Should we call the followers of the twenty-something know-nothing ocasionalists? ( A philosophy insider joke.)
Category: Economics
On Relative Poverty and Status
I have a little disagreement going with the Dark Ostrich. He asserts, "Relative poverty is all about status." In an earlier entry, I quoted him as maintaining that
We are born with a natural inequality which soon turns into economic inequality. The reason it turns into economic inequality, I believe, is that humans have a natural desire for status.
I replied,
Yes, we are naturally unequal, both as individuals and as groups, and this inequality results in economic inequality. But I wouldn't explain this in terms of the desire for status. Status is relative social standing, and depends on how one appears in the eyes of others. But this is relatively unimportant and has little to do with money and property which are far more important. I can live very well indeed without name and fame, accolades and awards, high social position and the perquisites that come in its train. But I cannot live well without a modicum of material wealth.
It is not desire for status that [primarily] explains economic inequality but the desire for money and property and the sort of material security they provide.
I would guess that no one who reads this weblog is absolutely poor, i.e., bereft of life's necessities, and that every one who reads it is relatively poor, and significantly so. What do I mean by 'significantly so'? Suppose A has a net worth of four billion USD and B a net worth of 3.9 billion. Then B is poor relative to A. I will call this insignificant relative poverty. But the Ostrich and I, though we have far more than we need, are significantly relatively poor as compared to, say, the late Fidel Castro, that man of the people and hero of the Left.
The Ostrich tells us that relative property is all about status. I take that to mean that it is the drive for social status alone that brings about economic inequality and with it relative poverty. That is empirically false. I am the counterexample: I live wisely and frugally and my net worth keeps going up. But I don't care about status, which is relatively unreal, being mainly a matter of what's going on in the heads of others. I carefully husband my resources because I want to be in a position to take care of myself and others when the inevitable disasters occur and not be a burden on others. What others think of me, though of some importance, is of less importance to me than my material well-being.
But let's be charitable. Perhaps what the Ostrich means to say is that it is the lust for status that mainly brings about economic inequality and relative poverty. I concede that that might be so. It is an empirical question and cannot be answered from the arm chair.
But there are a couple of normative questions in the vicinity and these are what really interest me. One is whether it is morally permissible to pursue loot and lucre, property and pelf, for social standing. The other is whether it is rational to pursue these things for social standing. I will leave the moral question for some other time.
As for rationality, it can be understood in two different ways.
An agent is instrumentally rational if he chooses means conducive to the achievement of his ends. A rational agent in Phoenix who intends to travel to Los Angeles by car in eight hours or less will head West on Interstate 10. If he were to head East he would show himself to be irrational, at least in respect of this particular goal or type of goal. This says nothing about the rationality or irrationality of driving to Los Angeles. Indeed, there are those who will say that it makes no sense to speak of ends as either rational or irrational, that such talk is meaningful only in respect of means.
On a second way of thinking about rationality, one can coherently speak of ends themselves as rational or the opposite. Consider social status and material security. Which is a higher value? Which is more choice-worthy? Which would it be more rational for a being of our constitution to pursue? To me the answer is obvious. Material security, which includes wealth well beyond what one needs physically to survive, is a higher value that social status. Modifying slightly what I said above,
I can live very well indeed without name and fame, accolades and awards, high social position and the perquisites that come in its train. But I cannot live well without material wealth in excess of what is needed for necessities.
Given how benighted human beings are, it may well be instrumentally rational to pursue wealth for the sake of status. That's an empirical question. But no reasonable person prefers status to wealth, just as no reasonable person prefers transient sense pleasures to long-term physical health.
So the Ostrich and I may be at cross-purposes. I am making normative claims while he remains at the level of the merely factual.
Now suppose someone asserts that the good is whatever satisfies desire, and that there is no way of ranking desires as objectively higher or lower, and their objects as more or less choice-worthy. Could I refute such a person? I don't think so. Contradict yes, refute no. For it all comes down to whether one has correct value intuitions. Some of us do and some of us don't. Just as some of us are color-blind, some of us are value-blind, wertblind in the terminology of Dietrich von Hildebrand. While color blindness is a defect in the eye of the head, value blindness is a defect in the 'eye' of the soul.
