and t-shirts. When I told him I was considering getting the above shoes, his response was “Dude! Just get a pair of Ecco Helsinkis!”
I looked at the Ecco’s and found them to be kind of dull and ugly. The shoes above are interesting and indeed when I wore them at my friend’s wedding, they got high marks.
Eventually I was able to get my friend to admit he shelled out 600 dollars for a fancy camping backpack and he did not wait until the item went on sale.
I’ve been in these conversations before. People usually say that the 600 dollar backpack is a better purchase than the shoes for all sorts of hippie-ish reasons. Camping is a noble activity. My thought is that there is no difference between my shoes and his backpack. We have different things that give us pleasure.
But in certain lefite-circles, the shoes are considered super-evil and the fancy 600 dollar backpack is not.
This is curious to me and one place where I generally dissent from the left. Either both the backpack and shoes are evil and part of the same consumerist problem or neither are. I’ve yet to here a convincing argument about why my shoes are part of the problem but a video game system is not.Report
ND, there’s no way I would spend $300 on a pair of shoes (maybe hiking boots, but fortunately I don’t have to spend that much), much less $600. But I can’t deny those are some damn fine-looking shoes. I may just point my wife to this post with a wink wind nudge nudge about Christmas coming up.Report
@newdealer Nice shoes. We have a local shoe designer Fluevog’s that I’m particularly fond of and are significantly less expensive. Bet your Paul Smith doesn’t have shoes in the Museum of Modern Art. My clothes splurges usually involve Robert Graham shirts.Report
James,
Thanks.
I know many people would not spend 300 dollars on a pair of shoes. Even I balked a bit but then said I’d been coveting them for months and could afford it.
But I would never spend 600 dollars on a camping backpack because it does not interest me as a hobby. Nor would I spend tons of money on a home entertainment system or a “man cave”. My choice in cars tends towards the more affordable as well. Ferraris are nice looking but it would never occur to me spend the money for one.
But I have no problem with people who spend their money on a 600 dollar camping back pack or a fancy home entertainment system. It is not going to produce a rant in me about “consumerism” Nor for the people I know who spend hundreds to thousands of dollars on tattoos.
I just find it kind of curious that expensive clothing (and I guess jewelry and handbags) produces very strong negative emotional reactions in ways that tattoos and backpacks do not. Often people can accept the aesthetic argument and my friend was intellectually honest enough to admit that his backpack purchase was the same as the shoes. But I’ve encountered others who will argue until the cows come home that the the a 600 dollar tattoo is morally superior to a nice suit or those shoes.
What is it about clothing/fashion that produces this strong reaction? It feels very psychological.
Now I will spend the rest of this season coveting this jacket and hoping it is available in my size at the end of the year sale:
http://www.thecorner.com/us/men/jacket_cod41384533rw.htmlReport
Cascadian,
I know Fluevog. His shoes tend to be too narrow for me. This is the same reason I can’t wear Chucks.
Robert Graham shirts also tend not to fit me very well. Plus it is not the aesthetic I tend to go for.Report
Eventually I was able to get my friend to admit he shelled out 600 dollars for a fancy camping backpack and he did not wait until the item went on sale.
We each get our senses of faux-morality from different places. That way, no one really ever has to feel bad for their choices because you can always find someone worse.
I used to complain to my wife about how much she spent on eating out until she mentioned how much I had spent on gadgetry. I only discovered that I was not in fact an intrinsically better person than her when I finally shut up and added.Report
I have a funny way of looking at how other people spend money. Basically, the calculus is this: how much money would I have to make in order to justify buying a $600 pair of shoes? And I can tell it would be so much more than I make right now that 600 dollars (or really, the 500 dollar increase over what I currently pay) is effectively meaningless. And that’s a whole lot of cheese.
I have some friends who are replacing their pool because it’s quote-unquote “too small”. Replacing a perfectly functioning below ground pool is just pocket change to them.
That’s about the kind of money I’d need to have to buy 600 shoes.
Not that I think other people are doin it rong, acourse.Report
Vikram,
Good point about faux morality.
Stillwater,
If I ever buy a house, I don’t understand the need for a private pool. My hometown subdivision had a perfectly good community pool.Report
ND, a lot of subdivisions don’t. It’s also going to vary from region to region. If you live in a hot climate, it can be really nice to have your own pool. I would probably prefer a yard all the same, but I understand the interest.Report
@newdealer
Those shoes are doooooooope!
I rarely begrudge people their luxuries. I might criticize priorities but provided they aren’t swapping out necessities for luxuries, that is really just a matter of preference. I, personally, think it important to get good value and might criticize someone who gets poor value. But value itself is subjective. If you feel like a million bucks when you wear those shoes and derive value from that, well, who am I to tell you otherwise?
What I do find objectionable (again, on a personal level) is people conflating price with actual or inherent value. I dated a girl who was big into designer bags. The kind that cost thousands of dollars. I asked her if there was a ten-fold difference in actual quality between them and backs in the hundreds-of-dollars range. She said of course there was… why else would they cost so much? I attempted to point out the fallacy of this logic, but she insisted: the stitching was better, the zippers, all of it. And not just better…. SO much better. So I asked: Will a $2000 bag last 10 times as long as a $200 bag? “Of course not.” Well then, why not buy the $200 bag and replace it as necessary and save money? “Because the $2000 bag is worth it.”
For whatever reason, she was unwilling to admit that the reason she felt the bag was valuable was because she personally put value on having a designer bag, that she derived value from that little LV logo or whathaveyou. And these are fine things to value! Or, as equally fine as me valuing really cool looking shoes! But when she started to argue that I was simply indulging a silly preference for loudly-colored shoes while she was making a wise value purchase… well, you can see why she might be my ex.Report
My *town* doesn’t have an outdoor pool, public or otherwise. And I don’t think you can swim in the major lakes in the area. I would love a pool, but it would be a very poor investment for us at this point in our lives.
Also, Zazzy would never sleep knowing the risk of Mayo drowning.Report
@newdealer
I just find it kind of curious that expensive clothing (and I guess jewelry and handbags) produces very strong negative emotional reactions in ways that tattoos and backpacks do not. …
What is it about clothing/fashion that produces this strong reaction? It feels very psychological.
Setting aside my quibble that tattoos do provoke that reaction in some people (I’m always a bit bothered by obviously poor people who have extensive and high-quality (not prison-style) tattoos; until I kick myself for being moralistic), I think you’re probably right that it’s very psychological.
My seat-of-the-pants take on it is that expensive backpacks seem intuitively functional for serious hikers, because when you’re more than a few miles from nowhere, having your backpack fail is a serious problem, possibly a disaster. But expensive clothes don’t strike most people as having that kind of utilitarian purpose. A pair of Lee’s Jeans cover your naughty bits just as well as some high end slacks, right? So I think the impression conveyed is not so much “he pays for quality,” as “he’s showing off that he can afford those clothes, and I can’t so fuck that snob.” I think we intuitively interpret it as conspicuous consumption, rather than practical consumption.
And of course sometimes that’s true. There are positional goods. But of course it’s interpreting too readily from a superficial appearance. I would never have bought a $600 backpack; I bought a mid-price range one and it never failed on me (not that I actually hike much–wilderness is scarce in southern Michigan). And as you say, there is real value to well-made clothing. And in fact in certain professions your appearance can be crucial to your success. I knew a young stock broker once; a young guy who really didn’t like his job, thought any trained monkey could do it, but with a wife and baby didn’t want to give up the good pay. He drove a Beamer, and when I complimented him he said, “I hate this car, but if I drive into work in a POS I’ll never get anywhere in this business.” So even the mere “showing off” aspect can have real utilitarian value.
I don’t sneer at your shoes. I just hope they’re as comfortable as they are elegant!Report
James kinda said what I was going to. Clothes are perceived to be a positional good. If they were made cheaper everyone else got what they had, they would have to get something else. On the other hand, if smartphones were made cheaper and everyone got them… cool.
I don’t respond nearly as adversely to really nice clothes as I do to tattoos. Actually, I’m not sure I respond that negatively to nice clothes at all.
Cars on the other hand? %&#@ Range Rovers.Report
James, your comment above reminded me of Chris Rock’s schtick on wealth.Report
Linky don’t work. Here:
http://www.youtube.com/watch?v=4m37JkkGjAYReport
@newdealer @jm3z-aitch
I think it might be simpler than that.
I know how much a t-shirt costs. So if I hear you spent 10x as much, I know just how ridiculous you are.
I have no idea what a hiking pack or tattoo costs. If you told me you spent $2000 on either, I’d probably conclude, “Well, I guess that makes sense.”
It is a situation wherein familiarity makes us MORE critical, not less.Report
Kazzy,
A sincere question. Do you have any idea how much better a really good quality t-shirt is, in terms of durability, comfort, etc., than a standard priced t-shirt is?
I really have no idea. I’d have a hard time believing that, to use your example, a 10x price t-shirt is actually 10x better quality. But could a 5x price t-shirt be 5x better quality? Is that theoretically possible, at least, or is it wholly ridiculous? I know there’s higher quality cotton, higher quality sewing, stain-blocking additives that keep the shirt cleaner and not as funky smelling…those have to be worth some price premium, but honestly I have no idea what I would find reasonable. I’m curious whether you have a better sense of that than I do.
To ties this back to shoes, I sorta lied. I have some foot problems, minor, but they can cause serious pain at times, and standing for long periods in dress shoes almost always means my feet ache at the end of the day. I look for shoes that are reasonably comfortable, and find them, but as something of a cheapskate I’ve been reluctant to to pay very much, so I get shoes that are comfortable but don’t last long (part of the problem is I like light shoes, which usually means flimsier materials). Or I’ve bought shoes that are durable but uncomfortable. I can’t bring myself to shell out much more than $100 on a pair of shoes, but it seems likely that if I could bring myself to pony up thrice as much or more, I might find a pair of shoes that almost literally change my life. And that would in fact be worth paying quite a bit more for.Report
James,
Absolutely. Everything I’ve ever bought from Old Navy has fallen apart in under a year. That is not a knock on them; they sell low-cost stuff so it makes sense if you sacrifice some quality. I’d be happy to buy my kids stuff from there since the odds of them wearing anything more than a year are low, but I like to get more mileage out of my stuff.
Now, that doesn’t mean you can assume a $10 shirt will last twice as long as a $5 shirt. It might, it might not. You have to look at the specifics. Price does not correlate perfectly to quality and doesn’t even serve as that great of a proxy for it.Report
By the way, did you look into Johnston and Murphy shoes??? Absolutely no foot pain!Report
Kazzy, I’ve never even heard of Johnston and Murphy until today. From their website it looks like really good prices. But I won’t buy shoes without walking in them–what retail outfits carry them?
And do they meet my other desire, durability?Report
@jm3z-aitch
I was singing their praises to someone recently; I thought it was you.
I bought three of their more casual pairs: Two that were something like this (http://www.johnstonmurphy.com/product.aspx?c=1216&sc=1216&pid=59865) and a pair of drivers. That was three years ago. They are pretty much the only shoes I’ve worn to work over the past 3 years (approximately 170 days of work/year). And they still hold up. They definitely show some wear, but they are as solid and as comfortable as they day I bought them. If I was picky, some polish and better care would probably resolve the wear issue. I don’t know how long a typical pair of dress shoes lasts (prior to my current job, I always worked in schools that were sneaker-friendly; as such, all of my dress shoes have lasted years upon years because they only get a few wears a year). But I will say I haven’t been shoe shopping in three years and haven’t yet gone for this year, so I may be pushing 4 years with these three pairs.
As you know, I’m on my feet all day long with the kids. I’ve worn these shoes throughout the day and into late evenings out without missing a beat. I don’t know how they do it, but they are miracle shoes.
I’ve only bought them at J&M outlet stores, which takes the price point down a bit further. There website has a “Store Locator” which shows me J&M retail stores, outlets, and third party sellers in Michigan (which I believe is where they are located).
Seriously, check them out. I can’t recommend them highly enough. ESPECIALLY if you have foot problems/pain.Report
@Kazzy,
a pair of drivers.
Whu? Are those for golf or for cruising in your convertible with your driving gloves, scarf, and cute little flat cap? Honestly, you and New Dealer make me feel so damned unhip. I’m going to take my hound dog and my shotgun out to the back 40 and shoot at shit just to cheer myself up.
There website has a “Store Locator”
Hot damn. I went down to the library and they showed me how to work this internet thingy, and it says Macy’s sells them. They got one of them Macy’s over in the big city. I know because my wife spent all her bingo winnings on a scarf there one time. Purty scarf, but I really needed a new side mirror on the pickup ’cause of that time Buck and me were playing chicken. Anyway, I wonder if they’ll let me in in my overhauls or iffen I need to get out my church clothes?
which shows me J&M retail stores, outlets, and third party sellers in Michigan (which I believe is where they are located).
Seriously, check them out. I can’t recommend them highly enough. ESPECIALLY if you have foot problems/pain.Report
I’ll offer my endorsement of Allen Edmonds. They styling is generally classic and conservative, which works just fine for me. They are well made, and when they are spent you can send them in for resoling. What you get back once they work their magic is practically a new pair.Report
@vikram-bath – those Allen Edmonds look nice, never heard of them, but will check them out.
@kazzy @jm3z-aitch – J&M indeed makes a good shoe. Also, depending on how dressy you need to go, I can tell you that this is one of the most comfortable shoes I have ever owned, though they are a tad warm, so bear that in mind.
http://www.onlinebootstore.com/great-boots/items/DMR13263221.html?origin=pla&unique_id=DMR13263221&gdftrk=gdfV23800_a_7c1827_a_7c8379_a_7cDMR13263221&gclid=CO-igfLNmbkCFTRo7AodBkAAWg
@newdealer – those are nice kicks. I am a bit of a recovering shoe horse – much better now, since I work from home, but I used to have quite a few pairs (for a dude).Report
@newdealer Ummm, to keep the riff-raff out? #notsureifseriousReport
(Sorry folks, another TL/DR comment. This is what happens when I stop my summer work of house renovation, begin to think academicallyish again, and take Adderall…particularly when I take Adderall.)
They dislike being priced out by makers of Candy Crush Saga because they think it does not provide value.
They’re wrong by definition. If other people are buying the game, they are doing so because they value it. What they really mean is it doesn’t provide the value they personally want, and they have utter disdain for other folks’ choice of values.
people are getting pushed out of San Francisco because rent has inflated in accordance with the market, rather than being controlled and regulated as should any infrastructure element of society. housing, food, and water really ought to be excluded from the normal (insane) behavior of market capitalism.
