Tuesday, March 16, 2021

Why Is Economic Inequality Bad For Society?

 ANAND [GIRIDHARADAS]: Should billionaires exist?

DJAFFAR [SCHALCHI]: In a well-regulated, well-managed, and thriving economy without monopolies, they wouldn’t. Wealth is like manure: spread it, and it makes everything grow; pile it up, and it stinks.

(https://the.ink/p/the-american-dream-is-now-in-denmark)

The first problem with gross economic inequality is that it is unjust. Whether you are trying to create a society that offers the greatest good to the greatest number (Utilitarianism), or designing a society such that you would choose to live in it as a member without knowing what your role in that society would be (Rawls), or even just a free society in which we have mutual benefit and self-interest rightly understood (Locke, Mill, et al), we have no reason to favor me over you simply because I have greater wealth, or because of who my parents happen to be, or any other random thing. As it should be with society, so it should be with the markets, which are structures within society.

Now, we might have reasons not to make everyone exactly equal. For example, economic growth tends to be greater when there are incentives for doing economically productive things. The enforcement or transaction costs might be very high. The benefits of corruptly evading these rules of equality would also grow very large.

What’s interesting is that these same costs show up at the other end of the economic distribution scale. If we have an incremental $1000 to incentivize someone to work harder to generate economic goods, we should not send it to a billionaire (who will not notice it), but to someone at the lower end of the income distribution (for whom it will make an enormous difference). If there are a few wealthy oligarchs and a lot of starving serfs, the oligarchs are going to have to hire a lot of guards and police to protect their estates. The Panama Papers showed trillions of wealth funneled through offshore shell corporations to avoid taxes.

The second problem with extreme inequality is that it is inefficient. For the reasons outlined above, it results in worse overall outcomes and in slower growth. In addition, the ability to claim all or even most of the gains to productivity can only result when there is unequal market power. As Schalchi says in the quote above, “ Wealth is like manure: spread it, and it makes everything grow; pile it up, and it stinks.” To have billionaires and paupers in the same society, you must have monopolies/oligopolies/cartels controlling large sectors of the economy, rather than having many small firms that perform slightly better or worse than one another, as in perfect competition or monopolistic competition (variegated production). Monopolies are inherently inefficient, creating deadweight loss by underproducing and overcharging relative to competitive companies. Many monopolies are also monopsonies, underpaying and underbuying labor and other inputs. All of this is just classic free market economics.

Third, the “trickle down” justification for giving tax cuts to the rich and corporations has failed. The LSE study linked below and summarized in the CBS article shows that across the OECD countries, tax cuts for the wealthy have produced zero benefit.

Beginning in 1974 and accelerating in 1980, the relationship between productivity and median household income broke down, coincident with the advent of large tax cuts for the wealthy and the decline of labor power. All of the gains gravitated to the top of the income distribution.

Lower taxes did not produce the boost to growth rates that was promised, or any additional growth at all for most people. The benefit was eaten up by the shareholding class — that’s me, not you.

Looking at the Rand study linked below, you can find out what your income would be, if the United States were only as unequal in 2018 as it was in 1974:

Would you have been better off? Almost certainly. Calculate how much our gross wealth inequality costs your family in particular every year, by looking at that counterfactual column and subtracting your income for 2018.

Would you be better off going forward if we took steps to reverse the concentration of wealth at the very top, by making government policies lift up the average and below? Almost certainly.

So, what’s your argument in favor of the current system and against a more equitable one again?

Sunday, February 14, 2021

Lyle's lesson on envy

 

       “You burn to have your photograph in a tennis magazine.”

“I’m afraid so.”

“Why again exactly, now?”

“I guess to be felt about as I feel about those players with their pictures in magazines.”

“Why?”

“Why? I guess to give my life some sort of meaning, Lyle.”

“And how would this do this again?”

“Lyle, I don’t know. I do not know. It just does. Would. Why else would I burn like this, clip secret pictures, not take risks, not sleep or pee?”

“You feel these men with their photographs in magazines care deeply about having their photographs in magazines. Derive immense meaning.”

“I do. They must. I would. Else why would I burn like this to feel as they feel?”

“The meaning they feel, you mean. From the fame.”

“Lyle, don’t they?”

“LaMont, perhaps they did at first. The first photograph, the first magazine, the gratified surge, the seeing themselves as others see them, the hagiography of image, perhaps. Perhaps the first time: enjoyment. After that, do you trust me, trust me: they do not feel what you burn for. After the first surge, they care only that their photographs seem awkward or unflattering, or untrue, or that their privacy, this thing you burn to escape, what they call their privacy is being violated. Something changes. After the first photograph has been in a magazine, the famous men do not enjoy their photographs in magazines so much as they fear that their photographs will cease to appear in magazines. They are trapped, just as you are.”

“Is this supposed to be good news? This is awful news.”

“LaMont, are you willing to listen to a Remark about what is true?”

“Okey-dokey.”

“The truth will set you free. But not until it is finished with you.”

“Maybe I ought to be getting back.”

