Pray That All Their Pain Be Champagne

Well I do, anyway.

The economist Justin Wolfers tweeted an interesting poll result yesterday, from Kaiser (though I’m having trouble finding it at the moment):

As far as you are concerned, do we have too many rich people in this country (31%), too few (21%), or about the right amount? (42%)

As far as I am concerned, 73% of the country appears to have lost its mind. I’d like everyone to be rich, which means, obviously, that we have too few rich people.

Failing that, I’d like to select some random non-rich person, and, without changing anyone else’s wealth, make him or her rich. And I’d repeat that operation as many times as I was allowed to. Wouldn’t you?

Here’s my question: On what theory is it preferable to go around doing the opposite — taking one rich person at a time, and, without changing anyone else’s wealth, making him or her poor? I can only think of one, and that’s if the rich person in question got rich by committing a crime.

So what explains the poll result? Do 31% of the people in the country really think both that some or all of the currently rich got that way through crime, and that none (or at least, fewer) of the currently non-rich deserve to be rich? (The former, that some rich people are criminals or otherwise rich through some sort of unfairness, seems obvious and inarguable. The latter, though, that no one or very few who are now non-rich deserve to become rich, just seems absurd to me.)

Note that if we define wealth in positional terms, the question has no meaning: We can never put more than 1% of everyone into the wealthiest 1%, and the question isn’t asking about simple population growth. It’s only if we define “rich” in absolute terms — say, a real income of $200,000 per year — that the question has any meaning at all.

I’d like to give everyone a real income of at least $200,000 per year. Why don’t you? I’m really, truly boggled here.

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357 thoughts on “Pray That All Their Pain Be Champagne

  1. Let’s define “rich” in relative but not positional terms, ie, someone is “rich” if they earn income or hold wealth more than two standard deviations above the mean (or median if you prefer). Then there are two operations that reduce the number of “rich” people. One is reducing their absolute wealth, and the other is increasing the mean (median) wealth.

    I have a feeling that people mean something like this. Certainly 73% of people would be right to say that they don’t want the number of top-end outliers to increase, because that means most of us are getting relatively (or absolutely!) worse-off. Then 21% probably think along the neoliberal lines you do, starting from the position that more rich people is a strictly better thing, defined in absolute terms.

    From my perspective, then, this poll says that “natural neoliberals” are a small minority, and that absolute-based thinking is simply not a good way to do economic analysis.

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    • Tell me, though — why is it that people would want to increase the median income, but not to the degree that people making the median income would be plausibly called rich?  (Note that when we look at the entire world, the U.S. median income is by many defnitions “rich” right now.)

      Even so, assuming it doesn’t make anyone worse off, I would certainly want to increase the median income.  Even assuming it made some very wealthy people worse off, I’d still do it.  Happily.

      It just seemed way, way less than intuitive that that was what the question was asking about.

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      • I absolutely agree that people making the median income in the US can plausibly be called rich already, certainly so relative to the rest of the world. Which is why I think that “rich” has to take the locally relative definition. From that perspective you can increase the median income all you want, but “the rich” still refers only to the outliers.

        It may be counterintuitive from the neoliberal standpoint, but from that poll I would guess that just 21% of people have neoliberalism as their natural disposition. For most people, the perspective I’m describing is, I think, the intuitive response to such a question.

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          • I think yes, on both charges.

            Chris Weaver’s comment below gets at one angle – it’s in part about the concentration of wealth. But I guess what I’m really saying is that you can’t make one person better off and leave everyone else unchanged. No matter what, you are making everyone else live in a society that is more unequal.

            People’s preferences – and society’s collective preferences – may in fact be opposed to a net increase in wealth if that increase is “badly” distributed (however you define that).

            It’s not about “eat the rich” vs “let the good times roll”. That’s naive neoliberalism where growth and aggregate output is all that matters, and where redistributive concerns are painted as some sort of uninformed populism.

            It’s much more realistic to model the aggregate welfare function not as a simple sum of individual outcomes, but also as a function of the distribution of outcomes (or at least to include preferences about distribution in the individual welfare functions if you still want aggregate welfare to be additive over individuals). Distribution does matter to people, whether you agree with it or not – we can just make your term a net zero on that count.

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                  • Because wealth is power, however it manifests it. Concentrate it in a centralized government? Wealth will manifest it there. Concentrate it in the market? Wealth will manifest it there. Concentrate it in military might? Wealth will manifest it there. Wealth = power, and power = wealth. This is where the left is coming from, and it’s something that you have to understand in order to understand the left.

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                    • I don’t think libertarians actually harbor that myth. I do think they believe that the power of wealth through government is morally different from the power of wealth through the market, but that’s because they simply have a different value system than, say, most of us on the left (and I mean actual left).

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                    • Thank you, Chris.  As usual Mike Schilling creates a strawman about libertarianism. (And, of course, engages in some of that liberal bumper-sticker debating.)

                      There are different types of power; there is the power to buy and there is the power to compel.  I’d much rather someone “buy” my compliance rather than compel it because I get something in return.

                      When wealth meets government the power that gets expressed is the power to compel, because as Max Weber said, “the state is that human institution that successfully claims a monopoly on the legitimate use of force.”  All government is based in force, even democracies.

                      Of course in a purely anarchic world wealth can buy thugs to engage in compulsion.  And of course no libertarian worth his salt finds that acceptable.  (And the recognition of that is what disproves Mike’s strawman.)   Different libertarians deal with that outcome differently, of course, but I interpret it as possibly meaning at least two different things.  On the one hand it can be the justification for (limited) government, to rein in that use of wealth’s power.  On the other hand, it can actually become the origins of the state.

                      Most libertarians, I think, will agree that the state is justified in constraining the wealthy’s use of thugs.  But we think that when you give the government power to do much more than that, you create a center of power that’s very attractive to those who want to exercise it, and of course the wealthy are going to be advantaged in getting control of it.  So we don’t understand why liberals are so cavalier about enhancing that center of power so that it becomes more attractive to those with wealth.

                      I think that’s a real paradox, and no liberal here has satisfactorily explained it.  It’s one of those areas where I want to challenge League liberals on.  If you worry about the wealthy’s use of power; and you are frustrated that government keeps getting co-opted by the wealthy, why do you still believe that giving government the type of power that’s attractive to the wealthy is a good idea?

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                    • James,

                      I think that’s a real paradox, and no liberal here has satisfactorily explained it. It’s one of those areas where I want to challenge League liberals on. If you worry about the wealthy’s use of power; and you are frustrated that government keeps getting co-opted by the wealthy, why do you still believe that giving government the type of power that’s attractive to the wealthy is a good idea?

                      I don’t see this as a paradox at all. Government needs the tools to contribute to the solutions of problems. Those tools can be misused to be sure, but that doesn’t speak to something wrong about the underlying idea that when used properly those tools can improve human welfare a great deal. Cointelpro is a mark against the FBI, it doesn’t mean we don’t need an FBI. Simplifying for the sake of this discussion, the wealthy using the levers of power to advance their own mercenary ends is a possibility to be wary of, but it doesn’t discredit the entire project of deploying government power for social welfare. Also, there is a spectrum of effectiveness, from particularly uncorrupt countries to deeply corrupt countries, from particularly effective mechanisms of advancing social welfare to less effective mechanisms. Liberals merely want to push America into the uncorrupt, effective social welfare end of the spectrum. (By this I don’t mean to say that this territory isn’t contested, or that libertarians or conservatives want a corrupt, badly performing social welfare system. We disagree about the best means to bring these ends about.)

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                    • Creon,

                      Your analogy misses the point.  I’m not arguing against the existence of government/FBI.  I’m arguing against giving it the kind of power to regulate the economy that liberals want to give it, because that’s precisely the power that attracts corporate interests like flies to shit.

                      That also doesn’t mean no regulatory power (although some libertarians will say so, and my less honest liberal friends here will say all libertarians say so).  There is the power to pass general regulations for health and safety–the generalized “police power” as it’s called–and then there is the power to make preferential regulations that help certain economic interests and harm others.  Liberals do not want to strip government of that power, because they want to use it to limit the wealthy and help the less wealthy.  The goal is fine, but the means necessary to achieve it are its own undoing because the wealthy are inevitably more capable of gaining control of that power than the masses.  That’s the paradox I’m talking about.

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                    • James,
                      Then why does this phenomenon, wealthy co-opting the government to advance their ends, not occur in every developed country? We should see this pattern throughout the developed world, in fact more so in countries with even more centralization than the US, even more government regulation and interference in the private sector. I’d point to those other developed countries and say, well if they can make it work there, why can’t we make it work here?

                      And there are a handful of mechanisms that I’d suggest to account for this danger – not a foolproof inoculation, but that’d help. Publicly financed elections or generous fundraising matching systems, larger professional bureaucracies as opposed to the presidency reaching deep into the bureaucratic innards and appointing deputy assistant deputy undersecretary for x, y, and z, closing down some of the government-industry revolving doors through better thought on the career trajectory of key individuals (Members of Congress, their staffs, senior regulators), and more use of quangos. As I said, not immunity from the problem you raise, but other developed countries show it isn’t an insuperable obstacle.

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                    • Creon,

                      Are you sure it’s not happening in other countries?  Or is it just happening to a somewhat lesser degree?

                      If we want to shift to a discussion about how the institutional structures of government can affect the degree of influence by the wealthy, I’m all in.  Because the governing structures do make a substantial difference.  They just don’t make all the difference, and there’s still going to be disproportionate influence by the wealthiest.  But for the record, I think it’s the parliamentary system–along with some cultural differences–that makes the difference.  Elect everyone on a big party ballot and it’s harder for the wealthy to promote particular winners than when we’re electing everyone by districts.  So I’ll give you Western Europe on that score as doing better than the U.S.  I’ve become more and more disenchanted with our electoral structures in recent years and would willingly chuck what we’ve got at the moment.

                      Publicly financed elections or generous fundraising matching systems,

                      Public financing might help, but it’s also an incumbent-protection program.  Generous matching funds might work, but either you dole them out to all comers or you reinforce a two-party system.  Take your poison–maybe they’re worthwhile.

                      larger professional bureaucracies as opposed to the presidency reaching deep into the bureaucratic innards and appointing deputy assistant deputy undersecretary for x, y, and z,

                      Yes.

                      closing down some of the government-industry revolving doors through better thought on the career trajectory of key individuals

                      Yes, although as Obama found out, often the most qualified people to be your advisers are exactly those who’ve been rolling around in the revolving door.  This would probably sort itself out over time, but would be hell for the first few presidents dealing with new rules.

                      As I said, not immunity from the problem you raise, but other developed countries show it isn’t an insuperable obstacle.

                      Agreed that it would help.  But I think we disagree on how much the wealthy influence other countries.  And I think that as long as we do single-member district elections they’ll be of seriously limited impact.  But, yes, if we can improve the situation, I’m all for it.  But I think to a large extent it’s sticking band-aids on the problem, when you’re saying “we still want to offer this great big juicy lollipop; we just want to make it harder for you to get.”

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                    • James,

                      So we don’t understand why liberals are so cavalier about enhancing that center of power so that it becomes more attractive to those with wealth. I think that’s a real paradox, and no liberal here hassatisfactorily explained it.

                      I think Shilling got to the answer upthread, and I’ve answered this many times: it’s because the wealthy, by having centralized private power, have the ability to create state power if there isn’t a sufficiently powerful government in place to check it.

                      I mean, I’ve said this till I’m blue in the face, but the libertarian conception of government being an entity causally and conceptually separate from the very real interests of those who grant it power is a myth. Government arises to serve the interests of the privately powerful. That’s even true for the US. In the best of circumstances, the government created is democratic and based on something like immutable rights which serve as a check on private power – eg., that no one under the authority of government can violate another’s rights. So the liberal project isn’t so much to increase the power of government for its own sake as it is to pry the power of government, in both it’s active and passive forms, from the grip of a few hands and put into the hands of as many as possible. Isn’t that what all the major liberal battles have been over for the last century? Extending basic rights to those who either are not accorded them, or are accorded them but aren’t granted protection of them by government?

                      So, to refocus on your question, regulatory capture isn’t a fundamentally new phenomenon from the liberal’s pov: it’s just a continuation of government serving the interests of private power either actively or passively. That regulation creates additional types of governmental corruption over and above merely permitting the first order bad behavior is a serious criticism against regulation, and against liberals insofar as they don’t take the issue seriously.

                      But I think even liberals could agree with that without concluding, as you do, that too much government is the primary problem here. Insofar as the problem is real, it’s still primarily a case of too much private power (economic or otherwise). (And just so Jason – if he’s reading this – doesn’t misunderstand that last sentence, it doesn’t mean that liberals hate the rich.) That is, there are first order bad behaviors certain economic actors will engage in to further their self-interest that have negative effects on others, and government has a legitimate role to play in trying (sometimes ineffectually) to constrain them. And there are second order behaviors which actors are permitted to take only as a result of government, which I think everyone could agree are problematic. It seems to the latter is the libertarian complaint here. But it also seems to me it isn’t inconsistent with liberalism.