I’ve yet to see a country that controlled and regulated food yet managed to feed its populace as well as the U.S. does. (Note: I’m not criticizing regulations like “no more than 1 rat bit per thousand parts of peanut butter, and I don’t think that’s what ND’s correspondent meant,either.)
It’s particularly disturbing to me because there is some anthropological evidence that formal governments actually appeared in conjunction with the development of agriculture, and were based on confiscating food surpluses and using them to control people in the society (see Jared Diamond, Guns, Germs, and Steel). A government that controls the food supply can starve the citizens into compliance. Obviously that’s not what ND’s correspondent has in mind, but that’s the opportunity his idea sets up.
And if we want an example of what controlled housing looks like, check out Sweden, where most housing is government built, not market built. It’s true that just about everybody lives in reasonably high-quality housing, but the wait time is years, even just to rent an apartment. (And check out the explanation by the representative of the tenants’ union: “But municipalities around Sweden don’t want people to move in, they prefer well-paid and well-educated residents, and as a result only provide houses that are available for purchase.” The value of the market is precisely that dollar considerations trump that kind of class-based snobbery.)
And–at the risk of being very repetitive, rent control does not ensure cheap housing, but tends to drive it out by discouraging development. I understand the concern and goal of making sure poorer people can afford to have at least a halfway decent home. But this discouragement of investment keeps the housing supply artificially tight. In a normal housing market, when supplies become tight and demand rises, greedy investors see an opportunity for financial gain, so they build housing, particularly multi-family housing,* and make dough. But if they can’t charge enough rent to make the profit they’re looking for, they’ll just invest elsewhere, and the multi-family housing won’t get built.
Sometimes rent-controlled cities will allow the development of a limited number of non-rent controlled units. You’re a developer in a tight housing market, and you get to build a non-rent controlled apartment; what do you do? Do you build something affordable and take a small profit, or do you build something highly upscale and take a large profit? But in a non-rent controlled city, the high-end market will get filled up, so the returns from them become smaller (just because it gets harder to fill them–it turns out that even in Chicago the supply of rich jackasses willing to pay 7 figures for a lake view is not infinite), and so for most new multi-family units, the more financially rewarding route becomes middle-middle or upper-middle class housing. And as those people move out of their old homes, not all of them will be filled up by other upper middle class people, because the supply of them is also finite, they fill up with middle-middle class and lower-middle class people, and the homes they moved out of get filled up by lower-middle and upper-lower classes, etc. I’ve occasionally been in homes/apartments of middle or lower class folks that are amazing in their structure (although generally not in how they’ve been cared for), with etched-glass windows, 12 foot ceilings, and wood work that by itself might be worth as much as the whole house. This is not theoretical.
It’s not an instantaneous process, but it’s one that continues unabated across generations, so that there’s constant movement, and consequently new affordable housing is continually becoming available. But because it’s not instantaneous, when the process is disrupted for a long time, as in San Francisco or New York, it’s going to take quite a while for the process to work its magic again.
I really encourage you to read “How Rent Control Drives Out Affordable Housing” and particularly look at the graphs in the appendix, and see how non-rent controlled cities actually have more lower cost rental available. The data is there; it’s not merely a theoretical speculation. (Although I will agree that San Francisco differs in that it’s so small and cannot expand, so it’s housing supply will naturally be tighter than most cities–it’s analogous to a natural monopoly in that sense, But, really, the Sunset and Parkside districts could easily be far more heavily populated, and in some pats it’s among the most geologically suitable sites for tall buildings in the whole city–certainly more so than downtown and south of Market where they’re building high rises on landfill!)
And just to note, when I lived in San Francisco I was more or less pro rent control myself. Not as strongly as my friends, who saw it as a moral issue, but nervous about what would happen to my rent if control ended. Curiously, though, the least expensive livable apartment Johanna and I were able to find was an illegal one built into the landlord’s garage…and it came with free parking in the driveway and sole use of the sizable (for SF) backyard. OK, not really curious; the illegality is precisely what made it so damned affordable. Regulation necessarily creates black, or at least gray, markets. That’s unavoidable, and sometimes it’s a cost that is cheap compared to the gains; but not always. So one relevant question here is, “do you really want the only housing that’s affordable for lower income people to be illegal housing?
the inflation which comes from speculators looking to profit ruins everything for everyone (but themselves)
Nah, inflation is primarily a monetary phenomenon. It’s only going to happen if the Fed lets it, but all they have to do is raise interest rates and/or sell T-Bills to suck money out of the economy and kill inflation. That’s the lesson we learned from Paul Volcker, former Fed Chair, back in the late ’70s/early ’80s, who purposed caused two recessions in order to quash the inflation problems of the mid ’70s. (Both problems sucked. In the ’81 recession, my brother was out of work for a year (although, fortunately, still young and living at home), but during the inflationary period people were paying credit card interest rates for mortgages, and as a pre-teen kid I watched my mom cry in the grocery store as she wondered how she was going to feed her family when food prices kept climbing so very much faster than her and my dad’s incomes.)
But to be fair, my tea partier brother was recently complaining about how we’re going to have a huge spike in inflation because of all the federal government’s spending. He’s wrong, too, so I’m not going to critique just the left on this issue.
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* At various levels, depending on what they see as the demand–sometimes big-ass houses, sometimes apartments, sometimes condos, and sometimes neighborhoods of small houses on small lots available to the middle and lower-middle classes. Of course sometimes that decision is driven by zoning regulations and the permitting process as well, so it’s not by any means a “pure” market process. The zoning and permitting cut both ways in terms of affordable housing. Sometimes a developer will be required to construct a certain amount of affordable homes, or zoning regs will demand smaller houses. But also sometimes zoning regs will prevent the building of small houses by requiring large lots, big setbacks from the property lines, or even a minimum house size. I met a woman near Angola, Indiana, who was frustrated because she wanted to build an 800 square foot house for her and her kid, but was denied because the county (a lakes region, where rich people want to buy properties) required a minimum of 1200 square feet, which was outside her budget.Report
The title of the article led me to expect a rather different discussion. This seems to be a question of market regulation. What is fair and just compensation for investment and effort? In a Capitalist economy how can incentives be manipulated for the greater good? Does the government have a moral obligation or right to manipulate? Who defines the greater good (a question widely debated)? What is the proper role of government in protecting the consumer from predatory business practices? Does government have a proper role in non-harmful transactions like facebook (knowingly entered into by all parties) other than to collect taxes on profits? The current crop of “robber barons” and their incredible wealth is really paltry compared to some Corporate balance sheets like Apple or Exxon. Are we permitted to bludgeon the wildly successful (individuals or corporations) with our moral outrage even if no law has been broken? Are you suggesting that the law needs to be revised? In what way?Report
What is fair and just compensation for investment and effort?
I’m actually *not* concerned with fairness here. And, frankly, I rarely am. If our cure-creator is a good person, she ought to be willing to produce her cure at cost and share it freely with everyone. I think such a person would quite likely feel that she were living a fulfilling life in sum.
One could argue she ought to be paid out of a concern for fairness, but I am rarely interested in such conversations. What if someone else would have discovered the cure five minutes after her, how much should she then get? And should the second person get nothing? Also, what about her teachers, parents, and her community? Fairness it too malleable a concept for me to really pay too much attention to.
In a Capitalist economy how can incentives be manipulated for the greater good?
Yes, this is most definitely my question. I don’t have a ready answer, but I suspect that the fact that there is a trade-off at all is resisted by a lot of people.
Are we permitted to bludgeon the wildly successful (individuals or corporations) with our moral outrage even if no law has been broken?
Well, personally I feel we can if it is genuinely for the better of society. I don’t know that it is though. It seems to be something that might do a lot of short-term good, but the long-term consequences are unknown but seemingly negative.
Are you suggesting that the law needs to be revised?
Not particularly. I’m happy if people know there is a trade-off at all.Report
“If our cure-creator is a good person, she ought to be willing to produce her cure at cost and share it freely with everyone. I think such a person would quite likely feel that she were living a fulfilling life in sum.”
Such altruism while admirable is in practice rather rare. I don’t feel that we have a right to impose it on someone just because they are successful. That feels too much like class warfare to me. All taxes are essentially a redistribution of wealth. How much/from whom/to whom is why special interest groups exist. Those who don’t protect their interest are likely to be plucked by those who do.Report
Well, I’m sure she would prefer to both feel awesome about having found a cure for Alzheimer’s *and* become rich. I am just saying that the intrinsic rewards might be sufficient, assuming she has some other means of keeping her family fed.Report
Vikram,
Jonas Salk did not patent the polio vaccine because he would want to benefit humanity. He would have been worth billions of dollars if he patented the vaccine.
Of course there is a counter-narrative that at the time lawyers concluded that he would not receive a patent and the altruism was just a show.Report
I wouldn’t go as far as ND but I’m likewise very underwhelmed by this post Vikram. It misses what people mean by income inequality. When people refer to income inequality they mean one thing, the majority of the people aren’t earning what could be considered a fair wage and are struggling economically since the necessities of life are expensive. When you add some necessary discretion spending, because people need some luxury/pleasure/entertainment in order to remain mentally healthy.
We have a society where some people are incredibly blessed with lucrative jobs that last their entire working lives and others are having to change jobs or even careers with great frequency. The ultimate question we need to ask is how hard we want life to be and how much struggle we want people to experience in order to make end’s meet. Like can kind of suck but that doesn’t mean we should make it intentionally suck.Report
When people refer to income inequality they mean one thing, the majority of the people aren’t earning what could be considered a fair wage and are struggling economically since the necessities of life are expensive.
That isn’t at all what I think people mean when they talk about income inequality. Not to say that those are not concerns, but when I’ve read about inequality, it is focused on…inequality of incomes. In particular, it is about there being gargantuan amounts of wealth being collected by a few individuals while the majority do not.
What you are referring to are more general standard of living concerns, which people were talking about long, long before income inequality became a target of interest.Report
I agree Vik. When i speak about income inequality, i’m talking about a vastly disproportionate amount of the rewards of growth going to a very small group of people. That seems to be, at the least, superficial evidence that they have gamed the system to get extra helpings of the pie. It also give them increased power from which to keep getting more and more.Report
To me, quality of life issues are very much a part of income inequality. I believe that a system where a few individuals collect the overwhelming amount of wealth is likely to lead to a much lower quality of life for everybody else for a variety of reasons. I also think that it threatens democracy in that politicians pay more concerns to the needs of the wealthy than everybody else.Report
Lee,
One way to ensure the poor don’t have a poorer quality of life than the rich is to reduce the wealthy’s quality of life.
More seriously, since I know you’re not going all Harrison Bergeron on us, the wealthy are necessarily going to have a better quality of life,* so while I understand your concern, I don’t understand either how you figure out your target for “too much better than the masses,” what rules you would devise to meet that target, and whether or not you think the quality of life for the next generation’s poor will be affected positively or negatively by these rules (e.g., is trickle-down medicine a real thing or not? trickle-down technological innovations?).
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*But do the rich have a better quality of life in non-material ways? And if not, how does that weigh in our calculations of quality-of-life inequality?Report
@leeesq ,
Without really contradicting what you just said, inequality is typically defined by the presence of the ultra-rich. That is the starting point of any concerns, not the fact that minimum wage jobs suck.
I have no doubt that these things are related and that people who are disturbed by the affluence of the ultra-rich are also likely to be angry about the level of the minimum wage, but all the folks talking about inequality focus on variance in income levels rather than on the absolute quality life of the poor (again, not saying that isn’t also important to them).Report
I’m not concerned with non-material quality of life issues. Besides using law enforcement to cut down on domestic abuse, child neglect, and other horrible things that people to do eachother; its impossible to provide everybody with a decent emotional life. However, I’m pretty sure that the rich suffer from emotional pain just as much as the rest of us if celebrity gossip is basically truthful. If anything, there dramas can get slightly more excessive.
Also, I think Harrison Bergeron was supposed to be a satire on the Rightist version of socialism than a satire on socialism. Vonnegut was pretty left-leaning in his politics.Report
Vikram, I guess overall I’m more concerned about quality of life issues than inequality per se. I see vast discrepancies of wealth as one of the causes of the problem but not the only cause. We can certainly have very well-off people and a high quality of life for the rest of us.Report
Lets look at one of the current problems of income inequality, rent. Rent is going up in many of the metropolitan areas in the United States. The average rent in Brooklyn is apparently now $3000 a month. Very few people can afford $3000 a month. That means that people are either going to move in with several people and split rent or that they are going to have to move out further from their jobs and deal with long commutes. Telling the poor to middle class people to the more affordable parts of the country isn’t really an option because moving is very difficult even for single people without a job or housing lined up. Plus, the people who can afford $3000 a month rent need the services of people who can’t afford $3000 a month rent, whose going to work in the restaurants, bars, or other places of entertainment; whose going to do all the boring grunt work, pick up the garbage, drive the trains and busses; teach their kids, etc.?
We need more affordable housing. I concede that rent control was a failed experiment and that it doesn’t work. However, we have another option besides the libertarian/market solution of building luxury condos for the rich and allowing trickle down affordable housing or bringing back flophouses and SRO apartments. The government can actually build affordable and decent housing like they do in some European countries. It would be something like this:
http://en.wikipedia.org/wiki/Gemeindebau
The reason why we don’t build Gemeindebau in America is because doing so would require taxing the rich and taking some of their income away to support the rest of us. How much are billionaires and millionaires willing to sacrifice in order to fight inequality?Report
I think it’s more likely that we would end up building Cabrini Green than Gemeindebau.Report
I’m actually in agreement with you. The United States and have generally horrible outcomes when it comes to building public housing. Its not even strictly a race issue. Social housing in other Anglophone countries and France is just as bad. Germany, Austria, and the Scandinavian countries have much better track records.* I just wanted to point out that there was an alternative policy besides rent control and stabilization from the left.
I think the housing issues that inflicted American cities during the Gilded Age is evidence that the libertarian solution won’t work the way they want it to. Housing might be more affordable but its probably not going to end up very nice unless you like slumming.
*If I had to hazard a guess, the architects of public housing in Austria, Germany, and the Scandinavian countries seemed to be completely unwilling to sacrifice aesthetics in the names of getting things built. They were able to secure the tax money for aesthetic concerns. In the Anglophone countries and France, there seems to be an unwillingness to address this concerns; maybe out of a belief that people need something to strive for so public housing shouldn’t be too nice.Report
Affordable housing relies on many things besides economics and architecture.