Is Economic Inequality Morally Acceptable?
This from a reader:
We are born with a natural inequality with soon turns into economic inequality. The reason it turns into economic inequality, I believe, is that humans have a natural desire for status. It is an essential part of the human condition, and I believe impossible to eradicate, indeed it is impossible to conceive human nature or existence without the existence of status, and our desire to improve it. It is part of any organisation, including academia or the church. This is an evil, I believe, but to eradicate it would involve destroying our freedom, which is a worse evil.
Yes, we are naturally unequal, both as individuals and as groups, and this inequality results in economic inequality. But I wouldn't explain this in terms of the desire for status. Status is relative social standing, and depends on how one appears in the eyes of others. But this is relatively unimportant and has little to do with money and property which are far more important. I can live very well indeed without name and fame, accolades and awards, high social position and the perquisites that come in its train. But I cannot live well without a modicum of material wealth.
It is not desire for status that explains economic inequality but the desire for money and property and the sort of material security it provides. Obviously, other factors come into the explanation including living in a politically stable capitalist country under the rule of law. There are socialist crap holes in which everyone except the apparatchiki are poor but equal, but impoverished equality is not an equality worth wanting. This is why commie states need walls to keep legals in while the USA needs a wall to keep illegals out.
Is the desire materially to improve oneself evil? I would say no as long as the the pursuit of wealth remains ordinate, and therefore subordinate to higher values. Is the resultant economic inequality evil? No again. Why should it be? I have a right to what I have acquired by my hard work, deferral of gratification, and practice of the ancient virtues. It is to be expected that I will end up with a higher net worth than that of people who lack my abilities and virtues.
The economy is not a zero-sum game. If I "mix my labour" (Locke) with the soil and grow tomatoes, I have caused new food to come into existence; I haven't taken from an existing stock of tomatoes with the result that others must get fewer. If my lazy neighbor demands some of my tomatoes, I will tell him to go to hell; but if he asks me in a nice way, then I will give him some. In this way, he benefits from my labor without doing anything. Some of my tomatoes 'trickle down' to him. A rising tide lifts all boats. Lefties hate this conservative boilerplate whoch is why I repeat it. It's true and it works. When was the last time a poor man gave anyone a job? Etc.
I deserve what I acquire by the virtuous exercise of my abilities. But do I deserve my abilities? No, but I have a right to them. I have a right to things I don't deserve. Nature gave me binocular vision but only monaural hearing. Do I deserve my two good eyes? No, but I have a right to them. Therefore, I am under no moral obligation to give one of my eyes to a sightless person. (If memory serves, R. Nozick makes a similar point in Anarchy, State, and Utopia.)
At this point someone might object that it is just not fair that some of us are better placed and better endowed than others, and that therefore it is a legitimate function of government to redistribute wealth to offset the resultant economic inequality. But never forget that government is coercive by its very nature and run by people who are intellectually and morally no better, and sometimes worse, than the rest of us.
The evil of massive, omni-intrusive government is far worse than economic equality is good. Besides, lack of money is rooted in lack of virtue, and government cannot teach people to be virtuous. If Bill Gates' billions were stripped from him and given to the the bums of San Francisco, in ten year's time Gates would be back on top and the bums would be back in the gutters.
Perhaps we can say that economic inequality, though axiologically suboptimal, is nonetheless not morally evil given the way the world actually works with people having the sorts of incentives that they actually have, etc. There is nothing wrong with economic inequality as long as every citizen has the bare minimum. But illegal aliens have no right to any government handouts.
Ten Political-Economic Theses
Here are ten theses to which I subscribe in the critical way of the philosopher, not the dogmatic way of the ideologue.
1. There is nothing wrong with money. It is absolutely not the root of all evil. The most we can say is that the inordinate desire for money is at the root of some evils. I develop this theme in Radix Omnium Malorum.
