Skip to comments.Welcome to the Paradise of the Real
Posted on 04/25/2014 9:00:08 AM PDT by No One Special
Word Problem No. 1: It's lunchtime for Mrs. Piketty's second-grade class. Bobby has 20 Gummi Worms, and Jenny has 20 SweeTarts. Bobby and Jenny both like Gummi Worms and SweeTarts, but both like SweeTarts a little bit more, so Jenny trades three of her SweeTarts for four of Bobby's Gummi Worms. Both are happy with this trade, so they do it again. Question: How many pieces of candy do the two students end up with for dessert?
Word Problem No. 2: Mrs. Piketty is unhappy with the inequality in her second-grade classroom. Jenny's 20 SweeTarts are valued much more highly than are Bobby's 20 Gummi Worms, trading at a rate of 3:4. To even things out, Mrs. Piketty gives Bobby a voucher for seven SweeTarts. Question: How many pieces of candy do the two students end up with for dessert?
Word Problem No. 3: Mrs. Piketty's attempt to solve the problem of inequality in her classroom has yielded unsatisfactory results. Bobby has his 20 Gummi Worms, and Jenny has her 20 SweeTarts, and SweeTarts still trade for Gummi Worms at a rate of 3:4. So Mrs. Piketty enacts some new policies. First, she hires Bobby as a hall monitor and decrees that hall monitors receive a minimum income of at least ten SweeTarts or the equivalent value in Gummi Worms. Also, she decrees that the high price of SweeTarts three of them cost four Gummi Worms is oppressive, but she's not an all-the-way-to-the-wall outright red, either, more of a social-democrat type with a subscription to The Nation, so she simply enacts some counteracting price supports for Gummi Worms, decreeing that they cannot be traded at a price less than 13/15th of a SweeTart. She enlists Mrs. Yellen from the next classroom over to provide zero-interest financing for the purchase of up to five SweeTarts per lunch period, increases Bobby's voucher allowance to nine SweeTarts per lunch period, and offsets that on her budget with a "fairness" tax of two SweeTarts per lunch period on Jenny, who is the sole member of her tax bracket. Question: How many pieces of candy do the two students end up with for dessert?
Answers: (1.) 40; (2.) 40; (3.) 40. There are only 40 pieces of candy, and rules, vouchers, taxes, zero-interest loans, redistribution, and mandates do not magic more pieces of candy into existence. If Jenny does not like the trading price imposed by Mrs. Piketty, she can keep all of her SweeTarts, while Bobby gets none. If Mrs. Piketty sends out her second-grade tactical SWAT unit to seize Jenny's SweeTarts and put some serious asset-forfeiture and social-by-God-justice up in her smug little 1-percenter face, Jenny can still leave her SweeTarts at home, eating them before or after school, and maybe even save them up in the hopes that her third-grade teacher next year will not be a howling moonbat. Faced with that inconvenient reality, Mrs. Piketty may demand the repatriation of these SweeTart assets and denounce Jenny as an "economic traitor," but she does not have any real power outside her classroom. Plus, Jenny and her SweeTarts are sort of popular, and she's a pretty good student to boot, and so there are other classrooms that would just love to have her, with Mr. Lee's nicely air-conditioned classroom across the hall offering some very attractive laissez-faire policies vis-Ã -vis SweeTarts and confectionery gains in general.
Forty is forty is forty, 10 times 4, 8 times 5, 6.32455532034 squared, 23 plus 17. You can set the trading ratio of apples to oranges however you like, but if you have 20 of each, you have 40 pieces of fruit at any price and the only way to bring more of it into the world is to plant trees, cultivate them, and pick the fruit.
Which is to say: Reality is not optional.
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Money is a symbolic system, the purpose of which is to facilitate exchange and to act as a recordkeeping technology. That money is so very important to our everyday lives and yet has no real connection with physical reality is the source of many apparent paradoxes and contradictions. These are the best of times, these are the worst of times.