Public behavior is the single biggest driver. If the public generally wants housing segregated by class, they will get segregation by class, architects and zoning be damned.
Gated communities for example, serve no other purpose than making physical the class barrier between Us and Them.Report
LWA,
I think there was a time when people thought that public housing could be good and clean and efficient and reduce crime. There was a famous early Superman comic in which the Man of Steel tackles the problem of juvenile crime. He blames it on their slum housing and tears it down and talks about how new and clean modern housing will make their lives better and turn them into good citizens. Superman clearly means New Deal built public housing.
Also Jacob Riis and How the Other Half Lives. Hull House, etc.Report
Gated communities for example, serve no other purpose than making physical the class barrier between Us and Them.
There’s not likely to be, say, a difference in crime?Report
I’d guess the crime question varies from case to case. In general, I’d guess it’s at-best marginal. Fun fact: Two apartment complexes I lived in had gates. If you ever called them “security gates” they would correct you and say “access gates.” Because with “security gates” comes expectations of security.
Personally, I think the loss of convenience compensates for any crime reduction. Though I might feel differently if I lived in a particularly high-crime neighborhood or other specific circumstances.Report
The gates you describe sound more cosmetic than actual — rather like the inconvenient security theater which airline passengers and taxpayers purchase at airports.
I also can’t help but think of NYPD’s stop-and-frisk policy much in the news lately: it’s certainly inconvenient to those stopped and frisked, and the practice is of at best questionable efficacy at actually reducing crime.
Is there a metric with which to balance whether the reduction in crime justifies the inconvenience?Report
Huh. When I think of “gated communities”, I don’t tend to think of the buzz-in apartment complexes.Report
Is there a metric with which to balance whether the reduction in crime justifies the inconvenience?
Not precisely, but I think the percentage of people who are found to have committed the crime you suspected them of doing is a useful stand-in. And on that measure New York’s implementation of stop-and-frisk is only a tad bit better than the TSA.Report
Jaybird, really, those are the only type I’ve ever seen. What do you have in mind?Report
Half-a-million dollar houses in a subdivision with only a few routes in or out and those routes have security guards who check the identification of people he doesn’t recognize.
I was on the catering team for a party in one, once. Swanky.Report
@jaybird
The relationship between gated communities of the type you describe and crime rates is complicated: http://www.sciencedaily.com/releases/2013/03/130320115113.htmReport
Generally speaking, gated communities have nothing to do with crime. Its essentially an architectural version of a red velvet rope marking a VIP section of the city.Report
Well, I’m not *THAT* surprised that there is about as much “intimate partner violence” in gated communities as outside… but that’s not the sort of crime that we’d expect gated communities to prevent, is it?Report
Jay,
My reading indicated higher rates of such crimes and attributed it to a feeling on the victims’ behalf of being “gated in” with their attackers. I’m not sure I buy that, but the alternative would be that the sorts of people who prefer gated communities are the sorts of people more likely to engage in that sort of crime… a correlation more than a causation. I don’t know if I’m comfortable drawing that conclusion either.Report
Kazzy:
Claims that gated communities may increase certain types of crimes appear to be purely speculative:
Crucially, the authors emphasise that people living in gated communities may be at greater risk of other crimes, such as intimate partner violence, bullying, or violent assault in or near the home, because the victim is “locked in” with the offender. In addition, gated communities may also be at greater risk from minor offences, such as vandalism committed by bored and over-controlled adolescents.
Nowhere in the article does it say that the study actually found higher rates of these crimes in gated communities. The abstract supports my interpretation, saying only that they found that gated communities did indeed have lower rates of burglary, and that “Future research is needed to further explore this initial finding and assess the influence, if any, of gated communities on other types of crime such as intimate violence and vandalism.”
From the tone of the article, it’s pretty clear that if the study had found solid evidence that gated communities increased any kind of crime, that information would have been featured prominently and in no uncertain terms.Report
“Plus, the people who can afford $3000 a month rent need the services of people who can’t afford $3000 a month rent, whose going to work in the restaurants, bars, or other places of entertainment; whose going to do all the boring grunt work, pick up the garbage, drive the trains and busses; teach their kids, etc.?”
This problem pretty much solves itself. If the people who do those jobs can’t afford to live there, they’ll leave. The reduction in supply will drive up wages for those jobs, and the reduction in demand will drive down rent. Then the people who do those jobs will be able to afford to live there.
This is simple supply and demand. The only reason we have this problem is that the left is hell-bent on preventing the markets from clearing, preferring instead to maintain expensive band-aid solutions indefinitely.Report
There is no evidence that it works this way. What actually seems to happen is that people accept really bad living arrangements.
I represent immigrants. A lot of my clients live in conditions out of How the Othet Half despite the NYC building code. You have apartments made for one family holding 2 or 3. You have single family homes filled with bunk beds.
I conceded that rent control does not work but I think history shows us that the market doesn’t work either. Affordable tends to mean as miserable as humans can bare in market speak.Report
There may be a disconnect over what sort of housing we’re talking about. All Brandon is saying, I think, is that they’ll have a place to live. And they will. Lee is saying that’s not enough, and the place they live should meet certain requirements (ie no flophouses).
Living in Sun Valley is really expensive. But they need a lot of hired help. So what happens? People live in rooms the size of closets and/or bunk beds with lots of other people. Thus, Brandon is right that the market provided a solution, but Lee is not wrong in that the solution the market provided was unacceptable (to him).
Have I represented everyone’s view correctly?Report
Eh, Lee, you’re referencing a city with rent control, not one with a comparatively non-distorted market in housing. I’m not sure you can use that to talk about what happens when there is a better market.Report
Also, Lee (and perhaps Brandon, I’m not sure), you miss that some people prefer the less pleasant in-closer housing arrangements to the more pleasant further-out housing arrangements. My brother-in-law bought a house in Lancaster, CA, which was 2 hours from where he worked, because he wanted a single family dwelling rather than an apartment. He did what Brandon suggested happens, and which you suggested doesn’t. Market outcomes almost never mean “everybody does X,” because so much depends on individuals’ subjective valuations.
Really, the dynamic is not fundamentally different when we move up class scales. Some middle class people want a roomy house with a yard so they move to the suburbs or exurbs, while others want the excitement of being in the city so they buy a condo with no yard. Some rich people build a giant mansion on vast real estate in the country, others get a penthouse overlooking Central Park. Obviously poor people don’t get quite as good choices, but as far as the actual dynamic, of whether they put more value on being in the city or more value on having nicer digs, is pretty much the same.Report
James, what I’m pointing out is that when we had the glorious age of no rent-control, there might have been affordable housing but it wasn’t, as Will pointed out and what I meant, decent housing. And I think you are over estimating how much choice that people have in their living arrangements. They also need to worry about getting to and from work and a host of other factors. A lot of people are constrained by circumstances and have to accept poor quality housing out of necessity not choice.Report
Will, thats basically my point of view. Its not just the point of affording affordable housing but decent and affordable housing. Not only is it immoral to require people to live in flop house or slum-like conditions but I think its dangerous from a political or a social standpoint. Like ND, I am not an anti-capitalist. We have ample evidence that Far Left economic policy doesn’t work well. However, I do think that capitalism should be saved from its worse excesses.Report
when we had the glorious age of no rent-control, there might have been affordable housing but it wasn’t, as Will pointed out and what I meant, decent housing.
I think you might be painting with too broad a brush. Sure there was really shitty cheap housing, tenements and the like, but are you sure there was nothing affordable that was affordable that wasn’t slum like? Do you actually know that or have evidence for it? I’m dubious because it just doesn’t jibe with what I know about the history of cities in general.
And anyway, in the glorious age of rent-control a place like NYC still has non-decent affordable housing, but has fewer total units available (because of landlord abandonment), and few investors willing to build anything halfway decent for anyone but the rich. We’ve taken what was a bad situation and made it worse with a policy that was well-intentioned but unwise in its effects.
And I think you are over estimating how much choice that people have in their living arrangements. They also need to worry about getting to and from work and a host of other factors. A lot of people are constrained by circumstances and have to accept poor quality housing out of necessity not choice.
I’m afraid I just can’t buy that. Some people, are constrained yes, but I think there’s far more choice than you expect. I know poorer people who commute from small towns/countryside to get to work at retail jobs in the city. I know NYC has a more comprehensive transit system than any just about any other city in the country. Sure, if you just don’t have money, you can’t afford something good. But if you could pay about the same for something nicer, but that required a commute, and you choose the less-nice housing to the commute, I don’t think that’s necessity, but a rational choice.
There’s real evidence for this kind of choice-making. A Rand study,sponsored by HUD, of an unrestricted cash grant program designed to help poor people afford better housing found that only 13 cents of every dollar went to spending on improved housing, while 71 cents went to increases in non-housing consumption. That is, given opportunities to get into better housing, people tended to value other improvements over improvements in housing.* By contrast, vouchers that could only be used for housing, and not non-housing consumption, result in people living in improved housing. That’s clear evidence of choice, not constraint.
I do think many people lack awareness of options, and that lack of knowledge constrains their choices. And there’s no doubt they may feel constrained and without meaningful choices as a consequence. But we do see people in the same circumstances making different choices, so we can know choice is actually available, if we can help people become aware of those options.
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*(Ironically, if I understand correctly, the unrestricted cash grant program was discontinued because people weren’t using it “correctly,” so the benefits, in terms of housing improvements, didn’t justify the costs–but the study didn’t really consider whether the recipients’ choices were evidence that low-quality housing wasn’t their primary concern, and so didn’t judge the total benefits of the probram.)Report
Lee:
So there will, in fact, be people to do those jobs. And I really don’t see a problem here. We know, by revealed preference, that they prefer to live in these conditions rather than in better conditions in places with lower cost of living.
The bottom line is that there are only so many units of housing available within a given radius of a given location. If the government imposes rent control to allow one person to get housing in a desirable location at a steep discount, someone else can’t live there. Why does the person lucky or connected enough to get a rent-controlled apartment deserve it more than someone who’s ready to cut a check for the market price?
There’s no magic here. Rent control doesn’t create new housing units—in fact it probably suppresses the construction of new housing units and causes existing units to be used less efficiently (No need to get a roommate if you can afford the rent yourself). There’s no way it can be anything other than a net utility loss.Report
Patient appears to be suffering from “Lone Genius Syndrome”: the erroneous belief that progress is made by a handful of people acting alone, rather than the collective effort of many, many people.
It’s difficult to blame the author, as people in the United States generally suffers from the same delusion.Report
Yes, this is a simplification of the post (and there are more in there actually). Rather than footnote endlessly, I’d rather just get the gist of the point across and allow the observant to not the deficiencies in the comments. (So, thank you.)
In this case, yes, it is unlikely that a single woman would be able to develop a cure. And she would almost certainly not be able to actually deliver it. The general difficulties of having to decide how to compensate (or not compensate) the network of organizations involved and their employees remain.Report
You’re not allowed to use simplifying hypotheticals, Vikram. It’s a negative reflection on your intelligence and moral character. You only think it helps get the point across more clearly and succinctly because… well, because of your intellectual and moral failings, right? (*grin*)Report
I have no way of disproving that that wouldn’t rely on those same failings.Report
There seems to be some kind of terminal disconnect in discussions about inequality. There’s probably some disagreement among those concerned about inequality on this point, but y and large, I don’t think many people hold the position that they’d like returns on investments that produce value for millions of people to come back at something like a tenth of what they are coming back as as a matter of the economics themselves, just because that would create a less unequal world. Maybe some do, but it’s frankly just a cutesy use of a (legitimate) numerical definition of inequality to put such heavy emphasis on the fact that these gains increase inequality.
People’s concerns about inequality, from what I can see, have more to do with the issue of the lack of growth at more modest levels of income in the light of these exploding returns to certain ideas and innovations that gain mass traction on a global scale (whether they’re movies, drugs, online networks, or soda pop). Proposals to address this disparity in growth are various – ranging from urging the revitalization of the labor unions movement to proposing higher taxes on high personal and investment incomes to fund better services on the order of 8, 12, 15% higher than they currently are. But they don’t generally involve wishing that these ideas never create this much profit, or that if they do, they are taxed at 90% like your example suggests.
Not that the power-to-tax-is-the-power-to-destroy argument has no purchase. The person who is on the track to cure Alzheimer’s could be disincentivized to do so by taxes (or other limit on her potential return). But is someone proposing that she be paid $20bn when the value is 200? If you believe she’d be likely to be disuaded if her compensation would be likely to turn out to be $160 or $120bn, great, then by all means stand by the argument at those numbers. But let’s try to be realistic about what measures people concerned about the inequality ramifications of profits like this are actually proposing. I’m not aware of many 90% capital gains tax proposals floating around even the more activist parts of those circles. Perhaps I can be pointed to them, though.Report
People’s concerns about inequality, from what I can see, have more to do with the issue of the lack of growth at more modest levels of income in the light of these exploding returns to certain ideas and innovations that gain mass traction on a global scale (whether they’re movies, drugs, online networks, or soda pop).
I’ve pointed this out before, but global income inequality is actually decreasing, probably for the same reason income inequality is increasing within first-world countries: Globalization and the Law of One Price. If the concern is for people with truly modest incomes, rather than for people with modest incomes by one’s own national standards, then there’s cause for celebration.
But really, if leftists don’t want people to think that they’re complaining about rich people making too much money, then they should stop speaking disparagingly of “income inequality,” “the super-rich,” “the 1%,” “the rich getting richer,” and things like that, and start saying what they actually mean. You can see how we might find that confusing, can’t you?
This isn’t directed at you, personally. I don’t have any specific recollection of you engaging in OWS-type rhetoric.
But is someone proposing that she be paid $20bn when the value is 200?
I have no idea what the actual numbers are, but in general I would not expect the developer of a drug or any other product to capture anywhere near its full value, even without taxes or price controls. Markets just don’t work that way. Especially not mass markets, where it’s difficult for producers to engage in fine-grained price discrimination. And their profits drop like a rock once it goes off patent.
Also, I suspect that the $200B only counts economic losses. Lost wages, medical and caretaking expenses, things like that. When you take subjective costs into account as well, it’s likely considerably higher.