2. There is nothing wrong with making money or having money. There is for example nothing wrong with making a profit from buying, refurbishing, paying propery taxes on, and then selling a house.
3. There is nothing wrong with material (socio-economic) inequality as such. For example, there is nothing wrong with Bill Gates' having a vastly higher net worth than your humble correspondent. And there is nothing wrong with the latter's having a considerably higher net worth than some of his acquaintances. (When they were out pursuing wine, women, and song, he was engaging in virtuous, forward-looking activities thereby benefiting not only himself but also people who come in contact with him.) Of course, when I say that there is nothing wrong with material inequality as such, I am assuming that the inequalities have not come about through force or fraud.
4. Equality of outcome or result is not to be confused with equality of opportunity or formal equality in general, including equality under the law. It is an egregious fallacy of liberals and leftists to infer a denial of equality of opportunity — via 'racism' or 'sexism' or whatever — from the premise that a certain group has failed to achieve equality of outcome. There will never be equality of outcome due to the deep differences between individuals and groups. We must do what we can to ensure equality of opportunity and then let the chips fall where they may. This is consistent with support for government-run programs to help the truly needy who are in dire straits through no fault of their own.
6. Private property is the foundation of individual liberty. Socialism and communism spell the death of individual liberty. The more socialism, the less liberty. "The bigger the government, the smaller the citizen." (D. Prager)
7. The individual is the locus of value, not any collectivity, whether family, tribe, race, nation, or State. We do not exist for the State; the State exists for us as individuals.
8. Property rights, contra certain libertarians, are not absolute: there are conditions under which an 'eminent domain' State seizure (with appropriate compensation) of property can be justified. This proposition tempers the individualism of the preceding one.
9. Governments can and do imprison and murder. No corporation does. Liberals and leftists and 'progressives' have a naive faith in the benevolence of government, a faith that is belied by that facts of history: Communist governments in the 20th century murdered over 100 million people. (Source: Black Book of Communism.) Libs and lefties and progs are well-advised to adopt a more balanced view, tranfering some of their skepticism about corporations — which is in part justified — to Big Government, especially the omni-intrusive and omni-competent (omni-incompetent?)sort of governments they champion.
10. Our social and political troubles are rooted in our moral malaise, in particular, in inordinate and disordered desire. It is a pernicious illusion of the Left to suppose that our troubles have an economic origin solely and can be alleviated by socialist schemes of redistribution of wealth.
Bozo de Blasio versus Walmart
Why should Gotham's mayor be against it? Because it helps the poor?
Walmart’s benefits are obvious to shoppers and to economists like Jason Furman, who served in the Clinton administration and was chairman of the Council of Economic Advisers under President Obama. In a paper, “Walmart: A Progressive Success Story,” Furman cited estimates that Walmart, by driving down prices, saved the typical American family more than $2,300 annually. That was about the same amount that a family on food stamps then received from the federal government.
Political Legitimacy and Rent Seeking
This is not an election fought over competing policies but a struggle for legitimacy. A very large portion of the electorate (how large a portion we will discover next month) believes that its government is no longer legitimate, and that it has become the instrument of an entrenched rent-seeking oligarchy.
By and large, I agree with this reading. "America's economy is corrupt, cartelized and anti-competitive," I wrote in August. It is typical of rent-seeking that Lockheed Martin's stock price has tripled during the past three years, and payment to its top management team has risen from $12 million a year to over $60 million a year, while Lockheed Martin's F-35 languishes in cost overruns and deployment delays. Produce a lemon and get rich: that's Washington. It is not a trivial matter, or unrepresentative of our national condition, that the FBI director who declined to prosecute Mrs. Clinton for mishandling of classified material just returned to government from a stint at Lockheed Martin, where he was paid $6 million for a single year's service. I don't know whether FBI Director Comey is corrupt. But it looks and smells terrible.
That's why it was so important for Trump to talk about jail time for his opponent. If things had not gotten to the point where former top officials well might belong in jail, Trump wouldn't be there in the first place. The Republican voters chose a reckless, independently wealthy, vulgar, rough-edged outsider precisely because they believe that the system is corrupt. They are right to so believe; if the voters knew a tenth of what I know about it, they would march on Washington with pitchforks.
