... One way of analyzing the changing nature of the US economy is by
looking at how much GDP physically weighs. Former Federal Reserve
Chairman Alan Greenspan once remarked that the value of US GDP is five
times as great as it was 50 years ago. Yet “the physical weight of our
gross domestic product is evidently only modestly higher today than it
was 50 or 100 years ago.” Very little of the nation’s economic
growth ”represents growth in the tonnage of physical materials — oil,
coal, ores, wood, raw chemicals. The remainder represents new insights
into how to rearrange those physical materials to better serve human
needs.”
In other words, to paraphrase economist Paul Romer, more and more we
create value by coming up with different “recipes” to rearrange the
physical world. Ideas and innovation are what truly drive growth. So
even though America becomes more productive and the size of the economy
bigger, it doesn’t gain any weight — just wealth.
Interesting way of illustrating the how advanced economies are changing.
"IN recent years poor countries have enjoyed impressive improvements in
GDP per person. But in the rich world they have hardly grown at all." Click on the link to see the short video: Economic growth
Jerry Muller is one of my favorite economic historians. I think this piece offers an insightful analysis of inequality in advanced market economies. As I read this piece I kept thinking back to Robert Fogel's (another favorite economic historian) The Fourth Great Awkening and the Future of Egalitarianism, where he makes the case that the economic challenge of this century is going to be focused on human capital. I don't think the ideologies of the left or right have come to grips with this yet. Muller begins:
Inequality is increasing almost everywhere in the post-industrial
capitalist world. Despite what many think, this is not the result of
politics, nor is politics likely to reverse it. The problem is more
deeply rooted and intractable than generally recognized.
Inequality is an inevitable product of capitalist activity, and
expanding equality of opportunity only increases it -- because some
individuals, families, and communities are simply better able than
others to exploit the opportunities for development and advancement that
today's capitalism affords. Some of the very successes of western
capitalist societies in expanding access and opportunity, combined with
recent changes in technology and economics, have contributed to
increasing inequality. And at the nexus of economics and society is the
family, the changing shape and role of which is an often overlooked
factor in the rise of inequality.
Though capitalism has opened up ever more opportunities for the
development of human potential, not everyone has been able to take full
advantage of those opportunities or to progress very far once they have
done so.
Formal or informal barriers to equality of opportunity, for example,
have historically blocked various sectors of the population -- such as
women, minorities, and poor people -- from benefiting fully from all
capitalism offers. But over time, in the advanced capitalist world,
those barriers have gradually been lowered or removed, so that now
opportunity is more equally available than ever before. The inequality
that exists today arguably derives less from the unequal availability of opportunity than it does from the unequal ability to exploit opportunity.
And that unequal ability, in turn, stems from differences in the
inherent human potential that individuals begin with and in the ways
that families and communities enable and encourage that human potential
to flourish. ...
The bolded sentence is my doing. Read the whole thing. Thoughtful stuff.
I've been doing some writing about the common misperception of the economy as a zero-sum game and the fear that we will soon (or ever) run out of nonrenewable resources. This is counterintuitive to so many people that I feel the need to address it some detail. I written a draft of this section for my book I'm working on but I need to massage more before posting it here.
In the meantime, Mark Perry has this interesting chart from his post Bad news for pessimists: Malthus was wrong. If commodities are becoming scarcer, then prices will go up. But as this chart shows, commodity prices over the long-haul, are getting less expensive in real dollars. Other databases I've seen show this to be true as far back as at least the mid-1800s. The trend is expected to continue for the foreseeable future. Why? I'll get to that in coming posts but here is the evidence making my point. Read Perry's post for more details on the data.
... Different languages have different ways of talking about the future.
Some languages, such as English, Korean, and Russian, require their
speakers to refer to the future explicitly. Every time English-speakers
talk about the future, they have to use future markers such as “will” or
“going to.” In other languages, such as Mandarin, Japanese, and German,
future markers are not obligatory. The future is often talked about
similar to the way present is talked about and the meaning is understood
from the context. A Mandarin speaker who is going to go to a seminar
might say “Wo qu ting jiangzuo,” which translates to “I go listen
seminar.” Languages such as English constantly remind their speakers
that future events are distant. For speakers of languages such as
Mandarin future feels closer. As a consequence, resisting immediate
impulses and investing for the future is easier for Mandarin speakers. ...
“Capitalism has a purpose beyond just making money. I think the critics of capitalism have got it in this very small box. That it’s all about money. It’s based in being greedy, selfish and exploitative. And yet, I haven’t found it to be that way. Most of the hundreds of entrepreneurs I know and have met did not start their business primarily out of a desire to make money. Not that there’s anything wrong with making money. My body cannot function unless it produces red-blood cells. No red-blood cells and I’m a dead man. But that’s not the purpose of my life.
Similarly, a business cannot exist unless it produces a profit . . . but that’s not the only reason it exists.”
When I was writing a review of Dwight Lee's and Richard McKenzie's excellent book, Getting Rich in America: 8 Simple Rules for Building a Fortune and a Satisfying Life,
I called Dwight to ask a question and we got talking about Rule #5: Get
Married and Stay Married. Dwight pointed out that if you follow the
other 7 rules but don't get married or stay married, you have a
substantial probability of building a fortune and a satisfying life.
But, he said, if you don't get married and stay married, you tend not to
follow at least some of the other 7 rules.
While the upscale college-educated crowd continues to marry at very high rates, marriage rates are plummeting among those further down on the socioeconomic ladder.
... A useful debate about the morality of capitalism must get beyond libertarian nostrums that greed is good, what’s mine is mine and whatever the market produces is fair. It should also acknowledge that there is no moral imperative to redistribute income and opportunity until everyone has secured a berth in a middle class free from economic worries. If our moral obligation is to provide everyone with a reasonable shot at economic success within a market system that, by its nature, thrives on unequal outcomes, then we ought to ask not just whether government is doing too much or too little, but whether it is doing the right things.
Instead, Dr. Butzer argues that Sargon's conquest itself caused
the collapse of trade by destroying cities and disrupting what had
till then been "an inter-networked world-economy, once extending
from the Aegean to the Indus Valley." In other words, as with the
end of the Roman empire, the collapse of trade caused the collapse
of civilization more than the other way around.
A new find suggests farmers in Bible lands built channels for irrigation long before historians thought they did, allowing for cultivated vineyards, olives, wheat and barley.
... “Educational systems could be improved by acknowledging that, in general, boys and girls are different,” said University of Missouri biologist David Geary in their statement. “For example, in trying to close the sex gap in math scores, the reading gap was left behind. Now, our study has found that the difference between girls’ and boys’ reading scores was three times larger than the sex difference in math scores. Girls’ higher scores in reading could lead to advantages in admissions to certain university programs, such as marketing, journalism or literature, and subsequently careers in those fields. Boys lower reading scores could correlate to problems in any career, since reading is essential in most jobs.”
Generally, when conditions are good, the math gap increases and the reading gap decreases and when conditions are bad the math gap decreases and the reading gap increases. This pattern remained consistent within nations as well as among them, according to the work by Geary and Gijsbert Stoet of the University of Leeds that included testing performance data from 1.5 million 15-year-olds in 75 nations. ...
... Two rival reform movements arose to restore the integrity of
Catholicism. Those in the first movement, the Donatists, believed the
church needed to purify itself and return to its core identity. ...
... In the fourth century, another revival movement arose, embraced by
Augustine, who was Bishop of Hippo. The problem with the Donatists,
Augustine argued, is that they are too static. They try to seal off an
ark to ride out the storm, but they end up sealing themselves in. They
cut themselves off from new circumstances and growth.
Augustine, as his magisterial biographer Peter Brown puts it, “was
deeply preoccupied by the idea of the basic unity of the human race.” He
reacted against any effort to divide people between those within the
church and those permanently outside. ....
16. A great piece by someone who considers them unaffiliated with any religion. Every Christian and congregation needs to reflect on the insignificance of the church in this writers life. His tribe is growing: The significant insignificance of religion
... It’s striking that so many economists have praised his [Tyler Cowen] op-ed: usually,
economists (with much reason) point to how their conclusions are
dispassionate, fact-based and (quasi) scientific as evidence for their
validity. You would think that Cowen’s conclusion that most economists
are not just disembodied scientists but that their values also influence
their work would make them uncomfortable. In debates around topics like
free trade, critics argue that economists’ social perspective tars
their recommendation, and economists vigorously deny the existence of an
“economics ideology”. In my view, the fact that so many economists
praise Cowen’s finding which undermines economics’ claim to scientific
knowledge highlights that many of these economists think their value
system is, well, right. Their cri de coeur endorses a view of
economics-as-it-is-practiced as not just a science but also a political
ideology. “We are good”, economists hear this op-ed as telling them, not
“We are biased.” ...
... Let me give you two examples of what I mean, two examples that I think
are revealing (and, not coincidentally, hobby horses of mine).
The college wage premium vs the marriage wage premium.
In contemporary societies, there is a strong college wage premium. That
is to say, people who go to college make more money on average than
people who don’t. While a minority of economists (including Cowen) have
questioned why this premium should exist, the majority of economists
generally take the existence of this college wage premium to mean that
college is good and important, that more people should go to college,
and that public policy has some role to play in promoting and
subsidizing college attendance. I would bet a goodly sum of money that
if you picked at random ten tenured economists from top-20 economics
departments, and asked them to list what an 18-year-old should do to
increase his chances of getting high wages, a majority would say “go to
college.”
There also exists a marriage wage premium, which is roughly as
significant and as consistent as the college wage premium. To say that
the marriage wage premium doesn’t get the same amount of attention is an
understatement. Economists recoil at the idea of praising marriage and
supporting public policies that increase marriage. They are much more
likely to dismiss the marriage wage premium as reflecting selection bias
(it’s not that marriage makes people earn more money, it’s that people
who would have earned more money anyway tend to get married) or intone
that “correlation is not causation”–criticisms that apply equally to
analyses of the college wage premium. I would bet a goodly sum of money
that if you picked at random ten tenured economists from top-20
economics departments, and asked them to list what an 18-year-old should
do to increase his chances of getting high wages, none of them would
say “get married and stay married”–even though the data on the marriage
wage premium supports this conclusion to the same extent as it does
going to college.
The perspective of economists seems as good an explanation for this discrepancy as any. Economics
as a profession, pretty much by definition, self-selects people who on
the whole enjoy higher education. Economists by and large enjoyed
college so much they decided to stay there for the rest of their
professional lives. Encouraging other people to do as they did feels
natural. They “know” that not everyone is like them, that selection bias
advises caution on this issue, etc. but they’re human like everyone
else. When the data can be read as supporting A and non-A, it’s our gut
(whether consciously or not) which tells us which is right. (As I once
put it on Twitter: thank God for confirmation bias, otherwise we’d never
know when correlation is causation.)
Meanwhile, economists’ “cosmopolitan perspective” (as Cowen puts it)
makes them not feel good at the idea of public policy that would
interfere with personal choices (allowing for a second that getting
married is a “personal choice” in a way that going to college isn’t).
Most economists think that government should not interfere or have a
stance one way or another with decisions that feel intimate to people.
That is a complete value judgement. And it’s a completely defensible
one.
But at the level of the economics profession, this leads to bias:
much more ink is spilled on, and thought given to the college wage
premium than the marriage wage premium. One is mostly praised and
interpreted in a certain way, while the other is mostly ignored. And, of
course, the thing that academic economics focuses on has an effect on
elite debate and public policy, especially when the socially liberal,
pro-higher ed biases of economists line up well with those of the rest
of the elite. ...
... To clarify: my point here isn’t “I’m right, economists are wrong” or,
worse, “No need to evaluate economists’ arguments on the merits, because
they’re biased anyway.” And by the way, yes, I am a practicing Catholic
and a social conservative, so my pro-marriage, pro-natality views have
plenty of bias too. My point here is to praise Tyler Cowen for
recognizing that economists have bias, and to note that fellow
economists have cheered him for doing so. It’s a great step for
intellectual honesty. Let’s be even more honest, and let’s have
economists who are willing to look beyond their biases. I’ve suggested
two places to start. I’m sure there are more.
... The math of wealth is actually pretty simple: It all boils down to
four things: 1. How much you start with, 2. How much income you make, 3.
How much of your income you save, and 4. How good of a rate of return
you get on your savings.