Measured by money, things look relatively grim for the American middle class and the poor. Men's inflation-adjusted average wages peaked in 1973, and inflation-adjusted household incomes for much of the middle class have shown little or no growth in some time. The incomes of those at the top of the distribution (which is not composed of a stable group of individuals, political rhetoric notwithstanding) continue to pull away from those in the middle and those at the bottom. The difference between a CEO's compensation and the average worker's compensation continues to grow.
But much of that is written into the code. If, for example, you measure inequality by comparing the number of dollars it takes to land at a certain income percentile, with a hard floor on the low end (that being $0.00 per year in wages) but no ceiling on the top end, and if you have growth in the economy, then it is a mathematical inevitability that incomes at the top will continue to pull away from incomes at the bottom, for the same reason that any point on the surface of a balloon will get farther and farther away from the imaginary fixed point at its center as the balloon is inflated. This will be the case whether you have the public policies of Singapore or Sweden, and indeed it is the case in both Singapore and Sweden.
Purely symbolic systems are easy to manipulate, which is why any two economists can take the same set of well-documented economic data and derive from it diametrically opposed conclusions.
With economic models, we are a little like Neo in The Matrix, before he takes the red pill: We are not in the real world, but in a simulacrum of it, one that has rules, but rules that can be manipulated by those who understand the code. Economic models and analysis are very useful, but it's worth taking the occasional red-pill tour, leaving behind the world of pure symbolism and taking a look at the physical economy.
Welcome to the paradise of the real.
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The physical economy the world of actual goods and services looks radically different from the symbolic economy. Measured by practically any physical metric, from the quality of the food we eat to the health care we receive to the cars we drive and the houses we live in, Americans are not only wildly rich, but radically richer than we were 30 years ago, to say nothing of 50 or 75 years ago. And so is much of the rest of the world. That such progress is largely invisible to us is part of the genius of capitalism and it is intricately bound up with why, under the system based on selfishness, avarice, and greed, we do such a remarkably good job taking care of one another, while systems based on sharing and common property turn into miserable, hungry prison camps.
We treat the physical results of capitalism as though they were an inevitability. In 1955, no captain of industry, prince, or potentate could buy a car as good as a Toyota Camry, to say nothing of a 2014 Mustang, the quintessential American Everyman's car. But who notices the marvel that is a Toyota Camry? In the 1980s, no chairman of the board, president, or prime minister could buy a computer as good as the cheapest one for sale today at Best Buy. In the 1950s, American millionaires did not have access to the quality and variety of food consumed by Americans of relatively modest means today, and the average middle-class household spent a much larger share of its income buying far inferior groceries. Between 1973 and 2008, the average size of an American house increased by more than 50 percent, even as the average number of people living in it declined. Things like swimming pools and air conditioning went from being extravagances for tycoons and movie stars to being common or near-universal. In his heyday, Howard Hughes didn't have as good a television as you do, and the children of millionaires for generations died from diseases that for your children are at most an inconvenience. As the first 199,746 or so years of human history show, there is no force of nature ensuring that radical material progress happens as it has for the past 250 years. Technological progress does not drive capitalism; capitalism drives technological progress and most other kinds of progress, too.
None of this should be taken as minimizing the problems faced by the poor, in this or any other country. But let's stay in the realm of the real for a little while: What is it, in terms of physical goods and services, that we wish to provide for the poor that they do not already have? Their lives often may not be very happy or stable, but the poor do have a great deal of stuff. Conservatives can be a little yahoo-ish on the subject, but do consider for a moment the inventory of the typical poor household in the United States: at least one car, often two or more, air conditioning, a couple of televisions with cable, DVD player, clothes washer and dryer, cellphones, etc. As Robert Rector and Rachel Sheffield report: "The home of the typical poor family was not overcrowded and was in good repair. In fact, the typical poor American had more living space than the average European. The typical poor American family was also able to obtain medical care when needed. By its own report, the typical family was not hungry and had sufficient funds during the past year to meet all essential needs. Poor families certainly struggle to make ends meet, but in most cases, they are struggling to pay for air conditioning and the cable-TV bill as well as to put food on the table." They also point out that there's a strong correlation between having boys in the home and having an Xbox or another gaming system.