What is rent seeking? Here:
"Rent seeking” is one of the most important insights in the last fifty years of economics and, unfortunately, one of the most inappropriately labeled. Gordon Tullock originated the idea in 1967, and Anne Krueger introduced the label in 1974. The idea is simple but powerful. People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors. Elderly people, for example, often seek higher Social Security payments; steel producers often seek restrictions on imports of steel; and licensed electricians and doctors often lobby to keep regulations in place that restrict competition from unlicensed electricians or doctors.
Price Changes 1996-2016
Graph from the American Enterprise Institute. Commentary mine.
One irony here is that the more worthless college education becomes (in the non-STEM areas at least), the more outrageously expensive it becomes, while with electronics, the use value of the gear skyrockets while prices plunge.
In the 'higher education' sector, a trifecta of corruption and stupidity. The federal government underwrites huge loans with no oversight; greedy and mostly useless administrators proliferate like rabbits, raising tuition and fees because of the availability of federal funds; stupid students go deep into debt to finance worthless degrees.
The degrees are not only economically worthless; they are intellectual junk to boot. Outside of the STEM areas, and the medical schools, the universities of the land have become leftist seminaries and hotbeds of political correctness.
U. S. Poor Richer than Middle Class in Much of Europe
If Sanders the superannuated socialist smokes, here is something for him to put in his pipe.
One good thing I will say about Bernie Sanders, though, is that he is not a stealth socialist like Obama and Hillary. He flies the flag.
Mona Charen on the Left-Leaning Pope Francis
Here (emphasis added):
According to "The Black Book of Communism," between 1959 and the late 1990s, more than 100,000 (out of about 10 million) Cubans spent time in the island's gulag. Between 15,000 and 19,000 were shot. One of the first was a young boy in Che Guevara's unit who had stolen a little food. As for quality of life, it has declined compared with its neighbors. In 1958, Cuba had one of the highest per capita incomes in the world. Today, as the liberal New Republic describes it:
"The buildings in Havana are literally crumbling, many of them held upright by two-by-fours. Even the cleanest bathrooms are fetid, as if the country's infrastructural bowels might collectively evacuate at any minute.
"Poverty in Cuba is severe in terms of access to physical commodities, especially in rural areas. Farmers struggle, and many women depend on prostitution to make a living. Citizens have few material possessions and lead simpler lives with few luxuries and far more limited political freedom."
This left-leaning pope (who failed to stand up for the Cuban dissidents who were arrested when attempting to attend a mass he was conducting) and our left-leaning president have attributed Cuba's total failure to the U.S.
It's critically important to care about the poor — but if those who claim to care for the poor and the oppressed stand with the oppressors, what are we to conclude?
Much is made of Pope Francis' Argentine origins — the fact that the only kind of capitalism he's experienced is of the crony variety. Maybe. But Pope Francis is a man of the world, and the whole world still struggles to shake off a delusion — namely, that leftists who preach redistribution can help the poor.
Has this pope or Obama taken a moment to see what Hugo Chavez's socialist/populist Venezuela has become? Chavez and his successor (like Castro, like Lenin, like Mao) promised huge redistribution from the rich to the poor. There have indeed been new programs for the poor, but the economy has been destroyed. The leader of the opposition was just thrown in jail. Meanwhile, the shops have run out of flour, oil, toilet paper and other basics.
If you want moral credit for caring about the poor, when, oh when, do you ever have to take responsibility for what happens to the poor when leftists take over?
We know what actually lifts people out of poverty: property rights, the rule of law, free markets. Not only do those things deliver the fundamentals that people need to keep body and soul together, but they accomplish this feat without a single arrest, persecution or show trial.
Memo to Pope Francis: Capitalism is the Solution, not the Problem
I mean if he is serious about reducing poverty. Stephanie Slade in a very good Reason article:
He has been called the "slum pope" and "a pope for the poor." And indeed, it's true that Pope Francis, leader to 1.3 billion Roman Catholics, speaks often of those in need. He's described the amount of poverty and inequality in the world as "a scandal" and implored the Church to fight what he sees as a "culture of exclusion."