So one obvious thing we could do to make wealth more equal is - surprise! - redistribution. It turns out that income redistribution and wealth
redistribution have much the same effect on the wealth of the poor and
middle-class. Income redistribution is probably a bit better, for two
reasons. First, people with higher incomes tend to save more, meaning
they build wealth more rapidly. Second, people with higher incomes tend
to have less risk aversion, meaning they are more willing to invest in
assets like stocks (which get high average rates of return, although
they are risky) rather than safe assets like savings accounts and CDs
that get low rates of return.
In other words, giving the poor and middle-class more income will boost the amount they are able to save, the percentage they are willing to save, and the return
they get on those savings. Part of the reason America's wealth
distribution is so unequal in the first place is that our income
distribution is very unequal.
But there are reasons to believe that redistribution can't fix all of
the problem, or even most of it. If you do the math, you discover that
in the long run, income levels and initial wealth (factors 1 and 2 from
above) are not the main determinants of wealth. They are dwarfed by
factors 3 and 4 -- savings rates and rates of return. The most potent
way to get more wealth to the poor and middle-class is to get these
people to save more of their income, and to invest in assets with higher
average rates of return.
As I mentioned, income redistribution helps these things a bit, but
it doesn't account for the whole difference. The rich probably save more
than the poor for many more reasons besides the simple fact that
they're rich. In fact, being willing to save more is probably a big part
of how the rich got rich in the first place. "Cheap" is an insult, but
being cheap is how you get rich. If you consume everything you earn,
your consumption will be higher today, but lower twenty years down the
road; in our consumption-focused society, a lot of people are caught in
this trap. And government can and should help them get out. ...
I heard a lecture by economist Peter Rodriquez of the University of Virginia sometime back. He believes our saving problems of the past generation are partly tied to globalization. As emerging markets grew they had more money to invest than their local economies could profitably absorb. American markets were more stable and reliable so the trend was to invest in the American economy. That meant a flood of capital, keeping borrowing cost low, and rising real estate values as foreigners bought up land for investment, making borrowing to buy real estate seem inordinately attractive. Combine this with weak consumer protection against nefarious lending practices and a poorly overseen financial sector, and the circumstances were ripe for disaster.
The great majority of people who become wealthy without having been born into wealth do so through frugal living and dogged investing. Yes, some get hit with challenges that wipe them out and others get lucky breaks, but the bulk of wealth creation happens through discipline practiced over a lifetime. Somehow we have to recover these values.
1. The United States had its financial bubble. Europe is having one too. Is China next? If it is, it could reshape the global economy and radically reshape Chinese government. Here is an interesting piece about China's real estate bubble.
... I like the idea of a breaking the Industrial Revolution into stages,
but I would define them in more fundamental terms. The first Industrial
Revolution was the harnessing of large-scale man-made power, which began
with the steam engine. The internal combustion engine, electric power,
and other sources of energy are just further refinements of this basic
idea. The second Industrial Revolution would be the development of
interchangeable parts and the assembly line, which made possible
inexpensive mass production with relatively unskilled labor. The Third
Industrial Revolution would not be computers, the Internet, or mobile
phones, because up to now these have not been industrial tools;
they have been used for moving information, not for making things.
Instead, the rise of computers and the Internet is just a warm-up for
the real Third Industrial Revolution, which is the full integration of information technology with industrial production.
The effect of the Third Industrial Revolution will be to collapse the
distance between the design of a product and its physical manufacture,
in much the same way that the Internet has eliminated the distance
between the origination of a new idea and its communication to an
audience. ...
... Eventually all of the creative ferment of the industrial revolution pays
off in a big “whoosh,” but it takes many decades, depending on where
you draw the starting line of course. A look at the early 19th century
is sobering, or should be, for anyone doing fiscal budgeting today. But
it is also optimistic in terms of the larger picture facing humanity
over the longer run.
5. What are the contours of income inequality in the United States? This 40 minute video by Emmanuel Saez offers some important insights.
6. Futurist Ray Kurzweil is a little too sensationalist for my taste but this vid offers interesting food for thought about nanotechnology and the future sports. We will even be able to have meaningful sports competition?
The recovered wealth - most of it from higher stock prices - has been
flowing mainly to richer Americans. By contrast, middle class wealth is
mostly in the form of home equity, which has risen much less.
1. Conventional wisdom says wearing the red shirt in Star Trek will get you killed. Not so fast. Statistical analysis in Significance Magazine disagrees. (Keep your redshirt on: a Bayesian exploration)
"... In spite of wearing a redshirt, there is
only an 8.6% chance of a member of the operations or engineering
departments becoming a casualty. These personnel should ensure that
their life insurance plans are based on their departments and not their
uniform color.
Although Enterprise crew members in
redshirts suffer many more casualties than crew members in other
uniforms, they suffer fewer casualties than crew members in gold
uniforms when the entire population size is considered. Only 10% of the
entire redshirt population was lost during the three year run of Star Trek.
This is less than the 13.4% of goldshirts, but more than the 5.1% of
blueshirts. What is truly hazardous is not wearing a redshirt, but being
a member of the security department. The red-shirted members of
security were only 20.9% of the entire crew, but there is a 61.9% chance
that the next casualty is in a redshirt and 64.5% chance this
red-shirted victim is a member of the security department. The remaining
redshirts, operations and engineering make up the largest single
population, but only have an 8.6% chance of being a casualty.
Red uniform shirts are safe, as long as the wearer is not in the security department."
2. Interesting piece on automation in the Economist: Robocolleague
Robots are getting more powerful. That need not be bad news for workers. ...
... Historically, technological advances have been relatively benign for
workers. Labour-market trends through the 19th and 20th centuries show
surprising continuity, according to Lawrence Katz of Harvard University
and Robert Margo of Boston University. In recent decades, for example,
computerisation and automation have displaced “middle-skilled” workers
at the same time as employment among high- and low-skilled workers has
increased. This “hollowing out” is not new, Messrs Katz and Margo note.
Early industrialisation had similar effects. Middle-skilled artisans,
like trained weavers, were put out of work by industrial textile
production, but the fortunes of less-skilled factory workers and
white-collar factory managers steadily improved. Mechanisation’s
insatiable appetite for routine work of all types has yet to create mass
unemployment. Quite the opposite.
The worry is that technology now has its sights set on non-routine
tasks as well as mundane ones. Yet Mr Autor notes that just because a
skilled job can be automated does not mean it will be. The number of
workers used to build Nissan vehicles varies a lot between Japan, where
labour is expensive, and India, where it is abundant and cheap. The
relative cost of different types of workers matters for firms as they
choose how to deploy new technologies. ...
Indie Capitalism has three foundational principles:
• Creativity generates economic value.
Creativity is the source of profit. Yes, efficiency can squeeze more
out of what exists, but creativity gives us originality, which
translates into a market advantage and big margins.
• Creativity drives capitalism.
These past few years we have been victimized by the disastrous results
of “creativity” applied to the financial sector (mortgage-backed
securities, for starters). What we lost sight of is that the scaling of
creativity to actually make things of value sold in the marketplace is
the true heart of our economic system. It is the true generator of net
new jobs, wealth, and tax revenue.
• Creative destruction is crucial to economic growth.
Crony capitalism, which relies on monopoly and political power, is
antithetical to entrepreneurial capitalism. A faster cycle of birth,
growth, and death of companies boosts creativity, economic value, and
growth.
The bottom line: For the first time in decades, several key economic drivers have created a competitive advantage for the U.S. that will encourage corporate strategic decisions on capital allocation and acquisitions for generations to come.
Here's why:
1. Cheap and abundant natural gas. ...
2. Innovation. Despite talk of a brain drain, the U.S. remains the global innovation leader, maintaining a position enjoyed for 50 years. ...
3. Rule of law. Without the means to protect intellectual property, it cannot be exploited for competitive advantage. ...
4. Human capital. The wage gap between the U.S. and China has been shrinking. ...
5. De-complexity. Western multinationals continue to struggle with management of operations in developing countries. ...
6. Public policy and abundance. The federal government appears to be seizing the opportunity to promote job growth at home.
7. Credit, currency and the coming wave of mergers and acquisitions.
"Picture an assembly line not that isn’t made up of robotic arms spewing sparks to weld heavy steel, but a warehouse of plastic-spraying printers producing light, cheap and highly efficient automobiles.
If Jim Kor’s dream is realized, that’s exactly how the next generation of urban runabouts will be produced. His creation is called the Urbee 2 and it could revolutionize parts manufacturing while creating a cottage industry of small-batch automakers intent on challenging the status quo. ..."
Throughout history, war and innovation have gone hand in hand,
whether it’s breakthroughs out of heavily funded R&D programs
or makeshift contraptions thrown together with spare parts. Soldiers are
trained to use the technology on hand to get the job done, one way or
the other.
But how would military operations change if soldiers on the
battlefield could have the best of both worlds: access to expert
engineers able to fabricate custom-designed fixes right on-the-spot and
in very little time? ...
"It may sound strange and far out, but it’s actually quite simple. 4D
printing is being billed as a process where synthetic objects can change
and adapt themselves to the environment. In a recent TED interview, Tibbits compared the process of 4D printing to the process of natural adaptation:
Natural systems obviously have this built in — the
ability to have a desire. Plants, for example, generally have the desire
to grow towards light and they generate energy from the translation of
photosynthesis, carbon dioxide to oxygen, and so on. This is extremely
difficult to build into synthetic systems — the ability to “want” or
need something and know how to change itself in order to acquire it, or
the ability to generate its own energy source. If we combine the
processes that natural systems offer intrinsically (genetic
instructions, energy production, error correction) with those artificial
or synthetic (programmability for design and scaffold, structure,
mechanisms) we can potentially have extremely large-scale
quasi-biological and quasi-synthetic architectural organisms."
The music industry, the first media business to be consumed by the
digital revolution, said on Tuesday that its global sales rose last year
for the first time since 1999, raising hopes that a long-sought
recovery might have begun.
The increase, of 0.3 percent, was tiny, and the total revenue, $16.5
billion, was a far cry from the $38 billion that the industry took in at
its peak more than a decade ago. Still, even if it is not time for the
record companies to party like it’s 1999, the figures, reported Tuesday
by the International Federation of the Phonographic Industry, provide
significant encouragement.
8. Teleworking: The myth of working from home from the BBC. "Yahoo has banned its staff from "remote" working. After years of many predicting working from home as the future for everybody, why is it not the norm?"
"Reasons for high unemployment among the young include ineffective education systems (the share of early school dropouts is 20% in Italy and 30% in Spain) and dual labour markets with highly protected jobs for older employees. The good performance of Germany is not least a result of the German apprenticeship system, which facilitates labour market access for school leavers by lowering the company’s costs for employing them. The OECD’s latest “Going for Growth” report recommends reforms to strengthen the vocational training systems as one of the most effective ways to fight structural youth unemployment. This would also be a reasonable starting point for the EU’s youth employment programme."
"What’s most revealing about this study is that, like earlier research,
it suggests that students’ preference for printed textbooks is reflects
the real pedagogical advantages they experience in using the format:
fewer distractions, deeper engagement, better comprehension and
retention, and greater flexibility to accommodating idiosyncratic study
habits. Electronic textbooks will certainly get better, and will
certainly have advantages of their own, but they won’t replicate the
particular advantages inherent to the tangible form of the printed book."
The Catholic Church has struggled to bring in young members in the
United States. Less than half of U.S. Hispanics between 18 and 29
identify as Catholic, compared with the 60+ percent of Hispanics older
than 50.
The narrative of decline in the mainline church underestimates the continuing influence of its members, says a religion researcher.
16.Some interesting observations by NYU psychologist Jonathan Haidt. He says we tend to process our social world through three lenses: Social distance, hierarchy, and disgust. Conservatives tend to have a lower threshold of revulsion while liberals, and praticularly libertarians, have a higher threshold.
A fat salary isn’t the only way someone can strike it rich. Regardless
of one’s income level, people who live below their means, invest wisely,
and live modestly are on the path to real wealth.
Here are five frugal habits that many of the upper class have adopted to build long-lasting wealth and financial independence:
Drive a modest car. Your car should only serve the purpose of getting you safely and comfortably from point A to point B—nothing more. ...
Buy a modest house.Warren Buffett
famously still lives in the Omaha, Neb., home he bought back in 1958
for $31,500. Take Buffett’s cue and don’t overwhelm yourself with a
large monthly mortgage payment. Buy a modest and comfortable home and use the money you save to build your savings and retirement fund.
Don’t pay full price. A great way to keep more of your money is by not paying full price on anything. ...
