Asymmetrical Information

From the desk of Winterspeak:

How poor is poor?

This New Yorker article looks at how poverty levels are defined in the US, and asks "how poor is poor?" Unsurprisingly, this question is deeply political, as the Left wants "poor" to be defined in such a way that maximizes its size, and so will bolster the case for government transfers, while the Right wants to define "poor" such that its size is minimized, and thus undermines the case for transfers.

The article itself has no ambivalence about how to define poverty, it states:

More recently, three economists at the University of Warwick published the results of a survey of sixteen thousand workers in a range of industries, in which they found that the workers’ reported levels of job satisfaction had less to do with their salaries than with how their salaries compared with those of co-workers. Human beings are also competitive with their neighbors. Erzo Luttmer, an economist at the John F. Kennedy School of Government, recently found that people with rich neighbors tend to be less happy than people whose neighbors earn about as much money as they do. It appears that, while money matters to people, their relative ranking matters more.
...
The conservative case against a relative-poverty line asserts that since some people will always earn less than others the relative-poverty rate will never go down. Fortunately, this isn’t necessarily true. If incomes were distributed more equally, fewer families would earn less than half the median income. Therefore, the way to reduce relative poverty is to reduce income inequality—perhaps by increasing the minimum wage and raising taxes on the rich. Between 1979 and 2000, the inflation-adjusted earnings of the poorest fifth of Americans increased just nine per cent; the earnings of the middle fifth rose fifteen per cent; and the earnings of the top fifth climbed sixty-eight per cent.

The article fixates on the notion that it is relative wealth that matters, and thus the solution to all ills is to reduce income disparity (I think he may mean consumption disparity, a distinction he makes earlier in the article and subsequently ignores). We will all be happy once we are all above average.

But there are other ways to reduce relative wealth disparities that article does not mention. Rich people and poor people could be sharply segregated so that the rich (or even the middle class) never enter the consideration set of the poor. While a great deal of this segregation happens today through zoning laws and housing costs, the distinctions could surely be sharpened by physically separating poor neighborhoods even further from rich neighborhoods, and re-instituting land covenants based on wealth.

Moreover, TV is a powerful channel of conveying the lives of the rich to the poor. The average TV character is much better looking, richer, and more educated than the average person, which creates horrible stress according to the New Yorker, so it would be better to restrict who folks can watch on TV based on their income.

Moreover, role models, many of whom are wealthier than the people who are supposed to emulate them, would have to end. Role models are harmful by throwing income disparity into sharper contrast than it would be otherwise.

Half of the one recommendation that the article makes, raising the minimum wage and taxes, would actually make the situation worse by forcing poor people out of jobs they way high minimum wages have in France. While poor people may be less happy than rich people, unemployed people are *much* less happy than employed people.

From the desk of Jane Galt:

Happy are they who redistribute their income

Mark Kleiman argues that my posts below imply support for Robert Frank's thesis that we should enact a liberal income redistribution scheme, because money doesn't buy happiness above a certain low income threshhold.

No, no, a thousand times no. I have been distinctly underwhelmed by Robert Frank's work, which argues from happiness research to conclude that--shockingly!--it proves scientifically that we should adopt the political platform that Mr Frank just happens to have believed in before he wrote the book.

Now, I am not as hostile to happiness research as, say, Will Wilkinson. I am willing to posit that status-seeking expenditure, on things like houses too big for a normal family to regularly use all the rooms, or expensive cars when the owners are not the kind of people who particularly care for driving or auto mechanics, does indeed strike me as a collective action problem. (A collective action problem is one where all the individuals in a group would be better off, say, striking to get more wages, but because they are only better off if everyone does it, they generally take another course of action acting alone.) Everyone buys expensive goods in order to signal their status to the community, but because status is a zero-sum game--one person must lose status in order for another to gain it--these are wasted activity from the point of view of the group; there is no net gain in happiness from all that expenditure.

But while to a liberal that implies that we should take some of that money that isn't producing any happiness and give it to others, to a conservative this points up the essential futility of income redistribution. Since you will be redistributing the money without redistributing the status, you'll produce no net gain in happiness. The average welfare mother in America has better health care, entertainment, food, shelter* and clothes at her disposal than the Rockefellers did at the turn of the last century.

You could give welfare mothers in New York City $1000 more a month to spend on housing, and they would still live in exactly the same crappy apartments they now occupy, because there is no more housing being built, and with a 2% vacancy rate, landlords can afford to be choosy about their tenants. That's why they're all herded into government housing projects. And in my experience, admittedly limited, public housing tenants complain about two things that no amount of money will fix absent major institutional changes (most of which would be opposed by the left): having the government for a landlord (imagine trying to get your pipes fixed by the DMV) and the other tenants, many of whom are criminal or antisocial, and tend to destroy both safety and the physical plant of the housing project.

Similarly, let me posit that any fashion trend, automobile, restaurant, or what have you, that is adopted by the poor will rapidly become a low-status item among higher income quintiles. SInce Robert Frank's writing implies that the physical objects do not actually make anyone happier, why should we give the government massive intrusive powers in order to give the lower quintiles objects which will not confer upon them the status that the objects are purposed for? Why, indeed, should welfare cover anything but enough food to keep you from being hungry, enough shelter and clothing to keep you from being cold? Our pioneer ancestors managed to live full and happy lives on such a regime.

What about those intangibles that could make us all so much happier: income security and increased leisure?

I have several problems with this. For starters, while I think that people spend a lot of money that doesn't make them happier, that doesn't mean I think that no spending makes people happier. My high speed internet connection, for example, makes me materially happier than I used to be, because it has enabled me to discover a community of people that I never would have met otherwise. A tired mother getting off her feet at an Arby's while the kids toss french fries at each other is certainly happier than she would be making mac-and-cheese for the zillionth time at home. Robert Frank (and Mark Kleiman's post) implies that there are certain activities and professions that are more worthwhile than others, and that we should design the economy in order to push more people into those things. But this presumes that Mr Frank (or any technocratic planner) has the ability to correctly identify the right activities. I am deeply sceptical of this--and I am certainly not going to hand that sort of power over to anyone based on studies who data comes from self-reported surveys, a notoriously unreliable data source.

Because I don't know which new technologies will make people happy, and which ones will merely enable them to waste more of their hard-earned money, I want the economy to sort that out, not some exquisitely educated clown like me. And while Mark Kleiman apparently thinks that following Robert Frank's suggestions would have no impact on GDP growth, I vehemently disagree.

Take income security. Now, believe you me, if anyone knows how much it sucks to have your carefully planned life overturned, it's me. I didn't just watch my city blow up due to 9/11; I saw my career and my relationship with my then-boyfriend implode, leaving me, at the age of 29, living with my parents and doing clerical work. If you had asked me beforehand if I wanted to buy insurance against just such an eventuality, I would have paid a pretty penny to avoid it.

But I would have been wrong. That was undoubtedly the worst period of my life, made even more dreadful by a growing fear that it would never end, and my life would be ruined. But the loss of everything I had counted on was what enabled me to take an enormous risk: becoming a journalist. I never would have dared to do something so insane if I'd had a cushy job. And that was possibly the best thing that ever happened to me.

The overwhelming majority of people simply will not reach their potential without the fear of catastrophe dogging their footsteps. There are some standouts; perhaps Mr Kleiman is among them. But there's a reason that I have produced a lot of stories on the world economy, and almost nothing of the novel I've wanted to write for years: I have a demanding editor who controls my paycheck demanding regular work out of me.

I don't mean to paint some Rebecca-of-Sunnybrook farm picture of the world, where suffering always spurs innovation, and risk is always rewarded. Some people whose expectations go awry never do get back on their feet. But most people whom I met have managed to pull together fuller, richer lives after the disaster pared their life back to essentials. And if the possibility of failure weren't real, the impetus to rise above wouldn't be, either. Guaranteeing people that their living standard can never really fall strikes me as a very bad idea.

Would leisure be bad for the economy? Well, it seems to me that France's experiment has revealed that mandating more leisure would, at the very least, be bad for full time employment. And the availability of full-time employment is one of those things that happiness research suggests does make people happier. At the upper reaches of the professional scale, it would also be bad for innovation. You can split a waiter's shifts pretty easily, but you cannot get as good as a result by splitting a lawyer's work in half and assigning the two halves to two different lawyers. That's because the true work--the reason you need a lawyer and not a paralegal--takes place in the lawyer's head, where all her knowlege about the case swims around together and forms connection between the various facts of the case. That's the main reason that big law firms don't have many part-time associates, and partners don't get to take it easy once they've got it made.