                       

                       

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                    • James,
                      I agree that the wealthy have privileged access to political systems around the world. So yes, I’d expect to see government being co-opted by the wealthy to some extent. I’d argue the co-opting is happening to a lesser degree in other developed countries evidenced by lower child poverty rates, higher PISA scores, and better social mobility (as measured by intergenerational earnings elasticity). Gains from economic growth and increased productivity are more evenly distributed across those societies when compared to those measures in the US. Altogether these other countries are performing well on broad social welfare indicators and the corruption perceptions index. If government being co-opted by the wealthy means performance on these metrics like Germany or the Nordic countries then I would welcome our new wealthy overlords. I think we disagree as to how much success we could achieve in combating government capture through institutional adjustments. To me, the social welfare successes government can achieve are a prize worth the tradeoff of self-interested actors’ interest in rent-seeking, iron triangles, and such.

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                    • Stillwater,

                      I confess to being puzzled by your response.  First,

                      the libertarian conception of government being an entity causally and conceptually separate from the very real interests of those who grant it power is a myth

                      How is that a libertarian conception?   I honestly don’t understand that claim.

                      Second, this,

                      the wealthy, by having centralized private power, have the ability to create state power if there isn’t a sufficiently powerful government in place to check it.

                      seems to conflict directly with this,

                      Government arises to serve the interests of the privately powerful.

                      If that is how government arises (and in all truth I think that’s a claim most, or at least many, libertarians would agree with), then how can there be a sufficiently powerful government that is opposed enough to the interests of the privately powerful to act as a check them?  That is the paradox I’m talking about, and you haven’t resolved it here.  You seem to be not really recognizing it.

                      the government …is … based on something like immutable rights which serve as a check on private power – eg., that no one under the authority of government can violate another’s rights.

                      That statement is using the theoretical definitions wrongly.  Let’s start with the Declaration of Independence. Jefferson stated that there are “certain unalienable rights” and that the reason we create governments is to secure those rights. That is, as you are arguing, using government to protect us from private power.  But libertarians agree with this–we support government for the purpose of preventing/punishing theft, etc.  But Jefferson was also specifically writing about governmental violations of those rights, as shown by the list of grievances that make up the bulk of the DofI.  Fast forward to the Bill of Rights, which is all about limiting governmental deprivations of rights–as the Constitution proper is a recognition of the necessity of having a functional government, the Bill of Rights is a recognition of the danger of that government to our rights and liberty.

                      Now, directly to your statement, people acting under the authorit of government are not exercising private power.  That’s where you are misusing definitions.  And if you read Madison’s arguments in Federalists 10 and 51, you see in his explanation of the Constitution a very deep concern about constraining both those in government and those outside of government from using that power for their own purposes.  But the issue is never about private power, per se, which governments are simply assumed to be authorized to constrain–the issue Madison is concerned about is about how you give government the power to constrain private power without making it possible for private power to take control of the institutions of government and transform their private power into public power.

                      So the liberal project isn’t so much to increase the power of government for its own sake as it is to pry the power of government, in both it’s active and passive forms, from the grip of a few hands and put into the hands of as many as possible.

                      I get that, but it’s not in fact the sum total of the liberal project.  If the liberal project was just to try to distribute control of public power as widely as possible, so that no one person or group could control it, there’d be little argument between us.  But liberals do want more public power than libertarians–they want greater government capacity to constrain private actions (which they would call private power, but which we libertarians would not necessarily define so–as with our discussion of sweatshop wages).  It is that greater power that I see as creating the paradox-the more public power that is available, the harder is the project of keeping it widely distributed, because that public power is a valuable good.  The more valuable it is, the more people will seek to control it, and the more organized an interest is the greater will be its ability to find ways to control it.

                      Isn’t that what all the major liberal battles have been over for the last century? Extending basic rights to those who either are not accorded them, or are accorded them but aren’t granted protection of them by government?

                      And libertarians tend to side with liberals on this issue, because for the most part (although not entirely) those were battles against public power, not private power.  The primary issue in the civil rights movement for example, was not that blacks were often forced to go to the back door of restaurants, although that was a real issue, but that they were denied equality in public accommodations like schools, buses, public restrooms, parks, etc., as well as being denied the right to exercise their due share of public power by voting.  The civil rights movement was indeed about extending/diversifying control over public power, but it was also in large degree about limiting that public power.

                      When limiting power is a major issue, there’s great overlap between liberals and libertarians.  Where we part ways, usually, is when it comes to increasing government power.  I agree, liberals don’t want to increase public power just for the sake of increasing it (and those who say so are guilty of very shallow argument), but undoubtedly liberals want to increase it more than libertarians do.

                      So, to refocus on your question, regulatory capture isn’t a fundamentally new phenomenon from the liberal’s pov: it’s just a continuation of government serving the interests of private power either actively or passively.

                      Exactly!  But my point is a) that it’s inevitable, absent really stringent constitutional constraints, and b) liberals dislike regulatory capture but insist on granting government the very power that leads private interests to work overtime to capture it–that, again, is the paradox.

                      That regulation creates additional types of governmental corruption over and above merely permitting the first order bad behavior is a serious criticism against regulation, and against liberals insofar as they don’t take the issue seriously.

                      But I think even liberals could agree with that without concluding, as you do, that too much government is the primary problem here.

                      Well obviously they do, but in doing so they still fail to recognize the paradox–that by wanting that much government they encourage capture by private power.

                      Insofar as the problem is real, it’s still primarily a case of too much private power (economic or otherwise).

                      I disagree.  Without access to public power, private power is more limited.  Access to public power simply expands the sum-total power of those interests.

                      Ultimately I don’t think you take seriously enough the incentives of those with private power.  When government is granted the power to regulate them, that power is neutral–it can potentially be used either to constrain those private interests or to advance and protect those private interests.  Given that, what incentive do those private interests have in letting themselves be constrained?  Rather, the more regulatory power that is given, the stronger their incentive to control that power so it is used to promote their interests.  Liberals want that power to be used to constrain them, but who has the greatest capacity to influence the state?  Ultimately, no matter how widely we try to distribute control over the levers of public power, we average citizens exercise it normally through the vote–the elite and other well-organized groups have disposable resources to spend in the effort of trying to influence and control it.

                      Once you recognize that, it’s hard not to be very pessimistic about the prospects of granting government any very substantive regulatory authority.

                      Or as James Buchanan wrote in his autobiography (how lucky I am to be reading it right now–it has really helped me organize my thoughts in this discussion): “Positive public choice theory suggests that the rent seekers are indeed to inherit our earth…”

                       

                       

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                    • Creon Critic,

                      Yes.  Institutions (rules and procedure; political structure) matter.  I am far from saying that all systems are equally bad (again, I am not an anarchist, and I don’t see this as a binary “either total government or no government” choice).  I think the U.S. system is worse, as far as control by the elite goes, than the Austrian system.  And then again, the Russian system is worse in that regard than the U.S. system.  I have my own ideas about what types of institutional changes are desirable to constrain the problem.

                      Now where the real challenge to my position comes is that the European states have even more regulatory power than the U.S. So why don’t I admit that you can grant more regulatory power without creating more regulatory capture?  Because in Europe it’s just a different set of interests that capture.  In the U.S. it’s the financial interests,  In France it’s the farmers.  In Britain its the unions, etc.  That’s obviously over-simplified, but I hope what I mean is clear.  I think all of those captures are bad, because they all result in unproductive, and by my definition, illegitimate transfers of wealth. Is that “better” than having true elites be the ones with control?  Arguably, and in my gut at least I tend to agree, although I haven’t thought it through.  But better does not necessarily equal good enough.  so while I do think that a parliamentary structure is better for the government, I would still limit the authority of that government dramatically.

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                    • Creon,

                      I would also add that from what I’ve heard about western Europe, there are serious problems of endemic poverty there as well.  I fully admit to not having been there, so this is all secondhand, but from what I’ve read it appears that most western European cities have some really nasty slums, just as a lot of American cities do.  And to the extent they are preventing absolute destitution by means of redistribution on a scale/structure that constrains economic development, they are effectively creating total dependency of the lower class on the political structure.  In an ideal world (heavy emphasis on “ideal”) there would be no need for political dependency among the lower classes.

                      I cannot find it right now, but I remember an interesting blog post by, iirc, Tyler Cowen, arguing persuasively that while European cities were much better places to visit, American cities were much better places to live (unless one was wealthy).

                      That’s not a paean to the U.S. system.  Just a statement that we ought to not over-idealize the European political approach.  There’s a lot of trade-offs between theirs and ours, and at least for me, my inclination toward one or the other depends largely on what individual factors I’m considering at the moment.  (E.g., if I consider what it’s like to be a Pakistani in London or a Turk in Berlin, I could easily persuade myself that Europe is hell, but of course that’s not the whole story.)

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                    • James,
                      I don’t think I agree with the idea that some interest (if not the wealthy) must have captured the government – speaking on a macro level here. I have variously seen this described as consensus democracy, consensual democracy, or consociational democracy – but basically those countries that have used government to mediate labor-industry conflict, managing distribution of the gains from productivity/economic growth and finding more egalitarian answers. Nearer Nordic model levels of taxation and government spending as percent of GDP must horrify those who put a lot of stock in the idea that government spending should be held to 18% of GDP (TVD linked to a CATO report and I think the Republican presidential candidates have mentioned this idea).

                      As for an allegedly unproductive and illegitimate transfer of wealth, I think I’d have to refer you to the Krugman Socialist Hellhole Blogging piece I mentioned in another thread. Illegitimacy is something we’d have to argue over, I’ll say in reading Roger’s point about win-win, voluntary transactions I think it has become clearer to me that I think markets merely produce outcomes. Even if the steps along the way are legitimate, so not even bringing into view the allegations of exploitation, I want to examine outcomes for comporting with ideas about social cohesion, fairness, and social justice. Also, the well has been so thoroughly tainted by past illegitimate force, there is not a fair starting point from whence to proceed into this win-win scenario – again, speaking on a macro level, so on the basis of things like social mobility between generations as opposed to whether a homeowner and a contractor can agree on a price for some building work.

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                    • James, I understand there’s no European paradise to be had. I lived in Germany for a year and in the UK for three years, and I understand there are complicated things going on under the surface that some American liberals may gloss over – issues of race, nationality, solidarity, who is Other and such. And yet, according to OECD figures, many European countries consistently outperform the US on some important social welfare measures that I’m sure you’re familiar with: child poverty, infant mortality, social mobility. And it isn’t as though the US doesn’t have its own pretty nasty history on race.

                      Also, I recently came across this at Sociological Images, I think the image is too big so I’ll just link to the post with an excerpt: Start-Ups and Safety Nets,

                      …look at this chart showing the rate of start-ups per working-age population:

                      [Image over at Soc Images]

                      The US ranks 23rd. That doesn’t quite square with all those photo-ops where the president (Obama, Bush, Clinton – they all do it) goes to some small successful company out in the heartland. What is it about these other countries that makes for more risk-takikng?
                      James Wimberly has an answer: the safety net. He makes the point with an analogy – his own photos of kids on a rope-walk – a single rope hung between two platforms in what looks like the Brazilian rain forest. (It’s really just a replanted hillside, formerly the site of a favela). The kids have safety devices – hard hats, a safety harness, guide-ropes to hold on to. Without these, only a few of the most f oolhardy would try a Philippe Petit walk. But the safety devices allow lots of kids to take a risk they would otherwise avoid.
                      The same logic applies to small business….

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                    • Creon,

                      I have variously seen this described as consensus democracy, consensual democracy, or consociational democracy

                      Also interest-group liberalism.  I fundamentally disagree with the approach, though, because it’s primarily not about setting up the rules for fair exchange procedures in society, but about battling over a political division of the wealth of society (which is what leads to persistent budget deficits, as future citizens are not an organized interest).  Many, perhaps most, political scientists like this model, because most of them have an open, or at least residual, belief in the nobility of politics.  I’m an outlier.   I place great reliance on Alexander Bickel’s claim that “the highest morality is almost always the morality of process.”

                      Of course here you and I are operating from different normative values.  It’s hard to reconcile those.  I’m not insulting your normative stance; I just don’t share it.

                      As for Krugman, I didn’t claim that European cities were complete hellholes.  I repeated the claim that mostly they’re better places to visit than to live (unless you’re well off).  He writes about a walking tour of Stockholm, which is quintessentially a touristy type thing.  Now I know diddly about Stockholm, and perhaps it’s all wonderful.  But I can take you on a walking tour of Chicago that would leave you believing it has no nasty areas.  In fact I’ve spent, all told, about 3 months of time in Washington, D.C., and I’ve never seen any bad areas–but that doesn’t mean they’re not there.  Now nobody who criticizes European social democracy actually claims there wouldn’t be beautiful cities, or at least parts of beautiful cities–in fact that’s pretty much what we would expect, that parts of the city are beautiful because they are preferential recipients of benefits from the state.  To take a non-social democratic example, Dubai has some stunningly impressive areas, and I could take you to Dubai and boggle your mind at how great it is.  Then I could take you to the guest worker housing…

                      So what do others who aren’t Krugman say about Stockholm? Try here, and here. Is Stockholm worse than, say, Detroit or L.A.? Probably not; it’s just that it’s not necessarily that much better. As usual when he’s taken off his economist hat, Krugman is very selective with his evidence. Would anyone believe that when he went to Stockholm he was shown the s***ier parts of the city?