Have an action mentality. Almost all self-made millionaires have
one thing in common: They are people of action. They don’t sit around
feeling sorry for themselves waiting for something good to happen to
them, as opposed to the people who I would say have the “lottery
mentality.” People of action take appropriate risks, are constantly
looking to improve themselves, and are addicted to knowledge, as it is
the best way to gain a competitive advantage in life’s financial
endeavors.
This article reminded my of a book written several years ago called The Millionare Next Door. We tend to confuse high income with high wealth. A great many people with the expensive houses and cars are spending more than earn. Their net worth is zero or less. Most people with a net wealth of one million or more live in modest homes, never buy new cars (or at least not expensive ones), watch expenses like a hawk, and are proactive with their investing. I think the never ending challenge for a follower of Jesus is a three part balancing exercise between personal consumption, giving, and investing wisely to care for one's own needs as well as to have more to give to others. I think the balance can very considerably between individuals, as well as vary over our lifetimes, based on any number of issues ranging from vocation to stage of life. I don't think the church does a very good job of helping us think this through.
In the years since the recession, the median household income in the U.S. has dropped to just over $50,000, while fixed costs like health care, higher education, and housing have only soared.
Now imagine trying to support a family of four on a fraction of that income.
It's a reality that stay-at-home wife and mother of two Danielle Wagasky has lived for the last four years.
And, perhaps a little surprisingly, she wouldn't have it any other way.
Wagasky, 28, lives with her her husband, Jason, 31, and their two young children in a three-bedroom family home in Las Vegas, Nevada. While Jason, a member of the U.S. Army, completes his undergraduate studies, the family's only source of income is the $14,000 annual cost of living allowance he receives under the G.I. Bill.
Despite all odds, the family has barely any credit debt, no car payment, and no mortgage speak of. ...
... Data struggles with the social. Your brain is pretty bad at
math (quick, what’s the square root of 437), but it’s excellent at
social cognition. People are really good at mirroring each other’s
emotional states, at detecting uncooperative behavior and at assigning
value to things through emotion. ...
... Data struggles with context. Human decisions are not discrete
events. They are embedded in sequences and contexts. The human brain has
evolved to account for this reality. People are really good at telling
stories that weave together multiple causes and multiple contexts. Data
analysis is pretty bad at narrative and emergent thinking, and it cannot
match the explanatory suppleness of even a mediocre novel.
Data creates bigger haystacks. This is a point Nassim Taleb,
the author of “Antifragile,” has made. As we acquire more data, we have
the ability to find many, many more statistically significant
correlations. Most of these correlations are spurious and deceive us
when we’re trying to understand a situation. Falsity grows exponentially
the more data we collect. The haystack gets bigger, but the needle we
are looking for is still buried deep inside. ...
... Big data has trouble with big problems. If you are trying to
figure out which e-mail produces the most campaign contributions, you
can do a randomized control experiment. But let’s say you are trying to
stimulate an economy in a recession. You don’t have an alternate society
to use as a control group. For example, we’ve had huge debates over the
best economic stimulus, with mountains of data, and as far as I know
not a single major player in this debate has been persuaded by data to
switch sides.
Data favors memes over masterpieces. Data analysis can detect
when large numbers of people take an instant liking to some cultural
product. But many important (and profitable) products are hated
initially because they are unfamiliar.
Data obscures values. I recently saw an academic book with the
excellent title, “ ‘Raw Data’ Is an Oxymoron.” One of the points was
that data is never raw; it’s always structured according to somebody’s
predispositions and values. The end result looks disinterested, but, in
reality, there are value choices all the way through, from construction
to interpretation.
This is not to argue that big data isn’t a great tool. It’s just that,
like any tool, it’s good at some things and not at others. As the Yale
professor Edward Tufte has said, “The world is much more interesting
than any one discipline.”
Issue 104 examines the impact of automation on Europe and America and the varying responses of the church to the problems that developed. Topics examined are mission work, the rise of the Social Gospel, the impact of papal pronouncements, the Methodist phenomenon, Christian capitalists, attempts at communal living and much more.
"Despite the tough economy, many of the nation’s largest churches are
thriving, with increased offerings and plans to hire more staff, a new
survey shows.
Just 3 percent of churches with 2,000 or more attendance
surveyed by Leadership Network, a Dallas-based church think tank, said
they were affected “very negatively” by the economy in recent years.
Close to half — 47 percent — said they were affected “somewhat
negatively,” but one-third said they were not affected at all. ..."
... It's not surprising that younger entrepreneurial firms are considered more innovative. After all, they are born from a new idea, and survive by finding creative ways to make that idea commercially viable. Larger, well-rooted companies however have just as much motivation to be innovative — and, as Scott Anthony has argued, they have even more resources to invest in new ventures. So why doesn't innovation thrive in mature organizations? ...
... First, he says, the focus of an established firm is to execute an existing business model — to make sure it operates efficiently and satisfies customers. In contrast, the main job of a start-up is to search for a workable business model, to find the right match between customer needs and what the company can profitably offer. In other words in a start-up, innovation is not just about implementing a creative idea, but rather the search for a way to turn some aspect of that idea into something that customers are willing to pay for. ...
... discovering a new business model is inherently risky, and is far more likely to fail than to succeed ...
... Finally, Blank notes that the people who are best suited to search for new business models and conduct iterative experiments usually are not the same managers who succeed at running existing business units. ...
5. A fascinating, if sobering, look at the conflict over islands off the coast of East Asia. Trouble at sea
"President Barack Obama's proposed tilt of U.S. priorities toward the Pacific – and away from the historical link to Europe – represents one of the most encouraging aspects of his foreign policy. Although welcome, we should recognize that this shift comes about three decades too late and that it may miss the rising geopolitical centrality of sub-Saharan Africa and Latin America. The emergence of these longtime historically impoverished backwaters has been largely missed as American policy-makers and businesses are now obsessed with the challenges and opportunities posed by the emergence of China and, to a lesser extent, India. Sub-Saharan Africa, for example, over the past decade has produced six of the world's 10 fastest-growing economies. Through 2011-15, according to the International Monetary Fund, seven of the fastest-growing countries will be African, and Africa as a whole will surpass the slowing growth rates in Asia, particularly China.
This growth has caused the region's poverty rates, still unacceptably high, to fall from 56.5 percent in 1990 to 47 percent today. Further growth will likely push poverty levels down further."
8. New Geography also asks, Is the Family Finished? Some interesting thoughts about the impact of declining birthrates in the U.S.
Pew Research Center has compiled key findings from a new analysis of the
nation’s foreign-born population, based on U.S. Census Bureau’s 2011
American Community Survey.
With more than half the population of many U.S. cities who are
multicultural and Hispanics comprising more and more of the
U.S. population, when does it become meaningless and redundant to
execute marketing strategy that is directed to a general market and a
Latino market perceived to be homogenous?
11. Committee on Economic Development has an interesting piece looking at both the ideological and economic aspects underlying the debate about the minimum wage. Raising the Minimum Wage: “Which Side Are You On?”
"It is an easy call if you are either (a) a strict libertarian or (b) an
enthusiastic advocate of the less fortunate with limited concern about
the scarcity of resources. (If you belong to both of those groups,
there is little advice that I can offer.) However, in between those
poles of opinion, things become rather murky, rather quickly."
... Comparing the Democrat and Republican participants turned up differences in two brain regions: the right amygdala and the left posterior insula. Republicans showed more activity than Democrats in the right amygdala when making a risky decision. This brain region is important for processing fear, risk and reward.
Meanwhile, Democrats showed more activity in the left posterior insula, a portion of the brain responsible for processing emotions, particularly visceral emotional cues from the body. The particular region of the insula that showed the heightened activity has also been linked with "theory of mind," or the ability to understand what others might be thinking. ...
... The functional differences did mesh well with political beliefs,
however. The researchers were able to predict a person's political
party by looking at their brain function 82.9 percent of the time. In
comparison, knowing the structure of these regions predicts party
correctly 71 percent of the time, and knowing someone's parents'
political affiliation can tell you theirs 69.5 percent of the time, the
researchers wrote. ...
STERLING, Va. - Perched by a computer monitor wedged between shelves of cough drops and the pharmacy in a bustling Walmart, Mohamed Khader taps out answers to questions such as how often he eats vegetables, whether anyone in his family has diabetes and his age.
He tests his eyesight, weighs himself and checks his blood pressure as a middle-aged couple watches at the blue-and-white SoloHealth station advertising "free health screenings." ...
... As Americans gain coverage under the federal health law, putting increased demand on primary care doctors and spurring interest in cheaper, more convenient care, unmanned kiosks like these may be part of what their manufacturer bills as a "self-service healthcare revolution." ...
Recent developments in the field of nanotechnology might give new
meaning to the phrase “nothing gold can stay.” Atoms and bonds developed
not by Mother Nature, but by scientists, are gaining momentum as the
building blocks for cutting-edge materials.
Using nanoparticles as “atoms” and DNA as “bonds,” Chad Mirkin, the
director of Northwestern University’s International Institute for
Nanotechnology, is constructing his very own periodic table. So far Mirkin has built more than 200 distinct crystal structures with 17 different particle arrangements. ...
Not so long ago, most ecclesiastical officials and Catholic academicians emphasized solidarity as a political
ideal. Owing to a common misunderstanding of both government and
solidarity, that emphasis was almost always at the expense of
subsidiarity. In recent years, however, the tide in favor of
subsidiarity has begun to turn.
It remains true that concern for the poor and marginalized must be a
significant political priority, reflected in how we conceive and use
government. But what too many Catholics missed for much of the twentieth
century was that solidarity is not really a political virtue
at all, whereas subsidiarity is. Solidarity is the concern of all for
all. It is the sense of responsibility we are all supposed to have for
each other. It leads to that true care and reciprocity which are the
marks of a healthy society, and it is prior to politics and government.
But insofar as solidarity has been incorrectly viewed as a political
virtue, too many Catholics have insisted on the need to mimic solidarity
by using government to enforce what they think the results of
solidarity should look like. ...
... In contrast, the principle of subsidiarity is distinctively a political
virtue, though not exclusively so. Based on the truth that human dignity
includes the right and the duty of persons to freely participate in the
solutions to their own problems, the principle of subsidiarity states
that everything should be done at the lowest possible level of
organization, and that whenever something more is needed, higher levels
of organization are obliged to assist lower levels rather than to
supplant them. This means that in the political order the virtue of
subsidiarity actually preserves and fosters the conditions within which
solidarity can flourish, even if solidarity does not necessarily
flourish as a direct result. ...
Since President Obama proposed an increase in the federal minimum wage in the U.S.,
from $7.25 per hour to $9 per hour and then index it to inflation, the
debate has been raging about whether or not this would make low wage
workers better paid or not paid at all (or in other words if they would
get unemployed).
The short answer is that it would be a little bit of both, but with
emphasis on little. To understand why we must first examine the issue
theoretically and then look at current U.S. conditions. ...
... If the legal minimum wage is lower or equal to the current pay level,
nothing happens at all. If it is higher than current pay but lower than
marginal productivity then workers get higher pay. If it is higher than
marginal productivity, workers lose their jobs.
Since minimum
wages are usually far below median pay, for most workers nothing
happens. For the small numbers that are affected some will receive a
raise, while others will lose their jobs. The exact proportion of
workers who are unaffacted, of workers who receive higher pay and of
workers who lose their jobs depend on the specific conditions in each
specific country (or state or city) and each specific period of time and
will therefore differ between different locations and different periods
of time ...
This fits makes sound economic sense to me. I think most people intuitively know that if you put the minimum wage at $30 you would wreck the economy. There is an upper limit on high you can go before businesses would be paying people more than the economic value of the labor they are getting in return. Presently, $9 is well below that threshold in most contexts and will therefore have only a modest impact on either improving wages or destroying jobs. I suspect the political and symbolic value is greater than the actual economic impact.
Politicians from both right and left could learn from the Nordic countries.
...The idea of lean Nordic government will come as a shock both to
French leftists who dream of socialist Scandinavia and to American
conservatives who fear that Barack Obama is bent on “Swedenisation”.
They are out of date. In the 1970s and 1980s the Nordics were indeed
tax-and-spend countries. Sweden’s public spending reached 67% of GDP in
1993. Astrid Lindgren, the inventor of Pippi Longstocking, was forced to
pay more than 100% of her income in taxes. But tax-and-spend did not
work: Sweden fell from being the fourth-richest country in the world in
1970 to the 14th in 1993.
Since then the Nordics have changed course—mainly to the right.