What about income distribution? I've said before that I think the supply-siders who argue that lowering our marginal tax rates will raise revenue are full of bunk. But that doesn't mean that I believe the Laffer Curve doesn't operate anywhere. High taxation has a pretty high deadweight loss, and given that the Fortune 500 is increasingly composed of people who earned, rather than inherited their money, I think it's inadvisable to risk it with the really large government taxation and regulation plans that would be necessary to bring Mr Frank's plans to fruition.

In sum, just because I think that people spend money on things that don't really make them happier doesn't mean I want the government to step in and make them stop, especially when so many of the prescriptions are potentially so harmful. Nor do I agree with Mr Kleiman's claim that individuals really can't deal with the vicissitudes of life; a middle aged man who loses his job could deal quite well if he'd been saving 25% of his salary. That he has failed to save adequately does not instantly present to me either a moral or a utilitarian case for rectifying his failure, particularly since doing so will encourage other people not to invest in their future. (I'd certainly vote to keep him from starving, but not to replace all his lost income). That is why I encouraged individuals to look hard at their spending to eliminate the things that do not truly make them happy, rather than calling for government programmes. They're in the best position to actually know what they need.

*Yes, the Rockefellers had a lot more space, and marble floors to boot. But would you rather have a big house with marble floors, or a little apartment with central heating, air conditioning, and indoor plumbing? I know which one I'd pick.

From the desk of Jane Galt:

Was it worth it?

The post below sounds like I'm feeling sorry for myself. Far from it. Yes, I share 450 square feet with a bullmastiff. Yes, I live on a tight budget, particularly now that I have finally started plugging 10% of my income into my 401(k). (I know that should be 15%, and it will be once annual raise time comes around. But that's another post.)

But I am lucky enough to have what just may be the best job in the entire world. I waste money on all sorts of stuff--cable television, deli sandwiches, diet gingerale. I don't need a car, I don't want an exotic home entertainment system, and I have excellent health coverage. I already live better than 99.9999% of people in the history of hte human race just by being in America, and on top of that I have a terrific family, a very cool dog, great friends, and I'm fortunate enough to be in a profession that provides many opportunities for free food. My apartment, though small, dark, and noisy, is also charming and cozy. I have a terrific life; I just don't have as many material goods as most of hte people I grew up with. The tradeoff has been well worth it.

THe reason I wrote that post was not to express, or invite, pity. Rather the opposite. I was responding to something I thought I saw in Laura's post: a healthy skewering of the sense of entitlement my generation was raised with. Every generation, of course, ends up coming to terms with the disappointing realization that the universe does not owe them anything. But the meritocratic system that produced Laura and me not only produced outsized expectations; it inculcated a belief that we deserved wonderful jobs and a comfortable lifestyle. John Cheever chronicled his generation's downward mobility, but his downward spiral was the decline of an aristocratic elite gone soft; they expected the universe to treat them well for no other reason but that it had always done so in the past. My generation, on the other hand, were the second generation of the meritocracy; we were raised to believe that intelligence and hard work were synonymous with personal worth, and that it was only just that we be rewarded richly for our labours. When the rewards did not follow as automatically as we had always assumed they would, we screamed in outrage.

But if you are healthy enough to walk nto work, have enough food so that hunger pains don't wake you up at night, don't have to suffer the cold longer than it takes to walk from the subway to your door, and don't worry that roving gangs of bandits will steal your cattle and burn your crops and leave your children to starve . . . well, you are so far ahead of the game as far as this planet is concerned that you have no right to ask for anything else. Anything you have on top of that is gravy. Every time you sit rinking chardonnay--or Miller Lite--with a group of friends, bewailing the earthquake in Kashmir or discussing whether it's worth the risk of viral resistance to send AIDS drugs to Africa, there is some lonely woman across the ocean lying on a dirt floor, every breath getting weaker as her life ebbs away. She feels the flesh of her limbs, the twitching of her fingers, the blinking of her eyes, the beating of her heart, just as you do at this moment, but she knows that she will soon loose that warm flesh to the void. She is dying not because she did anything to deserve it, but because she was born in the wrong continent, in the wrong time. She has never seen the internet, her country's capital, more food than she can eat. If you are not that woman, you have all the luck you need to live a rich and happy life.,

Don't get me wrong--I'm even luckier than most lucky Americans. I have never been afflicted by any misfortune worth mentioning. But even at my darkest hour, when I began to genuinely believe that I would never again being employed at anything that didn't require me to state my typing speed, I was unbelievably lucky just to live in a country that is so rich, it could afford to make an entire one-hour documentary on killer jellyfish for me to watch last night while blogging and instant messaging my friends last night.

The other reason I wrote that post is that I really disagreed with Laura's belief that things have, on the whole, gotten worse for our generation. For one thing, I'd imagine that Laura comes from a home like the one I grew up in, where the family was so financially successful that an ordinary middle class existance looks to us like disaster. And for another, while certainly some things, like Social Security are getting worse, other things, like health and lifespan, are getting much better. This may just be because I am young and childless, but I'll take a longer, healthier lifespan over an old-age pension any day.

From the desk of Jane Galt:

How good were the good old days?

Well, I've upgraded both Movable Type and my web browser (now proudly using Firefox 1.5) and for the first time in, like, a zillion years, I can see the nifty little buttons that let you hyperlink and make things bold and so forth. So now that I don't have to make all the damned HTML tags I want to celebrate by blogging my little heart out.

Luckily for me, there's a lot of fodder out there. Starting with this post by Laura of Apartment 11D:

Due to a gross miscalculation about the time it takes to write a dissertation, my son was born before either of us had finished. So, we lived in a seedy fourth floor walkup in Washington Heights with waterbugs the size of your fist flying into the baby’s bassinet. We were on welfare. My parents slipped us money at family gatherings and dropped off bags of groceries. Suspicious paint flaked up at the window sill.

One day, I walked into the court yard of my building and braced myself for the long haul with kid and stroller up the stairs. As I paused, I realized that the drug dealers had taken their pit bulls off their leash, and the dogs with studded collars were bounding for my kid. “Get your dogs off my kid!” I yelled at the guys in their black puffy coats, hoping that they would leave me alone, because their grandmothers loved me.

We were not only “elaborately educated” but positively festooned with degrees and here we were, living in poverty. After one year, degrees were finished, resumes submitted, but the jobs were too rare. We could either live in separate cities and far from family support or we would have to start over.

We started over. Husband ran out and got the first temp job he could find, an assistant job at an investment bank. We had tried fulfilling work, but it didn’t work out. His new job was demanding and inflexible and not interesting. At first it only paid enough to get by. If I worked, we would go into further debt. So, we assumed a traditional family structure, an imperfect situation for both of us, but the most important thing was to keep the pitbulls off our kids.

The temp job turned into an important job, Finally, after five years, we were able to take the two kids away from the pitbulls and waterbugs and drug dealers, and bring them to a place with a tiny backyard and a good school system.

We’re doing okay now. We still have to work our way through the student loans. And with all those years in grad school, we have no retirement money. We had to buy at the top of the market for the house, so we’ll always have to be very careful. I still buy the kids shoes at Payless and my meat on sale. But we’re okay.

That experience changed me. Made me a utilitarian. The number one purpose of work is to keep the pitbulls off your kids. Everything else is gravy. A fulfilling job. Gravy. A nice social life. Gravy. A job that benefits humanity. Gravy. A job that helps to overthrow the patriarchy. Gravy.

I think that these utilitarian notions of work are more common with my generation than with older generations. We don’t believe that we’ll have social security to rely upon. There are fewer jobs in key fields. Academic jobs were a dime a dozen back in the seventies. We’re saddled with student loans and the knowledge that our kids’ college tuition may exceed a year’s salary. Housing costs are insane. Mobility is much more difficult. There is little room for either gender to experiment with career changes or alternative plans. Whatever is working, you stick with, be it two incomes or one, fulfilling or drab.

On the one hand, I thoroughly agree with the sentiment of hte penultimate paragraph. My generation of nice upper middle class white kids was given a ferocious sense of entitlement by our parents and teachers. As long as we played by the rules we were taught in school--do your work on time, study hard, put work first--we were supposed to have wonderful jobs, terrific spouses, adorable children, a house whose tasteful bibelots and appropriately offbeat furniture all our friends could admire.

If you're a long time reader of this blog, you know what happened to me. I got into a top business school at the height of the internet bubble, went about $100K into hock for tuition, books, and living expenses, and by October of my second year had already secured a high paying job as a management consultant, complete with hefty signing bonus, relocation expenses, and a new new economy "live anywhere you want" policy. I spent most of my second year blissfully studying things that would have no relevance to my future job, travelling, and co-producing the annual GSB follies.