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                    • Creon,

                      many European countries consistently outperform the US on some important social welfare measures that I’m sure you’re familiar with: child poverty, infant mortality, social mobility. And it isn’t as though the US doesn’t have its own pretty nasty history on race.

                      I totally agree.  I hope I haven’t given the impression that I’m arguing the U.S. is necessarily that much better.  Obviously I’m pretty critical of us, too.  I just find–at least from some of my own close friends–a tendency to over-romanticize Europe in a way that glosses over those problems.

                      To add to your list, one of the most shocking things I’ve read in the last couple of years was a report showing that the U.S. has a smaller proportion of small businesses among all of its business entities than does Western Europe. That’s not good for us at all, and directly contradicts our commonly held beliefs and national economic mythology.  One of these days I’m going to blog at length about that.

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                • It’s not envy to note that concentrated wealth equals concentrated power, which often tries to remake society in ways that harm me, or at least that I dislike.

                  I understand that concentrated wealth equals concentrated power, and vice versa.  Which is exactly why I choose the way I do.

                  I imagine a control panel with two buttons, one red and one green.

                  Push the green button, and some random non-rich person gets a $200,000 per year income, while leaving nobody worse off.

                  Push the red button, and some random rich person becomes poor — no wealth, very little income.  Nobody gains anything, not even their victims, if it happens to randomly pick the next Bernie Madoff or whatever.

                  The red button concentrates wealth.  The green button spreads it out, while also helping to increase total wealth.

                  Given those choices, I’d push the green button all day long, again and again, until everyone was rich.  I’d probably punch someone if they pushed the red button.

                  And left-liberals should feel the same way — for solidly left-liberal reasons.

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                    • So what matters is having more than your neighbor?  Rather than always having good food on the table, a nice house, a car, health care, and a little savings on the side?  Plus a decent champagne on New Year’s Eve?  You can easily get all that for $200,000, and that’s not a bad living at all.

                      But if all that matters to liberals is having more than your neighbor, then liberals have given themselves a Sisyphean task. It’s not merely difficult, in these terms, to make people wealthy, but literally impossible.

                       

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                    • I suspect Jason gets that.  I also think he rejects it for the hooey that it is (unless a Chevy Cavalier costs $200,000).

                      Then it wouldn’t be $200,000 in real terms, because inflation would have eaten the most of it.

                       

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                    • Jason, see my comments below. What people consider rich, and whether they think there are too many rich people, are two different things. I don’t doubt that, framed the way you’ve framed it, people would choose your option. At the end, though, they still wouldn’t consider themselves or any of the other people whose lives they’ve just transformed to be rich. They might feel less animosity towards the rich though (until prices go up accordingly, and suddenly their new level is their old level, but that’s a different story).

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                    • Again, I thought I was careful to specify that we were talking about $200,000 in real dollars, not nominal dollars.

                      I tend to think people at that level aren’t going to be as envious.  This may actually be a different view of human nature than yours, but if so, do tell me — how do we actually fix the problems caused by envy in society, if no amount of rearranging wealth (and no amount of getting wealthier) can do it?

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                    • My answer is in all of my comments below. I don’t think the problem that comes out in this survey (to the extent that it reveals anything) is wealth, or even relative wealth, but anxiety, lifestyle insecurity, however you want to describe. I don’t think people making $200,000 in real dollars (granted, when you’ve given everyone the same base amount, that pretty much negates the possibility of them being real dollars, doesn’t it?) feel that anxiety, unless they’ve been really careless. A lot of people in the middle class do, even without making bad choices. But take them out of that situation, and the animosity goes away.

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                  • I can picture a level of wealth where everyone can buy $200,000/yr worth of mass-produced stuff [1], and that would be great.   Does this mean enough good schools, teachers, jobs, parks, medical care, etc. to go around, or that we all have fancy cars an 80-inch TVs? if the latter, I don’t much care.

                     

                    1. Of course, you’d save some of it, but you know what I mean.

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  2. It seems to me that there may be a growing disconnect in public perception between wealthy people and activities that benefit society. When a lot of people think new rich now days they don’t think about entrepreneurs who invent new services or goods that make people better off nor do they think industrialist who employs thousands. A lot of them probably think of a well networked executive who shuffles money back and forth with other well networked executives producing no benefit that they can understand when they think of the rich. They may think of an executive who’s appointed to head a corporation, pays himself a massive salary, flies the company into a mountain and golden parachutes out at the last moment when they’re thinking about the rich.

    I don’t assert those perceptions as being true but the wealthy perhaps have a branding problem right now.

    Also, you are deriving a lot of meaning from what is, on it’s face, a pretty odd sort of question that’d be very easy to give a knee jerk answer to without considering it very much.

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    • Also, you are deriving a lot of meaning from what is, on it’s face, a pretty odd sort of question that’d be very easy to give a knee jerk answer to without considering it very much.

      This isn’t a lot of meaning.  It’s some very, very elementary welfare economics.

      Still, people found it more appealing to signal “I don’t like the rich” rather than “let’s get good times going again.”  Even trying really hard to be charitable, that’s the best I can do here.

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      • It’s some very, very elementary welfare economics.

        Maybe not. Hanging out with libertarians and economist can have really weird effects on your intuitions. A lot of people just dont find defining “rich” in absolute terms very intuitive. So, when you ask people who are the rich guys, they will think about the “other guy who has so much more money than I” and that guy buys luxury goods and does strange work that doesnt seem to create value for society. What the hell is he being paid to do anyway? Its like what was Chandler Bing’s Job?

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      • Combine the first half of my comment with the second and your average low info poll respondent can be expected to interpret that poll question very differently than you do. You see a poll asking if there should be more rich and think that more rich people means more production, more wealth and more economic activity which means everyone’s better off and earning more. Your average low info respondent on the other hand probably thinks more rich means more poor, more parasites and more crooks wrecking the economy and driving the country into a ditch which means everyone’s worse off and earning less.

        I’m not saying that the low info respondant is correct, I’m simply saying you’re failing to consider other less well informed views than yours.

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          • Eliminate envy? And they say libertarians aren’t utopianists.

            Seriously though James, I was defending my original assertion that Jason was over reading into the poll in question. Not making some paen to the wisdom of the unwashed masses.

            And ya gotta admit that the economic leaders haven’t been covering themselves with glory the last few years. I mean I know, it’s all statist interventions fault I don’t find it surprising that the vox populi is feelin sour.

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            • Dammit, “eliminate envy” was supposed to be struck out.  I was jokingly repeating my comment from above, but replacing that phrase with “increase their information” (which in a better world would be a synonym).  I wasn’t actually snarking at you–I agree with you.

              They say comedy is all in the delivery.  My students rarely laugh at the right moments, either.

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  3. If I had to answer this question, say for a job interview, I’d go with “not enough rich” for sure. If someone called me on the phone and asked me a question like that, I’d probably tell them to go hang it.

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  4. The game is given away when you realize that poverty is defined by the things one does not have rather than the things one does.

    It doesn’t matter if someone has a house, and two televisions, and a refrigerator, and a microwave, and a game console, and a space heater, and a window air conditioning unit if this someone also doesn’t have first dollar health care coverage for diseases that can be prevented by exercise/diet.

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      • Except that’s not really true. Poverty is, for many, anxiety. If you can get rid of that, I doubt people will be nearly as concerned about the fact that some dude has a 75 foot yacht when at the end of the month they have to worry about whether they’re going to have money to buy food, much less have gas or bus money to get to work. Poverty = anxiety. Covetousness is a symptom.

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        • Poverty is, for many, anxiety.

          Riffing off that, is the reverse also true, that anxiety is, for many, poverty?  Because I think this feeds back into my rising expectations argument.  If our expectations rise along with our wealth, so that despite objective increases in our standard of living our subjective sense of our well-being does not improve, then no matter how objectively well-off the middle class becomes, they will still be–or at least feel themselves to be–impoverished.

          And many people take that feeling to be the critical issue, and ask for further increases in their standard of living to ameliorate that feeling, but unless we can achieve–quickly–vast increases in wealth for the middle class, we will still be feeding that feeling rather than ameliorating it.

          That’s why I insist on the inter-generational comparison, because as hard as it is for people to accept (because it is impossible for any of us to really feel our ancestors’ anxiety in the way we feel our own), it is ultimately the only way for most of us to successfully diminish that anxiety in the here and now.  I honestly think that those who focus on the anxiety and promote and validate it are, although well-intended, doing everyone in the middle class a disservice.

           

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          • Oh, I don’t think anyone would deny that our standards of living have increased, largely due to technology (money-wise, my generation is worse off than its parents at the same age, but my parents didn’t have a laptop in their 30s). However, that doesn’t change the fact that some people are constantly, or at least at the end of every pay period (whatever that is), genuinely worried about their food, their transportation, and their housing, to say nothing of their cable or whatever other luxuries they may or may not be able to afford. Sure, they don’t have to worry about where their next meal is going to come from every day, but they still have to worry, and a lot, about pretty basic things. There’s no way around that, and comparing it to the anxieties of the past, or of poorer countries, is kind of irrelevant.

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            • Chris,

              Are we talking about the middle class or the poor?  If someone’s worried about paying for food and they don’t have cable, I’m not talking about them.

              If they have cable but they’re worried about “pretty basic things,” just what things are we talking about?  Job security, I get that and don’t dismiss that at all.  But you’re talking awefully vaguely here, and it’s a lot easier to push your line of argument when it’s kept that vague.

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              • There are plenty of people who are in the middle class who live from pay check to pay check. One emergency — having to buy a new car unexpectedly, having sudden medical bills for oneself or one’s child (or one’s parents, or whoever), fire or natural disaster without sufficient insurance coverage (because insurance companies suck, regardless of what they’re covering), a lay off, getting fired, one’s spouse getting fired, or whatever — can mean the difference between middle class with cable and a nice meal out once or twice a month on the one hand, and taking the bus to the food bank and living with one’s parents on the other. Like I said, there are degrees of anxiety, and even the rich get anxious about their lifestyle, but I guarantee you that a great deal of the animosity towards the rich comes from the fact that people below a certain income level have to worry every day about what might come on the next, because their lifestyle is on ground that shaky. I’ll put it this way: if you can save enough money to support your lifestyle without a job, or in case of emergency, for more than a month or two (and many in the middle class couldn’t even for a few weeks), you probably aren’t thinking there are too many rich people, even if you don’t consider yourself rich.

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                • There are plenty of people who are in the middle class who live from pay check to pay check.

                  Who has denied this?  The point is not that there aren’t such people, but that there were such people in the past, too, but they were living pay check to pay check with a lower material standard of living.  I’m not arguing everything’s peachy keen for everyone in the middle class.  I’m arguing that it’s a fallacy to claim the middle class are worse off now than in the past.   You’re not targeting your rebuttal to that, but to some claim I’m not making.

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                  • James,

                    Respectfully, it sure seems like you’re saying everything is peachy for everybody in the middle class when the basis of comparison is the world today versus the world 50 years ago.  Whether or not you’re intending this is immaterial. What I read is somebody saying, “Hey, it’s better having MP3 players than record players, so all of your other complaints are moot.”

                    This is especially true when you argue that it is a disservice to even consider the anxiety felt by those in the middle class, as if instead we should be pointing to a cellphone constantly and saying, “Isn’t that so much better than a rotary?” Because frankly, the cellphone is super cool, but it isn’t making me feel better if my job is getting shipped overseas, if I can no longer afford a mortgage payment, if the CEO is continually getting raises while I am not, etc.

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                    • Sam,

                      You think this is what I’m saying because you’re committed to an ideological position from which you are unable to step back and look at the larger picture.  You keep pointing out that the middle class has it rough today.  I keep saying, yes, by today’s standards, but less so by historical standards.  And you keep saying, so far as I can tell, only today’s standards matter.  And I’m trying to point out that in that case the middle class will always have it rough, forever and ever, amen.  And it means that, contra what has been claimed here, things are not worse for the middle class now than they used to be.  Things are approximately the same level of toughness, but with better cars, better entertainment opportunities, and better houses.

                      But if people would moderate their rising expectations things would be less rough for most of them.  Yes, some people would still worry about their jobs being shipped overseas, but that’s not the majority of the middle class.  And if you’re worried about your job being shipped overseas, buying a 1,200 square foot house makes a lot more sense than buying a 2,000 square foot house.

                      You know who hasn’t lost their houses in large numbers in the past several years?  Those who didn’t get loans that were actually stretching their means.  People who kept their expectations in check.