Government’s share of GDP in Sweden, which has dropped by around 18
percentage points, is lower than France’s and could soon be lower than
Britain’s. Taxes have been cut: the corporate rate is 22%, far lower
than America’s. The Nordics have focused on balancing the books. While
Mr Obama and Congress dither over entitlement reform, Sweden has
reformed its pension system (see Free exchange). Its budget deficit is 0.3% of GDP; America’s is 7%.
On public services the Nordics have been similarly pragmatic. So long
as public services work, they do not mind who provides them. Denmark
and Norway allow private firms to run public hospitals. Sweden has a
universal system of school vouchers, with private for-profit schools
competing with public schools. Denmark also has vouchers—but ones that
you can top up. When it comes to choice, Milton Friedman would be more
at home in Stockholm than in Washington, DC.
All Western politicians claim to promote transparency and technology.
The Nordics can do so with more justification than most. The
performance of all schools and hospitals is measured. Governments are
forced to operate in the harsh light of day: Sweden gives everyone
access to official records. Politicians are vilified if they get off
their bicycles and into official limousines. The home of Skype and
Spotify is also a leader in e-government: you can pay your taxes with an
SMS message.
This may sound like enhanced Thatcherism, but the Nordics also offer
something for the progressive left by proving that it is possible to
combine competitive capitalism with a large state: they employ 30% of
their workforce in the public sector, compared with an OECD average of
15%. They are stout free-traders who resist the temptation to intervene
even to protect iconic companies: Sweden let Saab go bankrupt and Volvo
is now owned by China’s Geely. But they also focus on the long term—most
obviously through Norway’s $600 billion sovereign-wealth fund—and they
look for ways to temper capitalism’s harsher effects. Denmark, for
instance, has a system of “flexicurity” that makes it easier for
employers to sack people but provides support and training for the
unemployed, and Finland organises venture-capital networks. ...
"The Easterlin paradox suggest that in terms of human happiness -- a
squishy concept to be sure -- there is a limit to economic growth beyond
which there really is just no point in attaining more wealth. Further, a
decoupling between income and happiness at some threshold would imply
that GDP would not be a good measure of welfare, we would need some
other metric.
A recent paper (PDF) by Daniel Sacks, Betsey Stevenson and Justin Wolfers argues that the Easterlin paradox is also wrong. ..."
"Why isn't there more outrage about the president's unilateral targeted assassination program on the left?"
5. Arnold Kling with an interesting piece on the role of Jews in the rise of the modern urbanized economic order. The Unintended Consequences of God
"In those days, most people were farmers, for whom literacy’s costs
generally outweighed its benefits. However, in an urbanized society
with skilled occupations, literacy pays off. As urbanization gradually
increased in the late Middle Ages, Jews came to fill high-skilled
occupations. Botticini and Eckstein argue that literacy, rather than
persecution, is what led Jews into these occupations."
"But while progressives would clearly mock this policy [trickle-down economics], modern day
urbanism often resembles nothing so much as trickle-down economics,
though this time mostly advocated by those who would self-identify as
being from the left. The idea is that through investments catering to
the fickle and mobile educated elite and the high end businesses that
employ and entertain them, cities can be rejuvenated in a way that
somehow magically benefits everybody and is socially fair."
8. Mark Perry excerpts a quote from green libertarian John Mackey, CEO of Whole Foods Market.
“Capitalism is the greatest creation humanity has done for social cooperation. It has lifted humanity out of the dirt. In statistics we discovered when we were researching the book, about 200 years ago when capitalism was created, 85% of the people alive lived on $1 a day. Today, that number is 16%. Still too high, but capitalism is wiping out poverty across the world. 200 years ago illiteracy rates were 90%. Today, they are down to about 14%. 200 years ago the average lifespan was 30. Today it is 68 across the world, 78 in the States, and almost 82 in Japan. This is due to business. This is due to capitalism. And it doesn’t get credit for it. Most of the time, business is portrayed by its enemies as selfish and greedy and exploitative, yet it’s the greatest value creator in the world.”
9. Economist Gavin Kennedy with some interesting thoughts on the relationship between the state and the economy in developing nations:
The problem is to achieve the right balance between a competitive market economy and an effective state: markets where possible; the state where necessary.
11. Great piece about yet another way family life is changing. Yes, I’m a Homemaker
I’m a guy. My wife works. We’ve got no kids. I’m a stay-at-home dude.
"... What a sweet picture this conjures: the stay-at-home dad nurturing his
children, looking after the house and helping support his wife in her
budding career and shelving his own big ambitions for later. Now it gets
a little awkward. There is no adorable kid, nor plans to have one. No
starter home that needs knocking into shape. I'm not just doing this
temporarily until I find something meaningful to do. I’m
actually a full-time homemaker ... not stay-at-home dad but stay-at-home
dude. A conversational pause. Where do you mentally file this guy?
Usually I just change the subject. ..."
A new study shows that high-earning women are more likely to let their houses be messy than to hire a housekeeper or get their husbands and kids to pitch in. ...
... "You can purchase substitutes for your own time, you can get your husband to do more, or you can all just do less," Killewald says. "Whether women outsource housework in particular has less to do with resources, but whether or not paid labor is viewed as an appropriate strategy for undertaking domestic work.
Doing less housework seems to be a popular option. ...
Psychiatrists have
concluded that males take longer to assess facial expressions as their
brains have to work twice as hard to work out whether another person
looks friendly or intelligent.
In particular, researchers found that 40% of people say they would avoid someone who unfriended them on Facebook, while 50% say they would not avoid a person who unfriended them. Women were more likely than men to avoid someone who unfriended them, the researchers found.
... Libraries are responding to the decline of print in a variety of creative ways, trying to remain relevant – especially to younger people – by embracing the new technology. Many, such as New York’s Queens Public Library, are reinventing themselves as centers for classes, job training, and simply hanging out. In one radical example, a new $1.5 million library scheduled to open in San Antonio, Texas, this fall will be completely book-free, with its collection housed exclusively on tablets, laptops, and e-readers. “Think of an Apple store,” the Bexar County judge who is leading the effort told NPR. It’s a flashy and seductive package.
But libraries are about more than just e-readers or any other media, as important as those things are. They are about more than just buildings such as the grand edifices erected by Carnegie money, or the sleek and controversial new design for the New York Public Library’s central branch. They are also about human beings and their relationships, specifically, the relationship between librarians and patrons. And that is the relationship that the foundation created by Microsoft co-founder’s Paul G. Allen is seeking to build in a recent round of grants to libraries in the Pacific Northwest. ...
3-D printers can produce gun parts, aircraft wings, food and a lot more,
but this new 3-D printed product may be the craziest thing yet: human
embryonic stem cells. Using stem cells as the "ink" in a 3-D printer,
researchers in Scotland hope to eventually build 3-D printed organs and
tissues. A team at Heriot-Watt University used a specially designed
valve-based technique to deposit whole, live cells onto a surface in a
specific pattern.
... Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.
Sweden has also donned the golden straitjacket of fiscal orthodoxy with its pledge to produce a fiscal surplus over the economic cycle. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period. This allowed a country with a small, open economy to recover quickly from the financial storm of 2007-08. Sweden has also put its pension system on a sound foundation, replacing a defined-benefit system with a defined-contribution one and making automatic adjustments for longer life expectancy.
Most daringly, it has introduced a universal system of school vouchers and invited private schools to compete with public ones. Private companies also vie with each other to provide state-funded health services and care for the elderly. Anders Aslund, a Swedish economist who lives in America, hopes that Sweden is pioneering “a new conservative model”; Brian Palmer, an American anthropologist who lives in Sweden, worries that it is turning into “the United States of Swedeamerica”.
There can be no doubt that Sweden’s quiet revolution has brought about a dramatic change in its economic performance. The two decades from 1970 were a period of decline: the country was demoted from being the world’s fourth-richest in 1970 to 14th-richest in 1993, when the average Swede was poorer than the average Briton or Italian. The two decades from 1990 were a period of recovery: GDP growth between 1993 and 2010 averaged 2.7% a year and productivity 2.1% a year, compared with 1.9% and 1% respectively for the main 15 EU countries. ...
... The other Nordic countries have been moving in the same direction, if more slowly. Denmark has one of the most liberal labour markets in Europe. It also allows parents to send children to private schools at public expense and make up the difference in cost with their own money. Finland is harnessing the skills of venture capitalists and angel investors to promote innovation and entrepreneurship. Oil-rich Norway is a partial exception to this pattern, but even there the government is preparing for its post-oil future.
This is not to say that the Nordics are shredding their old model. They continue to pride themselves on the generosity of their welfare states. About 30% of their labour force works in the public sector, twice the average in the Organisation for Economic Development and Co-operation, a rich-country think-tank. They continue to believe in combining open economies with public investment in human capital. But the new Nordic model begins with the individual rather than the state. It begins with fiscal responsibility rather than pump-priming: all four Nordic countries have AAA ratings and debt loads significantly below the euro-zone average. It begins with choice and competition rather than paternalism and planning. The economic-freedom index of the Fraser Institute, a Canadian think-tank, shows Sweden and Finland catching up with the United States (see chart). The leftward lurch has been reversed: rather than extending the state into the market, the Nordics are extending the market into the state. ...
A concept promulgated by the right —
the notion of the hidden prosperity of the poor — underpins the
conservative take on the ongoing debate over rising inequality.
The
political right uses this concept to undermine the argument made by
liberals that the increasingly unequal distribution of income poses a
danger to the social fabric as well as to the American economy.
President Obama forcefully articulated the case from the left in an address on Dec. 6, 2011 at Osawatomie High School in Kansas:
This
kind of gaping inequality gives lie to the promise that’s at the very
heart of America: that this is a place where you can make it if you try.
We tell people — we tell our kids — that in this country, even if
you’re born with nothing, work hard and you can get into the middle
class. We tell them that your children will have a chance to do even
better than you do. That’s why immigrants from around the world
historically have flocked to our shores.
The
conservative counterargument – that life for the poor and the middle
class is better than it seems – goes like this: Even with stagnant or
modestly growing incomes, the poor and middle class benefit from the
fact that a stable or declining share of income is now required for
basic necessities, leaving more money for discretionary spending.
According to this theory, consumption inequality – the disparity between
the amount of money spent on goods and services by the rich, the middle
class and the poor — remains relatively unchanged, even while income
inequality worsens. ...
I like this article in that I think he does a fairly good job of laying out the conservative argument and then presents his counterargument in measured tones. There is a lot to process here, and there counterarguements to Edsall's arguements, but I appreciate articles that constructively frame issues.
"... University of Missouri MarketingProfessor Marsha Richins looks at this phenomenon in a new paper in the Journal of Consumer Research,
"When Wanting Is Better Than Having," where she compares high- and
low-materialist shoppers. "High-materialist" consumers have much higher
expectations of what a product will do for their overall happiness,
which is why positive emotions peak and then fall again after a
purchase.
According to research, materialists are "more likely to
believe that acquisition will change the kind of person they are,
improve their relationships with others, enable them to have more
pleasure in their lives, and enhance the effectiveness with which they
carry out daily tasks." They also experience "more negative emotions, such as anxiety, fear, and envy." ...
Seriously, technological innovation always creates dislocations. Fear of machines replacing humans goes back to the beginning of the industrial revolution. The economy has always adapted and expect it will again.
Alas, that won't help, as this graph
compiled by statistician Simon Hedlin shows. The total dependency ratio
(children and retirees, compared with those of working age) fell in all
G20/OECD nations bar Germany and Sweden between 1960 and 2010. In the
next fifty years, it will rise in all those nations, bar India and South
Africa. In most nations, the ratio will rise by 40% or more; there are
huge increases in dependency in parts of Asia (China and South Korea)
and in eastern Europe. Britain and America are towards the bottom of the
table, but their problems are big enough.
There are many implications. With more dependents to care for, it is
very hard to imagine how we will pay down our debts. And it is also very
hard to imagine how one can possibly expect government spending to
shrink significantly.
"... BiblioTech, a $1.5 million Bexar County paperless
library will have scores of computer terminals, laptops, tablets, and
e-readers – but not a dog-eared classic or dusty reference book in
sight.
“Think of an Apple store,” Bexar County Judge Nelson Wolff, who led his county’s bookless library project, told NPR when describing the planned library.
The 4,989-squre-foot, digital-only library, one of the first of its
kind, will feature 100 e-readers available for circulation, 50 e-readers
for children, 50 computer stations, 25 laptops, and 25 tablets for
on-site use. Patrons can check out e-readers for two weeks or load books
onto their own devices.