Then the recession and 9/11 happened, and they fired my entire associate class before we could start. But not before they strung us along with ever-later start dates, so that by the time we started looking for another job, we were competing with next year's class of business school graduates. Every time I went into an interview, I could see the interviewer thinking "What's wrong with her? Why doesn't she have a job yet?" Of course, they knew that I'd lost my job through no fault of my own; I simply bet on the wrong horse in the management consulting stakes. But still, why take a chance?

I had never before experienced the feeling of being unable to get a job. A permanent job, I mean; by this time I'd been working at the World Trade Centre Disaster Recovery Site for quite some time. But that didn't really have any future. I needed work I could build a career out of, work suited to my educational background, skills, and ambitions. Unfortunately, such work was pretty damn thin on the ground. My classmates in similar situations started going back to their old fields. My old field was installing computer networks, a field that had attracted a flood of new workers in the capital spending boom that preceded Y2K, and had subsequently busted along with the technology bubble. One technology recruiter I called actually suggested that I find some banker to marry and have babies, since he couldn't find himself a job, much less anyone else.

You have never seen anyone as indignant as I was to discover that the universe was not going to automatically provide me with everything I thought I had earned. And after the righteous anger had waned, I experienced something perilously close to despair. I felt as if someone had told me that the law of gravity had been repealed: if going to a good business school and doing everything you were supposed to was not enough to guarantee you security, what was? If that universal constant could not be depended on, I began to feel that perhaps nothing I had believed in could be relied upon.

That sounds grandiose and adolescent, and of course, it is. But unless you have been out of work for an extended period of time, it's hard to understand exactly how desperate it can make you. In American society, what you do is what you are; everyone asks how you make your money, and if you are not working, you become an object of pity, even as everyone reassures themselves that there must be something wrong with you, so that they do not have to confront the frightening thought that this could just as easily have happened to them.

That was one way to discover that the promises the meritocracy held out to its elite students cannot always be fulfilled. Lots of people end in the same place, though they get there down different roads: there are too few jobs in your chosen field; or a sudden layoff forces you to take the first job you're offered; a child's disability requires Mom or Dad to stay at home changing diapers instead of overseeing mergers; spouses jobs pull in different directions, forcing one to sacrifice their career aspirations; or it turns out that your job just isn't as great as it looked when you signed onto that career track at age 25. The result is that many in my generation . . . or really, the handful of my generation that went from elite school to elite school, academic honor to prestigious job . . . feel somehow that we were cheated, that we'll never have it as good as our parents.

But I think that this is vastly overblown. And worse, I think a lot of liberals tend to generalise their experience to that of their entire generation. Now, there's nothing that sets my teeth on edge than someone claiming that conservatives possess some fountain of widsom undreamt of by liberals, but I haven't seen conservatives making this particular sort of argument; when conservatives look to the past as a lost eden, they romanticize its social structure, where men were real men, women were real women, and children got a kiss and a cookie from a loving mother every day at 3:00 on the dot. Liberals look longingly back at the security and flat income distribution of the 1950's and 1960's.

But when I look at what my family was actually doing, it looks like neither paradise. My great aunts worked all through the fifties and sixties, on the farm or teaching school. My grandfather had his own business, a gas station. He was certainly successful, but he spent most of his day pumping gas. My mother stayed home with us until economic insecurity and the sheer boredom of keeping house in a small apartment turned her out onto the job market, where she sold real estate, as she continues to do. My father stopped working for the City and took a job with a trade association. When I look back I don't see a halcyon era of secure, well paying and fulfilling work; I see people doing what they had to to pay the bills. Indeed, when I began freaking out about my drastically reduced income expectations, my mother pointed out that when my parents moved into the apartment I grew up in, she was 9 months pregnant, had just quit her job, and they had a (to them) giant mortgage, and less than $500 in the bank.

And that's for nice middle class kids with good educations. The lives of the working and lower-middle class were even less fulfilling. Yes, many of them had secure union jobs that were relatively well paying, and I don't want to minimize the value of that; economic insecurity is terrifying. But most of those jobs were like well padded prisons. Forget the visions we all have of those mid-century factories, culled from World War II propaganda films showing happy workers driving rivets, with the vision of a brighter, freer world always in front of them, even as they stop to wipe the honest sweat from their rough-hewn brow. Working on an assembly line is like working inside a clock . . . your entire energy is focused on willing that minute hand to move. Almost any of my readers who worked on an assembly line would find themselves going insane after fifteen minutes of the mind-numbing repetition. And then you have 7 hours, forty-five minutes to go. By the end of your shift, the minute hand moves too slowly for you to concentrate on; you watch the second hand, which advances so sluggishly that you begin to suspect you are trapped in some sort of Einsteinian relativistic vortex where time is moving at a different rate for the rest of the world than it is to you; your life is rapidly trickling away even though the clock is stuck at ten minutes to five.

That's one day. Then you have four more days. And Sunday afternoon spoiled by the knowlege that you have to go back. Endure that torturous progression fifty times, and you've made it one year. Just thirty more to go before you qualify for that gold plated pension. And though it's tempting to believe that the only reason people like me find such work so intolerable is that we're just too gosh-darned bright, it ain't so. Slow and average people find assembly-line work just as stultifying as I do. The only people who find repeating the same action thousands of times a day challenging are too limited to be employed in most factories.

Most white collar jobs were almost as dull. It's hard to be sad at the loss of millions of payroll clerks tabulating ledgers by hand, secretaries dutifully typing up someone else's dull business letters, operators connecting long-distance calls, or any of the other jobs that have been destroyed by technological innovation. Some people are worse off, to be sure, and unlike most libertarians, I'm not willing to simply shrug off the very real unfairness of dumping workers in their mid-fifties on the job market with no help because they bet on the wrong industry 25 years ago. But fwe've replaced those jobs with jobs programming computers, selling software, helping users, designing robots. On the whole, that's a good thing.

It's easy for local tragedy to feel global. If you'd asked me in 2002, I would have guessed that the recession was the worst one since the Great Depression; literally half or more of my friends were out of work. Similarly, to academics, it feels like the whole world is going to hell because academic employment has become dramatically less secure; there has been a glut of graduate students, particularly in history and related fields, that has persisted since the 1960's, even as increasingly professional administrations rely more and more on adjunct professors who get no benefits, no job security, and get paid slightly less per hour than those Bangladeshi children who knot rugs. Though to be fair, the adjuncts are not chained to their desks, at least not literally. Of course, that may just be because the administration wants to keep them running around as much as possible.

But the fact that some of us have had to settle for jobs less lucrative or fulfilling than we expected does not mean that the whole world is going to hell in a handbasket. Yes, we probably can't rely on social security, but on the other hand, it's easier than ever to save for retirement, with Uncle Sam basically giving you a 30% match on every dollar you put into your 401(k). I think the most frightening thing for many of us is the feeling that we have no safety net--that we'll end up poor and abandonned in retirement. But for most of us, it would probably be easy to save for retirement if we were willing to live like your parents did--or at least like my parents did. One television, no stereo, no VCR, no cable, one (used) car, six rooms for four people, no eating out, no cell phones, no vacations other than visiting relatives, stretching meat out with egg and bread and noodle rings, jello as a salad, turn the light off when you leave the room and get off the phone--it's long distance!

That sounds dreadfully as if I'm lecturing Laura on how she'd be fine if she didn't waste so much money. Which is stupid. For one thing, I don't know Laura, and for all I know she pinches pennies so hard that Lincoln screams. And for another, I don't have kids, which I am reliably informed suck up 10% more income than any normal person earns, so it would be ridiculous of me to comment. And for a third, I know all too well just how deeply an intellectually rewarding trip to graduate school which does not result in the expected job can dig you into a financial hole. I know y'all think I'm joking about my student loan officer when I shill for you to buy stuff through my Amazon account, but without those commissions, I wouldn't be able to afford to buy books; the budget here at Stately Galt Manor is so tight it squeaks.

But the thing is, that even as I indulge in invidious comparisons between my apartment and the one I grew up in, and those my classmates are currently renting or buying, I have to remind myself that in so many ways I'm better off than my parents were at my age. I'll live longer (well, statistically, anyway), I have a fantastic job, and though I complain about lack of space, I have everything I need. The things I want more space for, and more money for, are incidentals that the human race lived happily without until, oh, last week. On the other hand, I have things they never dreamed of, like this blog, that enrich my life in various intangible, yet crucial, ways. Just like the song says, the good old days weren't always good, and tomorrow ain't as bad as it seems.

From the desk of Jane Galt:

Measuring prosperity

Sorry I haven't posted for a while, but there have been a lot of demands on my time. You probably didn't realise this, but occasionally I see people in the offline world, and it seems that the last few weeks of November are when everyone wants to see ol' Janie. As a result, my morning blogging time has been used up by the need to catch up on sleep.