In point of fact, though, there is pressure from the left to squeeze at least some (more) of the profits out of drug development, in addition to what we already see with capital gains taxation. One of the selling points of single-payer health care is that it will allow the government to “negotiate” lower prices for patented drugs.Report
One of the selling points of single-payer health care is that it will allow the government to “negotiate” lower prices for patented drugs.
A better way might just be to shorten the patent period (although we can’t actually do that without violating our WTO treaty, since it standardized patents internationally). But really, the period is only 20 years fromfiling, not from sales, and the development and testing period can cut into that 20 years, so nearly all drugs go patent and get commoditized in less than two decades (I bought some loratidine today–most people know it as Claritin, but why pay twice as much just for the name, when the Wal Greens/Wal Mart/Kroger/whomever version is pharmaceutically identical?).
That’s really not bad when we look at the long run. It took humans between one and two hundred thousand years to develop Drug X. It took a century or more for the pharmaceutical industry to develop it. But in just another 20 years it will be as cheap as soda pop.
But–and I’m not an expert on this–my understanding is that one of the reasons patent drug prices are so high in the U.S. is that they are lower in so many other places due to government’s negotiating lower prices. Sure, we can do that, too, but then where do the drug companies turn to make up that revenue decline? The development of the next miracle cure is not a law of nature, not something that will happen regardless of lack of incentives to do so. Sure, we could fund more university research, but I really doubt that’s going to make up the research shortfall that making drug development not profitable enough would probably cause. There aren’t many chemists who are going to spend 40 hours a week developing new drugs; some, but not many. (For the record, though, a scientist at Canada’s public health agency is testing a prospective ebola vaccine, which would be an awesome development.)
As for me, if Americans paying more for drugs helps make those drugs, and new ones, available at lower cost in developing countries, I’m not terribly bothered by that. Screw the richer western countries who are just sucking at our teat on this, but even that’s a price that doesn’t bother me too much if it means better health for people in poor countries.
I just worry that the left’s desire to control pharma revenues, or perhaps more fairly stated, to control drug prices to keep them affordable to poorer and uninsured Americans, doesn’t take account of the secondary effects of such a decision. As Bastiat said, we have to look at not just what is seen, but what is unseen.Report
Interestingly, Megan McArdle has said that the drug companies are actually hitting walls, as far as innovation go. So slashing the profit margins may not matter so much, since they might not be producing anything anyway.Report
They should throw lots of money at a male contraceptive. Apparently papaya seeds hold the key!Report
I just want to note here that drug costs are a very special case economically speaking. In a totally “free” market, there would be no patent protections, so drug prices would be very low–just a bit more than production and distribution costs. Once you grant patents, to incentivize innovation, prices rise, but you are now talking about a regulated market.
Of course, it’s even less free than that really because few people pay for their own drugs. Governments or health insurance companies do, which allows for prices to be negotiated down for those who belong to such plans. That isn’t the only change though. Demand for drugs may go up since consumers themselves don’t have to pay for them.
At any rate, there is a reason that the first example in an econ textbook will never be about drug prices.Report
“In a totally “free” market, there would be no patent protections…”
Okay, so what is a totally “free” market?
If a totally “free” market respects physical property rights (e.g., no stealing of merchandise) but not intellectual property rights (e.g., no patent protections), what makes one restriction in line with “totally free” and the other not?
This is not to say that making such distinctions is wrong, but it seems important to define what we actually mean be “free”.Report
Kazzy, a free market is one you don’t have to pay for. Boom!Report
I’m not an economist, so I am sure I am screwing up some elements of this, but I think this will be close enough for our purposes….
A “totally free market” would be one in which consumers can choose to trade or not trade with any number of sellers. Sellers meanwhile, are free to produce or not produce any products they are capable of producing and are free to set prices (keeping in mind that consumers may choose not to buy if they are too high). Property rights are said to exist and are enforced by some unseen mechanism. (Let’s say societal norms.) Intellectual property rights, however, are not a feature of the totally free market since this is not a “natural right”. There are no taxes and no subsidies.
Note that when I say “totally free market”, I do not mean the best possible market. It’s just the simplest kind. You may get better results by introducing certain innovations (including intellectual property rights).Report
So why are physical property rights assumed to be a natural right but intellectual property rights are not?Report
Because intellectual property is much like God’s love. You can give it away and still have it.
This makes it somewhat tougher to say who the owner of a particular piece of intellectual property actually is.Report
@will-truman: I know they are hitting some walls, but I have doubts that’s a permanent trend. One thing I learned from growing up Christian was that betting on mysteries that science could never explain was a sure way to go broke. Just think of biochemist/creationist Michael Behe’s claim that there is “irreducible complexity” at the biochemical level–he used examples that were promptly, or in some cases had previously been, proven false. Bet on the scientists’; that;s my motto.
@vikram-bath: I don’t really want to wade into the free market debate, because there are too many people here who are not interested in honest discussion of it. But I will say that for economists it is primarily a construct; an ideal type, sort of like physicists use when they give explanations that atoms have no mass (or whatever it is they actually assume for explanatory purposes). But the construct comes with certain assumptions that can be violated, and real-world violations are normally classified as “market failures.” One of the assumptions is that property can be controlled.
Obviously intellectual property cannot be controlled, so there is something of a puzzle there. Traditionally economists have seen (often too facilely, but at least as a hypothetical possibility) government’s role as correcting, or at least mitigating market failures, so they saw intellectual property rights protections as a “fixing” of a market failure. Whether this means a true free market is one in which government intervenes to prevent market failures or whether it means a true free market is characterized by a market failure…well, that’s a matter of individual interpretation, I believe.
But interestingly, there is now a cadre of economists arguing that lack of intellectual property rights protection does not create a market failure and does not limit the incentive to devise new technology, art, etc. I’m not well enough versed in those arguments to comment on them, but I think we can say that under that view a true free market would not require IPR (but that it wouldn’t create the problems you, and I, suggest). And to the best of my knowledge, those aren’t just left-wing internet-geek, “information wants to be free” economists devising justifications for their ideological preferences.
More generally, though, “free market” has become a lousy term to discuss because it’s used badly and creates such visceral emotional reactions that it inhibits reasoned debate. Both the poorly educated critics and the poorly educated advocates of “free markets” insist on using it as an absolute; as the real-world embodiment of the construct. Fanatically zealous advocates really seem to believe that a market unfettered by any government regulations would have no market failures and produce perfect peace and prosperity, and fanatically zealous critics really seem to believe that a market unfettered by any government regulations would be nothing but market failures and would produce nothing but theft and feudalism (although feudalism was, obviously, a non-market, government-mandated, system).
It’s better, to use Burt’s words elsewhere on this page, to see “free market” as ” spectrum rather than a toggle.” Markets are not binarily free or unfree, but more or less free. And the ideal–for a sane free market advocate–is to move them along the spectrum towards the “more free” end until the point at which the costs exceed the benefits.
Most sane critics will say they want the same thing, but they and the sane advocates have not just wildly differing measures of values and costs, but different frameworks for assessing what counts as a cost or value. Speaking from the sane (hopefully) advocates’ perspective, what sane skeptics often call market failures are, definitionally, nothing of the sort–they’re simply not outcomes that the hypothetical “pure free market” is really supposed to achieve (like stability, or a certain limit on economic inequality). They’re actually a different set of values that are simply outside the set of values incorporated into the free market concept.
The major dividing point, in my own idiosyncratic interpretation, is how different people weigh those different value sets, which are perhaps not directly commensurable. But we don’t need to use the fighting words “free market” to talk about those things, and can probably talk more clearly about those things if we don’t use that word. James K prefers to use the term “competitive markets.” I’m not a big fan of the term because much of the U.S.’s truly abysmal approach toward antitrust was built on the misbelief that “competitive” markets means no corporation really gets much bigger than another, or goes out of business because they compete for shit.* But in its proper usage–James K’s usage, I am pretty sure–it means more or less that whatever regulations are put in place are of general applicability, neither tending to specially favor any one firm of industry over another, not placing limits on their ability to enter the game and compete under a consistent and equally applicable set of rules. (Complaints about government giving special favors to some industries is one place where market critics and market advocates often line up together, but the critics are more apt to think we should distinguish cases where it’s appropriate from cases where it’s inappropriate, while the advocates are more likely to declare that it’s always, or at least almost always, inappropriate.)
I know that’s too long, and I hope it doesn’t sound like I’m criticizing you. I’m actually half-trying to answer your question and half-trying to persuade you to shy away from the term “free market” just for pragmatic purposes of having a shot in hell at reasoned debate.
Note: There are a handful of people out there with whom I will not deign to discuss this issue. You know who you are. I’m not trying to assume authority I don’t have and order you to stay out; I’m just saying don’t get your hopes up if engaging me in some way or another is your goal.
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*The old left-wing, or perhaps neo-Marxist, term for the fact that competitors sometimes fail was “destructive competition.” They saw it as a waste of resources, whereas a market advocate would see it as the necessary carnage of the kind of competition that necessitates innovation, and further benefits to consumers, as the means to survive. So the left/neo-Marxist (whichever, I’m not really sure where that group should be classified, although I probably should know) wanted regulation that prevented serious competition in the pursuit of ensuring a stable set of competitors. Needless to say, market advocates don’t see that as competition in any meaningful sense, but cartelization (which, under U.S. antitrust law, is legal when the government mandates it and illegal–collusion–when they don’t mandate it).Report
I guess I’m one of those people who believes that the efforts directed at imaginative and creative ways create/exploit existing demand ought be rewarded with protections against copycats. So I believe – until persuaded otherwise – that IP rights is a sound concept, and IP ought to be protected by statute.Report
@jm3z-aitch :
That’s why I’m starting to prefer the term “freer market,” preferably with qualifiers noting “freer” in what ways.
By the way, your comments are rocking in this thread.Report
@jm3z-aitch , I agree with pretty much everything you said. I’m not sure whether the solution is to just avoid the term “free market” though unless you have a more neutral substitute available.
At any rate, all I really wanted to communicate was that the drug market includes multiple special oddities that you would not find in simpler cases.
So why are physical property rights assumed to be a natural right but intellectual property rights are not?
@kazzy , Jaybird has it right. I can add a bit more, I think. If you imagine an emerging civilization, for the most part everything that is of value is either stuff or labor. Sure, someone might sell you a book, but most of the costs in the book might be in its actual production rather than in the information content. Before the printing press, I would be unsurprised if books actually sold by the page.
This isn’t to say that ideas wouldn’t matter in those societies. They would. It’s just that most of those ideas would be embedded in an object or in a person’s labor. There might be a lot of knowledge required to craft a functioning gun, but that is embedded within the gun you buy. You wouldn’t buy plans for making your own gun.
In more modern times, however, we have a lot of people producing things that only have information value, and we grew up in these modern times, so it’s natural for us to think that should be how the world works, but it’s actually not an obvious idea at all. And it requires the brunt of government regulation to make sure that people not infringe on the intellectual property rights of others.
As mentioned by jm3z-aitch, there are some economists who actually think intellectual property rights are counterproductive and should be modified or done away with. Usually Lawrence Lessig is one the guys on the posters. (I personally would like to see more of his ideas implemented though perhaps not the whole list.)Report
I guess I’m one of those people who believes that the efforts directed at imaginative and creative ways create/exploit existing demand ought be rewarded with protections against copycats.
I agree with this for the exact opposite reasons. (Seriously, I can explain.)
I’m almost entirely unconcerned that people who do good things get compensated. I am, however, hugely concerned that others get to benefit from the production of good things. So, I want creatives compensated only so that they will produce good things for others, not because I think what they deserve it in any sense.Report
Maybe we’re not really looking at this from opposite sides. I think that at a minimum if profits can be potentially derived from the creation of a good idea, those profits ought to accrue to the individual(s) responsible for creating it. So copyright protections are justified as a protection accorded to those individuals from other profit-seekers who have no connection to the creation of that item of value.Report
Pierre,
“Freeer” might work, especially if we emphasize the “er.” Which is also good because, to tie this in with the comments on another current post, we can sound like pirates.Report
I guess it’s kind of like saying “safer sex” instead of “safe sex.” But without the pirates.Report
Ahem.
Sincerely,
Shoutin’ Randal Bones
President, Pirate Anti-Defamation League (PADL)Report
Interestingly, Megan McArdle has said that the drug companies are actually hitting walls, as far as innovation go.
I suspect that this is true only for traditional drug development techniques and targets. There’s a lot of really cool, game-changing stuff in the very early stages of the pipeline. It may be a while before it bears fruit, but that’s all the more reason not to threaten to squeeze the profits out.Report
Vikram,
Liberals will amost universally agree that a capitalist-market system offers incentives to create which in turn increases the level of well-being for the worst off. (This is largely why liberals aren’t Marxists.)
As Rawls puts it, differences in inequality built into the basic structure of society are just (fair) iff they improve the condition of the worst off. Since we would all be poorer if we got rid of all inequality that arises from a market-based system, as they sort of tried to do in Communism, a market system is just.
However, it is also true (though Roger may disagree) that you can (and we do) build government interference and redistribution into the market system and create more equality without haming the worst off. This is why liberals believe Social Security and Medicare and other programs to help the poor, paid for with progressive taxation on the rich, are justified.
The title of the post suggests that you want to know where to draw the line, i.e. how much inequality benefits the worst off, but that will be a very difficult empirical question (and a moving target as society changes) that can only be know through testing and observation in society. I would suggest that what we see is that economies like the U.S. in the 50’s and 60’s (or even now) and perhaps moreso Scandavian countries, show that you can tax the wealthy while also improving the situation of the worst off. But once you go Cuba-levels of redistribution, you aren’t helping anyone.
But this is a subtle and empirical dispute, and I fear that you and oathers here might not want to have it today. But I see no valid (or remotely valid) objection to contemporary liberalism’s version of distributive justice anywhere in your piece, just vague intimations of a fallacious slippery slope argument. You are a very smart guy, though, and I suspect you can and have done better.Report
I’m not making a slippery slope argument. I am just saying there *is* a slope.
Your point about liberals vs. Marxists is well taken, but that isn’t solely about inequality. As I mentioned somewhere or other, those who oppose inequality aren’t strictly concerned with helping the poor. The urge to help the poor far predates our modern discussion of inequality.
You are a very smart guy, though, and I suspect you can and have done better.
If you are a Bayesian, you should revise your estimate of my intelligence appropriately!Report
This blog has reinforced my belief that there are those who do and those who want others to do for them.
I want an smart phone damn it, I shouldn’t have to spend so much of my money taking care of the necessities, I should be able to have all the “cool” things that as a human I have a right to have. How can I as a human have any dignity in life if I am left out?