In terms of physical goods, what is it that we want the poor to have that they do not? A third or fourth television?
Partly, what elites want is for the poor to have lives and manners more like their own: less Seven-Layer Burrito, more Whole Foods; less screaming at their kids in the Walmart parking lot and more giving them hideous and crippling fits of anxiety about getting into the right pre-kindergarten. Elites want for the poor to behave themselves, to stop being unruly and bumptious, to get over their distasteful enthusiasms, their bitter clinging to God and guns. Progressive elites in particular live in horror of the fact that poor people tend to suffer disproportionately from such health problems as obesity and diabetes, and that they do not take their social views from Chris Hayes and these two phenomena are essentially the same thing in their minds. Consider how much commentary from the Left about the Tea Party has consisted of variations on: "Poor people are gross."
A second Xbox is not going to change that very much.
What is it the poor actually need? In general, they do not have access to very good education. But our problem with education is not that we spend insufficiently on it. Rather, the problem is that our Kâ12 system is organized as something between a monopoly and a cartel. Medicaid, the health-care program for the poor, is designed similarly, and, no surprise, the poor receive inferior health care. If they are not often materially deprived, they are very often materially insecure, with little in the way of savings or assets. Even after a lifetime of full-time work, many poor people have retirement options far inferior to those enjoyed by wealthier people, despite having their paychecks garnished to the tune of 12 percent or so for this should start seeming familiar participation in a government-monopoly retirement program.
None of those problems facing the poor and they are the key problems is an economic problem. All of them are political problems. For progressives, the obvious solution to that is less economics and more politics. The possibilities of economic division will always be limited by what there is to divide so many houses, so many cars, so many apples and oranges, so many SweeTarts. Progressives don't care what's in the bag, so long as they get to be in charge of it. It is no accident that they talk about the "distribution" of wealth and income as though those things were literally distributed, like candy out of an Easter basket, by the distribution fairy.
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For the conservative, people are an asset in the coldest economic terms, a potentially productive unit of labor. For the progressive, people are a liability a mouth to be fed, a problem in need of a solution. Understanding that difference of perspective renders understandable the sometimes wildly different views that conservatives and progressives have about things like employment policy. For the conservative, the value of a job is what the worker produces; for the progressive, the value of a job is what the worker is paid. Politicians on both sides frequently talk about jobs as though they were economic products rather than contributors to economic output, as though they were ends rather than means. The phrase "there aren't enough jobs" is almost completely meaningless, but it is a common refrain.
For example, The Nation yesterday published a hilariously illiterate essay by Raúl Carrillo, who is a graduate student at Columbia, a Harvard graduate, and an organizer of something called the Modern Money Network, "an interdisciplinary educational initiative for understanding money, finance, law, and the economy." All three of those institutions should be embarrassed. Mr. Carrillo is the sort of man who thinks that 40 pieces of candy can be divided and recombined in such a way as to arrive at a number greater than 40. His essay, "Your Government Owes You a Job," argues that the federal government should create a guaranteed-job program, "becoming our employer of last resort." Mr. Carrillo's middle-school-quality prose must be read to be appreciated "Would jobs for all skyrocket wages and prices, spurring inflation? Such unfounded belief holds the jobless hostage to hysteria" but his thinking is positively elementary. It does, however, almost perfectly sum up the symbolism-over-literal-substance progressive worldview: "You need dollars to eat," he writes, "and unless you steal the dollars, you generally have to earn them."
But you do not need dollars to eat. You need food to eat. Experiment: Spend six months locked in room with nothing other than a very large pile of dollars; measure subsequent weight loss.