“LaMont, the world is very old. You have been snared by something untrue. You are deluded. But this is good news. You have been snared by the delusion that envy has a reciprocal. You assume that there is a flip-side to your painful envy of Michael Chang: namely Michael Chang’s enjoyable feeling of being-envied-by-LaMont-Chu. No such animal.”

“Animal?”

“You burn with hunger for food that does not exist.”

“This is good news?”

“It is the truth. To be envied, admired, is not a feeling. Nor is fame a feeling. There are feelings associated with fame, but few of them are any more enjoyable than the feelings associated with envy of fame.”

“The burning doesn’t go away?”

“What fire dies when you feed it? It is not fame itself they wish to deny you here. Trust them. There is much fear in fame. Terrible and heavy fear to be pulled and held, carried. Perhaps they want only to keep it off you until you weigh enough to pull toward yourself.”

“Would I sound ungrateful if I said this doesn’t make me feel very much better at all?”

“LaMont, the truth is that the world is incredibly, incredibly, unbelievably old. You suffer with the stunted desire caused by one of its oldest lies. Do not believe the photographs. Fame is not the exit from any cage.”

“So I’m stuck in the cage from either side. Fame or tortured envy of fame. There’s no way out.”

“You might consider how escape from a cage must surely require, foremost, awareness of the fact of the cage.”


David Foster Wallace, Infinite Jest

Tuesday, May 05, 2020

Coronavirus Dashboard

Useful links for COVID-19 outbreak

Spreadsheet of US coronavirus numbers by state: https://docs.google.com/spreadsheets/d/18oVRrHj3c183mHmq3m89_163yuYltLNlOmPerQ18E8w/htmlview?sle=true# from https://covidtracking.com/

Johns Hopkins tracking map: https://coronavirus.jhu.edu/map.html


What's the Point of Continuing the Shutdown?

Over on Facebook, Kathy asks:
Since "flattening the curve" was always about not overwhelming the hospitals and never about preventing the incidence of the disease, then what are we doing now? Put another way, how is opening gradually different than opening suddenly, if the end result is that we'll all eventually end up out in stores and restaurants anyhow while the disease is just as present and threatening? Seems like the only different outcome of a slower opening is further destruction of the economy. What am I missing?


During March, COVID infections were doubling rapidly and at an increasing rate (7 days, 5 days, 3 days), with ~20% needing hospitalization, and killing ~1-2%. That would have overwhelmed ICU/hospital capacity within a few weeks and resulted in ~1,000,000 dead in the US if nothing were done. So we did something: the shutdown. And so far, it's kept infection down within capacity almost everywhere (and spare capacity could be shuffled around).
That plateau also means the R0 number dropped to somewhere between 1.2 and 0.9 in the country as a whole because of the whole social distancing + Stay At Home program. Under local conditions where it's much higher, such as in institutions where distancing isn't possible (prisons, nursing homes, meat packing plants), once the virus gets inside the building, we get a cluster like the 2,000 at the prison in Marion. (This is why large gatherings will be the last to come back.)
Now, we can either loosen up or try for a "suppression strategy". If we had 100% compliance everywhere, infections would have gone to zero in 2-4 weeks, and we would be done. Wuhan managed it in about 35 days from peak, or about 80 days from start of lockdown If we get good (~60-80%) compliance, the R0 goes below 0.9 and the virus can't reproduce fast enough and dies slowly. If you loosen up a little, you may be able to stay under 1.2 and the virus will continue as it is; more than that, and you'll soon lose your grip on it entirely.
In the original models I looked at, that would take the US good compliance and coordination from March through June, at minimum.
If you can't keep everything closed up until the virus dies altogether, you can suppress it until it gets rare enough that you can test everybody and then track contacts. Only infected people would then have to be isolated, and then only until they're no longer infectious. Germany and New Zealand are at or near this stage now.
On the economic side, the thing to realize is that consumer/household consumption drives the economy. Shutting down businesses that would not have consumers, and those whose workers would soon become sick if not at home, is essentially a protective maneuver, putting the businesses in suspended animation rather than allowing them to fail. Paying people not to work under these conditions is a form of social insurance, just like paying people laid off due to flooding or a tornado that destroyed their workplace. It has the additional benefit of keeping money flowing through the economy, so there's demand. Where there's demand, there will eventually be supply to meet it. It doesn't work well the other way around (keeping supply high, but letting demand stay low) because the companies would have no one to sell to.