Honestly all I see and hear are I was born so give me what I want when I want and how I want it. Don’t even think to tell me to work for it, to earn it or to…gasp…invent it or build it myself.
Why should I be surprised. I think the writing was on the wall the first time I realized that people payed money in order to advance faster in Farmville on Facebook. That was for me the moment when I realized that people either didn’t want to work for the things they wanted or didn’t want to wait to get what they wanted.
Does anyone anymore take pride in accomplishments or in being able to support themselves and those they love? Are we doomed? Is this what progress is? Immediate gratification? Wanting to live off of others so that we can live the life we think we deserve versus the life we earn? Are we as humans entitled to everything? First it seemed like some thought they were entitled to their parent’s income, now that they are adult’s have they gone so far as to say they are entitled to everyone’s income?Report
Most people have never been able to support themselves and their families for most of human history and always needed societal and governmental support in order to make ends meet. Self-reliance is basically a myth. Without some form wealth redistribution, the result is widespread struggle.Report
I think there is a difference between having the latest and greatest gadgets and ancient societies sharing meat from the hunt. If someone needs some help I’m all for it. If they then take the help given to them to then go out and buy a smart phone not so much. Maybe it is my past experiences that makes me believe this. In fact I know it is. I have been dirt poor, I have been homeless. I have given up my phone and my cable. Those things that in the end really are not necessities.
I am a big believer in helping out those who need help. I have given every spare cent I could to people I knew needed help. I may have become a little jaded though when some tell you they need money to pay rent or to keep their electric on so you give them what you have. It’s always enlightening when they then proceed to buy a computer or a smart phone with that money. See, they didn’t lie. They wouldn’t have been able to pay their rent or pay their electric. They were buying “necessities” electronics instead of paying for their rent and electric. I had a very very close friend and former family member who did that one to me. I found out from her that there are people who say they can’t afford to live when what they really mean is they can’t afford to live in the style they want but are unwilling to work for.Report
Self-reliance is basically a myth. Without some form wealth redistribution, the result is widespread struggle.
I recently heard a nice bumpersticker-type response about this, which I can’t quite recall. Something like “self-sufficiency as a goal is a recipe for poverty”.Report
I think there is a misconception going on, even among liberals, about wealth redistribution.
We always talk about it as wealth being confiscated from one, and given to another. As Roger might put it, a zero sum game.
Sometimes, of course, this is exactly the case.
But the other case is one where collective effort is actually more efficient and produces a superior result.
Most public insurance schemes like Social Security, for example, reduce risk, and allow people the freedom to use their money in other ways rather than obsessively hoarding it for a catastrophe that may or may not ever come.
JustMe frets about slackers and moochers, and thats not completely false- but isn’t it also true that a culture that elevates self-interest, that scorns obligation to the greater good, contributes to mooching?Report
Not really moochers. I think you misunderstand. I think though that as a society we have a very skewed sense of what necessities are. I think that when it become more about the goods we can buy then about having a roof over our heads and food on our table and friends and families we can love and enjoy time with that we do a disservice to society. Is it really a necessity to have a new computer or a new phone or the latest trendy purse and shoes? Should we make sure that every person has a house and food so that they then can use the money they make to buy consumer goods? Is that what being American is all about…or better yet is that what being human is about, buying goods?Report
Ok, you don’t misunderstand I just didn’t express myself very clearly.Report
Just Me,
There was an outrage this week because a 23-year old computer programmer wrote an essay about his solution towards homelessness. He wrote about teaching the “unjustly” homeless to code. This raises all sorts of questions. One person noted that Silicon Valley finally got their version of Swift’s famous essay about cooking Irish children. Only without the satire.
1. How do we determine between the justly homeless vs. the unjustly homeless? Should we make this distinction or is housing a human right?
2. A lot of long-term homeless people suffer from undiagnosed and/or untreated mental illness. Are these people to blame for their mental illness? If not, doesn’t their mental illness make teaching them coding hard if not impossible? Shouldn’t we treat their mental illness first?
There might be moochers but I would rather not let the non-moochers suffer than avoid giving to grifters. That seems to be more moral.Report
Let’s see. My mother would be one of those homeless people. In fact when I was homeless it was because I wouldn’t kick her out of the place we lived to stay there. She has a brain tumor that causes some strong mental illness symptoms. We lived at campsites all summer long until I could afford to buy a trailer that we could both live in. Then years later she was kicked out again, due to anti-social tendencies. I again uprooted myself and got us into a house. One where she wouldn’t have to every day deal with people. This has helped her immensely. Do I think everyone deserves a house. Yes. But I think that every homeless person on this planet deserves to have someone who cares about them enough to take care of themselves more. I don’t look for the government to care when no one else will.
When I hear people tell me that well if I only cared I would be for redistribution I ask them are they willing to do what I have done. Are they willing to redistribute their money, their home, their future for others? Usually I get the whole, well I don’t know how you do it, I could never do it. Then invariably it comes back to well can’t the government do something about her, put her in a home, let them take care of her. Pardon me if I have to laugh ironically every time I hear about the government needing to take care of people that other’s in their families have throw to the curb.
Granted there are going to be those who have no family. Should there be a safety net? Yes, but how do you force another human being to accept that safety net? How do you force them to accept treatment?
Back to inequality, what exactly is inequality for the purposes of this discussion?Report
A lot of coders have mental illness. So I’m not sure why it would be hard to teach them how to code.Report
Just Me, has it ever occurred to you that in a differently ordered society you would be able to take care of your mother without the unnecessary hardships that you had to go through?
Like I said above, life is naturally sucky or has Hobbes put it brutish and short. One of the good things about the welfare state is that it allows us to blunt some of life’s sharper edges.Report
Just Me,
I’m not sure whether that is true and if you are talking about being somewhere on the Autistic spectrum, there is a difference between being a high-functioning autistic and having Paranoid Schizophrenia.
A few years ago I was on the bus home from work and a person with Paranoid Schizophrenia was sitting next to me. He decided to share his thoughts. He told me that the SF Park Rangers use the De Young Museum tower to summon 500 year old Nazi-Demons into SF. These 500 year old Nazi Demons then perform horrible experiments on people and he implied that these experiments were done to him. His constant interjection during this talk was “Dark Danger. Noone can see it but me. Dark Danger.”
This is the kind of mental illness I am talking about! It is much more severe than Asperberger’s syndrome. Show me a Google programmer who suffers from similar delusions. People with these illnesses are not to blame for their health problems.
You also dodged my question about justly v. unjustly homeless. It is pretty callous to suggest that some people are justly homeless.Report
How so, they would make it so that she wouldn’t get kicked out of a place for being crazy? Or would they put her in a home so I could go off and enjoy my life? Not being snarky here, I really am curious what this society would do for me.Report
Really so if someone chooses to be homeless they are unjustly homeless. Was I unjustly homeless? I didn’t have to leave were I lived, only my mother did. I’m confused with your question. Or do you mean it is unjust because I shouldn’t have had to make that choice. Anyways, if you want to call me callous for saying that some people are homeless because they have made that choice then call me callous.Report
ND if you are talking about Paranoid Schizophrenia yes they need to be treated I would think before teaching them to code. Or they would have to be treated in conjunction with teaching them to code. No I was not talking about autism.
So should we round up all the people who are homeless and mentally ill and treat them? Once they are treated, how do we monitor them to make sure they don’t go off their medications? This is a discussion I have had with Blaise many times. How do we make sure they stay medicated or in treatment? But this might be a discussion for a different post as it seems to be heading beyond inequality.Report
@leeesq,
always needed societal and governmental support in order to make ends meet.
Yes. But (and there’s always a but, when I agree with y’all, isn’t there?), let’s make sure we’re distinguishing between society and government here. A conservative or libertarian who argues against government aid is not necessarily arguing against social aid, or even individual obligation to provide social aid. I’ve helped on a couple of Habitat for Humanity houses, and I helped build an elementary school playground (I only do fun charity, it seems; I’ll leave the soup kitchens for the gregarious folks), both of which were privately organized and funded.
I’m not saying here that one is superior to other, or that either by itself satisfies all need. I’m only emphasizing that when a person critiques government aid we cannot assume they are critiquing all forms of aid, unless they clearly say so.
@stillwater;
“self-sufficiency as a goal is a recipe for poverty”.
That’s a fairly standard view among economists. Russ Roberts (who’s a research fellow at Sanford’s Hoover Institute and blogs at Cafe Hayek) is notable for emphasizing the point. In their use it’s really directed at anti-free traders and folks who are obsessive about buying local. But, yeah, it’s applicable to those who are obsessive about self-reliance,* too, since the dynamic there doesn’t differ much from those other folks.
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*I’m not sure, though, that Just Me was being obsessive about self-reliance, and I don’t want to suggest she was. I think her critique was more about expectations of receiving assistance, rather than about rejecting or refusing to give assistance.Report
When I hear people tell me that well if I only cared I would be for redistribution I ask them are they willing to do what I have done. Are they willing to redistribute their money, their home, their future for others? Usually I get the whole, well I don’t know how you do it, I could never do it.
Just a few days ago a very liberal friend of mine was pretty blunt about this. He said, “I care about people who are suffering, and I think everybody has a duty to help them, but I don’t want to actually have to do it myself, so I like the government to tax me and do what I should do.” And simultaneously we noted that this meant he wanted to tax me to do it, too, whether or not I agreed. It doesn’t sound funny, as written, but we got a good laugh out of it.
So I hear you. But out of fairness I will note that there are lefties who contribute generously with time and money, or who do make the huge sacrifices for their family members that you made for yours, and who do still think government should do more. Any time we have multiple issues with multiple positions people can hold, we’ll find that they can’t easily be broken down into just two internally-homogenous groups.Report
Not that anyone asked, but I like markets. I think they are awesome. If “self-reliance” and “self-sufficiency” are defined as making your own way without relying on markets for help, then I think they are overrated.Report
@J@m3z Aitch
I don’t see as sharp a distinction between society and government that you do. Social aid and norms have always been enforced by some form of coercion.
Its like HOAs; non-governmental structures that nonetheless exercise tremendous power and coercion.
The counterpart to your point that critics of government aid are not necessarily objecting to other forms of aid would be that those of us who promote government aid are fine as well with other forms.
As long as they are robust enough to be enforced. That is to say, taken seriously enough such that they function as something more than “revocable-at-will” volunteerism.Report
For the purposes of these discussions, I think HOA’s would pretty much have to be considered government entities in function if not in name.Report
@LWA;
I don’t see as sharp a distinction between society and government that you do. Social aid and norms have always been enforced by some form of coercion.
There’s quite a difference between people shunning you until you make good, and a special person authorized to imprison or kill you because you didn’t make good in a timely manner.
I stand by Weber’s distinction. Government doesn’t pursue any ends that haven’t also been pursued by non-governmental organizations (a point that may sit well with your position), but that what distinguishes government is its successful claim of having a monopoly on the legitimate use of force. That’s quite an arrogation of power, even when find ourselves supportive of it.
HOA’s are interesting. I would call them quasi-governmental. First, they are contract based; few people are really compelled to live in an LOA, whereas few people are able to escape being compelled to live under some government somewhere. So there’s far more voluntariness there. Second, their coercive authority is solely based on that contract and cannot be exercised outside that contract. In fact it cannot be exercised independently of true government, but must rely on government’s monopoly on the legitimate use of force to compel rule-compliance.
Certainly in their day to day operation they are very government like, what with elected representatives, authority to write rules mandating compliance, and authority to take (some) actions enforcing compliance. But in the end, they’re not really. Keep in mind, for example, Shelley v. Kraemer, where the Supreme Court ruled that racially restrictive covenants, that if X buys the house from Y, X cannot in the future sell it to a black person. In general, restrictive covenants can be enforceable, as they are private-party contracts, and state governments used to enforce them. Then suddenly they couldn’t and didn’t. So if the political values of the country shifted far enough toward the idea that HOAs were too oppressive with certain rules, the HOAs could lose the ability to enforce those rules, even if the great majority of their members still preferred them.
The counterpart to your point that critics of government aid are not necessarily objecting to other forms of aid would be that those of us who promote government aid are fine as well with other forms.
Yes. Without a doubt. Is it your impression that folks on the other side tend to suggest otherwise? That’s a sincere question: I don’t see this happening, but then I’d be less likely to notice such suggestions than you, as the ostensible target, would.Report
@jm3z-aitch , I think that the difference between societal and governmental support isn’t that great. This is especially true in a democracy. As I see it, governmental support can be more effective than private support in many cases. Government has an easier time raising money through taxes for one reason. Aid can also be directed towards people who need it without worrying if they are deserving or not. I loathe the concept of the deserving and undeserving poor. Its better to help everybody who needs it rather than worry to much about whether that person is deserving or not.
I suppose my general philosophy is “shit happens” rather than “the wages of sin or death.” A functioning society is one that protects everybody in it from the vagrancies of life to the extent possible. A capable government is better at this than a randomly organized charity. In case of mass tragedies like great natural disasters than government aid is simply the only way to do it. Private charities can provide band aid help but natural disasters can wreck such havoc that one requires tax power to raise enough money for recovery.Report
. As I see it, governmental support can be more effective than private support in many cases. Government has an easier time raising money through taxes for one reason.
Note that I explicitly wasn’t saying one was better than the other. But they are different, and your answer actually touches on why they’re different. As Weber said, government doesn’t do anything other groups don’t, but they can do it via the legitimate use of force. That legitimate force means government has an unparalleled capacity for mobilizing resources. Wal Mart’s a piker in comparison.
So this means that, yes, government can seriously address certain problems, including certain types of aid, that non-governmental organizations just can’t, or at least in a way that they can’t.
Unfortunately mobilizing the resources is only the first step, the one that relies on government’s primary advantage. Effective and efficient delivery of those resources is another problem, one that’s more hit and miss. Government sometimes does it well (with its straightforward mission and good organization, the Social Security Administration is a model of efficient effectiveness in delivering tens of millions of assistance and pension checks every month) and sometimes it does it poorly (Hurricane Katrina, our era’s poster child for bungling bureaucracy), and sometimes it does what others could not effectively but at the cost of great inefficiency (WWII, but I think the inefficiency can be forgiven in a case like that).
Aid can also be directed towards people who need it without worrying if they are deserving or not. I loathe the concept of the deserving and undeserving poor.