“A technological evolution is taking place,” Wolff says. “And I think we’re stepping in at the right time.” ..."
"UCLA's survey of incoming
college freshmen shows fewer identify as liberals and an increasing
number saying the economy significantly affected their college choice."
"In some ways, this shift isn’t as dramatic as it might first appear.
Even though younger evangelicals are increasingly walking away from the
religious right, they are still self-identifying as Republicans (54 percent) more than Democrats (26 percent). Younger
Christians still agree with the religious right on the issues but
reject the movement’s tactics, tone, and narrow focus on social issues."
8. Scientific American: The Liberals' War on Science. How politics distorts science on both ends of the spectrum.
"Surveys show that moderate liberals and conservatives embrace science
roughly equally (varying across domains), which is why scientists like
E. O. Wilson and organizations like the National Center for Science
Education are reaching out to moderates in both parties to rein in the
extremists on evolution and climate change. Pace Barry Goldwater,
extremism in the defense of liberty may not be a vice, but it is in
defense of science, where facts matter more than faith—whether it comes
in a religious or secular form—and where moderation in the pursuit of
truth is a virtue."
Back in 1974, Richard Easterlin published a paper called "Does Economic
Growth Improve the Human Lot? Some Empirical Evidence" (available here and here,
for example). Easterlin raised the possibility that what really matters
to most people is not their absolute level of income, but their income
level relative to others in society. If relative income is what matters,
then an overall rise in incomes doesn't make me any better off relative
to others, and so my happiness does not increase. Income becomes a sort
of arms race: even as we all race to get more, it doesn't actually make
us any happier. ...
He concludes with:
... For my own part, I confess that I find happiness surveys both intriguing
and dubious. It seems to me that higher levels of income are typically
correlated with more health, education, travel, consumption, and a
higher quality of recreation, so it's not a surprise to me it seems to
me that happiness rises iwth income. On the other side, it does seem to
me that survey questions about life satisfaction are answered in the
context of a particular place and time. If a person says that their life
satisfaction was a 7 in 1960 on a scale of 0-10, and another person
says that their life satisfaction is a 7 in 2013, are those two people
really equally satisfied? To put it another way, if the person from 2013
was transported by a time machine back to live in 1960, with all their
memories and knowledge of the technologies, medicines, foods, education,
and travel available in 2013, would that time traveller really be
equally happy in either time period? I suspect that when most people are
asked to rank happiness on a scale of 0-10, they don't say to
themselves: "Well, people living 100 years from now might have
extraordinarily high levels of income and technology, so compared with
them, I'm really no more than a 2." At best, survey questions on a scale
of 0-10 seem like an extremely rough-and-ready way of measuring life
satisfaction across very different countries or across substantial
periods of time.
... To better understand
the impact of technology on jobs, The Associated Press analyzed
employment data from 20 countries; and interviewed economists,
technology experts, robot manufacturers, software developers, CEOs and
workers who are competing with smarter machines.
The
AP found that almost all the jobs disappearing are in industries that
pay middle-class wages, ranging from $38,000 to $68,000. Jobs that form
the backbone of the middle class in developed countries in Europe, North
America and Asia.
In the United States, half
of the 7.5 million jobs lost during the Great Recession paid
middle-class wages, and the numbers are even more grim in the 17
European countries that use the euro as their currency. A total of 7.6
million midpay jobs disappeared in those countries from January 2008
through last June.
Those jobs are being replaced in many cases by machines and software that can do the same work better and cheaper.
"Everything
that humans can do a machine can do," says Moshe Vardi, a computer
scientist at Rice University in Houston. "Things are happening that look
like science fiction." ...
... So machines are
getting smarter and people are more comfortable using them. Those
factors, combined with the financial pressures of the Great Recession,
have led companies and government agencies to cut jobs the past five
years, yet continue to operate just as well.
How is that happening?
-Reduced
aid from Indiana's state government and other budget problems forced
the Gary, Ind., public school system last year to cut its annual
transportation budget in half, to $5 million. The school district
responded by using sophisticated software to draw up new, more efficient
bus routes. And it cut 80 of 160 drivers. ...
... -In South Korea, Standard Chartered is
expanding "smart banking" branches that employ a staff of three,
compared with an average of about eight in traditional branches. ...
... -The
British-Australian mining giant Rio Tinto announced plans last year to
invest $518 million in the world's first long-haul, heavy-duty
driverless train system at its Pilbara iron ore mines in Western
Australia. The automated trains are expected to start running next year.
The trains are part of what Rio Tinto calls its "Mine of the Future"
program, which includes 150 driverless trucks and automated drills.
Like
many technologically savvy startups, Dirk Vander Kooij's
furniture-making company in the Netherlands needs only a skeleton crew -
four people ...
... -Google's driverless car and the Pentagon's
drone aircraft are raising the specter of highways and skies filled with
cars and planes that can get around by themselves. ...
... "Trying to keep it from happening would have
been like the Teamsters in the early 1900s trying to stop the
combustion engine," Lavin says. "You can't stand in the way of
technology."
The upside of emerging technology is that most will make goods and services
less expensive. That improves our living standard. The downside is that much of
the work we used to do in order to earn the wages to buy goods and services is
rapidly changing. As the last sentence of the article notes, this is not the
first time we have been in these circumstances. Years ago I read that in 1885,
approximately 80% of everything we consumed in the U.S. was produced at home.
By 1915, 80% was produced outside the home. It created massive economic
dislocations. Each time these disruptions occur it has been hard for the people
living at that time to foresee what the new economic order would look like.
It is critical that Christian thinkers wrestle with the challenges of technological
innovation. Creative destruction (the market dynamic where jobs and industries
are destroyed in the wake of creating new ones) has always been a difficult one
for ethics. It is painful but the social cost of other alternatives is also
quite high. Anti-technological calls to abandon consumerism or, conversely,
just saying that “the market will sort it all out,” are not legitimate
responses. I think topics like this should be at the center of our theological
reflection about human labor and the economy.
A new paper reviews how psychology, biology, and neurology are
ganging up on economics to prove that, when it comes to making
decisions, people are anything but rational.
Daniel McFadden is an economist. But his new paper, "The New Science of Pleasure,"
shows the many ways economics fails to explain how we make decisions --
and what it can learn from psychology, anthropology, biology, and
neurology.
The old economic theory of consumers says that "people should relish
choice." And we do. Shopping can be fun, democracy is better than its
alternatives, and a diverse and fully stocked grocery store ice cream
freezer is quite nearly the closest thing to heaven on earth. But other
fields of science tell a more complicated story. First, making a choice
is physically exhausting, literally, so that somebody forced to make a
number of decisions in a row is likely to get lazy and dumb. (That's one
reason why stores place candy near the check-out aisle: They suspect
your brain is too zonked to resist.) Second, having too many choices can
make us less likely to come to a conclusion. In a famous study of the
so-called "paradox of choice", psychologists Mark Lepper and Sheena
Iyengar found that customers presented with six jam varieties were more
likely to buy one than customers offered a choice of 24.
If you've read the work of Dan Ariely or Daniel Kahneman,
you know exactly how far from perfectly rational we are when faced with
a decision. Many of our mistakes stem from a central "availability
bias." Our brains are computers, and we like to access recently opened
files, even though many decisions require a deep body of information
that might require some searching. Cheap example: We remember the first,
last, and peak moments of certain experiences. So when we make a choice
about how to spend a certain amount of time -- say, by going to Six
Flags -- we forget that most of the time at an amusement park is spent
waiting around doing nothing. Instead, we remember the thrill of the
roller coaster. (This has been previously used to explain why people
sometimes go back to disappointing old romantic partners, but that might
be for another article.)
The third check against the theory of the rational consumer is the
fact that we're social animals. We let our friends and family and tribes
do our thinking for us. In a fascinating example, McFadden presents a
study that shows Korean peasant women within the same village tend to
use the same contraception -- even though there is "substantial,
persistent diversity across villages." This pattern could not be
explained by income, education, or price. Word-of-mouth explained
practically all the difference.
In another corner of the ivory tower (or, more likely, across campus
in a glassy lab), neurologists are finding that many of the biases
behavioral economists perceive in decision-making start in our brains.
"Brain studies indicate that organisms seem to be on a hedonic
treadmill, quickly habituating to homeostasis," McFadden writes. In
other words, perhaps our preference for the status quo isn't just
figuratively our heads, but also literally sculpted by the hand of
evolution inside of our brains.
A final example to show how
other fields of science are ganging up on classical economics: The
popular psychological theory of "hyperbolic discounting" says people
don't properly evaluate rewards over time. The theory seeks to explain
why many groups -- nappers, procrastinators, Congress -- take rewards
now and pain later, over and over again. But neurology suggests that it
hardly makes sense to speak of "the brain," in the singular, because
it's two very different parts of the brain that process choices for now
and later. The choice to delay gratification is mostly processed in the
frontal system. But studies show that the choice to do something
immediately gratifying is processed in a different system, the limbic
system, which is more viscerally connected to our behavior, our "reward
pathways," and our feelings of pain and pleasure.
And there's much more. To explain it, here's Daniel McFadden himself.
The following transcript of our email conversation has been very
lightly edited for clarity. ...
1. I don't know much about Common Good RVA but I like their vision. Christianity Today published a piece featuring them, Why the Rest of Your Week Matters to God
"In general, the church has done a fine job equipping Christians for the "private" areas of their lives: prayer, morality, family life, and so on. However, in general, the church has done a poor job equipping people for the "public" parts of their lives: namely, their work, their vocation. The reality is, most people spend the majority of their time in this latter, "public" area."
2. Can we Survive Technology? Written 57 years ago, Fortune resurrected this article by John von Neumann. The editor's note begins:
Editor's note: Every Sunday, Fortune publishes a favorite story from our magazine archives. This week, to mark our FutureIssue,
we turn to a feature from June 1955 by John von Neumann tackling the
profound questions wrought by radical technical advancement—in von
Neumann's day the atomic bomb and climate change. von Neumann was one of
the twentieth century's greatest and most influential geniuses. The
polymath and patron saint of Game Theory
was instrumental in developing America's nuclear superiority toward the
end of World War II as well as in framing the decades-long Cold War
with the Soviet Union. In his time, von Neumann was said to possess "the world's greatest mind." Here is his characteristically pessimistic look on what the future holds.
It is amazing how much of what he wrote remains true today!
"CONCLUSION: Although "materialists' perceptions that
acquisition brings them happiness appear to have some basis
in reality," that happiness is short-lived, Richins concluded. As such,
"The state of anticipating and desiring a product may be inherently more
pleasurable than
product ownership itself.""
5. One of the most difficult topics to understand in economics is comparative advantage, especially why outsourcing jobs to other countries often is advantageous for both countries. Forbes has a creative piece this week, Is Outsourcing American Jobs Wrong?. However, as the BBC reports American manufacturers come back home, a trend that has been true for a few years now.
"In order to fight that perception and reclaim capitalism and business as
positive words, businesses have to find a purpose beyond just making money. Profit is necessary for business, Mackey said, but it's necessary in the same way that his body has to produce red blood cells. It's needed, but it's not the sole purpose."
"Most business leaders don't understand what makes innovation so different from everything else they do at work -- and they haven't adjusted their behavior to accommodate these differences."
"The science fiction vision of stars flashing by as streaks when spaceships travel faster than light isn't what the scene would actually look like, a team of physics students says.
Instead, the view out the windows of a vehicle traveling through hyperspace would be more like a centralized bright glow, calculations show. ..."
That's all for this week. Like the Kruse Kronicle at Facebook.
1. Governments want them. Surely, from a “seeing like a state”
perspective it is better to have large corporations that are dependent
on favors than small firms that are not.
2. There are genuine economies of scale and scope, including network effects.
3. Workers believe that they are more secure working for large
corporations, and they are willing to take less compensation as a
result. Note that this sort of belief could be self-fulfilling. Note
also that it is not terribly consistent with the data: compensation
appears to be higher at large firms, although that comparison assumes
that the investigator’s idea of objective value of workers is more
meaningful than their actual choices.
Think about Google. It needs to retrieve, store, and process huge
amounts of data. There are scale economies. Once you have that data,
you can benefit from other data, so you want to expand into email,
location services, social networking, phones, and anything else that
generates data. So there are economies of scope as well.
Maybe that is an exceptional case.