                      To me you seem to make it sound like this is impossible, nobody can be expected to do that.  But it doesn’t change the facts on the ground that by doing so you can relieve a lot of that anxiety.  Sure, by comparing things to 50 years ago I’m not going to be very persuasive to some people–it would be a lot easier to be persuasive if I repeated the same emotionally compelling stuff you’re saying.  But I don’t think it’s true enough to be worthwhile–partly true, but not nearly covering the comprehensive set of facts about this issue.

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        • Well you want to see who covets a 75 foot yacht the most. Go talk to a group of people with 65 foot yachts. And boy those people with 75 yachts just can’t take their  eyes off those 85 yachts.

          Anxiety…well yes. But that anxiety is about affording health care or how to juggle the full time and part time job and hope the brakes on the car hold  out for a few more months. There is anxiety and then their is anxiety.

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          • Sure, but as anyone who’s ever lived from paycheck to paycheck can tell you, that anxiety is very real, and it affects everything you do (and it affects your health). The anxiety is what poverty is, and it wouldn’t make much sense to talk about levels of poverty if there weren’t levels of anxiety.

             

            Again, if you get rid of the anxiety, if you make it so even people who don’t make enough to afford many luxuries don’t have to worry about the necessities, ever, you won’t find much griping about the rich. Sure, envy will still be around, because envy is a basic human emotion, but it won’t take the form of class hatred or worse.

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          • No, because as any psychiatrist aware of the data will tell you, psychopharmacological solutions without behavioral changes and talk therapy are pretty much short term fixes that merely mask the underlying problems. But good snark, dude, good snark.

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  5. Personally I think the problems we are facing result form the system reducing the number of rich people and thus concentrating the wealth. We have given too much power to too few. Any wealth redistribution effrots should focus on increasing opportunities for meritorious contributors rather than on simply reducing the numbers of the rich.

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    • Why should there be “wealth redistribution efforts“?

      Given that in your utopian fantasy such a thing occurs, what is to motivate anyone to “meritorious contribution” KNOWING that their “wealth” is going to be “redistributed” away?

      This is the fundamental rub. Soviets tried what you’re talking about, as have others. To keep society running smoothly, THINGS have to get done. Until we have the Brave New World ‘deltas’ to do all that grungy work we’re too intelligent and important to do ourselves, society will require “winners and losers” of the economic variety and the impetus of wealth or lack thereof to coerce that grungy work getting done. Until you solve this problem you’ve solved nothing.

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      • Because they would still become more wealthy than get are now. Honestly anyone with more than 100 million in networth who still works is motivated by more than mere money.

        In addition describing moving towards the tax policies of say the united states during the era in which it defeated the ussr might seems strange.

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      • Whoa, Danger, Danger, Will Robinson.

        Chris Weaver didn’t say anything about re-establishing the Soviet Union.  Sometimes there’s a middle ground between “I have an idea for how to improve things” and “I want to establish a murderous totalitarian regime that will starve to death or outright murder millions of people.”

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        • I want to establish a murderous totalitarian regime that will starve to death or outright murder millions of people.”

          Let’s leave aside the mass murder etc. A lot of the starvation was brought about by trying to run a large centralised command economy. Massive redistribution creates bad incentives. That said, Mr Weaver’s comments were so vague and at most obliquely referred to the problem as  about having too few rich people or something that it is not entirely clear how we can go from there to the soviet system. Its not even clear how much he is actually arguing in favour of redistribution.

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  6. I wonder what poll results would be if the question had instead asked about the number of poor people.

    Implicit in the question is some assumption of where the new rich people are coming from (whether existing poor people are being made rich by magic or by redistribution or whether rich people are being introduced from overseas) and the varying results are, I think, more interestingly interpreted as presenting different intuitions on what generates unequal outcomes.

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  7. At Scalzi’s blog, there was a quip: “Being poor is knowing exactly how much everything costs.”

    I think this at least is one standard by which everyone can and should be rich. I’m rich by this standard (when I go shopping, I put stuff in the basket and pay with minimal attention to the price) despite earning only $60K/year.

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    • Most Americans don’t put only in front of 60k per year. I don’t know you cost of living but the median national income is $26,364. People like you me and my girlfriend easily double that. I’m saving 13200 a year for retirement and she is paying off a new car and all of her credit debt in less than 6 months. This is going on while we eat out multiple times a week and I support the expensive hobbies of miniature gaming and tattoo collecting. We can’t use ourselves as anything but examples of people who are making it.

      http://blogs.reuters.com/david-cay-johnston/2011/10/19/first-look-at-us-pay-data-its-awful/

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      • median national income is $26,364.

        That’s a very misleading number, as it includes all members of households, working and non-working, above the age of 14.  So when my daughter turns 15 she’ll be included in that, whereas she currently isn’t.

        Using Wiki because I’m in a hurry, the median household income is a little over $50k, the median income for men who work full-time is around $45k, and for women who work full-time it’s around $35k.

        I make no claim that those numbers are satisfactory.  I only put them out there for greater accuracy of data on which to base arguments one way or the other.

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        • Also, this: http://economistsview.typepad.com/economistsview/2011/09/mean-vs-median-income-growth.html

          There’s a good data and discussion on mean vs median incomes in the US, and this gem:

          “Average real income per family in the United States grew by 32.2 percent from 1975 to 2006, while they grew only by 27.1 percent in France during the same period, showing that the macroeconomic performance in the United States was better than the French one during this period. Excluding the top percentile, average United States real incomes grew by only 17.9 percent during the period while average French real incomes — excluding the top percentile — still grew at much the same rate (26.4 percent) as for the whole French population. Therefore, the better macroeconomic performance of the United States and France is reversed when excluding the top 1 percent.”

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  8. Honestly, I’m wary of interpreting this poll much one way or another.  The terms are just too poorly defined, and in context mean too many different things to too many people.  On top of that, “rich” is not a terribly neutral term these days, if it ever was.  “Wealthy” might have been a more neutral term, but “rich” carries with it connotations of obscene wealth and power over the lives of others even though it is definitionally mostly just a synonym for “wealthy.”  “Rich” conjures up images of Marie Antoinette; “wealthy” conjures up images of a successful retiree on easy street.

    More than that, though, what you usually get with responses to poll questions like this are emotional gut reactions, not well-thought out responses.  I agree with you – there’s not nearly enough rich (or at least wealthy) people in this country, nor for that matter could there ever be enough.  If, that is, we’re defining “rich” in absolute terms.  But to reach that point, you need to give the question enough thought to get past the connotations of “rich.”

    That 31% think would answer that there are too many rich people under those circumstances doesn’t surprise me; hell, if the pollster caught me on a bad day, I might have even given that answer.

    The response that confuses me is the 42% saying just about enough.

    More than anything, I would like to see the cross-tabs on this.  I cannot find the actual poll, either, and this is not the sort of thing that Kaiser usually polls on, which makes me a bit more skeptical about this.

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    • “Things are sort of roughly all right now” and “the second one you said, the answer in the middle” are the sort of things people often say in answer to polls when what they mean is “I don’t want to admit that I don’t understand the question.” (Really the only good answer to this question as drafted is “I don’t understand this question.”)

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      • You are, of course, correct.  But it’s so much more fun to pretend like the people responding to the question after having their dinner interrupted interpreted the phrasing exactly as we would interpret that phrasing so that we can appropriately make our political point.

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    • Honestly, I’m wary of interpreting this poll much one way or another.  The terms are just too poorly defined, and in context mean too many different things to too many people.

      Did you imagine that this wasn’t one of my points?  The poll only makes any sense at all when we consider that it’s really asking something a lot more like the following:

      Given the existence of a tribe you mistrust, would you like that tribe to have more members, fewer members, or about the same number?

      If we read the poll result in that way, it’s actually sort of surprising the numbers aren’t even more ridiculous.

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      • If that was one of your points it didn’t get that meaning on the first review. When I read it over the I saw you identify the poll, describe it and the results and then light into liberals and the respondants in general. I wouldn’t describe it as a diatribe but it reads as very… exercised. I am missing the part where you cast doubt onto whether the poll was a good one or whether we should take the results very seriously. But I’ve misread many a post before so I could easily be missing something?

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        • I guess you’re right.  I have very, very often noted in this space how opinion polls tend to yield absurd results that are only explicable as signaling (if at all), and I didn’t think I needed to remind people that that’s a peeve of mine.

          I mentally put this poll in the same class as the one where everyone says we should cut foreign aid — to 10% of the budget, from an assumed 25% — when really it’s 0.3%.  Or the one where a significant number pegged corporate average profits 60% per year (which they appear to have thought was a bad thing, but which would really be transcendentally awesome, as I explain here).

          I guess I should have explained that I was working in that same mental category. I didn’t want to be too verbose, but yeah, it’s also possible to be too concise.

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        • Because the nobility were part of what was essentially a semi-rigid caste system.  Social mobility in the U.S. ain’t really what it ought to be, but people move up and down–particularly across generations–in a way that would stun the sensibilities of the noblesse and devastate their sense of oblige.

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              • Teen births are at a record low in the United States.  They have never been lower since we started keeping track of that statistic.  In 1940.

                Granted, we’re still higher than most developed countries, but given our religious beliefs about birth control and abortion, this isn’t terribly surprising.  Nor should it necessarily be something to complain about, if one values adherence to those beliefs highly enough.

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              • It’s not teen pregnancy per se.  It’s unmarried teen pregnancy.  Of course that’s been declining lately, too, but we’re comparing eras when it was common to get married right out of high school to an era where it’s common to wait until the mid 20s to get married.  So lots of those teen pregnancies from earlier eras were to married couples.

                But while we’re talking about stagnation in mobility and household income, it is worth noting that this happened during an era when divorce increased dramatically.  We all know that in divorces women are disproportionately likely to fall in income status compared to men, and two income households normally become two single-income households.

                Add to that the simple delay in marriage means there are more single-income households among twenty-somethings than there were a generation ago.

                And yet there’s a strange tendency to pretend that this didn’t play a substantial part in stagnating household incomes.  It ain’t the whole story, but it’s an important part of it.  And the solution to that part of it–persuading people to marry young–isn’t likely to win many friends here.

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      • Quite obviously, the rich today are a combination of the nobility (old rich: think Upper East Side) and the bourgeois, but then, the French Revolution just served to make the bourgeois rich like the nobles anyway.

        Besides, I think Mike’s analogy had slightly different mappings than your interpretation of it.

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        • Quite obviously, the rich today are a combination of the nobility (old rich: think Upper East Side) and the bourgeois…

          And this was true of the nobility in the Old Regime, too.  But other than that, I think James Hanley is basically right.

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          • I think some of you might be surprised at how many nobles there were in the Old Regime with relatively little wealth and very few professions that they could take part in without losing their status. It was a society of privileged orders to be sure and one in which mobility was highly restricted, but it’s somewhat of a mistake to think of these orders as being defined by their level of wealth. In many ways, it was better to be a successful merchant by the eighteenth century than it was to be a member of the aristocracy. It’s just the crown was intermittently restricting trade and you had little say with them. It’s hard to say though if the Revolution changed much about the social structure, or if it just reflected changes that had long since been accepted. Remember that Voltaire’s jokes about the worthless aristocracy were chuckled at in high society salons by liberal-minded nobles keen to show that they were comfortable with the tenor of the times decades earlier.

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            • I think some of you might be surprised at how many nobles there were in the Old Regime with relatively little wealth and very few professions that they could take part in without losing their status. It was a society of privileged orders to be sure and one in which mobility was highly restricted, but it’s somewhat of a mistake to think of these orders as being defined by their level of wealth.

              Oh definitely.  But most people also imagine that Old Regime nobles all had pedigrees going back to Charlemagne, and the truth is mostly they didn’t.  By the Revolution, most of the nobility had been ennobled by purchasing an office at some point after the Renaissance, when the practice began.  Most nobles were acutely aware that they were former bourgeois, and the old nobles were most especially aware of, and resented, the fact.

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  9. Let me explain why.  To the left, this is a zero-sum game (remember, these are people who think Krugman is an intelligent economist although he is neither).  That means that if 1 guy gets rich, there are 100 others who have to become poor to finance his wealth.

    Of course, that’s bunk.  But until we start teaching real economics (not “Keynesian economics) this problem will continue.  Maybe as a public service someone should start giving free econ 101 lessons at the occupy protests.

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      • Why the hostility to zero-sum understandings? Surely you’re not expecting people with stagnant wages, foreclosed upon homes, progressively costlier benefits who see the wealthy getting wealthier to believe that the game isn’t one in which there are winners and losers. It’s one thing to have a particular view of economics; it’s another to assume that people aren’t going to look at the evidence in front of them to draw particular conclusions.

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        • Sam,  It’s easier to interpret that evidence when you actually have that “particular view” of economics (which “particular view” happens to be the one held by economists ranging from Krugman to Friedman).  You’re making the mistake of looking at a single data point (what’s happening at this moment) and assuming its representative of a much larger data set.