I understand your position, but does putting aid in the hands of government in any way guarantee we distribute aid this way? What about drug testing for welfare recipients? What about kicking people out of public housing if they or a family member commit crimes? Keep in mind these programs are designed by actual people, who are representatives of actual people–those same actual people who in their private, non-governmental, social aid discriminate based on their views of who is deserving or not. I think you’re mythologizing government a bit here–just because it can, and sometimes does do this does not mean it does so reliably. And heck, the church I used to attend ran a soup kitchen, and they never checked people at the door to see if they were deserving or not.Report
LWA and SW,
“self-sufficiency as a goal is a recipe for poverty”
Agreed 100%. Self sufficiently, I doubt we could support one one hundredth the current inhabitants on earth, and the living standards would be Malthusian to say the least. Even hunter gatherers depend upon their band (or a band).
As LWA says, collective effort is usually more efficient and productive, hence the importance in more complex and prosperous societies of division of labor (specialization) and exchange. And just as we have both private insurance and public risk pooling, hunter gatherers have something similar with networks of reciprocity, collective defense and meat exchange.
On the topic of “slackers and moochers” HGs control this effectively via patterns of reciprocity. Being a consistent moocher (or bossy bully) is a really risky strategy in a small band of well armed gossipers. Christopher Boehm has several good books on the topic and how they may contribute to anti-authoritarian hierarchies and our moral instincts.
On LWA’s suggestion that “a culture that elevates self-interest” and “scorns obligation to the greater good” contributes to mooching, I would have to agree here as well. I recommend a culture which promotes the mutual convergence points between self interest and the greater good and which discourages free riding on others.Report
Surely there’s some weird amalgam form of “self-sufficiency” within our current framework.
Perhaps something like “pays about as much in taxes as s/he takes in subsidies”. Where would the line for that be?
You’d think that we, as a society, would have a goal of putting as many people on or above that line as we possibly can.Report
What was it about this post that tipped you into deciding to express these thoughts about this blog now and here?Report
Good question. I think it is more a general tone then a specific instance. Also more of a general tone on here then just this particular post. It seems at least to me, that more and more I am hearing about how those who do well owe those who don’t a life. Not just a safety net but a life that has dignity and some abstract well being quotient that I don’t get. I don’t know how to put this in words to make others understand. Writing is not my strong suite, I tend to question and formulate ideas as I speak not before hand.
Maybe I posted on this blog right now because for the first time yesterday while visiting my father I wondered if he has Alzheimer’s and the example in this blog stuck close to home and struck an emotional chord within me.Report
@just-me
You forgot to complain about the “PC police”.Report
Glad you could come out and play Kazzy. You always make me feel so much better about myself.Report
Well, given that you didn’t actually respond to anything Vikram wrote, but instead gave out some boxed complaint about the lower class, it seemed appropriate.Report
Kazzy I am the lower class. Call me trailer trash, call me blue collar, call me homeless, I have and am all of those things. I guess if I comment about blacks I am showing white privileged and can’t understand their struggles. Now you are telling me I can’t comment about my own life and experiences?Report
Excuse me. I should have said the subset of the lower class that you believes simply wants things done for them.
Can you demonstrate that these people exist in numbers great enough to make a meaningful difference in society?Report
Kazzy, can you prove they /don’t/ exist? It’s a common enough cheap shot around here, when anyone turns up to contradict from personal experience — I shall call it the Kazzy Box. Now comes one person with personal knowledge of the problem of homelessness to dump it in the Kazzy Box, only to be told to file a class action suit.Report
See here is where the difficulty lies. I tell you that I know x number of people who would fall in that category. You tell me that well that doesn’t make a statistical sample, that is a personal observation. (You didn’t but I would) I don’t have the inclination to research the topic or the time. I know that I am in the lower class, that I know many people who this applies too. I have had this discussion with some of them. I don’t look down on them, I don’t ridicule them, I am still friends with them. They honestly think that having things is part of being alive. They honestly think that along with having a roof over their heads, having food on the table, having a smart phone, brand new computer, cable, high-speed internet is just as important. I didn’t call them moochers. It is just a difference of thinking. They think that necessities include things I would call luxuries. Is society changing so that what I think are luxuries really are necessities?
This last isn’t directed at you Kazzy, it is a general statement that I am leaving here as I go about my day.
Here is the last thing I am saying on this topic. If this blog really wants opinions from all walks of life, all view points then don’t bash the people who try to give an honest opinion and viewpoint. I had thought that I could give the view point of someone who is and has been for all of my life one of the “down trodden”. God I love being told that because I can’t afford to go buy everything that someone who is rich has that I am downtrodden. Way to take away people’s self-respect and dignity. I have to wonder when “things” became the defining score on being happy and human. I mean I don’t feel my human rights are violated because I have been poor my whole life. I work, I take care of my family, I laugh, I love and pet my kitties and my dog. When I buy something I feel a sense of pride that I earned it. I feel a sense of accomplishment in that I am a good person, that I have friends who care for me, someone who loves me and I do for others when I can and even when I can’t. I don’t measure myself against some billionaire who has made it rich, nor do I cry “but he is rich because of me”. No he isn’t. He is rich because he had connections, had a great idea, to a risk, or was plain lucky. Big deal. He is not me, he has his own problems and his own tribulations.
I come to this with a personal experience that says hey you are talking about something I have personal knowledge of. Not something I have had to read about or Google. Personal knowledge, personal experience. If that experience and knowledge isn’t wanted or needed so be it. I know what is and what isn’t. I know how I am, I know my situation, I know that while I may not be able to get the latest and greatest gadgets that my life is a good one.
You may say that this is inequality. That somehow my not having everything my heart wants is bad but I don’t. You may say that it was wrong to have been homeless, actually it sucked on one part but it was fun on the other. When you are poor and life sucks you learn who is important in your life and you learn things that you can never learn in a book or at a college. You learn the importance of others and the importance of being who you are. Of not letting your circumstances define who you are. Of not letting others define who you are.
There are those who do and those who don’t. You can help both. Both are deserving of help. To say that either one is good or bad is a misunderstanding by my reckoning of goodness and badness. To never see good in those who are successful is just as bad as never seeing badness in those who aren’t.
Ask those you want to help before you help them. Help them yourself first. Don’t tell someone else they need to do what you see needs doing.Report
@blaisep
No need for any such box, for your lies are the only ones which draw my ire. You tell tales of personal experience it would take any man twenty lifetimes to accumulate. It is not enough for you to have an opinion on damn near every matter, but you insist on speaking from a position of authority predicated on what I sincerely believe are vast exaggerations if not complete fabrications.
I have not rejected @just-me ‘s experiences. Her initial comment made no reference to her personal experience. And I think it fair to assess the scope of a problem before determining how to act on it.Report
Kazzy, I have no reason to lie to you or anyone. I’m just gonna shine that on, knowing you’re just peeved. These things really did happen to me. The Kazzy Box is a wonderfully capacious container. Reality doesn’t matter. Your precious little abstractions are all that matter and woe betide the incautious fool who dares to contradict you from the real world.Report
@blaisep
Characterize me however you want, I care not a bit.
One day, I would love to see you layout the full timeline of your life and compare this to the various claims you’ve made over the years.
And if we want to get into who dismisses whom, it was you who said I ought not speak with any authority on matters of education or child development. Despite the fact I have two degrees and 10+ years of experience on the subjects. Naw… you talked to a kid once so… who the fuck was I to disagree?Report
I think this portion of this discussion isn’t productive. Please continue on in other areas.Report
If this blog really wants opinions from all walks of life, all view points then don’t bash the people who try to give an honest opinion and viewpoint. I had thought that I could give the view point of someone who is and has been for all of my life one of the “down trodden”
Just Me, we’re not always on the same page, but I’m fully supportive of you here. (And Kazzy, you know I love you, man, but I think your PC police comment was kind of out of line–even though her fuller explanation of her background context came after you posted your comment, I thought her first comment was clearly referencing her own experiences with not having things she wants.)
I, too, get particularly inflamed by the assumption that I’ve never experienced such hardships. When I was a kid my dad got injured and was in the hospital for nearly a year. I have no idea what kind of health insurance my parents had, or if they had any at all, but I know it took them many years to pay off the medical bills. After that year in the hospital my dad spent another year recuperating before he could work again. Imagine the hit on our family finances of my dad going two years without work, and all those medical bills. My mom’s work at General Electric paid middle class wages, but it was spotty, depending on how many orders they’d received, and she was often laid off for extended periods of time. Even after my dad could work again things were often very tight. I remember one of my parents once letting it slip that we might lose our house. I remember how excited my parents were when my dad found some cash he’d tucked into a pocket of his wallet and forgotten about…it’s what allowed us to eat until payday. I remember my mom making a meal that consisted solely of corn mush and vegetables, and trying to make it sound special, rather than being all she could dredge out of the nearly empty cupboards. And as I noted in another post recently, I remember the effect of high inflation on our limited income, the fretting over being able to afford gas to drive to work, and my mom crying in the grocery store (which is emotionally devastating to little kids, who look to their parents as the stabilizing force, able to fix everything and control everything in the kid’s world that needs to be controlled). We weren’t especially bad off, compared to some other people. But my parents were never “comfortable” financially until some time after all the kids were grown and gone, the medical bills paid, the mortgage paid off, and no longer having three teenage sons eat them out of house and home.
But the idea that I’ve never experienced being poor, or that Just Me doesn’t know what it’s like? It’s too easy an assumption. It allows people a convenient hook for rejecting your argument without having to face the discomfort of thinking about it and possibly challenging their own views. (It’s particularly irksome when someone who did grow up privileged assumes that, because in fact they know less about being poor than I do.)
We all do it, and I could name some specific cases where I’ve done it, so I’m not really trying to sound holier-than-thou (although I probably am failing at that effort). But it’s worth noting that the approach is intended as a conversation stopper, or at least as an effort to dismiss someone without really listening to them. That’s good when we already know what they’re going to say (because, like me, they repeat the same points ad nauseum) and we’ve already considered and rejected those points. But I don’t think that applies in Just Me’s case here.Report
Heh. I don’t characterise you as a liar. That was a cheap shot, a fit of pique. You owe me an apology but I don’t expect one. Fact is, I don’t want one. I’d rather you go on making these childish noises. I’ve paid the price for all these experiences. You spend your life on the road, going from gig to gig, having to squeeze into every container into which you’re thrust. Loneliness is the occupational hazard of my job. I haven’t had a real home in almost ten years now.
I’m not gainsaying you on childhood education. If memory serves, there’s a Google Doc in my Drive where we worked on just such an article. As it happens, I put my wife through four years of college and two master’s degrees, one in Bilingual Special Education and Community College Administration and I wrote and edited all her papers. I put the computer in her classroom. I’ve bought the Spanish-English dictionaries for her students to take home, so they could teach their parents English. I’ve had those parents, ten at a time in my living room, teaching them English. I’ve run a Spanish language school in Guatemala. I’ve taught more than 70 people to code in Java and C/C++. You might say I have some practical experience in education and you may not say I don’t.
You have no monopoly on the truth, Kazzy. Now here’s how I characterise you: about as old as my children with less experience in the real world than any of them. Was a day when I thought I knew everything, too, just like you. The older I got, the dumber I feel. But when it comes to Fixing Inequality, I have some practical experience on that front, too. Four fucking generations of it. I watched my parents work themselves to the bone, we all got sick, watched my siblings almost die of malaria — now have you ever watched your parents making preparations for a child dying? I have. You’re not going to take that moment away from me, you cheap shot artiste.
All my parents did went for nothing. The secondary school my father taught at in Nigeria is closed. The hospital my mother taught at is closed. Everything they did, all those years, all those privations, when both of them could and should have been making some good coin back in the States, all for nothing. For all the effort they put into making Africa a better place, training their own replacements to take over, none of it stuck. They might as well have been painting a yellow line down the middle of a dirt road. I was determined if I went into Do Gooderism, the things I did wouldn’t be for nothing.
And JustMe, my girlfriend, turns up to give you an earful from the perspective of actually being homeless — your reaction. Some petty, vicious little snark about the PC Police. We have some real world experience in the equations of thrust which translate money into results. And you don’t.Report
@blaisep
I call you a liar because I think you a liar. You proved yourself as much during your comment deletion on Jason Kuznicki’s post a few months back.
I don’t like dealing with liars, so at this point, I’ll cease dealing with you.Report
@just-me
On further reflection, @jm3z-aitch is right and my kneejerk critique of you was unwarranted and unfair. I’m dealing with some real life things right now, but they don’t excuse that. My sincerest apologies for that and the resultant handling of my responses to your own real life experiences, which no doubt are of value and should be treated as such. I’m sorry.Report
Oh stop your squealing, Kazzy. This is what it comes to, out here. We’ll just call it BlaiseP’s Asymptote: when the delta X for facts goes below a designated rise rate, all that results on delta T for continued conversation is personal attacks.
You lost. You went personal. You’re all out of facts. Shepherds grow like their sheep. Calling me a liar — I shall tell you a truth – you spend too much time around children and not enough around adults.Report
Again, you exposed yourself when you violated Jason’s privacy to read an undrafted piece to generate a criticism of a separate piece, deleted the comment in which you made such actions clear, and then lied about the affair.
You want to throw stones? You’ve got the most fragile of glass houses.Report
I wrote … all her papers
Ahem; academic fraud.Report
You lost.
Huh? This is about winning? Who’s keeping score?Report
Yes, it was academic fraud. And yes, I did say I hadn’t read Jason’s post. Both of which I’m quite prepared to state as facts, and did, to Jason and all concerned. Doesn’t change anything fundamental about the childishness of what’s going on here.
As for keeping score, let’s not bullshit ourselves. When all these self-appointed referees are wandering around the field, there’s a game going on and there is a score being kept. I don’t mind being called a liar. I’ll fess up to where I’ve lied. I have. Now about being called a liar by various and sundry around here, I’ve heard a lot of that over the course of my life, children calling each other liars. And that’s what most of you are to me. Children. You’re about the ages of my children, some much younger than my children. I’ve got grandchildren older than your children. So excuse me an old man’s laugh. A bunch of sophos-moros, wise in your own conceit.
Carry on.Report
Next time I read a post I am interested in putting my two cents worth on I will wake Blaise up. Really the only times I post are when he is gone or sleeping. I can get the lefts perspective from him. And as an added bonus he listens and the discussions don’t end up like this.Report
@LWA,
HOAs are interesting. Just as few people can escape being under the juristdiction of some government somewhere, few people can escape being subject to deed restrictions, either by the subdivider of the land, the HOA, a neighborhood group, or the lender. The only thing you can do, is choose which set of restrictions you want to live under.