Anyway, I've been meaning to post for a while on Kevin Drum's argument that instead of looking at GDP growth, we should keep our eyes on the growth in median wages. I don't think that that's a bad idea, or really a good idea . . . I think that excessive emphasis on any one metric leads to distorted economic thinking, and don't agree with Mr Drum's assertion that you can't have a society getting worse off as long as median wages are growing; people at both tails could be getting dramatically poorer without altering the trajectory of median wages. WHile I realize that for some people, the wealthy getting poorer is a feature rather than a bug, this would still decrease net utility in our society. Unless our society gets a lot of net utility from watching rich people suffer, and while this may be true, judging from our tabloids, I'd prefer not to believe that we as a nation are that petty.

But more deeply, I don't see either of these metrics as a very good guide to policy, because I don't believe that there is very much the government can do to influence them, for good or ill.

Oh, we have a good idea, on a gross level, of what governments should not do to really screw up the economy. Governments should not create massive hyperinflation, they should not nationalise industries, they should not implement regulations that allow industries to function as cosy little cartels, they should not block trade with other nations, they should not enact currency or price controls, they should not indulge in confiscatory taxation. (Note to conservatives: 35% marginal tax rates do not count as confiscatory for these purposes. Nor, for that matter, do 45% or even higher rates.)

But other than not screwing things up, there's very little the government can do to increase growth. And there's nothing that the government can do to increase median wages that isn't on our list of bad things you shouldn't do to the economy.

Just as conservatives prefer to believe that the Reagan tax cuts resulted in the economic growth and increased tax revenue of the eighties, despite the fact that the tax cuts coincided with recovery from the worst recession of the postwar period, liberals like to believe that leftish economic policies resulted in the extraordinary wage growth of the 25-year period following the end of World War II. Unfortunately, the numbers don't back this up. The growth in wages largely tracks the growth in productivity, which was not due to government policy, but to changes in technology and the labour force. While union bargaining power can increase the wages going to union workers, as I understand it there's little indication that this increase is taken from capital's share of national income, which means that whatever unions generated in the way of surplus wages for their workers seems to have come out of the pockets of other workers, or consumers.

So why have median wages been stagnating even though productivity began increasing in the 1990s? Two reasons: increasing labour supply, and increasing costs for benefits. While median wages have stagnated, total compensation hasn't. In essence, workers have been consuming all of their income increases as health care.

At the same time, new entrants have flooded into the labour market, not just here, but abroad. The world labour force is currently undergoing a massive expansion as the result of the entry of India and China's citizens, who number approximately 1/3 of the entire population of the earth. At home, women have entered the labour force in dramatic numbers (an increase which has now stopped). And technology is "entering" the labour force by displacing workers. Just think how many fewer secretaries there are now that the typing pool has disappeared.

Those technology improvements raise productivity. But they don't do so evenly; they have raised wages mostly at the top, unlike the mechanical revolution, which increased the productivity of low-skilled assembly-line workers. Difference in skills account for most of the divergence between the top and the bottom of the income distribution. (Yes, CEO salaries are largely related to how cozy they are with the board, not how skilled they are. But there are only about 1,000 people in the country running companies large, and cozy enough, to get truly outrageous pay packets. This is a minor annoyance, not a national disaster.)

The government could shoot illegal immigrants on sight, force women out of the labour market, curtail trade, and slow the pace of technology growth so as to reduce the return on skilled labour. But these are not good things for the government to be doing. Making the country as a whole poorer in order to reduce income inequality doesn't sound to me like a good idea. I realise that many liberal commentators claim that they can do this without sacrificing growth. But I don't see how.

From the desk of Jane Galt:

Thrift

Alex Tabarrok's post on Bill Cosby led me to this column in the Washington Post, arguing that Cosby's tirade against underclass blacks is wrong.

It smacks of elitism that poor blacks are held to standards that most Americans aren't, Dyson said in an interview. He reminds readers of what President Bush asked Americans to do after Sept. 11, 2001.

He asked us all to go shopping. And many did and are still shopping till they are now dropping from financial exhaustion.

"It is interesting that Cosby expects poor parents, and youth, to be more fiscally responsible than those with far greater resources prove to be," Dyson writes.

But what about the oft-repeated assertion that poor blacks can't afford to be spendthrifts?

"There is a cruelty to such an observation," according to Dyson. "Not only is the poor parent, or child, at a great disadvantage economically, but they are expected to be more judicious and responsible than their well-to-do counterparts, with far fewer resources."

Dyson's book is a stinging indictment of upper-middle-income blacks who have benefited from the civil rights movement but now feel justified to criticize poor black folks who haven't ascended to the same financial success.

By no means does Dyson absolve impoverished blacks of personal responsibility. Instead, he documents why we all "must never lose sight of the big social forces that make it difficult for poor parents to do their best jobs and for poor children to prosper."

You've heard me argue before that the middle-class moralistic tone taken towards the poor often vastly overestimates how easy it is to transcend one's peer group. But that argument can't be applied to Cosby, who grew up in the Philadelphia ghetto. And if those pushing middle-class values on the poor can seem insufferably smug, their prescriptions are, by and large, correct. To me, this columnist sounds not compassionate, but lunatic. Do people with fewer resources have to be more judicious than those with more? D'uh! Speaking as someone who chose a career in which she makes only a fraction of what her graduate school classmates rake in . . . well, if I wasn't a hell of a lot more judicious and responsible than my classmates, I'd be bankrupt and homeless. It seems rather crueller to let someone continue to dig themselves into a pit, than to point out that the only way they are headed is further down.

From the desk of Jane Galt:

The poor really are different

. . . notes William Raspberry:

I recalled what William Galston, a University of Maryland professor of public policy, once called his "favorite statistic": that finishing high school, reaching age 21 and getting married before having the first child dramatically reduces the odds that the child will experience poverty.

So, I wondered, what does he make of the "Promises" findings?

"If I were a woman in a community like the one they describe, and the pool of men I was looking at involved dropouts with criminal records and abusive patterns, I wouldn't marry either. But that omits the prior question: Why would I allow such a man to impregnate me?"

In short, it isn't simply the decoupling of marriage from children, he said, but the decoupling of the decision to have a child from the rest of your life.

"I'm not surprised by the finding that these young women place a high value on marriage," Galston told me. "The poor do not differ from the rest of America in their aspirations. They want college, a profession, marriage, a house with a picket fence. What distinguishes them is some combination of opportunity and concrete steps from their current reality to their future dream. Basically, what these women have is a magical outlook on life."

Galston's "magical outlook" aptly describes a phenomenon I've long observed but never named. I've asked young men where they expect to be 10 years hence, and their earnest expectations include "nice job, nice wife, nice car, nice crib" -- though nothing they are doing or planning puts them on track to achieve those goals. They are less aspirations than hopes.

Or magic.

"The poor don't need their consciousness raised as to what a good life looks like," Galston says. "They may have a pretty good idea of what they want 'way down the road,' but they don't know what to do next .

That's why mentoring is so much more important than money.

From the desk of Jane Galt:

Does IQ matter?

Bryan Caplan thinks so:

Lots of people loathe IQ research. But even people who are open-minded about IQ often puckishly say "So what?" It doesn't really matter if the IQ is the main determinant of earnings, or economic growth, or anything else. All that matters is whether the marginal effect of policy on the variables we can change is worth its marginal cost. Thus, it doesn't really matter if IQ matters.

But this response overlooks a basic point. If IQ matters, then analyses that ignore IQ will typically overstate the marginal effect of other variables.

. . .

Thus, IQ is highly policy-relevant after all. The left-wing ideologues who damn anyone who even thinks the letters "IQ" are actually on to something: IQ research does turn out to be a rationale for "right-wing" laissez-faire policies. The more IQ matters, the more likely it becomes that existing government policies are a waste of money - and that you would get a bigger payoff by doing less - or maybe nothing at all.

As far as I can tell, interventions to correct IQ are nearly prohibitively costly. Head Start is useless, and even expensive interventions like the Perry pre-school project produced results that are distinctly disappointing from a cognitive perspective: at a cost of roughly $23,000 per child per year, the project produced moderate increases in high school graduation and income, while lowering crime rates and modestly decreasing welfare dependancy. But while the results are worthwhile, and probably cost-effective enough to justify to even the most hard-hearted welfare opponent,my understanding is that the project did not turn poor kids into middle-class adults; it turned poor kids into more functional low-income adults. And $23,000 per kid is going to be a hard sell in today's budget environment.

From the desk of Jane Galt:

The poor really are different

The post below is complicated, for some conservatives, by the fact that if the poor acted like the middle class, they wouldn't have problems like no credit or savings.