Mr. Carrillo's intellectual failure is catastrophic, but it is basic to the progressive approach. Mr. Carrillo argues that a guaranteed-job program would "pay for itself," mitigate deficits, empower women, strengthen communities, liberate us from Walmart and McDonald's I half expected him to claim that it would turn a sandwich into a banquet. But the question he never quite gets his head around is: Jobs doing what? Americans in guaranteed government jobs "needn't construct trains or solar panels," he writes. Instead, they could be employed in "non-capital intensive" sectors such as "child-care, eldercare, and" focus in here, kids "community gardening." Experiment: Offer for sale at a price of $250 a voucher entitling its bearer to one year's worth of meals at McDonald's, one year's worth of groceries at Walmart, or one year's worth of produce from your local community garden; compare sales figures.
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Mr. Carrillo cites William F. Buckley Jr., who once recommended that welfare dependents be put to work tidying up parks. What Mr. Carrillo does not understand is that Mr. Buckley's case was not an economic one but a moral one; he believed idleness to be a sin. ("I get satisfaction of three kinds," he said. "One is creating something, one is being paid for it, and one is the feeling that I haven't just been sitting on my ass all afternoon.") Mr. Carrillo's argument is an explicitly economic one, and it is illiterate. The economic difference between paying a man to engage in "community gardening" and paying a man to sit on his ass all afternoon is negligible, as good as the spade in the soil might be for his soul. Our food does not come from community gardens for the same reason that we do not generate our own electricity at home or build automobiles in a million mom-and-pop shops across the fruited plains.
Mr. Carrillo argues that we "deserve" to participate in society not only as consumers but as producers, but he never considers what it is that people in government-mandated jobs would produce that would not be produced by their working in the private sector. The answer, by definition, is: nothing of economic value. Producing that for which there is no demand is not genuine economic activity; it is performance art. As an economic matter, writing a man a check for that sort of job is indistinguishable from simply sending him a welfare check; the difference is that it inconveniences the beneficiary (which WFB endorsed on moral grounds) and the always-unspoken corollary that such a program would create some management jobs for progressives interested in exciting careers in public service rather than in careers earning market wages for producing goods and services that people actually want.
(How do we know what people actually want? They voluntarily pay for it.)
The economics here are thoroughly upside-down, even for The Nation, which is, lest we forget, still a partisan of socialism, the flat-earth, Jesus-rode-a-brontosaurus, turtles-all-the-way-down school of economics. Mr. Carrillo's prose and analysis get even worse, e.g.: "Because non-JG [that's âjob guarantee'] employees could quit for a JG job, their bargaining power would increase. By the same token, businesses could hire JG-trained employees, so employers' negotiating power would increase as well. Thus, wages wouldn't spiral. Furthermore, guaranteed employment for low-income individuals would discipline the prices of goods and services they typically buy." Which is to say, you can strengthen both sides of a negotiating table (relative to whom?) and stabilize the prices of products consumed by low-income people by sending more dollars chasing after an identical supply of goods. This, the product of Harvard and an institution with the word "money" in its name.
The cost of mass unemployment is not only the loss of income and dignity suffered by the jobless. The real cost includes the loss of the economic output of the unemployed. Mr. Carrillo, and the writers of The Nation at large, if you can bear to read them, implicitly believe (and sometimes explicitly argue) that a certain share of Americans have absolutely nothing to offer in economic terms. Every time a progressive decries the so-called race-to-the-bottom economy, what he is saying is that American workers have no advantage relative to the Haitians who labor sweatily in their imaginations. (Strange thing that nobody seems to have clued in BMW or Boeing about that race to the bottom, and that investment in high-wage countries such as the United States and Germany is so high compared with investment in low-wage countries such as Rwanda and Cameroon.) Having no economic value to speak of, the American worker must be dependent upon government trickery his benevolent betters protecting his job while cleverly disguising the cost of doing so or else on sentimentality, appeals to "economic patriotism" and the like. Each of those appeals is like offering an American worker a government-guaranteed job in that it is identical to putting a price tag on his forehead reading: "$0.00."