Sorry, but I call bullshit. I think your perspectives is extremely provincial, and you are not aware of what the rest of the country is like. I’m 48 years ok and I’ve lived my whole life without living under an HOA. That includes living in So Cal at my in-laws’ house and being a homeowner in both Oregon and Michigan. Do you even know that there are real actual houses outside of modern subdivisions? Do you even know what traditional neighborhoods look like, or are you too much of a Lexus Liberal to be caught dead in such a place?
We’re all entitled to our own opinions, but not to our own facts.Report
HOAs are interesting. Just as few people can escape being under the juristdiction of some government somewhere, few people can escape being subject to deed restrictions, either by the subdivider of the land, the HOA, a neighborhood group, or the lender. The only thing you can do, is choose which set of restrictions you want to live under.
In this respect, it resembles the “liberal archipelago”,
http://www.liberal-vision.org/2010/07/05/chandran-kukathas-the-liberal-archipelago-a-theory-of-diversity-and-freedom-2003/
where you can select which community you want to live in.
Except one could argue that our existing nation-state-city jurisdictions function that way already.
No one ie compelled to live in California; if it is too restrictive, they can vote with their feet and live in any other state. Likewise, if the USA is too restrictive, they are free to emigrate to anywhere in the world.
So the monopoly of force of any jurisdiction can be exercised only within that jurisdiction- Texas can’t enforce an anti-sodomy law against people in New York.
An example I can think of is the grouping of 1,000 condos within an HOA; a condo development that is large enough to have its own stores, workplaces, etc- a small city unto itself.
Adjacent is a small town that has 1,000 houses.
Which is coercive and which is voluntary?Report
Eh, my reply got above somehow.Report
I’m not bothered by people gaining wealth by creating value for society, even immense value. I’m bothered when people ruthlessly seek every last bit of wealth they can, harming others along the way.
“I can earn $200B while employing 1000 people or $200B+50K while employing 999 people and making each of them work .1% harder.”
I don’t think they have an obligation of any kind to do the former, but I fear if the latter mindset becomes pervasive, we are all worse off. Every man for himself is a poor societal ethos.
Also, nice piece (as always).Report
The cultural and legal ethic of maximization of profit is exactly what incentivizes innovation. And as I’m sure you know, the real life questions are not framed with quite so start and exactly-defined criteria as the ethic set out in the comment. Which is not to say that a point of unreasonability cannot be at least roughly identified, but rather to say that it’s a spectrum rather than a toggle.
Given that, of course the idea that a degree of redistribution optimizes social outcomes seems obvious. We should bear in mind, though, that such redistribution does take us away from the equilibrium an undisturbed market would create, and thus shifts incentives and therefore also shifts outcomes. Make the choice, but be aware that you are making that choice.Report
I would argue that there is a balance that needs to be maintained.
I agree that innovation can and does spring from the profit motive. I’m skeptical of my friends who do seem to think we can have a Star Trek type economy or non-economy as it is. And I seem to know plenty of people who want Star Trek.
But too much inequality produces revolution and chaos and social unrest and probably prejudice and racism. Zero-sum societies are not good places to live in.
So as my name suggests, perhaps I am just a squish who believes that the Welfare State saves Capitalism from its worst excesses. This is what people thought of the New Deal.Report
I’m curious about this:
We should bear in mind, though, that such redistribution does take us away from the equilibrium an undisturbed market would create, and thus shifts incentives and therefore also shifts outcomes.
When we use terms like ” undisturbed equilibrium”, what exactly are we referring to? Is it the equilibrium established where unfettered supply meets unfettered demand? Where supply meets demand given preconditions A? Preconditions A’? Goals B or B’?
Is it short term micro equilibrium or long term macro equilibrium? Lots of folks think that substantial government intervention in-built volatility of market activity (does the sign wave constitute equilibrium, or are we talking about a flat line to some extent?) is necessary to mitigate the violence of the swings.
Questions…Report
@burt-likko ,
Prioritizing profits above all else is what bothers me. I understand the need for innovation and the importance of rewarding innovaters. I wouldn’t necessarily seek to prevent these via state means beyond tweaks to our existing tax system and social safety net.
Carrying on the example I mentioned, with the $20B+50K/999 workers versus $20B/1000 workers, I wouldn’t want to make the former route illegal. I would just rather live in a world where the billionaire said to himself, “I’ve got $20B. I don’t need to unnecessarily put the screws to my employers to further line my own pockets.”
America, by and large, has an individualist mindset. This has served us, but I think a better balance with a collectivist mindset would be preferred.Report
We are referring to what would happen in Somalia, of course.Report
So the definition is ostensive? Thanks!Report
@burt-likko I mostly agree with you and ND’s comment. However, I’m not sure about your undisturbed market. Creating a successful business in North America is aided by the society we live in. Progressive taxation pays for this society. Wanting the benefits with out having to pay for them, being Wall Mart and not actually sustaining your work force but ultimately having others (gov) help pay. It makes me think of when my little one had her first lemonade stand. She was so excited about all the money she made. She was planning on being a tycoon, until I clued her in that the lemons, sugar, and plastic cups that were provided her would wipe out most of her profits.Report
Vikram, you wrote “The billionaires of this world mostly got there by providing modest bits of value to very large numbers of people.” That may be the most salient observation here: the scalability of the product is what seems to matter most if the object of the exercise is the accumulation of massive wealth.
With that said, a pharmaceutical cure for Alzheimer’s seems like it would be eminently scalable.Report
I dunno, the financial bubble made a lot of billionaires. What did they give the world again? Besides the Tea Party and a panicky six months of fiscal Armageddon and a world-wide recession.
I mean besides the ATM.
Don’t get me wrong. I’m a fan of finance and banks and mortgages and such. But lately it seems like about 95% of “finance” is elaborate con games, scams, rakes, or other schemes designed to concentrate money. HFT’s earn my special ire.Report
I’m going to concur here.
There is a difference between making an investment in Genentech than the neat parlor tricks of the last financial bubble.Report
I concur as well, actually. I’ve been brooding whether to compose a post about financial engineering. (The short conclusion of it would be that I am not a fan.)Report
The worry I have is that because a lot of financial engineering looks opaque, our natural biases are going to incline us to go for the intuitive point that they aren’t really providing any real value. But these are precisely the kinds of cases where we should be very careful about our intuitions.
I don’t know that the financial market is set up correctly.* But I imagine that even one that was set up to do its job would have financial products that looked complicated and opaque simply because the need to extract as much liquidity from one’s assets** as possible can require some complicated bits of financial engineering.
*markets have to be set up. The question of who owns what and who is liable for what matter. See Jamestown colony in the 17th century for how the wrong set of rules created a famine.
**Presumably that’s the purpose of the financial sector; to pay more for the other part of the economy. If we can get more bang for buck, everyone benefits.***
***Unless of course the whole thing just collapses. But that is the hard part. What does work and what is too conservative an approachReport
Well, @murali , the worry I have is that apparently even the people doing the engineering don’t understand what the hell they’re doing. Or they do, and it’s all hogwash, but they don’t care because their incentives are all screwed up.
On the other hand, I’m not a fan of the kind of regulation that judges things on the basis of “too much, too little, too high, too low” etc. Regulations should be binary; this thing is okay, that other thing is fraudulent and illegal. The decisions should be categorical and as simple as is practicable.
A big problem as I see it is that a lot of what passes for “investment” is barely distinguishable from simple gambling. The only real difference is the events on which you’re placing bets; the price of a stock as opposed to the outcome of a football game, for instance. I was taught in my econ classes that “investment” was something like the farmer who purchases a new tractor or buys seed and fertilizer. I recognize the value in virtualizing this process so that someone can indirectly invest by, for a simple example, depositing money in a bank (which is really a somewhat disguised loan) which is then in turn loaned to the farmer for buying a tractor, seeds, and fertilizer.
Now it so happens that the farmer, when making these textbook investments, is also engaging in a bit of a gamble, isn’t she? She’s gambling that the weather will be favorable, that the bugs won’t eat her crops, and that the price she receives at the market for her harvest will more than cover the investment and yield a profit. The banker is also making a gamble on all that, and also on the competence and honesty of the farmer as well. And the depositor is making a gamble on the discretion of the banker to make loans that at least won’t blow up and collapse the bank.
So an investment, any investment, is inherently a gamble. It carries both a risk and a hope for reward. The problem is that the guy playing games in a casino in Vegas can say the exact same thing. And from the micro perspective of the individual investor in a virtualized financial investment environment, the two cases are literally indistinguishable. But from the macro perspective of the economy as a whole, the two cases are clearly distinguishable in that one drives production of useful goods and services in a positive sum fashion while the other is a simple win-lose, zero-sum game.
And the worry I have is that far too much of our virtualized, financial investment economy with all the opaque financial engineering is just zero-sum gambling disguised as productive investment vehicles. It carries a gloss of respectability by virtue of being conducted by firms like Goldman Sacs on Wall Street but in reality, there’s little to distinguish it from casino gambling down in Atlantic City.Report
@rod-engelsman That there are bad incentives for short term bubbles over longer term sustainability at least seems to be the case. I’m not sure I entirely disagree with what you’re saying, but I doubt that everything would look all positive sum-like even were the incentives to be correct. And that gives me lots of caution when it comes to proposing changes.Report
@murali , I’m not sure what changes, if any, I would propose either. I’m just very skeptical of the uncritical view of many toward the instrumental utility of financial capitalism as it exists. Far too many people making far too much money just playing with paper.
I sure as hell can’t see the justification for granting tax breaks for that sort of thing vs actually working for a living.Report
But that’s the thing, how do we know that they are just playing with paper and not doing something that actually has value, or would have value if done properly but only looks like playing with paper.Report
Logic 101: You can’t prove a negative.
It’s not really my responsibility to prove that what they’re doing doesn’t have value. If what they’re doing does have value, let them ( or someone anyway) make the positive case for that. As it stands, it’s certainly not obvious to me that it does.Report
But Jason’s recent post on this is informative: If we had to prove the value of everything we did in order for it to be permissible, very few things would be and life would be unpleasant.Report
@rod-engelsman
The Wall Street person might be investing/speculating in a hot bio-tech company working on a better grain that is more disease resistant or a cure for Tropical Race 4 which threatens the existence of the banana. Or possibly a more efficient and less noxious treatment for cancer.
I would call these proper investments. Saying that an investment is a simple farmer with a tractor and seed is a sure way to keep everyone at a sustenance level of living and a society that does not produce the Dark Side of the Moon.Report
The worry I have is that because a lot of financial engineering looks opaque, our natural biases are going to incline us to go for the intuitive point that they aren’t really providing any real value.
Well, that’s why I need to write a whole post about a single instance that I actually understand. 🙂
It won’t be a witch-burning.
Logic 101: You can’t prove a negative.
@rod-engelsman , I think your logic classes must have been teaching different things than my logic classes.
It’s not really my responsibility to prove that what they’re doing doesn’t have value. If what they’re doing does have value, let them ( or someone anyway) make the positive case for that.
If we are to reason from ignorance (and I don’t see an alternative, since we aren’t discussing a specific, concrete case), then the fact that these creations exist and their production is being paid for is strong evidence in favor of their being of value.
Of course, the same can be said of a casino, but the casino would also be able to argue that they provide entertainment value to their customers even if on net they lose.Report
There’s been some interesting research that attempts to approach this problem from the side: They look at how much, as a percentage of GDP, finance takes up — and at what percentage financial bubbles tend to emerge.
Which makes sense — there’s only a finite amount of ‘good’ investments at any time, and it’s rather impossible to run an economy where too much of the money is being churned on the ‘investment’ side alone. So if you’ve got too much money on the investment side, too much of your economy tied up in finance alone — you’re going to create bubbles.
The US was, last I checked, still several times higher than the normal ‘bubble’ level.Report
Logic 101: You can’t prove a negative.
Sigh. Another yahoo who thinks he understands logic just because he took Logic 101. If you’d bothered to stick around for Logic 102, you’d have learned that everything they taught you in Logic 101 only applies to unrealistic, highly idealized models, and doesn’t work in the real world at all.Report
the scalability of the product is what seems to matter most if the object of the exercise is the accumulation of massive wealth
I had a more detailed post about that idea a long time ago on a blog far, far away.Report
The Tech startups that made billionaires of the owners when they went public are easy targets to vent about but the reality is that the vast majority American businesses are small operations that have been employing a few people for a generation or two. Most owners work long hours and some weekends to eek out a modest income. Many would be more financially secure if they were employees instead of employers. But, being somewhat stubborn and independent by nature they persevere. They are usually the first to arrive each day and the last to leave and also the last to get paid. When they lay off an employee or decide not to add one it wasn’t optional, it was a hard choice.
People talk about how the government should do this thing or that thing. Last time I checked the government was broke, worse than broke. When you say the government should do that you actually mean WE should do that. So first ask yourself “Am I willing to do my part of that?” Or could it be done in a better way? When we all stop and realize this is our money we’re spending and a debt we are placing on our decendants we might be a bit more thoughtful about how we do it.Report
Repeating what other people have already said: curing diseases is not how most millionaires and billionaires have gotten rich. One of the major problems with capitalism is that it has done a spectacular job of multiplying the number of frivolities and luxuries which we (or the richer 10% of the world) can access while leaving the world with a shortage of necessities.
It’s not a question of whether we’re willing to give up the cure for Alzheimer’s (although I think a lot more could be done, and a lot more lives saved and improved, with $20 billion in the way of preventing malaria and other infectious diseases afflicting the third world, than would be achieved by an Alzheimer’s cure – so in your hypothetical situation I would prefer using the money for that). It’s a question of whether a broader distribution of material well-being for more of the world is worth giving up the next iPad. And I believe that yes, it is.
And that’s if you accept the contention that the two are mutually exclusive, which I don’t necessarily (the marginal value of money to a person decreases the more they have – we’re not going to suddenly cease to have inventors if they make $1 billion rather than $10 billion on their inventions).