If poor people did just four things, the poverty rate would be a fraction of what it currently is. Those four things are:

1) Finish high school
2) Get married before having children
3) Have no more than two children
4) Work full time

These are things that 99% of middle class people take as due course. In addition, there's some pretty good evidence that many people who are poor have personality problems that substantially contribute to their poverty.

For example, people with a GED do not experience significant earnings improvement over people who have not graduated from high school. In this credential-mad world, this simply should not be. And it is true even though people with a GED are apparently substantially more intelligent than people without a GED.

How can this be? Even if the GED were totally worthless, available evidence seems to indicate that intelligence carries a premium in the labour market.

The best explanation seems to be that people with a GED (as a group) are smart people with poor impulse control. What intelligence giveth, a tendency to make bad decisions taketh away. Anyone who has spent any time mentoring or working with poor families is familar with the maddening sensation of watching someone you care about make a devastating decision that no middle class person in their right mind would ever assent to.

So I think that conservatives are right that many of the poor dig themselves in deeper. But conservatives tend to take a moralistic stance towards poverty that radically underestimates how much cultural context determines our ability to make good decisions.

Sure, I go to work every day, pay my bills on time, don't run a credit card balance and don't have kids out of wedlock because I am planning for my future. But I also do these things because my parents spent twenty or so years drumming a fear of debt, unemployment, and illegitimacy into my head. And if I announce to my friends that I've just decided not to go to work because it's a drag, they will look at me funny--and if I do it repeatedly, they may well shun me as a loser. If I can't get a house because I've screwed up my credit, middle class society will look upon me with pity, which is painful to endure. If I have a baby with no father in sight, my grandmother will cry, my mother will yell, and my colleagues will act a little odd at the sight of my swelling belly.

In other words, middle class culture is such that bad long-term decision making also has painful short-term consequences. This does not, obviously, stop many middle class people from becoming addicted to drugs, flagrantly screwing up at work, having children they can't take care of, and so forth. But on the margin, it prevents a lot of people from taking steps that might lead to bankruptcy and deprivation. We like to think that it's just us being the intrinsically worthy humans that we are, but honestly, how many of my nice middle class readers had the courage to drop out of high school and steal cars for a living?

I'm not really kidding. I mean, I don't know about the rest of you, but when I was eighteen, if my peer group had taken up swallowing razor blades I would have been happily killed myself trying to set a world record. And if they had thought school was for losers and the cool thing to do was to hang out all day listening to music and running dime bags for the local narcotics emporium, I would have been right there with them. Lucky for me, my peer group thought that the most important thing in the entire world was to get an ivy league diploma, so I went to Penn and ended up shilling for drug companies on my blog.

Maybe you were different. But think back to the times--and you know there were times--when trying to win the approval of your peers convinced you to do things that were stupid, wrong, or both. Remember what it felt like to be sixteen and skinny and maybe not as charming and self confident as others around you, and ask yourself if you'd really be able to withstand their derision in order to go to college--especially if you didn't even know anyone who'd ever been to college, or have any but the haziest idea of what one might do when one got out. Try to imagine deciding to get a BA when doing so means cutting yourself off from the only world you know and launching yourself into a scary new place where everyone's wealthier, better educated, and more assured than you are.

Or take a minute right now and try to imagine how your friends would react if you announced that you'd decided to quit work, have a baby, and go on welfare. They'd make you feel like an outsider, wouldn't they? And isn't that at least part of the reason that you don't step outside of any of the behavioural boundaries that the middle class has set for itself?

Bad peer groups, like good ones, create their own equilibrium. Doing things that prevent you from attaining material success outside the group can become an important sign off loyalty to the group, which of course just makes it harder to break out of a group, even if it is destined for prison and/or poverty. I think it is fine, even necessary, to recognize that these groups have value systems which make it very difficult for individual members to get a foothold on the economic ladder. But I think conservatives need to be a lot more humble about how easily they would break out of such groups if that is where they had happened to be born.

That leaves us in a rather awkward place, because while I don't agree with conservatives that the poor are somehow worse people than we are, I also don't agree with liberals that money is the answer. Money buys material goods, which are not really the biggest problem that most poor people in America have. And I don't know how you go about providing the things they're missing: the robust social networks, the educational and occupational opportunity, the ability to construct a long-term life instead of one that is lived day-to-day. I think that we should remove the barriers, like poor schools, that block achievement from without, but I don't know what to do about the equally powerful barriers that block it from within.

But I also don't think that the answer is to use those barriers as an excuse to wash our hands of the matter.

From the desk of Jane Galt:

Perish the poor

For all that I cringed in reading the self-satisfied proclamation that the Katrina disaster is the inevitable result of American's political sins, I do think that the catastrophe has a lot to do with poverty. But as I said in my previous post, I think that the interaction of the poverty with the hurricane to produce a social disaster is extremely complicated.

The problem of the poor is that the poor have more than one problem. In America, in these days, people who don't have more than one problem usually don't end up being poor. The poor lack education; they lack robust networks of family and friends to weather them through a crisis; they lack resources to draw on in emergencies, and yes, conservatives, they lack middle-class behaviours that could help pull them out of the underclass. We saw all of those things operating in New Orleans.

The poor, because they were uneducated, did not understand as readily as the middle-class that fled that this time, it was really a good idea to evacuate, even though the last seven times you evacuated nothing happened.

The poor lived on the lower ground, where flooding was worse, because housing that tends to flood is cheaper than housing that stays dry.

The poor did not know anyone with a boat they could call when the water started to rise.

The poor did not have any far-flung family, spread around the country by the modern educational and professional employment system, to stay with outside of New Orleans. Many of the refugees have reported that this is the first time they've left the city.

The poor did not have any money to stay in a motel, because it was the end of the month (government checks come on the first of the month) and the pay period (which generally spans two weeks), and few poor people have savings.

The poor were less likely to have cars, or know people with access to cars. They are less likely to be connected with churches or other social organisations that could have functioned to make sure they got out.

The poor do not listen to news as frequently, or as intently, as the middle class, meaning that they had a much hazier idea of what was going on, even if they had had the education to understand what a Class Five hurricane was.

The poor were angry about the divide between them and the middle class, particularly since the middle class is mostly white, and the underclass is mostly poor. When the refugee relief efforts broke down, the belief that they were being targeted because they were black seems to have led to violent and anti-social behavior.

Those with behaviour problems and anti-social personalities tend to be poor. (This is not to say that poor people all have behaviour problems: all rabbis are jewish, but that doesn't mean that all, or even a majority, of jewish people are rabbis). When the middle-class fled the city, the concentration of the dangerous among the population rose precipitously.

The poor had nowhere to put their pets (they were not allowed in the Superdome), leading many to stay with their animals rather than abandon them. Middle class people who went to motels or friends didn't have this problem.

The poor are vastly less responsive to public education efforts than the middle class (I've seen few good theories as to why). This meant that they didn't take evacuation warnings seriously.

The poor have a harder time missing days of work than those on salary; undoubtedly, some were worried about losing time if they evacuated.

The poor tend to be more passive than the middle class. That not only prevented evacuation; it probably prevented some possible self-rescues.

The poor tend to have less rich social networks, which meant fewer people looking for those who were trapped; that's the repeated lesson of heat waves in America.

The poor lack access to credit. Without credit it is hard to get a motel room; it is also hard to comply with an emergency evacuation order if it's the end of the month and you're out of cash.

The poor are the ones who mostly make up gangs, who are organized, have guns, and take very little effort to turn into a marauding mob. This is only a tiny fraction of the population, but a tiny fraction is enough to terrorize the rest.

As you can see, few of these are directly reparable by the government in any sort of reasonable time frame, and I'm not sure a lot of them are reparable at all; as far as I know, people on the dole in Europe live from check to check too. Other things, like gangs, are something the government has been fighting for some time.

But the government could have rectified this by building an evacuation plan that included:

1) Shelter for all the people without means to stay in hotels, not a small fraction of them

2) Provision for pets

3) A serious, door-to-door evacuation effort

4) Transportation to shelters from NOLA

Why didn't New Orleans do this? Some combination of cost, ignorance, and the wishful belief that something that hasn't happened yet won't happen tomorrow, I expect.

But what about Bush? I hear you cry. Look, the Bush administration undoubtedly screwed up in many ways, but as far as I can tell, none of their preventive failures would have made much difference. The majority of people are expected to have drowned because they were trapped in their attics in the relatively early hours of the flood--when there simply wouldn't have been any way for even a crackerjack FEMA effort to have rescued the majority of the dead. Once the levee broke, those people were mostly doomed. And responsibility for evacuation rests with the local government.