          If you want the evidence that’s in front of us, compare average standard of living in the U.S. today to average standard of living half a century ago (1961).  We are, the great majority of us, much better off.  The economy in general is a positive-sum game, and if you don’t think so, you’re not really looking at very much evidence at all.

           

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          • They may be better of than they were in 1961, but are they better off than they were in 1981, when you could graduate high school and still get a middle-class job, you could afford to send your kids to college without going thousands into debt, and actually have a pension when you retire?

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            • 1981? Sigh.  Have you looked at the unemployment numbers for the succeeding 2 years?  My brother was out of work for 18 months during that time.

              We’ve had a recession.  A very fishing serious one.  But there is no good reason to believe this is the new normal.

              And, yes, if you look at standards of living, on average (even including the rich) we’re better off now than we were then.  Our cars are safer and last longer, we have more access to entertainment and culture through the miracle of cables and satellites, we have access to a library of music or books in devices small enough to get lost in your knapsack, life expectancy for newborns since 1981 has risen about 2 1/2 years for females and almost 5 years for males.

              Yeah, it just fishin’ sucks to be alive now.

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              • We’ve had a recession.  A very fishing serious one.  But there is no good reason to believe this is the new normal.

                There is if you want to sell alarming newspapers.  Of course, the alarmism might be right if Europe implodes.

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          • James,

            Respectfully, why do we stop at 1961? Perhaps we ought to tell people struggling through personally dark economic times that they’re hugely better off than they would have been had they been alive 100, 200, or 500 years ago. Because they are. Except that human beings don’t sit around comparing their lives to what they would have been decades earlier. They look at the bills that are coming in at the end of the month, they look at their salaries, they look at the goals that their have for their lives, and the realize that there is a sometimes vast disconnect between the three. When they then see the wealthy aren’t getting hurt, but are in fact, getting wealthier, it becomes that much harder to believe in the positive-sum economy that you’re describing.

            Telling them that economists have measured and concluded that  everything is fine, is like being Kevin Bacon in Animal House and screaming at the panicked parade attendees.

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            • Respectfully, why do we stop at 1961? 

              Because I was trying to be generous and not point out how vastly better off we are than folks in 1861.

              Perhaps we ought to tell people struggling through personally dark economic times that they’re hugely better off than they would have been had they been alive 100, 200, or 500 years ago.

              I do, when I’m not feeling so generous.  The point is not that nobody’s feeling pain now.  The point is that you claimed it’s a zero-sum game, and now you’re implicitly admitting that it’s not, without stepping up and confessing your error.

              Except that human beings don’t sit around comparing their lives to what they would have been decades earlier. They look at the bills that are coming in at the end of the month, they look at their salaries, they look at the goals that their have for their lives, and the realize that there is a sometimes vast disconnect between the three.

              Yes, and our persistent complaint is that the middle class is always struggling, and we think that in the right world the middle class wouldn’t struggle.  But because our expectations rise, because we insist on having ever more stuff to qualify as middle class, economic struggle is in fact a defining feature of what it means to be middle class.  The people decades earlier were economically struggling, too, but they were struggling with a lot less stuff.

              Very simply, if most people making middle class incomes today contented themselves with the living standards of the 1950s, they would have plenty of money to sock away in investments.  They wouldn’t be struggling at all.

              What you’re asking us to do is to ignore perspective.  To look at the current moment without any context.  Sure, people do in fact do that.  That doesn’t make it an intelligent way to try to understand things.

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              • I think part your point might be that as wealth increases, expectations rise a well. So the narrow standard that people ‘aren’t making enough money’ is unhelpful. It reminds me of a poll where people were asked ‘how much more income would you need to be financially secure?’ and almost everyone in every income bracket answered roughly 15%. So, the argument that some objective standard be employed here is an important one. And if the objective standard doesn’t accommodate a preferred view, then I think the preferred view can be legitimately criticized on that score.

                But, you know as well as I, that this goes back to liberals not having a principled view of processes or outcomes that is in some sense measurable or clearly articulable. That’s a real knock on liberalism, one I’ve expressed concerns about and find even more troubling as these discussions go forward.

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                  • Consider it a victory. Remember that conversation about liberal’s changing priorities? I think part of the problem here is that liberalism has won the major battles (not completely, of course) going back say 70 years – the poor are taken care of, economic quality of life has materially improved, access to economic and social opportunities are pretty open to all (no systematic discrimination in the workforce tho it lingers on), etc. There continue to be important battles, but they lack the centrality which important battles once upon a time did.

                    If that’s right, then liberals priorities sorta have to change since the main drivers of policy have in some sense (not entirely!) been achieved. That’s much to general, of course, to not suffer from huge pushback, but I say it to make the following point: if it’s true that liberal initiatives have accomplished their main goals of protecting the poor and worst off, extending basic rights and equality of opportunity to all in the community, etc., then maybe it’s time for liberals to refocus on the ways government interferes with those very goals.

                    Maybe I’m suggesting here that adopting some libertarian views re: limiting government are the logical next phase of liberalism once liberal goals have been achieved thru the use of government.

                     

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                    • Mark, Thanks for the invite. I think my change of views about this really can be credited to Hanley’s one question (well, that and his pit-bull like relentlessness): what are the limits of liberalism? And in fact, I didn’t shy away from his challenge to liberals to justify our views precisely because I’d always wanted to do just that, especially wrt contemporary liberalism,  but couldn’t in the circular space of my own head.

                      So, you know, count me in. At least on the fringes.

                       

                       

                       

                       

                       

                       

                       

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                    • what are the limits of liberalism? And in fact, I didn’t shy away from his challenge to liberals to justify our views 

                      Which has led to both some good discussions and my profound respect.  This may be a good time to let the cat out of the bag and admit that one of the reasons I am actually a much more moderate libertarian than I usually let on is that Leaguers have done such a good job of challenging me on the limits of libertarianism.

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                • Stillwater,

                  But, you know as well as I, that this goes back to liberals not having a principled view of processes or outcomes that is in some sense measurable or clearly articulable.

                  I didn’t understand what you meant by this – Rawlsian primary goods and Amartya Sen’s capability approach come to mind.

                  I’m also deeply skeptical of your assessment, even with caveats, that liberalism has won the major battles on social insurance and social welfare (via Justin Wolfers’ feed, I think from a Pew Global Attitudes Project report, pdf),

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                  • CC, that quoted comment was referencing some long and very detailed discussions between James and I, one’s which I don’t think I can summarize very well. The point I was making isn’t that liberals lack principles – I think they – we – do. It’s that we lack, in some sense of the word, systematic principles which permit objectively measurable success/failure, or which, alternatively, constrain the liberal project to clearly identifiable goals. I think that the overall goal of income equality might be useful role for government to play, but until some standard of ‘income equality’ is clearly identified, there is no goal to try to achieve. ANd that;s what James is arguing in this part of the thread: that data shows the material conditions people are living in are actually higher now than in 1961. So, if material conditions is the standard, liberal goals have already been met. If the liberal wants to shift the goal to some other standard, then they (we) have to clearly articulate what that standard is, or ought to be.

                    Re: the claim about liberal goals having been met, I tend to think that’s for the most part true. But I also phrased it as a conditional: if those goals have been largely met, what follows for a liberal project based on promiting/protecting rights and opportunities to all? Maybe a better way to say it is this: to the extent that those goals have been met by us of government (in a specific area, say), liberals ought to focus on institutional structures within government which are inconsistent with those goals.

                     

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              • I’m not really clear on how things are so much better than they were in 1961.  In 1961, on my dad’s salary (he was a high-school grad) as a Sears department manager, my family lived in a ~1500 sq ft house that he paid $18,500 for.  He bought a new car every 4 years and took a couple of vacations every year.  In 2011, on my salary as an IT professional AND my wife’s salary as an executive assistant,  we live in a 1500 sq ft house that we paid $190,000 for, we buy a new car about every 4 years and haven’t been able to afford a real vacation in 3 years.  My Dad retired from Sears with  the house paid for and a pension from Sears along with his SSI and my parents enjoyed a nice retirement.  Meanwhile, my wife and I lost big chunks of our 401Ks (along with a bunch of stock (options) when the dot-com bubble collapsed and again in 2008.

                In ’61, I knew people who graduated from high school, joined the union, and went to work for Pennzoil or Continental Can.  They made good livings and retired with pensions.  A HS grad now is luck to get a job at Wendy’s.

                Sure, we’ve got all sorts of electronic gadgets that weren’t available then, but, for the American working class, I don’t see how things have gotten better.

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                • No, you simply don’t understand. Because we have the Internet and MP3 players now, we’re bad people for pointing out it’s harder for a middle-class family than it was twenty to thirty years ago.

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                  • Jesse,

                    You’re really missing the point.  For most middle class families it’s not actually harder now than it was twenty years ago.  What keep it hard is that the insist on spending their money on things like internet service and MP3 players.  There’s nothing wrong with having those things, but if in fact people tried to live at the level of 20, 30, 40 years ago, they’d find that nowadays it’s easier now to do that than it was back then.

                    But I know I’m a heretic for critiquing the middle class.  As Murali said over here, “people prefer false intuitive explanations over true counterintuitive ones.”  Data won’t persuade you as long as there is an emotionally compelling counterexample.

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                    • Except, as I and other people have pointed out multiple times, as a percentage of income, spending on electronics, clothes, and other consumer goods have actually gone down as a percentage of income.

                      People aren’t feeling a squeeze because they buy their kids an XBox at Christmas and have a $60/month phone bill (much like their parent’s did, only it was a landline and a cell phone), people are feeling a squeeze because their health care premium has skyrocketed, the cost of college has vastly outpaced inflation, and so forth.

                       

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                    • What keep it hard is that the insist on spending their money on things like internet service and MP3 players.  

                      Huh?  Internet service costs about the same as the newspaper + magazines subscriptions I’ve replaced with it.  An MP3 player is a hell of a lot cheaper than a stereo.  The device that lets me watch streaming Netflix on my TV is an indulgence, but it was a one-time cost of about fifty bucks.  It’s not hard because there are new toys.  It’s hard because big-ticket items like housing, health care, and college tuition are completely out of hand.

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                    • Except, as I and other people have pointed out multiple times, as a percentage of income, spending on electronics, clothes, and other consumer goods have actually gone down as a percentage of income.

                      Yes, and that’s why people have a higher standard of living, something you keep dismissing as unimportant.  But you know what people give up when times are tough?  Small ticket items that they actually can live without.  If people have given those things up and are struggling, odds are they have my sympathy.  If they’re still spending on those things and are struggling, they’re making wrong decisions.  Those things do add up.  And you and Mike are really making my point here about rising expectations–you think we shouldn’t count these things in comparing what it means to be middle class because they’re normal and not major expenditures.  But that’s just internalizing the rising expectations so totally and completely that you can’t really see it.

                      Mike Schilling–re: housing.  You want to bring down the price of housing?  Diminish the regulations governing the building of housing.  Limit people’s ability to move.  Get rid of the mortgage interest deduction on taxes.  Eliminate de facto subsidies of mortgages by getting rid of Fannie and Freddie.

                      And let’s not forget, again, that the average house size has doubled in the last half century while families have gotten smaller.

                      I’m not arguing for those policies.  I’m saying the factors that have driven housing prices aren’t mysterious, and they’re predominantly factors that liberals support; regulations, mobility, mortgage interest deduction, Fannie/Freddie. (Perhaps not, as a general rule, bigger houses; at least not among my liberal friends.)  And those are all supported for good reasons–I’m not knocking liberals for supporting those things.  I’m knocking liberals for supporting things that drive up housing prices then complaining about higher housing prices.

                       

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                    • people are feeling a squeeze because… the cost of college has vastly outpaced inflation,

                      Jesse,  I still want you to dig into that question about a low-cost college education.  Is it possible to have such a thing?

                      I’ll reveal the trick behind the question: Inexpensive for the buyer does not necessarily mean “cheap.”  It just means subsidized.

                      And what effect do subsidies have on the real prices?

                      Also, do you know what’s driving the increasing price of college education?

                      It’s really simple to say education should be cheap, but if you start analyzing it beyond that bit of bumper sticker liberalism, it turns out to be a lot more problematic than you’re thinking right now.

                       

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                    • James, I just want to point out, again, that there’s a difference between standard of living and what we might call lifestyle insecurity (I think I’ve heard that term somewhere, but I’m too lazy to look up). You can have a relatively high standard of living, historically, and still live paycheck to paycheck.

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                    • And you and Mike are really making my point here about rising expectations–you think we shouldn’t count these things in comparing what it means to be middle class because they’re normal and not major expenditures.  

                      No, I’m disputing your point about what’s signal and what’s noise. People aren’t insecure because they’re spending a few dollars a week on things that aren’t strictly necessary — they’re insecure because necessities keep getting more and more expensive, with wages not anywhere near keeping up.

                      Nor is the  internet a luxury for many of us.  I couldn’t do my job without connectivity from home.  I am not unique in this.