The farther away we move from the physical economy into the manipulation of symbols through public policy, the more progressive ideas make apparent sense. And symbolism is more comfortable for progressives in general, owing to a disinclination to literally get their hands dirty. There is, for example, no environmentally clean way to produce energy, and the really productive ways of producing energy like fracking for gas in Pennsylvania give them the fantods. There is no environmentally clean way to build a man a house, either, or provide him with clean drinking water, or to heat that house, or to grow a crop of wheat, or to make that wheat into bread. If you think you can have health care and electric cars without steel mills and oil refineries, you are mistaken. But actually expanding physical production within our own political boundaries, for instance by building more pipelines to connect petroleum producers with petroleum refiners, scandalizes the progressives. Every smokestack is another Barad-dÃ»r to them even as they bemoan the loss of "good factory jobs," the largely mythical former prevalence of which provided their political forebears with a deep bucket of solutions to throw at the problem of potentially bumptious poor people. They detest the economic use of undeveloped lands, whether for energy or timber or grazing cattle as though beef comes from Trader Joe's. They refuse to understand that if you want more oranges and apples, you have to plant some trees maybe even cutting down some other trees to make room for them, or, angels and ministers of grace defend us, harassing a tortoise in the process.
Though there are many exceptions, the closer a man's occupation takes him to the physical economy, the more skeptical he is of progressive central-planning ambitions. You do not meet a great many left-wing corn farmers, copper-mine operators, oil drillers, or houseÂ builders. You do meet a fair number of progressives on Wall Street and Silicon Valley and on the campus of Harvard utterly failing to teach the likes of Mr. Carrillo the fundamentals of economics, prose composition, or anything else. Follow that road to its terminus and you end up at the place in which the secret to national prosperity appears, self-evidently, to be stimulating demand, as though the nation could grow wealthier by wanting more rather than by making more, as though we could consume that which has not been produced.
As though Bobby and Jenny could shuffle around their 40 pieces of candy until they became 50 pieces of candy.
Politics is parasitic. Even at its best, it produces no goods of its own; it has only that which it takes from what others produce. For about 200,000 years, human beings produced almost nothing the per capita economic-output curve is nearly flat from the appearance of the first homo sap. until the appearance of Jethro Tull and Eli Whitney. We've had politicians since before Hammurabi, but we didn't escape the shadow of famine until a few thousand years later when somebody discovered that the wars fought over dividing up the harvest could be prevented by making that harvest bigger and then figuring out how to get that done. Politics is a footnote the inventory in your local Walmart is the headline.
For the conservative, people are an asset in the coldest economic terms, a potentially productive unit of labor. For the progressive, people are a liability a mouth to be fed, a problem in need of a solution.
I forgot the sub-title which is:
How to refute progressive fantasies or, a red-pill economics
Okay, life is a multi-variable zero sum game.
"the genius of capitalism and it is intricately bound up with why, under the system based on selfishness, avarice, and greed, we do such a remarkably good job taking care of one another, while systems based on sharing and common property turn into miserable, hungry prison camps."
that is an awesome economic essay
“Okay, life is a multi-variable zero sum game.”
Not so. There are (almost?) always real returns to trade, between willing partners.
For instance: Bobby and Jenny both prefer Sweet Tarts to Gummi Worms. However, after eating 12 of her 20 Sweet Tarts, Jenny realizes that she’s getting sick of Sweet Tarts, and wouldn’t mind a few Gummi Worms for a change. She trades 4 of her Sweet Tarts for 5 of Bobby’s Gummi Worms. Both agree that they got a good deal.
The problem in the examples above is that the teacher (government) dictated the terms of trade.