Now, perhaps it shouldn't. Perhaps the Feds should do that job. But those are big questions of federalism--and I think that Mickey Kaus is right that this disaster has shown one of the major weaknesses of federalist government, though I also agree with a colleague that there's simply no other way to organize a country as big as the US. And given the fact that the administration was apparently prevented from deploying some troops because of jurisdictional clashes with the Louisiana governor after Katrina struck, it seems unlikely that the administration would have managed to secure such powers before the disaster that showed how badly it was needed.

But I also think there's a wishful tone to the belief among many liberals that this all could have been prevented had only a Democrat been in charge. Exhibit one for this is the mendacious charge that Bush somehow cut funding to levee building efforts that would have prevented this. Exhibit two is the more plausible assertion that FEMA was better under Clinton. But I'm not quite sure how we know it was better. We had one major disaster under Clinton, Northridge, in which local services remained intact, communications were fine, and most of the rescues seem to have been performed by private citizens at the site. What we may have just learned is that when it's needed, as it was in 1992 and 2005, FEMA doesn't do a very good job. And if that's so, there are deep systemic problems having to do with the bureaucratic and legislative structure of the US government that will not be changed by changing the party affiliation of the five guys at the top of the pyramid. Yet no one's really looking at changing the system that broke down--only at changing out some of the cogs in the machine.

From the desk of Mindles H. Dreck:

Peer pressure

Blogger contributions for flood aid can be logged here. Certainly we can all give a few days' pay.

I gave to Mercy Corps, but I suggest you find the charity that works for you.

But just do it now. The earlier they have the money, the faster they can add resources. It's going to be a beautiful weekend here in the Northeast. I wanted to enjoy it knowing I did something.

I tell you what. I'll donate up to another $1,000 to match further contributions referencing this blog as logged on Truth Laid Bear. On your honor - you actually made the donation, and you made it after reading this. Send me an email (dreck-at-janegalt.net).

UPDATE: Thanks Amber, Mark Garbowski and Dr. Ann Sherman for donating.

In addition to a significant donation, David Walser is hosting a party to make Hygiene Kits (I had some trouble with that link, try going to providentliving.org and follow 'caring for others', 'humanitarian services', 'make humanitarian kits'. As he points out:

Since we have a desire to give of our time and effort in addition to our cash, we are going to host a party at our house to assemble hygiene kits. Here's a link that
describes the purpose of the kits:

http://www.providentliving.org/content/display/0,11666,3471-1-1607-1,00.
html.

Obviously, the kits might not be ready in time to be of much help for those displaced by hurricane Katrina. If not, they will be available when the next disaster comes. (Our neighborhood assembled a few thousand kits in response to the tsunami disaster. The need created by the tsunami had exhausted the supply of kits. The kits made in response to the tsunami have been used in the disasters that followed. That may be the case with any kits we assemble now.)

I only mention this because my sense is that there are many who longing to do something more than give cash.

Good idea.

ANOTHER LARGE DONATION from reader "Hank". Well done. I see there have been a few donations without an email to me - 'fling93', technofunk, Jeff Boulier, Sean Davis. I think they are going for the pound cake (see next post). Jane and I will have to sort that out.

I really couldn't decide what blog to credit, as so many of them are pushing this. I thought it was Hewitt that recommended Mercy Corps (and credited his blog with my donation), but I see I was wrong. Oops.

From the desk of Jane Galt:

Credit catastrophe

One million with ruined credit? That number is surely too high; most people will make their payments. Nonetheless, it's reasonable to assume that there will be many whose credit suffers from Hurricane Katrina--people who forget payments because their house is underwater, people who lose everything and can't afford to meet their debts. It seems logical that creditors and credit agencies would have some system set up for dealing with natural disasters like this, but who knows?

Something Jack Shafer has had the guts to point out is that the people being affected by the hurricane are almost invariably black and poor. I've no doubt there are some closet racists out there telling themselves "look at all those black people looting" as they watch the mayhem on television; I doubt any of them are telling themselves "look at all those black people left for days without food, water, or power in 90 degree heat because they were too poor to evacuate". I myself was thinking "Why the hell didn't all these people leave when they were told?" The answer, Jack Shafer points out, is that it's not so easy when you're poor:

To be sure, some reporters sidled up to the race and class issue. I heard them ask the storm's New Orleans victims why they hadn't left town when the evacuation call came. Many said they were broke�"I live from paycheck to paycheck," explained one woman. Others said they didn't own a car with which to escape and that they hadn't understood the importance of evacuation.

But I don't recall any reporter exploring the class issue directly by getting a paycheck-to-paycheck victim to explain that he couldn't risk leaving because if he lost his furniture and appliances, his pots and pans, his bedding and clothes, to Katrina or looters, he'd have no way to replace them. No insurance, no stable, large extended family that could lend him cash to get back on his feet, no middle-class job to return to after the storm.

It is, of course, no more tragic when a poor person dies than a rich one; the ratio of one life, one death is the dreadful arithmetic we all face alike. But it is more tragic when someone dies because they have nowhere to go, than when only their own bullheaded stupidity is to blame.

From the desk of Jane Galt:

GGS blogging

Brad de Long and a few others have been doing a lot of Guns, Germs and Steel blogging. The topic: is Jared Diamond a racist? Since one of my main complaints with the book is that he spends a huge amount of time trying to conclusively disprove something that rather few people in his readership demographic believe--that the low technology level achieved by peoples outside of Eurasia by 1500 was the result of their inherent genetic inferiority--I don't think this is a debate I'll step into.

The more interesting critiques, like Timothy Burke's, fault Jared Diamond for being too much of a geographical determinist; what about culture, asks Mr Burke? I agree that he's overdeterministic, but no one has made a cause for my favourite candidate for explaining the technological difference: luck.

Having convinced me that Eurasia simply had better crop candidates than anywhere else, Mr Diamond undercut his argument when it came to a discussion of corn. Wild corn, it turns out, is a remarkably bad candidate for domestication. In it's native state, corn ears are about the size of a human fingernail. It took milennia to breed the succulent sweet corn that I enjoyed last night.

So what other food candidates are there that people didn't try to domesticate, or didn't have the patience to stick with? Or that didn't produce as good mutations at the right time? Or where there was no agricultural genius to invent, say, the rice paddy? I found other arguments, such as the point that it is easier for domesticated food crops and animals east-west than north-south, still very compelling, but the argument that Eurasia just lucked out on domestication candidates suddenly lost a lot of its lustre.

It turns out I wasn't the only one. The inimitable Brian Caplan had the same thought:

According to Diamond, the horse is just easier to domesticate and gives a bigger bang for your buck than a llama or a zebra. What made Diamond's argument especially convincing to me was his claim that since the integration of the world economy, scientists and entrepreneurs have tried mightily to domesticate non-Eurasian animals, with little success. Zebras...

were tried out as draft animals in 19th-century South Africa, and the eccentric Lord Walter Rothschild drove through the streets of London in a carriage pulled by zebras. Alas, zebras become impossibly dangerous as they grow older...Zebras have the unpleasant habit of biting a person and not letting go. (Guns, Germs, and Steel, pp.171-2)

More generally:

In the 19th and 20th centuries at least six large mammals - the eland, elk, moose, musk ox, zebra, and American bison - have been the subjects of especially well-organized projects aimed at domestication, carried out by modern scientific animal breeders and geneticists... Yet these modern efforts have achieved only very limited successes. (Guns, Germs, and Steel, pp.167-8)

But doubt about this argument started to well up in me when I reflected on Diamond's history of corn:

Archaeologists are still vigorously debating how many centuries or millenia of crop development in the Americas were required for ancient corn cobs to progress from a tiny size up to the size of human thumb, but it seems clear that several thousand more years were required for them to reach modern sizes.(Guns, Germs, and Steel, pp.171-2)

Or to take a more familiar example, look at what we've done with wolves! We've turned them into everything from the noble Lassie to the irritating poodle. It really makes me start thinking, "Sure, the zebra is hard to domesticate now; but if we worked on them for a few hundred years, I bet the change would be amazing."

On reflection, it's not surprising that modern science has failed to domesticate animals like zebras. It would probably take generations, so the investment wouldn't pay a reasonable rate of return. And we've already got something better, anyway.

But if breeding useful animals takes centuries, I don't see this as a great explanation for why Eurasia did so much better than Native Americans and Africans. You'd just wind up asking, "Why were Eurasians more successful breeders?," which seems like a special case of "Why were Eurasians more economically successful overall?"

Admittedly, there is more to Diamond's argument, and it's worth reading in its entirety. He also says that the wild ancestors of the Eurasian flora and fauna were initially closer to being useful to man than the non-Eurasian flora and fauna.

Maybe he's right, but I'm worried that Diamond's suffering from hindsight bias: If the Eurasians domesticated the horse, it must have been inevitable, right? But if the Incas had shown up in Europe in 1492 with deadly llama cavalry, and mowed down backward European infantry, I suspect modern Incan historians would have declared the horse a hopeless candidate for domestication too.