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                    • Mike,

                      I’m not saying people are insecure just because of those small-ticket items.  As you may remember from other threads I’ve also talked about the doubling of home sizes while family sizes have declined by a third or more.  If a family of 6 has a 1000 square foot house, that’s 167 square feet per person.  If a family of 4 has a 2000 square foot house that’s 500 square feet per person.

                      For many of the people we’re worried about right now that is a big part of the reason they’re anxious–the rising expectations led them to spend on that square footage per person.

                      But for liberals middle class people are never responsible for any of their problems–it’s always the fault of the rich who’ve screwed them over.  (I don’t actually mean that, of course, but see how easy it is to play your moronic game of lying about the other side’s beliefs?)

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                    • Yup, and you’re assigning all the blame to the person who signed the mortgage but assinging none to the person offering the mortgage.

                      Oh, and by the way, Fannie & Freddie actually had a much lower default rate than many private lenders, I’d happily phase out the mortgage interest deduction, and even the FBI has said there was an epidemic of mortgage fraud committed by the banks. But I know, government intrusion into business – bad!

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                    • Jesse,

                      You seem to have missed the point where I said I didn’t actually mean that; I was just mocking Mike for playing that kind of game.  Do try to keep up.

                      As for Fannie and Freddie’s lower default rate, it was still enough to drive them broke, so I’m not sure exactly what you’re boasting about.  And perhaps you don’t understand that their very existence, the expectation that they would be backed by the government, provided an incentive to mortgage brokers to offer riskier loans (look at the percentage of subprime loans held by F&F).  You also conveniently forget the government’s pressure on the industry to offer more subprime loans.

                      Yes, there’s enough blame to go around, both government and industry (nobody should have been buying such opaque tranches of RMBSes so eagerly–and that was the real industry problem, not this fake business about mortgage lenders scamming people).  And borrowers.  In the end, nobody put a gun to their head and forced them to buy.  Someone offered them a deal they should have rejected; they took the deal.  You seem to be treading awfully close to my strawman of saying they don’t bear any responsibility for their own actions.

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                    • If I go to a doctor and he tells me I need this procedure and it turns it out it ruins my life, it’s perfectly reasonable to blame the doctor. Yet, I say the same thing about a banker and I hear calls of personal responsibility. I guess I should’ve known medical jargon just like I’m expected to be able to parse a 60-page document.

                      As for Fannie and Freddie, no one is saying they’re blameless. But, the banks are far more to blame, yet you’re not calling for the dissolving of Citibank, BOA, or JPMorganChase. After all, Fannie & Freddie lost market share during the 2nd Bush administration because they most subprime loans didn’t meet their standards.

                      84% of total subprime loans were made by private lending institutions during the boom and 83% of subprime loans to low-and-moderate income home buyers were made by private lending institutions. To look at those numbers and think the problem is Fannie & Freddie is insanity.

                       

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                    • nobody should have been buying such opaque tranches of RMBSes so eagerly–and that was the real industry problem, not this fake business about mortgage lenders scamming people

                      Once there was value in worthless loans, lots of them were produced.  I’m surprised you, of all people, doubt the power of the market.

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                    • I guess I should’ve known medical jargon just like I’m expected to be able to parse a 60-page document.

                      I don’t accept the analogy.  You can be expected to know how much a mortgage is costing you.  If you can’t figure out your own budget, you have a problem that goes beyond unscrupulous lenders. (I mean the general “you,” not “you” specifically.)

                      yet you’re not calling for the dissolving of Citibank, BOA, or JPMorganChase.

                      Really?  Do you know that?  I was all for letting the failed banks fail.

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                    • But you know what people give up when times are tough?  Small ticket items that they actually can live without.  If people have given those things up and are struggling, odds are they have my sympathy.  If they’re still spending on those things and are struggling, they’re making wrong decisions.  Those things do add up.

                      Is it that they do give them up or that they ought to?  It doesn’t seem to me beyond the realm of imagination that poor people–or if I don’t use the word “poor,” then maybe “less off than I am”–might spend money on small ticket items that yield temporary and instantaneous pleasures rather than on what they actually need.  Of course, if things really were so bad that it’s a question of bare survival, then they probably would opt to give up those small ticket items.

                      Of course, maybe they should spend more frugally (heck, maybe I should).  And I think one is justified, to some degree, in withholding sympathy from those who don’t spend frugally.  (Or at least withholding some sympathy; I find it hard to have much patience for those who claim categorically to have “no sympathy” for someone who is in a bad way even if that situation is due partly to that someone’s own improvident decisions.)

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                    • James

                      You can be expected to know how much a mortgage is costing you.

                      Sure.  But when you look at your 2% APR loan mortgage payment, and you look at the housing market and houses are appreciating by 15% or more a year, it’s not entirely stupid to say, “Hey, I can afford this $950 payment even with the $250 PMI, because in two years I’ll have enough equity that the PMI is gone and in 5 when it adjusts I’ll just get another ARM.  The worst that can happen is that interest rates go up, what, 3%?  I can still get an ARM for a low enough rate that my mortgage payment will be less than it is now with the PMI”.

                      Except then the bubble bursts, and your house depreciates, and you can’t get rid of the PMI (okay, maybe you should have seen that one coming) and now you don’t qualify for a refi because nobody’s offering ARMs to you and you don’t have enough equity to qualify for a 30 year fixed.

                      Just like a lot of businesses got screwed when credit dried up, a lot of homeowners got screwed, too.  And while I can certainly say, “I told you so” on account o’ I’ve never had anything *but* a 30 year fixed, I don’t think it’s *entirely* unreasonable to be sympathetic with the large volume of people who believed their loan officer who told them (a) that an ARM was a good idea in the first place (b) that housing prices never go down… not since WWII, look! and (c) that no matter what happens, they can just come back and refi and the loan officer will take care the paperwork for an extra $6K slapped on the loan.

                       

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                  • Once there was value in worthless loans, lots of them were produced.  I’m surprised you, of all people, doubt the power of the market.

                    Mike, do you ever take a moment to think anything through?  I have never argued the market is perfect and nothing goes wrong.  Markets are chaotic, and it’s out of that chaos that value is created.  But sometimes it goes wrong.  I’ve never denied that and you’ll never find any place where I have.

                    Ford produced Edsels.  Ooops, I guess I’m doubting the power of the market!  GM went broke because it couldn’t make cars at a cost it could sell them for.  Oh, I’m doubting the power of the market!

                    No, you ninnyhammer, the power of the market is the power to reward the good ideas and to punish the bad ones.  If the government hadn’t stepped in there would have been a whole hell of a lot more punishing going on.

                    But, again, you’re deadwrong if you see the mortgage bubble and crisis as solely a market phenomenon.  Government policy played a huge role in it, and helped to distort markets, creating the bubble.  It was the bubble that fooled banks into stupidly thinking the RMBSes were valuable when in fact it was impossible to see the value of the mortgages they contained.  So, yes, the banks made careless decisions and deserved to be punished by the market–that’s the power of the market.

                    But who’s going to punish the government that set up short-sighted policies and then bailed out the banks?  Not anyone who desperately keeps trying to absolve the government of its responsibility in the whole scheme.

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                    •  It was the bubble that fooled banks into stupidly thinking the RMBSes were valuable when in fact it was impossible to see the value of the mortgages they contained.  

                      Why is it libertarians don’t think rich people are ever responsible for their own behavior?  (That one was deliberate.)  They were stupid and greedy, exactly like the VCs in the 90’s who invested in internet companies with no business plan or hope of profit.  People can be blinded by greed.  When enough of them are blinded by the same thing at the same time, you have a bubble.  That doesn’t absolve the people responsible.  Yes, the government had a part in it, but the government didn’t force anyone to invest in opaque CDOs, or treat CDSs as real insurance policies, or any of the other nonsense that passed as financial genius five years ago.

                      So, yes, the banks made careless decisions and deserved to be punished by the market–that’s the power of the market.

                      And punished the rest of us, who are living with this crappy post-crash economy, even though it wasn’t us who got hypnotized.

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                    • But sometimes it goes wrong.  But sometimes it goes wrong.

                      And I think you may have missed my point.  The Edsel was produced because Ford misjudged the market, and failed because the market rejected it.. Crappy loans were produced because there was a market for them and because the market is a powerful force.

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                    • I wrote: It was the bubble that fooled banks into stupidly thinking the RMBSes were valuable when in fact it was impossible to see the value of the mortgages they contained.

                      Mike responded: Why is it libertarians don’t think rich people are ever responsible for their own behavior?

                      This is rather unbelievable.  I say that banks were stupid, that they let themselves be fooled by the bubble, and Mike claims I don’t think they’re at all responsible for their own behavior?

                      Maybe you should try reading my comment one more time, Mike.

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                    • The Edsel was produced because Ford misjudged the market, and failed because the market rejected it.. Crappy loans were produced because there was a market for them and because the market is a powerful force

                      And in the end the crappy loans would have gone the way of the Edsel if the government had not intervened.  You are in error to think that these are fundamentally different things.  The market doesn’t just discipline bad decision s in only one way (producers failing to sell).  It also disciplines buyers who make bad choices (I mean particularly here those who bought the mortgages).  Both of these failures, the Edsel and crappy mortgages, were how the market punishes participants who make bad choices.

                      And I want to re-emphasize that the market for bad loans was as much a result of government policy as it was of anything else.  The political encouragement of subprime lending,  the elimination of capital-gains taxes on home-sales, and the Fed’s loose monetary policy all played a role.  And it’s not that any of those policies were ill-intentioned, or that by themselves any of them were stupid.  It’s that in conjunction they helped stimulate a boom.

                      I was at a conference recently where an academic MD was talking about the problem of chemical combinations in the environment.  He said we don’t yet even have  a handle on safe levels of most chemicals individually, and we know almost nothing at all about the harms caused by these chemicals–even at low levels–in combination.  It was a sobering thought.  The relevance here is that public policies have a similar logic.  We don’t have a good ability to predict how they’re going to function in combination, but it’s certain that in combination they will have effects.  A priori we don’t know if those combined effects will be good or ill, but being non-intended effects, it’s wise to be wary of them.

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                    • Well your whole post sounded like you still thought I was giving a total pass to the banks.  Frankly, you’ve been so persistently…what shall I say, dishonest? inaccurate (a nicer term than the alternative), that I have no confidence in your integrity.

                      I’d prefer to have intelligent discussions with you, but you’ve consistently refused to make that possible.  I’m still open to the possibility, if you’ll stop making false claims about libertarianism.

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                • Mike,

                  A $190k house in current dollars is only about 1/3 more than an $18k house in 1961 dollars, not ten times as much.  Just to make things clearer.   Odds are your house has amenities your dad’s house didn’t, so a lot of that price increase relates to quality.

                  That car you buy every four years is vastly higher quality than the car your dad bought ever four years.  (And what is this obsession with buying new cars ever four years–you obviously don’t care very much about going on vacation, as demonstrated by your obvious preference for buying a new car as soon as the old one’s paid off.)

                  You’re not accounting for those things.  And more importantly, you’re comparing just two data points.

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                  • The $190K house was built in 1921, the only thing is has that my dad’s house didn’t is central air, a microwave oven and smoke detectors.   If those had been available in 1961,  my guess is that we would have had them.  He purchased the house new in 1960, when we moved from Pennsylvania to Florida.  A far as the car goes, we put about 20K miles per year (we live in an area where mass transit is pretty much nonexistent) on the car and have found that when a relatively low-end auto (we have a Mazda 3 right now) gets over 80K miles on it, it gets unreliable and starts to nickle & dime you on repairs.  My dad was a Mercury Comet man, for some reason and I think he just liked the smell of a new car.

                    So, the house costs 3 times as much, it takes a college education and two incomes to have even a similar standard of living, pensions are no longer available…exactly how have things gotten better?

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                    • pensions are no longer available

                      Another not-quite-truism.  A vast proportion of the middle class is now in defined contribution pension plans or 401Ks, whereas previously they would have been in defined benefit plans.  We can argue about the relative merits of those, of course.  For my part I’m dubious about defined benefit plans because they so often require your company to still be in existence when you retire–that’s a bigger wager than most people recognized back in the ’50s (and by “most people,” I don’t mean “dumb people,” lots of the smart ones didn’t correctly evaluate that risk, either).

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                  • James, I truly respect you and your comments here on the League. Unfortunately as an economist (I think that’s what you are, plz correct me if I’m wrong), you’re making the mistake of discussing facts with folks who want to discuss feelings..This is akin to the fights I used to have with my wife. Logic and facts are all well and good, but dammit I want a new car cause Suzie has one and I always hated that bitch! So there! ;)

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                    • I think the criticism of people denying countervailing facts because of an emotional investment in their views is pretty standard across all political views. It seems to me your claim here does just what you’re criticizing others for: denying the facts and expressing a feeling.

                       

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                    • Stillwater, I contrast your position here with what you said here.

                      I can go back through all the liberals on this blog and show emotionally charged phrases referring to the economic condition primarily of OTHERS. Then more emotionally charged positions in response to reasoned facts and statistics.  That’s what I meant by ‘feelings’ and while it is a criticism it is not an admonishment. Women are better for their feelings than without net net. We’d all be a bunch of robots if we only worked from logic with no emotion.