My tendency is to think that economies of scale are fairly common,
but economies of scope are relatively rare. I understand big companies
that specialize in a relatively narrow capability–something like Fedex,
for example. I am less convinced about organizations that branch into
many functions, like universities or large financial firms....
I think his last paragraph is an important distinction. The
size of the firms in an industry is directly related to the nature of the goods
and services offered in that industry. The economies of scale and the
technological wherewithal needed to execute the manufacture of a jet versus
providing a haircut means a handful of big firms will exist in the former
industry and no large firms will exist in the latter.
There is nothing intrinsically bad about having large
corporations. They are indispensable in achieving certain ends. That doesn't
mean they don't present challenges.
There’s no way around it. Money is involved in just about everything.
But just how has money affected history’s great scientific discoveries?
We
may now come closer to an answer, thanks to a new Danish-led research
project, which examines the background of some of the great scientific
discoveries of the past 200 years.
The project is headed by Danish science historian Peter C. Kjærgaard, a professor of evolutionary studies at Aarhus University..
By
digging into the archives, he aims to trace the money path from the
hands of science-minded people to the final research findings.
This
method has enabled him to chart the intricate web of economic,
scientific and political interests that led to the discovery of the
world’s first dinosaur nest in the Gobi Desert in the 1920s.
“We have taken the initial steps towards the first major systematic
historical studies of how money has affected the production of
scientific knowledge,” says Kjærgaard.
“Regardless of where and
when in the history of science we look, we can see that researchers have
always depended on money in their work and personal lives. It sounds
banal, but it’s important to understand that without money we wouldn’t
have the scientific data that we have today.”
The project has so far resulted in four journal articles about the role of money in science. ...
... Moreover, there are sound reasons why a conservative would support a welfare state. Historically, it has been conservatives like the 19th century chancellor of Germany, Otto von Bismarck, who established the welfare state in Europe. They did so because masses of poor people create social instability and become breeding grounds for radical movements.
In postwar Europe, conservative parties were the principal supporters of welfare-state policies in order to counter efforts by socialists and communists to abolish capitalism altogether. The welfare state was devised to shave off the rough edges of capitalism and make it sustainable. Indeed, the conservative icon Winston Churchill was among the founders of the British welfare state.
American conservatives, being far more libertarian than their continental counterparts, reject the welfare state for both moral and efficiency reasons. It creates unhappiness, they believe, and inevitably becomes bloated, undermining incentives and economic growth.
One problem with this conservative view is its lack of an empirical foundation. Research by Peter H. Lindert of the University of California, Davis, shows clearly that the welfare state is not incompatible with growth while providing a superior quality of life to many of those left to sink or swim in America.
In a new paper for the New America Foundation, Professor Lindert summarizes his findings. He points out that there are huge efficiencies in providing pensions and health care publicly rather than privately. A main reason is that in a properly run welfare state, benefits are nearly universal, which eliminates vast amounts of administrative overhead necessary to decide who is entitled to benefits and who isn’t, as is the case in America, and eliminates the disincentives to work resulting from benefit phase-outs. ...
A National Bureau of Economic Research paper by Edward N. Wolff, a New
York University professor and one of the leading U.S. experts on wealth
shares, shows that in 1998, the richest one percent of Americans owned
38.1 percent of the nation's wealth. It has fallen fairly steadily since
then to the current level of 35.4 percent.
And then shows this graph:
The preceding sentence doesn't match the data. The percentage dropped nearly five points between 1998 and 2001, and then began to slowly rise again, though it is true that it has not risen to all-time highs.
I find that median wealth plummeted over the years 2007 to 2010, and by
2010 was at its lowest level since 1969. The inequality of net worth,
after almost two decades of little movement, was up sharply from 2007 to
2010. Relative indebtedness continued to expand from 2007 to 2010,
particularly for the middle class, though the proximate causes were
declining net worth and income rather than an increase in absolute
indebtedness. In fact, the average debt of the middle class actually
fell in real terms by 25 percent. The sharp fall in median wealth and
the rise in inequality in the late 2000s are traceable to the high
leverage of middle class families in 2007 and the high share of homes in
their portfolio. The racial and ethnic disparity in wealth holdings,
after remaining more or less stable from 1983 to 2007, widened
considerably between 2007 and 2010. Hispanics, in particular, got
hammered by the Great Recession in terms of net worth and net equity in
their homes. Households under age 45 also got pummeled by the Great
Recession, as their relative and absolute wealth declined sharply from
2007 to 2010.
I'm having trouble with my SSRN account so I haven't yet been able to look at the article. Lots of interesting facts that need to be reconciled.
"... Drawing on data from the [Harvard] university's library collections, the animation
below maps the number and location of printed works by year. Watch it
full screen in HD to see cities light up as the years scroll by in the
lower left corner. ..."
4. There is a U-shaped happiness curve, consistent across cultures, that shows happiness declines from childhood until about our mid-forties and then begins to improve as me grow old. It appears it may hold true in primates as well. Our ability to discount bad news, even when we shouldn't, follows the same U-shaped curve. Our brains and experience are optimal for discerning bad news in middle-age. Turns out that ignorance (or maybe denial) truly is bliss. Viewpoint: How happiness changes with age. On a related note, it appears that Elderly Brains Have Trouble Recognizing Untrustworthy Faces.
5. The holiday season is in full swing and many people falsely believe this a time of elevated suicide rates. Actually, spring and summer have the highest rates and Nov - Jan have the lowest. In 2010, July was highest and December was lowest. Holiday suicide myth persists, research says
"Michael" was in the top 3 names for boys from 1953-2010. It dropped to sixth last year. Want to know how your name ranks for each year since 1880? Go to the Social Security Online's Popular Baby Names. The Baby Name Wizard is also pretty cool.
"For the first time in Barbie’s more than 50-year history, Mattel
is introducing a Barbie construction set that underscores a huge shift
in the marketplace. Fathers are doing more of the family shopping just
as girls are being encouraged more than ever by hypervigilant parents to
play with toys (as boys already do) that develop math and science
skills early on.
It’s a combination that not only has Barbie building luxury mansions —
they are pink, of course — but Lego promoting a line of pastel
construction toys called Friends that is an early Christmas season hit.
The Mega Bloks Barbie Build ’n Style line, available next week, has both
girls — and their fathers — in mind.
“Once it’s in the home, dads would very much be able to join in this
play that otherwise they might feel is not their territory,” said Dr.
Maureen O’Brien, a psychologist who consulted on the new Barbie set...."
And this reminds me of last year, or the year before, when cooking sets were becoming big with boys. They've been watching Emeril Lagasse on the Food Network. "Bam!" New merchandising angle.
11. Love them or hate them, the Koch brothers are intriguing. Many political junkies know of them but few others seem to know about them. Forbes has an interesting feature article in the most recent issue on the Koch empire and its influence: Inside The Koch Empire: How The Brothers Plan To Reshape America
14. "Data-driven healthcare won't replace physicians entirely, but it will help those receptive to technology perform their jobs better." Technology will replace 80% of what doctors do
"Scientists have designed an energy-efficient light of plastic packed with nanomaterials that glow. The shatterproof FIPEL technology can be molded into almost any shape, but still needs to prove it's commercially viable."
"... Last month, at the first ever conference of the Sustainable
Nanotechnology Organization in Washington DC, Michail Roco of the
National Science Foundation, and architect of the U.S. National
Nanotechnology Initiative provided a response. He said, “every
industrial sector is unsustainable…and nanotechnology holds the promise
of making every one of them sustainable.”
It’s my belief that that is true: nanotechnology, or the ability to
manipulate matter at a scale of one billionth of a meter, has
far-reaching implications for the improvement of sustainable technology,
industry and society.
Already, it is being used widely to enable more sustainable
practices. Safer manufacturing, less waste generation, reusable
materials, more efficient energy technologies, better water
purification, lower toxicity and environmental impacts from chemotherapy
agents to marine paints are all current applications of nanotechnology.
There is no reason for this technology to develop in an unsustainable
manner.
In the past, a lack of foresight has resulted in costs to society – people, businesses, and governments, and—
that could have been avoided by proactive efforts to manage risks.
Today, the tools to develop safer technologies and less harmful products
exist. Let us not miss this opportunity. ..."
"It used be that news of death spread through phone calls, and before
that, letters and house calls. The departed were publicly remembered via
memorials on street corners, newspaper obituaries and flowers at grave
sites. To some degree, this is still the case. But increasingly, the
announcements and subsequent mourning occur on social media. Facebook,
with 1 billion detailed, self-submitted user profiles, was created to
connect the living. But it has become the world's largest site of
memorials for the dead."
20. From the "That's just not right!" file. Harvard Economics Department does their version of "Call me maybe."
Arnold Kling is a libertarian economist who blogs at askblog. His tag line for his blog is "taking the most charitable view of those who disagree." In a recent post, Being Uncharitable to Those Who Disagree, he began with:
In his recent book, Libertarianism: What Everyone Needs to Know, Jason Brennan writes,
American politics has two large camps. The first camp advocates an
American police state–one that polices the world at large while policing
its citizens’ lifestyles. It advocates having government promote
traditional Judeo-Christian virtues. It wants to marginalize or expel
alternative modes of life. The second camp advocates an American nanny
state–one that tries to nudge and control the behavior of its citizens
“for their own good.” Both camps support having the government manage,
control, and prop up industry and commerce. In rhetoric, a vicious
divide separates the two camps. Yet when in power, the two camps act
much the same.
Brennan’s book is in large part an effort to refute the uncharitable
views that others hold about libertarians. In that regard, it may be
valuable. However, the quoted paragraph offers what I believe is an
uncharitable view of progressives and, especially, conservatives. ...
He continues:
... I think that if you want to be convincing in an argument, taking an
uncharitable view of the opponent is a bad strategy. Just as
libertarians become scornful and defensive toward those who take an
uncharitable view of our beliefs (think of people who say “libertarians
just want to let people starve” or “libertarians believe markets are
perfect”), we can expect others to become scornful and defensive if we
take an uncharitable view of their beliefs.
I have written an essay, to appear next month, in which I suggest
that the core conservative belief is that civilization is always
threatened by barbarism. Think Lord of the Flies. Meanwhile, I
think that progressives also see a threat everywhere–the threat of
oppression. Think of the Biblical story of the Exodus. Libertarians do
not typically focus on barbarism or oppression. Instead, we focus on
coercion vs. free choice. We celebrate the fruits of voluntary
cooperation via markets. Think I, Pencil.
Suppose that my characterization of conservatives is correct. Then
libertarians need to address their concern. How do you keep
civilization from sliding into barbarism? Conservatives viewed
Communism as barbaric, and they saw a need for our government to defend
against it. Similarly, they see terrorism as barbaric, and they see a
need for our government to defend against it.
How should this concern with external barbarian threats be addressed? ...
Cleansing our conversations of all caricature and uncharitable characterizations is probably not realistic. It may not even be desirable. On occasion, such characterizations can sharpen communication as we passionately debate. Not every conversation is an attempt to persuade. But Kling's point is exactly right. If your point is to persuade or open a conversation, why would you resort to uncharitable characterizations of the person you want to persuade? It continues to amaze me how common it is to read a book, article, or blog post that starts out with stated aim of convincing readers of a particular view but then uncharitably mischaracterizes the audience that the author intends to persuade.
Do you agree about the prevalence uncharitable characterizations in conversations that are intended to persuade? If so, why are we so prone to it?
JCPenney can offer shoppers something no online retailer can: food and drinks to enjoy while they spend money.
CEO Ron Johnson said the retailer was planning on replacing traditional cash registers with coffee and juice bars, reports Sapna Maheshwari at Bloomberg News. A prototype he showed reporters in August included a Caribou coffee stand. ...
... Johnson has also announced plans to give associates iPads and eliminate most cash registers. ...
Johnson is the guy who introduced selling upscale products at Target and created the Apple birck and mortar model. He recently did away with most of JC Penny's model of using sales and coupons to bring people into the store and sales have suffered as a result. But this was only the first step in a move to remake the JCPenny shopping experience ... and I would say "experience" is the operative word.
Eight years ago, Joseph Pine did a TED Talk What consumers want. He explains that through most of human history we had a commodity economy. We grew things or extracted things from the ground. Then we figured out how to form commodities into goods. We became an industrial economy. But eventually goods became so standardized that they became commodities and everything was about lowest price. Then came customization of goods, which be definition entailed offering service that would distinguish goods. Enter the service economy. But now, due to the internet revolution, services are almost a commodity. What many people are now looking for is an experience from their economic exchanges. Studies already show that many people scope out products on the internet but still go to a brick and mortar store for the shopping experience.