From the desk of Jane Galt:

Wolfie for the Bank

Paul Wolfowitz takes the helm of the World Bank today. So far, so good. But fighting poverty nation by nation is perhaps the hardest job in the world today. A while back I had an interesting debate with Laura, of the ever-excellent Apartment 11D, on whether or not "unregulated capitalism" was good for the third world. My answer is that when we look at the third world, our heart cries out, as it should, but that doesn't mean that those in the third world are victims of anything but nature. The appalling poverty of Sri Lanka or Mozambique is not some bizarre aberration that can be tracked to a cause we can cure. We are the aberration; Sri Lanka and Mozambique are the normal state of human history. Trying to figure out how to reproduce those abnormal results in a couple hundred more countries is very, very hard. Fascinating, and unbelievably important. But tricky. If Paul Wolfowitz thought he was controversial before, wait until he tries to finance his first dam.

From the desk of Jane Galt:

What do you mean by rich?

Ever noticed how no one in the United States--except for Paris Hilton--is rich? People making incomes well into the six figures don't think of themselves as rich; they're just upper middle class. That may be because someone on the Upper West Side making $700K is cramming his family into a seven room apartment that would hardly do for a garage in whatever leafy suburban haven spawned him.

What does it mean to be rich? We have only the vaguest idea, generally, which is why it's so hard to pinpoint in ourselves. My idea of being rich, having grown up on the Upper Westside, has less to do with several thousand square feet to dust and vacuum, and more to do with never having to worry about money.

But, of course, we can always find new things to worry about. By the standards of, say, 1920, every single one of us, even welfare mothers, is rich. Every single one of us has enough food that we never need to go to bed with our stomachs crying out to be filled. Every single one of us has running water--running hot water--and bathtubs and indoor toilets to put the water into. We have stoves that do not need to be carefully tended to keep the fire going. We have central heat. We have cars or public transportation to take us wherever we want to go for a trivial sum. Almost every poor person in America has a color television, offering free entertainment 24 hours a day, and most of them can afford to buy cable to go along with it. We are so wealthy that even a welfare mother can afford to let her children stay in school until they graduate--indeed, so wealthy that a once-unbiquitous dramatic scene, the child vowing to drop out of school in order to help the family out, has entirely dropped out of the literary canon. The average middle class man of 1920 would have regarded all but the most hopelessly drug addled or mentally ill street people as wealthy beyond dreams of avarice.

And yet we have not stopped dreaming, have we? There is always another IPod to buy, a vacation to take, an expensive school that our children must attend in order to make sure that they can afford to send their children to still more expensive schools. As long as human beings can dream, they will never get to be rich.

From the desk of Jane Galt:

Numbers that just don't add up

This article in Reuters, provocatively titled "In U.S., So Many Obese, So Many Hungry" says that "In a nation where obesity is the second-leading cause of death, 33 million Americans don't know where their next meal is coming from -- a year-round paradox that only becomes more pronounced during the holidays."

This number makes no sense.

It makes no sense because 33 million people is more than 10% of the US population. Yet only 12.5% of the US population is below the poverty line, even with the recession-driven spike of recent years.

It especially makes no sense because those living below the poverty line have much higher incidence of obesity than those living above it. Either the remaining 2.4% of the population that is poor but isn't "food insecure" (the USDA figure they're using) is really whomping the hell out of those averages, or a lot of people who don't know where their next meal is coming from are managing to run into it anyway.

As it happens, the definition of "food insecurity" is rather more tame than "don't know where their next meal is coming from", as this article from the USDA makes clear:

"Food insecure" means being uncertain of having, or being able to acquire, enough food to meet basic needs because of lack of money or other resources. . . on a typical day, the prevalence of food insecurity with hunger is only about 13 to 18 percent of the annual rate. For example, in 1998 people in 3.7% of households were hungry at some point in the year because of inadequate resources.

Note the introduction of "food insecurity with hunger", a different, smaller category from "food insecurity". That is the actual number we should be looking at, and it is about 1/3 of the number Reuters gives us. Awful statistics, ho!

From the desk of Jane Galt:

The poor really are different

Reihan Salam has a terrific post on why being a middle-class drug-addled screwup is not the same thing as being a poor drug-addled screwup:

The profoundest Ivy League screw-ups feel screwing-up in the gut. That�s why, unless death by overdose intervenes, they�ll eventually stop screwing-up. The anxieties of said screw-ups are dominated almost entirely by the weight of their own expectations. It�s painful and awful. Gut-wrenching is the word. It�s also provides an inner reserve, of intestinal fortitude and of inner �will to power�-esque overdrive energy. That�s something most very poor people don�t have. Those who have it don�t remain poor for very long. My concern is for the others.

Note the �thousands of dollars stolen from my friends and lovers and family.� Drug addicts without this kind of an infrastructure exhaust whatever meager infrastructure they do have early on, and then they prey upon strangers. Then they go to prison, with all the horrors that entails. What angers me, and I realize that I haven�t been very coherent, is that a middle-class person can mess up again and again, falling through safety net after safety net, and still thrive, given time and a bit of gumption and stick-to-it-iveness. If you�re not middle class, and you�re not from a stable, intact, literate, ambitious family, you will have a very, very hard time. Your likelihood of death is vastly higher, as is the likelihood that you�ll live at the mercy of a criminal justice system you scarcely understand. (That I, in my infinite idiocy, scarcely understand.) This is a grave injustice, and it derives at least as much from a cultural breakdown driven by middle-class people who�ve suffered virtually none of the consequences as from the unconscionable stinginess of a social policy oriented primarily towards social control.

From the desk of Jane Galt:

Books on the poor, we will always have with us

A while back I made a qualified recommendation of David Shipler's The Working Poor in the course of (unqualified-ly) telling you to go read Jason DeParle's American Dream right now. Steven Malanga has a rather harsher take on it in his review of books about the working poor.

Mr Malanga's review is pretty one sided, but it makes some important points. In particular, it scores on Barbara Ehrenreich's Nickel and Dimed, which I thought offered occasional insight into the lives of the working poor, but found almost unreadable because of its dripping, venomous contempt for the middle class (and its paternalistic contempt for her working class co-workers, whom she repeatedly implies are too stupid or deluded to understand that THEY'RE BEING BRUTALLY EXPLOITED AND THEIR LIVES ARE WORTHLESS!). There was also too much pseudo-intellectual Freudian interpretation of perfectly ordinary practices, supposedly showing the subtle, cruel underbelly of employers. Wal-Mart's pre-employment tests aren't just an attempt to protect the store from thieves and erratic workers, or even a useless and idiotic ritual designed by managers who ought to know better; they're a plot to make the worker feel powerless and dominated by The Oppressor. Merry Maids doesn't have people scrub the floor on their hands and knees because that gets the floor cleaner (she quotes an "expert" who says it doesn't); it's because nasty middle class women like to see their house cleaners in a submissive posture.

(Here, she happens to have entered on two of my areas of expertise: floor cleaning, and women who employ house cleaners. Though Ms Ehrenreich claims to be a house cleaner of old repute, she is clearly deficient in her floor knowlege; no one who has ever scrubbed their floor on their hands and knees would seriously entertain the idea that one can do just as good a job with a mop--there's simply no serious comparison. My mother is both a knee-scrubber, and an employer of cleaning professionals. The cleaning lady does her floors with a mop. But when my mother cleans, it's with a bucket and a sponge.)

Malanga's review is justifiably scathing. I urge you to check it out right now.

From the desk of Jane Galt:

Income Inequality: Nature v. Nurture

Do parents really transmit their earning potential to kids? If they do, then there's a social argument for rather more draconian redistribution and other measures (since no one can really argue that anyone "deserves" to be born to certain parents) than if they don't.

Of course, the mechanism matters too. The ever-incisive Alex Tabarrok posts about a paper which seems to indicate that what wealthy parents transmit to their children is not "privilege" but genes with high income potential:

The graph shows how parent income at the time of adoption relates to child income for the adopted and "biological" (non-adopted) children. The income of biological children increases strongly with parental income but the income of adoptive children is flat in parent income. What does this mean?

The graph does not say that adopted children necessarily have low income. On the contrary, some have high and some have low income and the same is true of biological children. What the graph says is that higher parental income predicts higher child income but only for biological children and not for adoptees.

This would seem to track with recent research indicating that one of the most prominent symbols of affluent privilege--the Ivy League education--does not actually produce much economic success. Students who are accepted to top-ranked schools, but choose to go somewhere else, do just as well economically as the children who go through the high-priced, high status school; the secret of their success is not the expensive education, but whatever personal qualities permitted them to be admitted to Harvard. Business school recruiters, I quickly learned, care little about what you have studied; what they are interested in is the fact that you have what it took to be admitted to the University of Chicago, or another prestigious programme.