                      Unfortunately Economists have to work with what they’ve got. They can’t predict with any accuracy because they can’t account for the ridiculous insane things people do in their formulae. Chris can’t handle a discussion and prefers snarky comments but join me below where I’m going to bring in new facts and figures to buttress this case even further.

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                    • Strictly speaking I am not an economist. I am a political scientist who is more interested in economics than political science.  I do have substantial background in economics, I read more writings by economists than by political scientists, and I do teach a political economy course that’s cross-listed in both political science and economics.  But credential-wise, I’m a political scientist.

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                    • James, Ah I think I’ve gone and confused you with that James K. fellow. Well you’re hitting on all cylinders on the economics points and are highlighting the ignorance of many on said subject. Murali’s quote still stands, these things are often counterintuitive and people prefer their wrong but locally intuitive thinking.

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              • 1. I really think you’re not going to get far when you’re talking to people worried about their economic condition if you say, “Hey, you’re better off than you were in 1861. Shut up already.” That’s just me though. Feel free to keep trying it.

                2. Zero-sum games produce winners and losers. People who have been laid off, people who are bankrupted by medical bills, people who have seen entire industries that they counted on for livelihoods aren’t winning. That you’d look at these people and tell them that their struggles are evidence of a positive sum game is offensive at best.

                3. How can you expect people to measure living standards against anything but what they’ve known? You’re asking human beings to be unrealistic at this point, simply because it would better fit your own world view.

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                • Sam

                  What you are arguing for is that ignorance of history is bliss. Unless you know what the base case is (abject poverty) and the solution (positive sum voluntary specialization and exchange) then you ate likely to recommend solutions that feel good as they make things worse.

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                    • To be perfectly honest, I see such things as “power (electrical or gas or whatever)” as one of the things without which you are, indeed, impoverished.

                      I also include stuff like “running water” and “sewage” and “enough calories” and “some degree of climate control”.

                      It’s when people have all of these things that I’m willing to say “okay, whatever you are, you are no longer impoverished”.

                      And people then talk to me about stuff that is higher and higher and higher on Maslow’s hierarchy.

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                    • I’m sure 2011 Jaybird does. But, I’m sure there were plenty of conservatives and libertarians in 1935 America who saw it as an unreasonable use of federal power and proof the average American was getting more lazy. After all, he could just get a job and get electricity out to his farm on his own dime.

                      I look forward to the 2051 version of Jaybird saying something like, “they weren’t progressive enough to think electricity every day doesn’t mean anything without free access to nanotechnology.”

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                    • Well, keep in mind, the entire world had access to Solar for all of human history.

                      Now, I do not think that people are entitled to as much power as they could possibly want… but I do think that people who cannot afford enough electricity to run a refrigerator year round and a heater in wintertime are, in fact, in poverty and removing them from poverty would entail making sure that they had, at least, that much.

                      Now if you’d like to argue that electricity is technically a luxury, I suppose that I would concede the point.

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                    • I wouldn’t trade places with William Randolph Hearst.  Absolutely not.

                      Who would I trade places with?  My daughter, possibly, or her eventual children.  Someone living in the far future.  No one from the past, unless it was only temporarily.

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                    • I can access Wikipedia, thus I have a better life than William Randolph Hearst!

                      Jason’s thoughtful comment aside, I am astounded at the dishonesty of Jesse’s comment.  I am comparing the middle classes of one era v. another.  I was not comparing the middle class of today vs. the superwealthy of a prior age.  To bring in Hearst is so wholly irrelevant to what I was saying that it can hardly be credited as having been written by someone as intelligent as Jesse.  It’s amazing how a critique of the middle class enrages normally thoughtful people.  It’s as though they think that group is off-limits for critique–clearly we have a sacred cow here.

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    • Krugman is hardly an “economics is zero-sum” kind of guy. and Keynesianism, no matter what the likes of Don Bodreaux claims about it really differs from Austrian and Neoclassical schools with respect to what the causes of business cycles and what to do about them. The rest of the time, they agree. It is easy for lay persons and government officials to overstate and misuse Keynesian theory, so much so that it is possible to think that keynisan theory is true and still remain within the classical liberal fold.

      Its also a mistake to suppose that zero sum interactions are not possible. Insitutions do matter, and even if zero sum interactions won’t dominate in a free-ish market, that doesnt really say anything about the current crony caplitalist system you have. The current crony capitalism may very well be encouraging zero-sum interactions that trnasfer money from the worst off to the better off.

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  10. The above is mixing fantasy with reality. If there were a universally applied unit of accountability, no predation. If there was a universal self imposed ethical standard, it would not matter where the arbitrary point of where the rich begin and the poor cease to exist?

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  11. I agree with MC,

    If you have a zero sum world view or are just an envious person, then other people’s wealth is bad.

    Jason, Michael and I default to assumptions of a positive sum world. Of course there are societies and individuals that got their wealth in a negative sum win/lose way — they cheated, lied, stole or otherwise tore the wings off little flies. I hope there are less of these people.

    I think this poll question partially captures people’s world view.

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    • I don’t think the world is completly zero sum but i think there is somethign like that going on. I’m fine with postive sum interactions but i do not think that there is an ever increasing pie such that everybody can always have more and at the same time the rich can get richer at a fast rate. I think the world is sort of zero sum and what kind of assumptions about how we would like the world to be are not terribly relevant to reality. As an example lowering the capital gains tax directly helps certain people but does little for most people. Or having no Cap Gains tax would really benefit a small group.

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      • Greg
        This proves you do not get how wealth and prosperity are created. In a positive sum voluntary exchange it is possible for both to benefit. Those producing the most benefit for the most people will gain the most. And this is wonderful. Liberals fundamentally misunderstand the world. You guys are dangerous

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  12. I’m calling “bullshit” on the “it’s-not-a-zero-sum-world” advocates, not because the statement itself is false but because it does not mean what such advocates seem to assert that it means.  At any given time every system is zero-sum.  Doesn’t matter what scale.  The movement of time is required to enable outside inputs.  Freeze the moment and there’s only a definite amount of anything, no more no less.

    Introduce the reality that there’s a future and you introduce the reality of net change over time.  That net change can amount to contraction or expansion of whatever you want to count in the system in question.  It’s easy to get people to agree that it’s better for the system to be bigger in the future.  It’s a little harder to make them feel secure that their piece of it will be bigger than what they’ve got right now or what they would have in the future without the proposed changes — and if they feel insecure about it, it’s because it seems right now that they or others they know (or maybe just about everyone) have been screwed somehow, probably by rich people.

    It seems to me that there are too many rich people, not nearly enough rich people, and certainly not the right amount of rich people.

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    • I’m calling “bullshit” on the “it’s-not-a-zero-sum-world” advocates, not because the statement itself is false but because it does not mean what such advocates seem to assert that it means.  At any given time every system is zero-sum. 

      Say I’m a baker.  I have 100 loaves of bread.

      The first loaf of bread is worth a lot to me, because if I didn’t even have that, I’d starve to death.

      The last loaf of bread isn’t worth all that much to me, because with 99 loaves of bread left over, I’m not going to starve for a good long time.

      You come into my shop…  and, for a small amount of money, I give you my 100th loaf of bread.  It’s now your first loaf of bread.  And therefore it’s become more valuable.

      Sure, you can freeze time, but time doesn’t ever actually do that on its own.  Instead, we’re all exchanging stuff all the time, and making more value, even if it’s just by re-arranging stuff, as in the example.  That’s not even counting production, which also requires time, and which also can be (and often is) positive-sum.

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      • Exactly.  The mere fact that time moves on and we live in a dynamic system means that planning should assume that things will be different in the future than they are now.  But there’s nobody arguing that’s not the case. Even in accounting, where they freeze the moment all the time in financial statements, there’s an assumption of dynamic change.  Any entity that can’t pay its short-term liabilities cannot continue as a going concern, not fundamentally because of the rules of accounting, but because of the remedy actions of creditors and loss of access to suppliers, and financial statements are supposed to give us a basis for assessing prospects for survival to profitability.

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    • JJ,

      “…if they feel insecure about it, it’s because it seems right now that they or others they know (or maybe just about everyone) have been screwed somehow, probably by rich people.”

      Exactly our point. Many or most on the far left misunderstand the world. This is one reasons progressivism is fundamentally dysfunctional. Free enterprise and science are potentially positive sum systems. They can create prosperity, wellbeing and knowledge. To understand the world we live in people must recognize this potential.

      I am not saying nobody ever gets cheated or robbed — indeed for most of history the average person was cheated and robbed by the elites and priests. Free markets create the possible path for positive sum creation. To participate you must add value to others. That is the way it works. We forgot to tell young people this and now they take to the street with bongo drums and demand a piece of the pie.

      The answer is put the dang drums away and start adding value to others. Build something. Create something. Work for someone. Serve someone’s needs.

      This world needs more rich people that got their by providing values for others.

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      • Agree. For many on the left, the complaint is that the market isn’t free – that corporations and the already-rich simply play by different rules. They can give unlimited amounts of money to candidates; we are capped at $2400. They can lobby full-time during the off-season; we get to vote every other year. They take income as capital gains and pay half the tax rate of a wage-earner. That’s not fair by any standard, free-market or not.

        For others, there’s the idea that capitalism as an order is inherently wrong. Capital should not be given the privileged position. Policy should seek to maximize human well-being instead of profit (and no, the two are not identical in any realistic scenario). Free-market capitalism maximizes all the wrong things: profit, exploitation, risk; in reality it takes a strong representative government to curb these vices and provide stable social insurance, productive and rewarding employment, and an ownership stake in society for all.

        Neither of these positions are naive to the benefits that markets can and do provide. They are simply critical of a philosophy that takes market outputs as morally justified a priori, without considering what those outputs actually are and to whom they accrue.

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        • Benjamin

          Of course capital should not be given privilege. The rules of free enterprise are that all interactions are voluntary and nobody can restrict competitors from offering superior terms. Thus the dynamic snuffs out exploitation and unfairness.
          I don’t know if market outomes are morally justified or not (unless we define this as via the rules of the game). I do know that they are positive sum and more efficient than the alternatives.
          Don’t you progressives see the truth? Your solutions are the path to failure and poverty. That is why we keep arguing to look at the larger picture.

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      • Wow Roger. Lots of people who work are pissed at the way it appears the rich and corporations have gamed the system and get extra helpings of pie. Are you really going with people who aren’t happy with the current system are lazy and not working?

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              • I can see an argument why i shouldn’t see the world as zero sum. I don’t agree with that but i can see a good argument for that. Naive…no i don’t see that anymore then believing everything can be a positive transaction. You are ascribing a values to the beliefs you like and dislike based on whether you like them. The world isn’t what we would like it to be or what our grandest theories suggest it should be.

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              • Sometimes it’s negative sum.  Say you loan money to someone who won’t be able to repay it.  He uses the money to buy a house, and you camouflage the loan among some slightly less bad ones and sell it to investors.  The person who can’t repay it has no benefit once he’s been evicted, the investors are out the loan value minus the resale value of yet another foreclosed house, and you have your commission, which is far lower than the investor’s loss.  This is called free enterprise, and anyone’s who’s lost his job because of the resulting collapse is just an ignorant loser who doesn’t underhand economics..

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                • “Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.” – Andrew Mellon, Secretary of the Treasury under Herbert Hoover _or_ some people in this thread.

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                  • The Chinese Hanzhu character for Crisis is conjoined of two characters, one meaning “Danger” and the other meaning “Opportunity”.  Mellon was right speaking as an economist and wrong speaking as a liberal. Japan’s economic “crisis” will not improve after 20 years of liberal measures for precisely the reasons Mellon was hinting at. 20 years ago the price of real estate in Tokyo ALONE exceeded the value of all the rest of the real estate in the world, at least on paper. Clearly unsustainable. They needed massive devaluation and liquidation to “purge” the system. They haven’t done it. FDR kept things in stasis (or tried to) for 10 years, the only reason we got out of the great depression was WWII.

                    When you have cancer they give you chemotherapy, which is nothing less than poison. It puts you through hell, but it can also save your life. Not all medicine goes down with a spoon full of sugar.

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                    • Gah, no, and no.

                      For a thorough debunking of the danger/opportunity saying, this: http://pinyin.info/chinese/crisis.html

                      And for a similar debunking of Mellon and of your assertions about Japan, go read some 1990’s Ben Bernanke papers, the sort that led him to be appointed by a conservative as central banker.

                      To address your Great Depression point, read Lords of Finance. It goes into detail as to how WWII was really exceptional fiscal stimulus and how FDR accompanied it with incredibly easy money, and how that saved the world after all.

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                    • Ben, my wife is Chinese. I’m glad an occidental decided to lecture other occidentals on what orientals mean when they write things. On the other hand, her understanding not influenced by him is in agreement with what I said. I had heard this in a Chinese professor’s home told me by that professor almost 30 years ago. There were of course a lot more words and I’m handicapped in not being able to type pinyin. Perhaps using a dictionary definition of opportunity is misleading and the rest of my response is not indicative of “opportunity” in the same sense as your source’s misgivings.