Invention and technological and medical progress was doing quite fine back in the ’50s and ’60s when Western economies were far less unequal and money was not nearly so concentrated at the very top. They will not collapse if money starts flowing to someone other than the top 0.1% again. Showing a little confidence in and consideration for the contributions of people NOT in the top 0.1% might even be good for the economy by giving them more capacity to contribute and more incentives to do so.Report
I’m not necessarily sure I can support the casual dismissal of consumer goods as luxuries. Do people strictly need these things from a survival sense? No. However, nearly every society that grew rich enough to produce luxury goods and other frivolous things has. That suggests that they do perform a necessary function for human happiness.Report
One problem I see with our economic system as currently constructed is that an unquestionably good thing, productivity improvements, has led to a situation where the production of more and more luxury items for some is absolutely necessary in order for all to secure the necessities of life.
What I mean is that, not that long ago in human history, the vast majority of the population was engaged in producing the necessities of life–food, rudimentary clothing, shelter, etc. Now our food is produced by something like two or three percent of the population with maybe another two or three percent engaged in industries directly supporting the farmers. (Things like fertilizer and tractors.) You see similar productivity gains, with important exceptions, in practically all other industries as well. The upshot is, that in order to secure gainful employment, most of us are engaged in producing goods and services that are decidedly not necessities. And since we need money in order to secure the necessities, most of us rely on others of us to purchase luxury goods and services just to live.
That’s why we have recessions, or at least why it can take a while to climb back out of one. The system is awfully brittle when any disruption in consumption of luxury items necessarily results in loss of gainful employment for many, which spirals down as those people necessarily cut back consumption. This is why Keynesian stimulus makes sense.
You know, I live in the “breadbasket”, otherwise known as flyover country. And while we have some other industries our primary occupation is agriculture. And this last recession didn’t really hit us much. People delayed buying things like cars and homes, but they kept buying food because, you know… ya gotta eat.Report
Rod,
Here is where my libertarian comes in.
Life when most people were agricultural workers and largely making their own food was very hard and very monotonous. Perhaps it is my agnosticism and non-asceticism but I don’t see why it is morally and ethically superior to have most people be farm workers.
Also it might happen but I’ve personally never known anyone to not buy food because they bought a really nice suit.Report
ND, I’m not making a normative judgement here. I’m just making an observation of how our economy functions and how it can get bolloxed up.
I’m not saying that the agrarian economies of a couple centuries ago were somehow morally superior. Just that they were different in the mechanics of how they functioned and so had different failure modes than what we have today. Back then the economy would go to hell for largely exogenous factors like an extended drought or something. Today all it takes is a bit of skittishness on Wall Street and dip of a couple percentage points in “Consumer Confidence” to throw some people out of work and into poverty.
If I’m making any normative, moral argument here, it’s just that we need to recognize the reality of how our economy functions, and particularly the failure modes, and design institutions to ameliorate the consequences of those inevitable failures. Given your moniker, I’m sure you agree. (In other words, we’re on the same side here.)
You mentioned elsewhere (was it this thread?) that you had coveted a $600 pair of shoes and actually purchased a $300 pair. Now frankly, that seems a bit twee to me. But then I don’t think I’ve ever actually “coveted” a pair of shoes in my life; it’s just not something that interests me. But I have no objection whatsoever to you coveting whatever the hell you covet and spending your money however you please.
The problem I see is that our economic system, as a consequence of productivity gains, absolutely depends on your coveting and purchasing those luxury goods in order to provide the employment that allows someone else to purchase beans and rice and pay the rent. Because it’s an easy thing, with little practical consequence, for you to decide not to buy those fancy shoes or to wait until next month or next year because your investment portfolio took a little dip or you’re not quite sure if that big client is going to work out.Report
Rod,
I guess there always is a dissenter. ‘Twee seems to be a very telling word of judgment. At the very least a bit of alleged Midwestern, downhome superiority over the coasts. At worse, a statement about what is and is not considered masculine and what “real men” should care about.
IIRC my reading correctly, there has not been a completely natural famine since the 1500s. Every famine since that time has always been made worse by some kind of contribution of human indifference and malice. The Irish Potato Famine
is a good example of this.Report
Rod, even assuming that you are right, and I think that you are engaging in a fair bit of over simplification on how the pre-industrial economy worked, people gave up that sort of agrarian life for reason. It was boring, it was tedious, and most people lived horrible lives during it.Report
Hey, they were more equal though. You’ve got to give them that!Report
Jay,
I’m a pretty liberal guy but rural-pastoral utopia arguments kick in my inner-libertarian. Or at least my inner neo-liberal.
And no people were not more equal. Eastern European Jews were not equal compared to the Cossacks who raided their villages and beat them. Black sharecroppers were not more equal compared to white sharecroppers, etc.Report
Lee & ND, it seems to me that you’re reading more into Rod’s comment than is there. I don’t think he is singing triumphalist praise for agrarianism or economies based on fulfilling certain needs. I think he is saying that one advantage to being in a region or industry that is geared towards more basic needs is that you are less susceptible to the economic hiccups and wave-and-crash than those geared towards items that, in a crunch, everyone can do without.
His solution to that is not going agrarian, but counter-cyclical spending (or stimulus spending) to smooth out the hiccups that occur elsewhere.
While one can take issue with the second, I think the first has remained relatively unchallenged. Indeed, ND confirmed it when he said that nobody is going to buy a really nice suit at the expense of food. Which was exactly Rod’s point.Report
Is Rod really talking about rural-pastoral utopia? I don’t think he is. I don’t think anybody here is.
(I would, in fact, argue that many are so conditioned to the immutable superiority to urban and cosmopolitan life, that any suggestion that rural life isn’t inferior in just about every way is such a challenge to the accepted order that it might as well be saying “rural rules, urban drools.” In other words, while Sarah Palin made unacceptable comments about the city vis-a-vis rural life, any comment whatsoever that points to a perceived advantage of rural life is to be considered “out of order”.)Report
Will,
The ‘twee comment really bugged me. That did read like a judgment.Report
Oh, I think that was, a bit. But I think that was primarily about the shoes. Not about the ultimate superiority of rural life over urban concerns. Just that he “doesn’t get it” in a pretty subjective sense.Report
Will, I don’t think thats how it really plays out in reality based on historical experience. When the nation was mainly aggrarian during the 19th century, a lot of farmers were as hardhit by the various panics as people in the cities.Report
@vikram-bath
Does the generation of content, mentally, not qualify as labor?Report
I think it qualifies. It’s how lawyers can bill you while in the shower.Report
Then I’m a bit thrown by this comment:
“This isn’t to say that ideas wouldn’t matter in those societies. They would. It’s just that most of those ideas would be embedded in an object or in a person’s labor.”
To be clear, I’m not talking so much about the guy that says, “You know what would be a great idea? Silent velcro.” I’m talking about the guy that spends the time, energy, material cost, etc. to actually invent silent velcro but is then incapable to capitalize on that because the guy next door peaked over his shoulder and is selling it at a price that only accounts for material cost and product cost, whereas the inventor has to account for R&D.Report
OK, let’s say someone does do the work to invent silent velcro, and it turns out the solution can be wholly described on a single piece of paper, and any of several thousand people would be able to take that piece of paper and produce silent velcro cheaper than him (since they didn’t have to incur his development costs).
That is the problem that led to the creation of intellectual property rights.
Let’s say instead though that you could only make silent velcro by spending 20 years as an apprentice in a velcro factory honing your art. Then, you don’t really need intellectual property rights to protect you.
In a society in which innovations look more like the former, you need intellectual property rights. In a society like the latter, you don’t so much. My argument was that for much of history, we lived in the second society. But for all of our lifetimes, we have lived in the first.Report
So is your assertion that IP rights are not natural rights based on the idea that they were unnecessary for much of human history? And, as such, a completely free market does not recognize them?
Mind you, I’m not necessarily agreeing or disagreeing; just trying to understand why a market with protections for physical property rights can qualify as truly free but protections for intellectual property rights would make it less free.
Myself? I’m a firm believer in IP in abstract, but struggle with our current system. Generally speaking, I do not believe that someone should be able to gain from your labor without your permission. This means you can’t steal the money I earn through my employment, the products I create through my toil, or the ideas I generate via mental effort.Report
I thought Silent Velcro was a serious and important book, but the anti-environmentalists attack it for the consequent restrictions on mosquito nets.Report
So is your assertion that IP rights are not natural rights based on the idea that they were unnecessary for much of human history?
And, as such, a completely free market does not recognize them?
Yes, sort of. The reason a market with IP rights is not “totally free” is that it requires regulation enacted on top of what you need for a market without IP rights. Keep in mind that I am not saying freer is always better. (In general, I will always try to avoid saying that.)Report
@vikram-bath
But by that same definition, physical property rights require regulation. As does enforcing basis contract law. And fraud prevention. It seems we assume those things while IP is sometimes in doubt. And perhaps appropriately so. But even the free-est of markets requires some regulation lest it becomes a free-for-all.Report
I can’t disagree with that, Kazzy, but economists seem to take the enforcement of physical property rights for granted but not the enforcement of intellectual property rights.Report
Okay.
You might soon learn, if not already, that I can be a bit of a literalist with terms, only out of a desire to seek clarity. When things start being taken for granted, or going without saying… it is easy to get muddled. That is not on you, mind you.
Thanks.Report
I am way late to this discussion, so I’m just going to assume that all of the points about focusing on inequality vs. injustice, or when inequality becomes unjust, or whether one person suddenly becoming super rich has anything to do with the issue of inequality in society as a whole, have been dealt with, so I just want to make a point about the scenario in the post.
Putting aside for the moment the fact that I cannot fathom why anyone, no matter what they have done and how valuable it might be to humanity, would want to make so much money that they could not possibly spend it in 10 lifetimes without basically giving it away like Bill and Melinda (who still have more money than they can possibly spend), what does a scenario like this say about our culture? That we could even conceive of a situation in which someone who has such important knowledge – knowledge that could greatly ease the suffering of millions of her fellow humans – might choose not to give it to the world because she doesn’t feel adequately materially compensated is disturbing. I understand the need for incentives, but it seems to me that if there are such things as moral duties in this world, then sharing such knowledge is almost certainly one of the strongest of them, and if we live in a world in which people do not feel compelled, regardless of the material incentives, to act on that duty, then we live in a world with a seriously fished up incentive structure. Forget inequality; if this is our world, we’ve got much larger problems.Report
Most of the most efficient systems we had to instill strong senses of moral duty have, in recent years, been infected by modernity. In attempts to remove some of the problems that come attendant with any given established system, we also threw out some of the babies in the bathwater.Report
Yeah, this is a conversation I believe you and I have had a few times, and I think we’re both on roughly the same page.
It seems to me that, more than inequality, more than the persistence of poverty in a world that has no business allowing the persistence of poverty given how much material wealth it has created, and more than any petty political difference, this is the crisis of our age: if we have elevated material incentives to such a high status that they can get in the way of even the most basic ethical duties, then we need to do some serious re-evaluating of our world view.
I imagine the Rogers of the world coming here now and saying that this world view has created a better quality of life than any other in human history, and without challenging that statement (I think it’s false, or rather, not even close to the whole truth), I wonder if we haven’t reached the point of even this value devaluing itself.Report
Did the rich overall in the past have a stronger sense of moral duty than they do now? The Gilded Age had some great philanthropists among the rich like Andrew Carnegie, who was basically the Bill Gates of his day. Rockefeller to was a philanthropist. However, many of the rich of the Gilded Age had no sense oh philanthrophy. Cornelius Vanderbilt was opposed to all charity and argued if the poor didn’t want to be poor, they should be as rich as he was. Gould, Frisk, and many others were known for their mean-spiritedness.
I think that this presents a rosy view of the past.Report
We’re not speaking of the rich. Most scientists, the idea people, are not in the upper classes, though they may be upper middle class. If, as I’m claiming, having knowledge that will dramatically reduce the suffering of humankind means that you have a moral duty to spread that knowledge (not necessarily to bring it to fruition, because such things often require practical knowledge and capabilities that the idea person might not have by him or herself), then Carnegie et al. aren’t particularly relevant. Or rather, their moral failings lie elsewhere.Report
There’s a rumor out there, for example, that the company that makes Valtrex has a cure for herpes somewhere in the back, but it makes the company more money to sell a pill that you need to take daily.
How much malice would that require?Report
Jay,
I dunno, how much do we pay our CEOs?
$8 million dollars sounds about right.
Bear in mind, it took nationwide umbrage
to convince the HealthCare insurance companies
that death by spreadsheet was probably
not good for the long term bottom line.Report
the company that makes Valtrex has a cure for herpes somewhere in the back,
Well, what does it mean to “have a cure”. Do they just have a sketch of a molecule? If they haven’t gotten past stage III testing, they don’t know that it would work well or what the side effects would be and it’d be illegal for them to sell it. If the *have* gone through that testing, then people would be really mad, and we’d probably see news stories about it.
To be honest, that claim reminds me of the folks who thought that GM made an awesome all-electric car in the 80s that they killed to help the oil industry but somehow forgot how they did it now that they’d be able to actually make money off it.Report
We did sort of cover that. Here is what I said about it: “If our cure-creator is a good person, she ought to be willing to produce her cure at cost and share it freely with everyone. I think such a person would quite likely feel that she were living a fulfilling life in sum.”
And, though some people in these comments have taken it that way, I am not so concerned with incentivizing her with the ability to buy whatever she wants but instead her ability to research a cure confident that she can recover her costs. If she is unable to, she might not be able to get funding.Report
It seems to me there are two issues: having the money to produce it in the first place, and recovering that money later on. If it’s the former, then it’s not so much a worry as a practical necessity, though if she does not have the money should could (and should) give the knowledge/ability to someone who does. If it’s the latter, well, we’re back to society being fished up.Report
Also, note that in the first case, we’re not even talking about inequality at all.Report
The major arguments against inequality rather than against poverty are….
The wealthy do so at the expense of the poor. To the extent this is true, I totally agree this would be a problem. Obviously our hypothetical cure-creator did not do this though. The guys at Enron though?
The well off use their influence and money to rig the game to preserve a privileged status. To the extent this is true I think it is a problem. It basically can lead to class immobility and inequality of opportunity. History reveals this is endemic just about everywhere.
The well off use their influence and money to distort politics and democracy. I agree this can be a problem too.
Finally, that inequality creates or feeds envy and dysfunctional status arms races. Again, it is hard to argue with at least some aspects of this criticism.Report
Envy’s a good thing. Makes folks /want/ to achieve something.
A certain amount of inequality makes the world a better place.Report
Good day! Would you mind if I share your blog with my facebook group?
There’s a lot of people that I think would really enjoy your content. Please let me know. ThanksReport