It sounds like Johnson is in accord with Pine's perspective. Johnson's critics are legion right now. It will be interesting to see if he pulls this off.
JUST AS I WAS wondering how to start this review, along came the SundayNew York Times Magazinewith
a short article by Adam Davidson with the title “Made in Austria: Will
Friedrich von Hayek be the Tea Party’s Karl Marx?” One Tea Party
activist reported that his group’s goal is to fill Congress with
Hayekians. This project is unlikely to go smoothly if the price of
admission includes an extensive reading of Hayek’s writings. As Davidson
remarks, some of Hayek’s ideas would not go down well at all with the
American far right: among them is a willingness to entertain a national
health care program, and even a state-provided basic income for the
poor.
The source of confusion here is that there was a Good Hayek and a Bad
Hayek. The Good Hayek was a serious scholar who was particularly
interested in the role of knowledge in the economy (and in the rest of
society). Since knowledge—about technological possibilities, about
citizens’ preferences, about the interconnections of these, about still
more—is inevitably and thoroughly decentralized, the centralization of
decisions is bound to generate errors and then fail to correct them. The
consequences for society can be calamitous, as the history of central
planning confirms. That is where markets come in. All economists know
that a system of competitive markets is a remarkably efficient way to
aggregate all that knowledge while preserving decentralization.
But the Good Hayek also knew that unrestricted laissez-faire is
unworkable. It has serious defects: successful actors reach for monopoly
power, and some of them succeed in grasping it; better-informed actors
can exploit the relatively ignorant, creating an inefficiency in the
process; the resulting distribution of income may be grossly unequal and
widely perceived as intolerably unfair; industrial market economies
have been vulnerable to excessively long episodes of unemployment and
underutilized capacity, not accidentally but intrinsically;
environmental damage is encouraged as a way of reducing private
costs—the list is long. Half of Angus Burgin’s book is about the Good
Hayek’s attempts to formulate and to propagate a modified version of
laissez-faire that would work better and meet his standards for a
liberal society. (Hayek and his friends were never able to settle on a
name for this kind of society: “liberal” in the European tradition was
associated with bad old Manchester liberalism, and neither “neo-liberal”
nor “libertarian” seemed to be satisfactory.)
The Bad Hayek emerged when he aimed to convert a wider public. Then,
as often happens, he tended to overreach, and to suggest more than he
had legitimately argued. The Road to Serfdomwas
a popular success but was not a good book. Leaving aside the irrelevant
extremes, or even including them, it would be perverse to read the
history, as of 1944 or as of now, as suggesting that the standard
regulatory interventions in the economy have any inherent tendency to
snowball into “serfdom.” The correlations often run the other way.
Sixty-five years later, Hayek’s implicit prediction is a failure, rather
like Marx’s forecast of the coming “immiserization of the working
class.” ...
Paul Solman: It being Thanksgiving, we give today's post to Governor William Bradford of the Plymouth Colony, built by pious Protestant purists backed by profit-seeking investors.
Bradford tells the story of the tough Massachusetts winter of 1623 and how the colony barely survived, unable to raise enough food to sustain themselves. One reason he gave: the rules of the colony, as laid down by the investors, specified that the colonists should till their land in common, as was the case in the England from which they migrated.
But the colony, perhaps desperate, seems to have changed the rules in order to jack up productivity, allowing individual families to tend plots on their own, an early instance of the benefits of pursuing self-interest as opposed to communalism.
I am on record: successful economic grand strategy entails a balance between cooperation and self-interest. Extremes in one direction or the other are unsustainable. According to Governor Bradford, extreme communalism wasn't doing the job in Plymouth, Massachusetts ca. 1623. ...
Ever wonder why the red and white striped pole is displayed outside many barbershops? Neither have I. Not until I stumbled across a morsel of obscure history about this symbol. I was immediately drawn in.
In the middle ages surgeons and barbers performed most of the operations. Yes, that’s right – barbers. Blood-letting was the most commonly prescribed treatment of the day, a cure for almost every ailment. Surgeons would order it, barbers would do the cutting. The red-and-white-striped pole outside the barbershop was the signpost that blood-letting was performed here. The red represents the blood being drawn, the white represents the tourniquet used, and the pole itself represents the stick squeezed in the patient’s hand to dilate the veins. Interesting, eh?
What I found even more interesting, however, was that for more than 3000 years, from antiquity until the advent of modern scientific medicine, blood-letting was universally accepted as the most effective remedy for almost every disease. It was recommended for the treatment of countless ailments ranging from cholera to cancer, tetanus to tuberculosis, gout to gangrene. It was even prescribed to treat acne and hemorrhoids. Before the circulatory system was understood, a prevailing theory was that blood could stagnate in the extremities. A build-up of bad blood could cause all manner of maladies. The cure was purging.
Every one bought in. For eons. Even in ancient cultures like the Mesopotamians and Egyptians. The Talmud (ancient Israel’s sacred writings) specified certain days for blood-letting. Hippocrates (the father of modern medicine) accepted the practice as good medicine some 500 years before the birth of Christ. So did Socrates and Plato. Early Christian writings offer advice on which saints’ days were favorable for blood-letting. Well into the scientific era the practice continued to prevail. The more blood drawn the better, even to the point of losing consciousness. Many sessions would only end when the patient began to swoon. 1799 George Washington, suffering from a throat infection, requested that he be bled heavily (nearly four pints) and died shortly thereafter.
One typical course of medical treatment began the morning of 13 July 1824. A French sergeant was stabbed through the chest while engaged in single combat; within minutes, he fainted from loss of blood. Arriving at the local hospital he was immediately bled twenty ounces “to prevent inflammation”. During the night he was bled another 24 ounces. Early the next morning, the chief surgeon bled the patient another 10 ounces (285 ml); during the next 14 hours, he was bled five more times. Medical attendants thus intentionally removed more than half of the patient’s normal blood supply—in addition to the initial blood loss which caused the sergeant to faint. Bleedings continued over the next several days. By 29 July, the wound had become inflamed. The physician applied 32 leeches to the most sensitive part of the wound. Over the next three days, there were more bleedings and a total of 40 more leeches. The sergeant recovered and was discharged on 3 October. His physician wrote that “by the large quantity of blood lost, amounting to 170 ounces [nearly eleven pints], besides that drawn by the application of leeches [perhaps another two pints], the life of the patient was preserved”.
“The life of the patient was preserved” by draining thirteen pints of his blood?! Outrageous! Sounds totally absurd today. But is it any more absurd than the widely accepted practice of draining off the strength of able-bodied adults by “curing” them with dependency-producing subsidies? Can we legitimately claim to be “preserving the life” of the needy by weakening their capacity to become self-sufficient? And how absurd is it to measure the effectiveness of our remedy by the volume of recipients who return for repeated “treatments”?
Is harmful medical treatment better than no treatment at all? The French sergeant who survived the blood-letting would doubtless answer “yes”. His surgeon acted upon the best knowledge that was available at the time. Is harmful charity better than no charity at all? Recipients would doubtless urge its continuation. But just as it took centuries of malpractice before the medical profession finally realized that blood-adding, not blood-letting, actually saves lives, so charitable malpractice may have to run its course.
Bloodletting persisted into the 20th century. Not until Pasteur (1822-1895) figured out that germs, not bad blood, cause diseases did the practice begin to fall out of favor. It took many more decades before the practice was finally abandoned. The modern science of microbiology finally brought a 3000 year practice to an end. I can’t help wondering how long it will take the tradition-steeped compassion industry to recognize the need for a fundamental change of practice.
I've actually incorporated the bloodletting metaphor in some writing I've
been doing on economic issues. (Stay tuned.) For millennia, bloodletting was
the preferred method for treating illness. Only in the past century or two have
we learned enough about the human body to see that this is not effective, even
destructive. For millennia, the preferred method for treating poverty was
generosity. Poverty was an inadequate distribution of a fixed amount of wealth.
Only in the past century or two have we really unlocked the powers of
productivity and exchange. Poverty is now more appropriately seen as exclusion
from networks of productivity and exchange.
No metaphor is perfect. Generosity had limited effectiveness over the
millennia and generosity still has a critical role to play today, particularly
in times crisis. But the revolution in productivity and exchange has radically
altered how we address challenges we face.
All my life I've heard that the Bible talks about wealth and poverty more
than any other topic, yet I find very few theologians who have ever taken even
one class in economics. I can probably count on one hand the number who have
had formal training in economics. The irony is that it is often those who most
contextualized the Bible on a range of issues ranging from science, to gender
roles, to slavery, to war, and to government, who I find become the most wooden
and "fundamentalist" on economic questions ... unable (unwilling?) to
make a leap from the advanced agrarian societies of the Bible era to modern
economies, sometimes even pining for retreat from the dark dystopian present
back to the bucolic bliss of the past. (And just to be fair, those that are
most "fundamentalist" on so many other issues want to baptize our
present economic order as the "biblical" model.) We aren’t going back,
and idealistic models like distributism and liberationism, or any other model
that doesn’t seriously take into account issues of productivity and exchange, offer
no guidance for the future.
There are many challenges confronting the church of Jesus Christ but I
continue to be convinced that it is the church's inability to come to grips
with modern economic order, and by extension the inability to help people find
meaning in the our present context and equip them for ministry in our present
context, that is at the top of the list of challenges.
One of my favorite blogs is Adam Smith's Lost Legacy, written by economic historian Gavin Kennedy. He frequently finds mentions of Adam Smith's "invisible hand" from around the web and then goes to work debunking the abuse of Smith's views. The metaphor, mentioned only twice in passing in The Wealth of Nations, was appropriated by economists over the last half century in support of modern notions of free markets. He wrote an intriguing article on this topic Adam Smith and the Invisible Hand: From Metaphor to Myth.
But Kennedy also helps interpret other aspects of Smith's work. Some economists apply economic principles to the formation of religious organizations and Smith is indentified as having supported a competitive religious marketplace over state run monopolies, as a way to promote religion. Kennedy writes the following in Adam Smith's Authentic Views On Church and State.
... Laurence Iannaccone’s selective
inference, upon which Tim Harford draws, that amount to saying that Smith’s
asserted that “more competitive religious marketplaces lead to
more dynamic churches”, deserves closer examination.
The key emphasis of Smith’s suggestion that a
multiplicity of local religious sects which “allowed everyman to chuse his own
priest and his own religion as he thought proper” was aimed at breaking to
relationship between authorised established state religious churches and the
state. ...
Kennedy gives a lengthy quote by Smith and then writes:
... I think these long quotations encapsulate what Smith
was about in arguing for a multiplicity of sects, namely that the very
competition of each would act as a balm on the otherwise violent, or at least
the disturbing clamour of their zealots at the expense of public
tranquility. It was not aimed at
causing larger congregations so much, perhaps, as allowing room for the tolerance of a
third-sect of potentially non-religious citizenry, living amidst a large number of
religious sects at peace with each other. ...
Understanding Smith's comments in context adds a lot. Interesting stuff!
3. "British people - and many others across the world - have been brought up on the idea of three square meals a day as a normal eating pattern, but it wasn't always that way." Breakfast, lunch and dinner: Have we always eaten them?
7. "It's a common grumble that politicians' lifestyles are far removed from those of their electorate. Not so in Uruguay. Meet the president - who lives on a ramshackle farm and gives away most of his pay." Jose Mujica: The world's 'poorest' president
8. You may have heard that there was a presidential election last week. Here is a map showing how the counties voted, with red being the most intensely Republican and blue being the most Democrat. (Source: The Real Reason Cities Lean Democratic)
9. Speaking of the election, there has been a lot written about how the GOP will need to change if they want to win national elections. As a right-leaning guy, I thought this article in Slate, The New Grand Old Party, and this one by Bobby Jindal, How Republicans can win future elections, were among the best.
13. Nanotechnology just keeps getting more amazing. "The latest invention from Stanford University’s Department of Electrical
Engineering sounds like something a superhero would have. A
self-repairing plastic-metal material has been developed by a team of
professors, researchers and graduate students." New Self-Repairing Material Invented at Stanford
15. Speaking of 3D-Printing, how big a deal is it? "Chris Anderson has exited one of the top jobs in publishing -
Editor-in-Chief of Wired magazine - to pursue the life of an
entrepreneur, making a big bet that 3D printers represent a massive new
phase of the industrial revolution." Chris Anderson: Why I left Wired - 3D Printing Will Be Bigger Than The Web
"A
flash mob (or flashmob) is a group of people who assemble suddenly in a
place, perform an unusual and seemingly pointless act for a brief time,
then disperse, often for the purposes of entertainment, satire, and
artistic expression. Flash mobs are organized via telecommunications,
social media, or viral emails." [Wikipedia accessed 11.12.12]
How do you define a church?"