Sunday, April 12, 2020

How and Why to Save the Post Office

As many of you know, the Post Office is in dire straits due to the quarantine shutdown reducing their letter & package volume by 50%. As you may not know, they've been in dire straits for a while due to the 2006 PAEA bill that requires them to prefund retirement benefits for all their employees for the next 70 YEARS, two to three times as long as most pension funds do.
As a result, if something is not done to help, the Post Office will have to shut down in June 2020. Many of you are dependent on the Postal Service to deliver medicine, food, and other necessities. For small businesses, postal delivery is the only viable link they have to deliver to customers, and postal delivery completes the eCommerce loop for every online business in America. For many rural communities, no commercial package delivery service can profitably offer last mile delivery to and from your doorstep.
The President and Senate Majority Leader have blocked funding to keep the Post Office running during this time of crisis.
It was part of the Coronavirus Recovery Package that found Boeing important enough to bail out, but not the government run Post Office.
So here's a three point plan to Save the Post Office:

  1. Buy some stamps at usps.com
  2. Send your Congressperson and Senators a postcard or letter each, telling them why you like the Post Office and how you depend on its service. Recommend that they fund the Post Office rescue and repeal the 2006 PAEA pension requirements. Do this once a week until it happens.
  3. Send a postcard or letter to your friends, sharing something about your life during quarantine or just reaching out to them, and asking them to participate in this effort to save the Post Office, if they happen to like getting and sending mail and packages like this. (Most people do.)

Saturday, March 14, 2020

A Time-Traveller's Letter

Hello to the me who is just about to graduate from high school. This is your older self from 2020. I am writing this letter as part of a time travel experiment that resets my timeline to this date; although you should retain all of my memories if all goes according to plan, this letter is a backup. Diagrams and instructions for how to build the time machine and repeat the experiment are appended to this letter, in case you need to reboot your life again and this timeline doesn’t work out.
Also enclosed, find a picture of us at my age, holding a picture of us at your age, located in front of a building that does not exist in your time, both as verification that I am the future you, and just for the general wow factor. As further verification, in the next few months, the Berlin Wall and the rest of the Iron Curtain will fall, at about the time that your hallmates are playing the Indigo Girls’ “Closer to Fine”, which has not yet been released. A condensed personal and general history of the future follows […].
Here are thirty people close to you whose lives you can save or who you can spare from years of suffering with ten minutes or less of effort at the right time […] If you’re not worried about altering the timeline in big ways, here are ten points at which a small change could have produced a big change for the better[…]
Be on the lookout for other opportunities to help other people in a simple way, especially when you are in a rush to do something else. It is better to be kind and useful than to appear clever or funny or cool. There will be many more opportunities for the latter than the former in this life.
Someone needs to help, and you are someone. If something needs to be done, and you cannot find anyone else to do it, you have just volunteered.
Run toward what you fear. You fear will shrink and you will grow.
Procrastination, writer’s block, and general inertia will eat up an unconscionable amount of your life until you realize that these are just illusory. There’s nothing to them but what you pretend is there. There is always a best thing that needs to be done at this time, so do that, and then do the next thing.
Start keeping a journal. Take more photos. Write a targeted number of words every day—1000 words a day will stack like bricks into a book. You’re a good writer, but if you revise your writing, then B papers will become A papers. Start writing earlier to allocate time for that. Editing is like Photoshop or darkroom work—it will allow you to pull things into focus or blur them, dodge and burn, until the work looks like what you want it to.
You’re naturally cautious, so you should generally say yes to every opportunity. You’re generally cooperative, so you should generally say no to sales pitches. The harder someone tries to sell you, the less worthwhile the product. Learn how to sell gently.
You like to pretend to be uptight, to the point where you forget it’s an act sometimes. Pretend to be extremely laid-back and mellow instead and see how that goes.
Take the harder class; it’s easier. Take the better-paying job; it’s no harder.
If someone is better at something you have been doing a long time, that’s not a reason to stop doing it, thinking you’ll never be as good as they are. It’s an opportunity to shortcut by dissecting what they’re doing or to collaborate with them. A lot of the time, you can just ask them to show you how they do it or what you’re doing wrong. Deliberate practice with a goal will get you past the plateaus you’re currently experiencing in e.g., your performance in tennis or musical instruments. Anybody who’s great at anything started out sucking at it, probably worse than you.
Also, find a way to learn all of that trade school/shop class stuff. It’s unconscionable not to know how to repair or build things, and it will teach you the importance of good craftsmanship.
All of your athletic problems boil down to three things. When you do something, you must turn your whole body to it. When you swim, turn your whole body and not just your neck to breathe. When you serve or hit a forehand, twist your whole body. When you punch or kick, turn your whole body’s weight to it like a spring. Second, you are uncomfortable having your hips above your head or falling in any way. Practice those things a thousand times, or until that concern disappears. A thousand dives off the high dive. A thousand headstands. A thousand trust falls. Third, an hour of yoga very week will fix that problem with your knees and the tightness in your back.
In the next couple of years, you are on course to make three small mistakes that are very costly: failing to take the seminar with your advisors and instead taking one with the hostile guy, going to grad school in Ohio rather than California, and failing to build up an immunity to iocaine powder prior to getting in a death match with the Sicilian. At least you don’t get embroiled in a land war in Asia, though the country does.
I hope this helps and wish you (me) the best of all timelines.

Originally posted on Quora here: https://www.quora.com/You-get-to-restart-your-life-at-any-age-however-you-would-have-no-recollection-of-being-any-older-All-you-will-be-allowed-to-bring-with-you-is-a-letter-What-will-you-write-in-that-letter/answer/Scott-Gosnell