                      Put another way, there is a weiji moment when you and I are practicing gung fu. Every punch you throw has a danger element to it and an opportunity for me to place you on the ground with prejudice. Regardless of what Mair thinks, he would do well to experience some tai ji quan and round out his word driven understanding of a great culture.

                      Bernanke is a fool. Precisely how has he stopped or alleviated this crisis we are in? I’ve already recommended you read some Duncan, I’m assuming you haven’t yet.

                      There are plenty of books discussing the disaster that was FDR’s reign of terror. I could link to multiple books, but followers here might want something web available like this.

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                • Mike and Greg
                  Let’s take a step back.
                  Of course not everything in the world is positive sum. Most interctions clearly are not. Of course someone can find a way to cheat someone else with complex financial products

                  The point of free enterprise is to replace the 10,000 year path to wealth — steal or extort it– with a system which when enforced limits actions to positive sum expected win win scenarios.

                  The reason we are 20 to 100 times as prosperous as our ancestors is that we established a system where most wealth comes from doing good for others rather than stealing from them. No it is not perfect. It is just better than the alternatives

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                  • Of course someone can find a way to cheat someone else with complex financial products

                    Which, for the past few decades, has seemed like a much faster and surer route to wealth than building a business that creates a useful product or performs a useful service   Go no further than that to see why people in general disrespect the wealthy.

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                  • For the past thirty years, that hasn’t been the case. More money has been made through FIRE (and other bubbles) than through actual innovation.

                    I’m a liberal because I believe in positive sum — because the reactionaries that want to cut their taxes and steal our parks are the same ingrates who don’t believe in veterans benefits — and do believe in treating people like slaves (including elected officials. wasn’t just J. Edgar, ya know)

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    • James and Jason, I think Just John has a point. I have the ultimatum game in mind. Two players distribute a windfall, Player 1 proposes a distribution and Player 2 can reject or accept with the proviso that a rejection means neither player gets anything. I understand rejections of unfair distributions, 99 to 1 for instance, without invoking envy or covetousness. Those who respond “too many rich people” could be rejecting unfair divisions on egalitarian, social justice basis. Essentially saying that too high a proportion of the gains from increased productivity and economic growth have accrued to the wealthy and overall things would be better off with more equitable distributions.

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  13. I think that you may be misinterpreting the answers given by the respondents, Jason.  I’d be willing to bet if the question was phrased “Do you think more people/less/people/same have more wealth/enough wealth to live comfortably/have luxury items/ etc. that you would get the percentages you are looking for.

    I think “the Rich” is starting to mean something in our culture that is different from how you mean it; it donsn’t mean people who have wealth.  I think when most people think of “the RIch” they think of the guys who didn’t mind screwing their future to make a few hundred million (a la AIG and Bear Stearns).  Or the people that have seemingly unlimited money and spend some of it on lobbying to make sure they can’t have affordable health insurance.  Or the Kardashians.  I suspect most people answering this “less” to this question are saying we don’t need more people like that.

    I’m not saying that view is correct or even healthy; I’m just saying that’s what people are really trying to tell you.

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    • Rich is only meaningful when used to denote someone’s wealth relative to someone else.

      The clearest way to interpret the poll is that the respondents are zeroing in on the amount of inequality they are comfortable with.  A certain number of rich people (i.e. relative to their peers) is desirable.  But 50% rich people implies 50% of people being extremely poor.

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        • While someone can have an arbitrarily large number of dollars or other currency, I’m not sure that capital and natural resources can be continually amassed in the same way.

          If rich mans have a disproportionate access to capital and resources, I’m not sure how someone with even a million dollars could stay rich seeing as how they’d still only have their labor to give, and presumably all of their peers would be in a similar boat, meaning that 50% millionaires would just lead to inflation until the underlying inequalities re-emerged.

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          • Again, I’m talking in real terms here, not in nominal terms. It would be easy to make half of us millionaires in nominal terms, but the resulting society would be really, really crappy because of the hyperinflation.

            What would a society be like in which the bottom half were all millionaires in real terms?  I have no idea, but it can’t be that bad, can it?

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              • If “everyone” suddenly received $1M we’d look like Zimbabwe, the relative value of a million would rapidly diminish to worthlessness. The only way the game works is if some have it and others don’t otherwise no one will be willing to give up their goods and services for something they already have in abundance. Want a latte? That’ll be $250 cash. Want a car? That’ll be a $500K.

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                • I specified that the wealth increase would be in real terms.  How often do I have to repeat it?  Not nominal terms, real terms.  (Those both are terms of art, by the way, and my use of them should have been enough to answer your question.)

                  To make a short story needlessly long, I’m not saying “fire up the printing presses.” That would be a disaster, and anyone even slightly aware of economics will agree.

                  I’m saying “Imagine there was a way to give everyone the same opportunities possessed right now, by rich people, on account of their being rich.”

                  That’s wealth in real terms.  That’s what I’m asking for.

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                    • Not with suitably awesome technologies.

                      Look, I’m not saying it’s at all practical to give everyone this kind of purchasing power, given the technology we have today.  I’m just saying that it would be really really nice if we could.

                      This would be a supremely banal point, of course, but for the poll results.

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                  • I don’t know what the context would be.  Radical technological change, perhaps.  Frankly, if I knew even 1/300 millionth of that scenario, I’d run out and apply it to myself.

                    The point is that the poll question asks me to contemplate a world in which I make myself (or a fellow American) richer.  It seemed obviously a nice thing for me to do.  So nice, in fact, that I’d do it all day long if I were able.  Which is why the results of the poll were so stunning in the first place.

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                    • Jason, I believe you asked the right question in the first place in the right way. I clearly understood the issue with Ethan’s question, sorry for jumping in to correct his understanding, but there are lurkers too who need correcting. ;)

                      It is easy to posit the economy you describe. I always look to the old Star Trek. No one seemed to be slaving for a paycheck, what everyone wanted in that (libertarian) Utopia was something meaningful to do with their lives. It was all about avocations not vocations. Except for those schmucks who wore the red shirts and got killed when they went to the planets, I’m guessing they were paying off student loans to the Star Fleet Academy.

                      My grandfather was a millionaire and lost every penny in the great depression. At 68 he had to go back to work and died leaving 5 children and a widow 2 yrs later. While he had wealth, his greatest avocation was reading and he had spent considerable sums accumulating an impressive library. Unfortunately my grandmother did not share his love of books and sold many of them for less than pennies on the dollar. Fast forward to today and books are dirt cheap. Everything is relative.

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  14. BD,

    I agree with concerns of privilege and inconsistent rules. 100% But if that is what OWS was about, it would be a wing of the Tea party.

    Free enterprise does not maximize exploitation. It expressly prohibits it by insisting that all interactions be mutually voluntary.

    And yes, the far left is totally naive to what markets deliver. That is why they actively undermine the system that created prosperity and wellbeing for billions.

    If the far left gets what it wants, billions will die and the rest will be impoverished. Other than that it’s a pretty good idea.

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    • Exploitation is systemic under complete free enterprise. People who do not own capital are dependent on those who do. There is always market power and monopoly at work, allowing the rich to extract profits from hard work while never allowing the workers to accumulate wealth. The fact that workers agree to do this is irrelevant – what choice do most really have?

      You’re right about the “far left”, but that’s a red herring. I’d be an idiot for arguing that the right is actively trying to destroy prosperity or whatever just because a few hardliners want to undo governance in its entirety.

      Most lefties I talk to, even at Occupy, are just left-liberals like me. And most of them hew to some variant of the positions I described above. Some are anti-capitalist but not anti-market (myself included); others are simply Tea Party (ie, “the game is rigged”) types but with liberal social values to boot. These are eminently reasonable outlooks in my mind – true communists or whatever are are rare as Ron Paul types on the right. They’ll always be there, but that’s not what the debate is about.

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      • Wardsmith brought up star trek. I read a few weeks ago a blog where the writer compared the utopian world of star trek which is 350 years in the future with the real world 350 years ago.
        The difference between the past and now is greater than the difference between us and utopian star trek.
        All this whining on the plight of the middle class misses that liberals are trying to fix their woes by throwing sand in the gears that allowed us to flourish today. It is better to be poor in America than an aristocrat 350 years ago.

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      • James, that’s just ad hominem. I did not fail intro economics, nor intermediate economics, nor advanced economics, in fact I graduated with departmental honors, am a working economist currently, and will be in a graduate program next year for Philosophy and Economics at a well-known school.

        So, when I attempt to explain lucidly and concisely what I mean by systemic (not systematic) exploitation, I do hope you will argue it on the merits, or at least ask for clarification if I have underexplained in the interest of brevity, rather than resorting to unfounded personal attacks.

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        •  

          Good for you, Ben, and sincerely I wish you success.  (And kudos for keeping your cool in response to was indeed an insult, although not technically an ad hominem.)  I’m concerned at your mention of “philosophy and economics,” though.  To me that suggests the wrong turn, away from empirical analysis and into squishy normative analysis. (I’ve talked to philosophers about economics–they general seem to understand it about as well as economists understand philosophy.)

          Because, sincerely, if you think exploitation is common in free markets then I think you’re using an ideologically-motivated definition of exploitation.

          I will explain at more length.

          Exploitation is systemic under complete free enterprise.

          No, in a free enterprise system people earn their marginal productive value.  Exploitation in market systems is a Marxist connotation, stemming from his labor theory of value, which was fundamentally flawed.

          People who do not own capital are dependent on those who do.

          As people who do own capital are dependent on those who do not, else they would lack a labor force.  Capital without labor is of no value; labor without capital can survive on its own.

          There is always market power and monopoly at work,allowing the rich to extract profits from hard work while never allowing the workers to accumulate wealth.

          There is frequently market power at work, but to say there is always monopoly at work in a free enterprise system is fundamentally wrong, both theoretically and empirically.  Monopolies make above-normal profits, attracting competitors who compete those profits away.  This is standard economics–I sincerely hope your economics profs did not fail to teach you this.

          The fact that workers agree to do this is irrelevant – what choice do most really have?

          I’ve just been re-reading Hernando de Soto’s The Other Path for my political economy class.  I highly recommend it, and he answers your questions.  Peasants streaming into Lima, Peru, from the countryside started tens of thousands, maybe hundreds of thousands, of small businesses.  This is one of those arguments that make me irate–in the guise of being concerned about the plight of workers you infantilize them, seeing them as helpless and hopeless except when given alms by the corporations.  I wish you could have gone to my 20th high school reunion–I was blown away by how many of my classmates had started their own businesses, including some who never went to college.

          I’m left wondering what kind of economics education you received that didn’t answer these questions.  You obviously did well, but I wonder if your program did well by you.

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          • I think I’ll start from the bottom and work backwards on these. First, I completely agree with your comments about small business. Entrepreneurship, even in a Marxian model, is often talked about in a Schumpeterian framework; it’s small business owners who in my view best offer a model of a post-capitalist (but still market-based!) economy, since they are essentially laborers ‘who own the means of production themselves’ – from one perspective, Marx’s ideal.

            Unfortunately not everyone can do this, for various reasons – lack of access to credit, or education, or health insurance, or simple risk-aversion or lack of ability. These pure laborers are dependent on wages from capital to finance their day-to-day existence; whereas capitalists, even in the absence of labor, have accumulated the wealth to live comfortably for at least a short stretch of time. The dependency is asymmetrical; therefore, the resultant bargaining power is inherently in favor of employers; therefore it is systemically true that workers receive an ‘unfairly’ low portion of the surplus from collaboration (which is not an issue for entrepreneurs). (Also I could throw in ‘reserve-army’ stuff here but I’m sure you’ve heard that plenty.)

            Aside: Marginal productive value is a non sequitur. It’s only possible to assign such a value to labor if the level of capital is static, and it’s only possible to assign such a value to capital if the level of labor is static. But both are dynamic and codetermined, so marginalism is useless when talking about what is fair compensation for each factor. (This thinking is not essential to my point however.)

            With respect to monopoly, I think the empirics show that there is usually at least partial monopoly (a la the Card and Krueger minimum wage study) in effect, which is attributable to permanent rigidities in the system (natural/geographic monopoly, barriers to entry, returns to scale). When this is the case there is no mechanism of competition in labor’s favor, and oh so very rarely is this situation reversed. In other words, even if you take the marginalist approach, workers are often paid below their product while capitalists almost never are – and somehow the system prevents most workers from ever accumulating any wealth of their own, while constantly enlarging the fortunes of the owners.

            So to call it exploitation is a charge that can be assessed even from the neoclassical framework, which I can assure you was not lacking in explication in my coursework. In any case I did look into the program I mentioned and was assured that the Economics half remains mathematically rigorous (the courses are the standard postgrad fare) while the Philosophy half will take the track of interrogating assumptions like rational choice in a similarly rigorous fashion.

            Also, thanks for responding. :-)

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