Manufacturing fetishism – the idea that manufacturing is the central economic activity and everything else is somehow subordinate – is deeply ingrained in human thinking. The perception that only tangible objects represent real wealth and only physical labour real work was probably formed in the days when economic activity was the constant search for food, fuel and shelter.
A particularly silly expression of manufacturing fetishism can be heard from the many business people who equate wealth creation with private sector production. They applaud the activities of making the pills you pop and processing the popcorn you eat in the interval. The doctors who prescribe the pills, the scientists who establish that the pills work, the actors who draw you to the performance and the writers whose works they bring to life; these are all somehow parasitic on the pill grinders and corn poppers. ...
... Many of those who talk about the central economic importance of manufactured goods do so from an understandable concern for employment and the trade balance. Where will the jobs come from in a service-based economy, manufacturing fetishists ask? From doing here the things that cannot be done better elsewhere, either because of the particularity of the skills they require, or because these activities can only be performed close to home. Manufacturing was once a principal source of low-skilled employment but this can no longer be true in advanced economies.
Most unskilled jobs in developed countries are necessarily in personal services. Workers in China can assemble your iPhone but they cannot serve you lunch, collect your refuse or bathe your grandmother. Anyone who thinks these are not “real jobs” does not understand the labour they involve. There is a subtle gender issue here: work that has historically mostly been undertaken by women at home – like care and cooking – struggles to be regarded as “real work”.
Where will exports come from, they ask? From exporting “designed in California” or “tailored in Savile Row”. Ask Apple, or your tailor, how they derive their earnings.
There is a persistent misconception that the value of something lays within the thing itself. Economic theorists ranging from Adam Smith to Karl Marx subscribed to the labor theory of value, the idea that the value of a thing is related to the amount of labor put into its production. In fact, the economic value of a thing is determined by the amount someone is willing to pay for it. It is about as simple as that.
Economic value is not a measure of importance. Water is very important to sustaining my existence. A diamond is not. Yet I might $1.00 for a bottle of water but millions of dollars for the Hope diamond. Why? Because water is so plentiful that finding the next bottle of water is no problem. Finding the next Hope Diamond is a big problem.
Rather than imputing intrinsic economic value to things, we need to look at how economic value is created. Joseph Pine explains that most of human economic history was about growing or extracting things from the ground. They were commodities. As commodities are undifferentiated the, big issue was price. Then came the ability to fashion things we take from the ground into goods. The value was in the fabrication. But after a time, competition drove goods into a commodity mode (Henry Ford and the Model T), with people looking for the lowest price for the good. Goods were now commodities. Then came customization. Value came from being able to customize goods to particular consumer needs. It was this service that created value but now the ability to customize is becoming commoditized. Pine suggests that creating experiences for consumers is the next step in adding value. Check out his video at TED for more.
More than fifty years ago Leonard Read wrote his famous essay, I, Pencil: My Family Tree as told to Leonard E. Read." It has been used in economics classes ever since to help students get a sense of the incredible complexity of market economies. The free market think tank, The Competitive Enterprise Institute, has made a six minute video that tells the I, Pencil story. There clearly is an advocacy component at the end of video but the video tells the story quite well.
It's a stunning thought: The United States, long dependent on foreign
oil, may actually achieve energy independence over the next two decades.
And by 2030 it could become a net exporter of oil. ...
... That intriguing possibility has generated most of the headlines, but
the IEA report draws attention to another trend that's just as
important: A possible reversal of globalization trends that until now
have mostly caused a net outflow of jobs from the United States to
lower-cost nations, such as China and India. ...
... Some economists have been predicting a second phase of globalization,
in which foreign labor costs rise and it becomes more cost-effective to
produce things in developed nations such as the United States. And now,
the booming U.S. energy sector may give that trend a boost.
The IEA report points out that abundant energy in the United States
will have at least two secondary effects: It will make the U.S. an
energy supplier to the rest of the world. And it will lower costs for
U.S. manufacturers, since energy is a key input for factories who run
assembly lines.
Energy is already a growing industry that supports perhaps 10 million
U.S. jobs, and while the growth of some fields, such as green energy,
may sometimes be overstated, it's clear that energy jobs tend to be
high-paying ones that can help replace some of the blue-collar jobs that
have been lost. ...
... ower energy costs will also be a growing competitive advantage for U.S.
manufacturers. Some foreign manufacturers—especially those based in
Europe—already find it cheaper to build certain things in America,
especially products that are sold here. If the gap in energy costs
grows, it will only lure more firms across the pond.
Some economists believe a "reshoring" trend is already underway....
... The principle of solidarity is a sense of the common good, of the
natural and supernatural connections that bind us one to another, and of
our responsibility toward one another.
In individual cases, the
application of the principle is a reminder of the clear moral imperative
that the wealthy exercise their sacred obligation to aid the less
advantaged and to work toward the betterment of everyone. ...
... This principle of
solidarity in relationship to government action means that state
government — and many times the federal government — are appropriate
vehicles to direct the use of wealth collected through taxes or
otherwise for the common good. We see this in such things as
unemployment insurance and in Social Security. ...
... Subsidiarity is the principle that says that in matters economic and
political, the preference is always to be given to the most local level
of authority that can handle the matter. We don’t appeal lemonade stand
issues to state regulatory authority; at least I hope not. So, too, with
questions such as traffic, employment issues and health concerns
solutions should be found at the most local level possible.
This
principal does not negate the idea that sometimes the federal government
must be involved, but the preference is clearly for solutions to be
found at the local level if possible. ...
... Catholic social teaching emphasizes the application of both the
principle of subsidiarity and the principle of solidarity. The two are
not meant to be mixed and balanced; instead one principle acts as a
check on the other principle.
There is no Christian doctrine that
clearly defines when and how the two principles are to be applied, when
one is meant to be used to check the other. Instead, the application of
the two principles — subsidiarity and solidarity — where one principle
limits the over-application of the other principle, is an exercise of
prudent judgment.
A pretty good summary. What more would you add or what would you qualify? Did you see my post from earlier today? Moderation Polerization Through Polarity Management. Do solidarity and subsidiarity form a polarity?
Why did inequality never become the
defining issue of the 2012 campaign? It appears that voters,
intuitively, don’t see it as the problem some politicians would
have us believe.
Even economists disagree over how bad inequality is, the
correct way to measure it, why it’s increasing and what to do
about it. And most Americans, no matter how humble their
circumstances, don’t resent the wealthy so much as strive to get
rich, too. One point on which economists do seem to agree is
that income inequality by itself isn’t harmful -- except when
it’s so great that the scales of opportunity tilt. On that
score, the U.S. has reason to worry.
Median household income is lower than it was a decade ago.
At the same time, the gap between rich and poor has widened.
Economists recently reported that the top 1 percent receive
about a fifth of the national income -- up from less than a 10th
in 1970 -- and control about a third of the country’s wealth.
The data, however, overstate inequality by not counting
government transfers such as food stamps, unemployment insurance
and Social Security. When these things are included, every
income group shows modest gains from 1997 to 2007. When health
benefits are also calculated, income disparity really drops off,
with the bottom 20 percent registering income growth of about 26
percent. The top 5 percent show a 63 percent increase. ...
... Where does this leave us? If income inequality by itself
isn’t bad, and if it’s not a zero-sum game, it’s debatable
whether the tax system should be used to close the rich-poor
chasm. Redistributing income might choke off growth. But with
the opportunity gap growing, the tax code certainly shouldn’t
encourage more inequality, as it now does. In that spirit, here
are three tax and education reforms that might help rebalance
the opportunity scales:
The estate tax is a good starting point. ...
Restricting these breaks would help make the tax code more
progressive without redistributing income by raising rates. ...
Another idea catching on with lawmakers in both parties is
education savings accounts, which work like 401(k) retirement
plans. ...
4. Inhabitat reports on The World's First Commercial Vertical Farm Opens in Singapore. "The dense metropolis of Singapore is now home to the world’s first commercial vertical farm! Built by Sky Greens Farms, the rising steel structure will help the city grow more food locally, reducing dependence on imported produce. The new farm is able to produce 1 ton of fresh veggies every other day, which are sold in local supermarkets."
5. The New Republic has a very lengthy article The Mormon Ethic and the Spirit of Capitalism. It offers some interesting insights in to Mormonism's road from communalism to economic individualism, a trajectory followed by many Protestant sectarian movements. Jackson Lears writes:
"Mormons embraced economic individualism and hierarchical communalism;
they distrusted government interventions in business life but not in
moral life; they used their personal morality to underwrite their
monetary success. They celebrated endless progress through Promethean
striving. They paid little attention to introspection and much to
correct behavior. And their fundamental scripture confirmed that America
was God’s New Israel and the Mormons His Chosen People. It would be
hard to find an outlook more suited to the political culture of the
post–Reagan Republican Party."
"A number of students asked foreign policy questions, and then a young woman asked me about the responses I have received to my Atlantic cover story from this past summer, "Why Women Still Can't Have It All."
I answered, and several other young women followed up. After ten
minutes or so, I saw that the roughly 50 percent guys in the room had
gone completely silent. When I commented on the suddenly one-sided
nature of the conversation, one young man volunteered that he "had been
raised in a strong feminist household" and considered himself to be
fully supportive of male-female equality, but he was reluctant to say
anything for fear he would be misunderstood. A number of the other guys
around the table nodded in agreement."
7. French and Spanish legal documents from colonial Louisiana are being digitized, opening up a new window on colonial history in that part of the world. Colonial La. records shed new light on US history
8. People who know me personally know I tend to use sarcasm and double entendre in spoken communication. One of my biggest blogging challenges is editing most of this out of posts. Emoticons can help but some of the biggest misunderstandings I have had came from people not being able to see my wink or big grin as I write certain things. For that reason, I found this interesting: The Strange Science Of Translating Sarcasm Online
"In their new book "Religion and AIDS in Africa" (Oxford University Press), sociologists Jenny Trinitapoli and Alexander Weinreb seek to challenge the widespread view that religious beliefs and communities have unwittingly assisted in the spread of the disease through their resistance to preventative sex education. They also show that not only have religious groups had a largely positive role in AIDS prevention, but also how the epidemic has shaped religious beliefs in unexpected ways."
Man does not live by GDP alone. An introduction to the Legatum Institute's latest Prosperity Index.
It
doesn't take a degree from Oxford to understand that a nation's average income --
even after adjustments for purchasing power, to make international comparisons
more relevant -- is an inadequate measure of comparative well-being. That
reality has inspired numerous attempts to create a better measure. The latest,
most comprehensive, and arguably most insightful, is the Legatum Institute's Prosperity Index for 2012,
released just this week. I can't claim utter objectivity here: I've been a
consultant to the Legatum Institute. I suspect, though, that you won't need
much convincing to be captured by this ambitious effort.
Back to
that pesky measurement problem. For decades, the United Nations has been
brewing a straightforward improvement on income rankings on a regular basis, work
largely inspired by the passions of Nobel Prize-winning economist Amartya Sen.
The UN's Human
Development Index blends per capita income, years of schooling, and life
expectancy. And in the past few years, it's added an "inequality adjusted"
version that discounts each component according to how equally it is
distributed in the population before combining them in index form.
Obviously,
though, other elements matter to well-being -- among them human rights,
economic freedom, socioeconomic mobility, personal security, social insurance,
and social cohesion. Other indexes try to capture one or more of these
attributes. Thus the Heritage/WSJ Index of Economic Freedom
ranks countries according to ten criteria ranging from property rights to
entrepreneurship. The World Economic Forum measures
national competitiveness, writ large. The Life
Satisfaction Index simply cuts to the chase, ranking countries according to
surveys of self-reported happiness.
The
Legatum Institute's approach is truly catholic (with a small c). First,
countries are rated according to eight sub-indexes (economy,
entrepreneurship/opportunity, governance, education, health, safety/security,
personal freedom, and social capital), which are derived from 89 variables. Some
are objective (e.g. the unemployment rate) and some subjective (the percentage
who answered "yes" to the question: "Did you worry yesterday?") The raw data,
by the way, can be accessed on the website.
Scores
on each of the eight sub-indexes are given equal weight in producing the
aggregate rankings. ...
Recent Comments