Mr Tabarrok points out that these results are not perfectly generalisable:

The other proviso is that the Holt experiment is only informative for the experimental variation in environment. In other words, we can tell from the Holt experiment that variation in parental income from around 25 thousand to 175 thousand doen't have much impact on variation in adopted child income but all these children are raised in the United States so culture and other variables are roughly similar. In other words, move a child from a poor country to a rich country and you would expect a much bigger treatment effect than moving a child from a poor family to a rich family.

I'd add that the sample undoubtedly excludes the United States' most dysfunctional families, those whose parents are trapped in the underclass, and its cycle of unemployment, poverty, drug/alchohol use, abuse, and so on. If one compares those families to middle class ones, one might see a very close correlation between parental income and child income. But once one has reached the minimum threshold necessary to reach the lower bounds of the working class, how much money one's parents make seems to matter very little independant of genetic heritage.

This raises some interesting philosophical issues. No one "deserves" a good genetic inheritance. On the other hand, your genes are, fundamentally, "who you are", and shouldn't our system reward people for being intelligent, well-behaved, and so forth, even if they didn't do much to get that way?

From the desk of Mindles H. Dreck:

A Superb Plutocracy Rebuttal in the Blogosphere

I have often praised John Weidner (and his invisible "Truth Squad") for his well-argued comebacks to the partisan hysteria of Paul Krugman. Weidner et. al. have outdone themselves with a lengthy rebuttal to Paul Krugman's "For Richer". This is definitely worth a read -

First, the pretext for writing it was the study cited above by P & S [Piketty and Saez, upon whose work Krugman claims to have based his article] purporting to buttress Krugman's case that we are backsliding into inequality. As we have noted before, when Krugman cites research it's a good idea to actually read the citation. It usually turns out that he either misstates or distorts his sources to promote his political agenda. Indeed, in is the case, he does both.

Let�s begin with the "return of the Great Gatsby" and Krugman's hysterical claim that people in the top 1/10th of 1 percent of income share ("plutocrats" as he calls them) are almost back to their 1913 share levels. This is patently false. We invite readers to look a Figure XII (page 46) of the linked P & S study where they the will see that the top share, despite recent increases, is just over half of the 1913 level. Furthermore, as P & S point out, the character of the people in this top tier has changed. The Gatsby types were coupon clippers or "rentiers" as P & S calls them. They spent most of their days planning the evenings' social events. By contrast, the current top tier are what P & S call the "working rich." These are people who go to their offices everyday, put in long hours and, in most cases, did not inherit their wealth. Of course, a few of them break the law occasionally and must be punished, but, in general, the working rich are a more sympathetic bunch than the idle rich of the early 20th century. Indeed they are testaments to the upward mobility in American society.

Weidner refers to Krugman as a "'glass half empty' kind of guy." I like to think of him as a "glass is only as empty as I say it is" kind of guy, myself.

Could someone send this to all the letter writers cheering Krugman for finally revealing what they already "knew"?

From the desk of Mindles H. Dreck:

Wealth Redistribution - The Easy Way

The vast majority of the political spectrum believes that it is appropriate for the government to relieve the suffering of citizens at the lowest end of the income distribution. Even those who feel it is not truly an appropriate function of government can often be convinced that having government perform that function may reduce the costs to society as a whole. In addition, most believe, as I do, that continuous, sustainable improvement in the living conditions and opportunities of all is the noblest of all purposes. Where I part company with so many of my friends and correspondents is how best to achieve such growth.

It is an entirely different and tenuous argument that an aim of government should be to deprive those at the high end of the economic distribution of their wealth. That this in and of itself is a net plus for society, or that it is simply morally right to disallow extreme wealth, is highly problematic. As Arnold Kling points out, this is basically the path Krugman is taking with his recent anti-plutocracy columns.

Similarly, I find it odd that most limousine socialists, upon the very sight of rich people getting wealthier, assume that this has happened at the expense of the poor. Zero sum reasoning that is - "you have a dollar because I don't", or vice versa. Strangely, people who have money are often more susceptible to this argument. This is guilt, perhaps, or stems from the relative wealth reference in Prospect Theory (I digress, but where would this post be without a reference to a Nobel Prize winner?).

One argument against redistribution for the sake of reducing wealth boils down to simple axiomatic beliefs: The individual has a sacrosanct right to his property (like life and liberty) and government cannot deprive him of it in order to re-engineer society in some bureaucrat's vision. Property must be exchanged for value, and not by force. These happen to be my beliefs, but there is little point in arguing this because people tend to place a particular subjective value on the right to property that cannot be argued productively.

There are, however, several arguments against purposeful redistribution that suggest it would be harmful to the greater public good.

The first is that free market economies require clear and stable rules supporting private ownership of property and clear control over one's assets' disposition in order for the economy to be productive with its capital. This can only be suggested by observed correlation, but the work of economists like Hernando de Soto has made a compelling case for property rights. Adding one's own subjective qualifiers as to what constitutes "too much" property is merely a soft way to dilute those rights. Those who point at Sweden need to consider how much more extreme Sweden's concentration of wealth is at the high end - i.e. two families and a handful of pension funds controlling most of the private sector and the government representing nearly half of the economy. Incidentally, this is true of many quasi-socialist economies - wealth is in fact concentrated in...well...the "Eurotrash" and/or a few government bureaucrats.

Another argument is that the opportunity to amass wealth increases behavioral incentives for productive economic activity. This is both true and largely undisputed. The argument becomes a lot more contentious at the margins, however. How much of a disincentive is a particular marginal tax rate or transaction cost? While generally agreeing that lower taxation is an economic stimulus on the margin, economists argue derisively with each other about whether different forms and quantities of tax reductions can be more or less of a stimulus, whether any resulting budget/debt impact will offset or even overwhelm the tax stimulus, and whether today's marginal tax rates provide much opportunity for increased incentives. Nonetheless, if we are talking about confiscating wealth for social purposes, we have to quantify the benefit to society in order to justify the marginal cost, however small or large.

Personally, I'm disgusted at the ease with which statists can actually rationalize their insufferable sense of moral superiority by advocating taking private property. Just the other night I heard one on NPR talking about raising taxes to balance the budget (and rolling out the hoary and unproven deficit-interest rate argument!). It was as if the current spending side of the budget was written and delivered with the Ten Commandments. I have the same problem with the abortion argument. I am pro choice myself, but I'm appalled at the way pro-choice activists deny that an abortion, all else being equal, is a HORRIBLE thing. We can only try to justify it using utilitarian arguments balancing the rights of the mother and the future well-being of mother, child and society against the destruction of an unborn child. But I digress again...(and invite hateful mail).

It has been suggested, with little evidence, that these very few wealthy control politics, and the benefit of better immediate wealth distribution is effectively to re-democratize. Can we prove that, for instance, Bill Gates is controlling the political process? Does Larry Ellison control the legislative or executive branch? Do the massive perpetual foundations set up by the Rockefellers, Fords, Guggenheims etc. "control" government?

The latter is much more likely.* It seems that these family foundations are much more active in government. The first generation filthy rich are too busy buying ski-in ski-out Vail mansions with attached helipads. Since these dynastic foundations are, in large part, a creation of the supposedly wealth redistributing estate tax, what does that say about the wealth concentration argument?

Absent government-imposed distortions, a fool and his money are soon parted. I say let the rich give it all to their kids. It'll be back in the economy in no time. Anti-plutocrats' ends, as well as those of us with a more laissez-faire bent, will both be served.

* Actually, one might argue it is getting to the point where unions, corporations and associations such as the trial lawyers exert a disproportionate influence on government. I'm not sure how that observation relates to the plutocracy argument and tax rates on individuals. Unions and associations pay no taxes, and corporations of size are all in the same tax bracket.

From the desk of Mindles H. Dreck:

Turns out the rich are like us

Loser: los�er
Pronunciation: 'l�-z&r
Function: noun
Date: 1548
1 : one that loses especially consistently
2 : one who is incompetent or unable to succeed; also : something doomed to fail or disappoint
3. Blogger who, upon reading a post in Jane Galt's Weblog a) focuses on one somewhat tangential comment -

The income effect is good -- richer people tend to save more of their income.

b) spends the rest of the evening locating a copy of a study that suggests this is not true, at least over a career, and c) thereby uses up his blogging time for the evening.

Except to marvel at one of the comments that suggests that "a retirement system, ANY retirement system, is a wealth transfer from one group to another." Only if you believe voluntary sale and forced redistribution are somehow equivalent! Put me down in favor of choice.