Yet even as he calls for greater concern for the marginalized, he broadly and cavalierly condemns the market-driven economic development that has lifted a billion people out of extreme poverty within the lifetime of the typical millennial. A lack of understanding of even basic economic concepts has led one of the most influential and beloved human beings on the planet to decry free enterprise, opine that private property rights must not be treated as "inviolable," hold up as the ideal "cooperatives of small producers" over "economies of scale," accuse the Western world of "scandalous level[s] of consumption," and assert that we need "to think of containing growth by setting some reasonable limits."
Given his vast influence, which extends far beyond practicing Catholics, this type of rhetoric is deeply troubling. It's impossible to know how much of an impact his words are having on concrete policy decisions—but it's implausible to deny that when he calls for regulating and constraining the free markets and economic growth that alleviate truly crushing poverty, the world is listening. As a libertarian who is also a devout Roman Catholic, I'm afraid as well that statements like these from Pope Francis reinforce the mistaken notion that libertarianism and religion are fundamentally incompatible.
I'm a conservative, not a libertarian, but the above is basically on the right track. Read it all. When I say capitalism is the solution, I mean, of course, capitalism under the rule of law. It is curious that neither capitalism nor the rule of law fare well under administrations like the current one in the USA.
Empty Rhetoric, Disregard for Reality
Thomas Sowell versus Barack Obama.
The Poor are not Poor Because the Rich are Rich
As Robert Samuelson points out.
The two conditions are generally unrelated.
[. . .]
It's also not true, as widely asserted, that the wealthiest Americans (the notorious top 1 percent) have captured all the gains in productivity and living standards of recent decades. The Congressional Budget Office examined income trends for the past three decades. It found sizable gains for all income groups.
True, the top 1 percent outdid everyone. From 1980 to 2010, their inflation-adjusted pretax incomes grew a spectacular 190 percent, almost a tripling. But for the poorest fifth of Americans, pretax incomes for these years rose 44 percent. Gains were 31 percent for the second poorest, 29 percent for the middle fifth, 38 percent for the next fifth and 83 percent for the richest fifth, including the top 1 percent. Because our system redistributes income from top to bottom, after-tax gains were larger: 53 percent for the poorest fifth; 41 percent for the second; 41 percent for the middle-fifth; 49 percent for the fourth; and 90 percent for richest. [Emphasis added.]
The Pope is Just Wrong about Economics
Pope Francis' Erroneous Economic Pontifications
Once Again, Pope Francis. Excerpt:
It is interesting that the Pope refers to compassion in the way he does, given that the contradiction that is the “welfare state” has not only ruined the most needy and has led to growing exclusion, but has degraded the notion of charity which refers to the voluntary surrender of personal resources and not to a third party forcibly taking something from someone else’s labor.
The Pope is a Buffoon When it Comes to Economics
There is too much buffoonery in high places.
It would be nice to be able to expect from popes and presidents a bit of gravitas, a modicum of seriousness, when they are instantiating their institutional roles. What they do after hours is not our business. So Pope Francis' clowning around does not inspire respect, any more than President Clinton's answering the question about his underwear. Remember that one? Boxers or briefs? He answered the question! All he had to do was calmly state, without mounting a high horse, "That is not a question that one asks the president of the United States." And now we have the Orwellian Prevaricator himself in the White House, Barack Hussein Obama, whose latest Orwellian idiocy is that Big Government is the problem, not him, even though he is the the poster boy, the standard bearer, like unto no one before him in U. S. history, of Big Government!
But I digress. Here are a couple of important points in rebuttal of Francis (emphasis added):
To begin, we note that “trickle-down” economics is a caricature used by capitalism’s critics and not its defenders. Those of us who embrace free markets do so not out of a belief that the breadcrumbs of affluence will eventually reach those less well-off, but, rather, out of a conviction that the free market is the best mechanism for increasing wealth at all levels. As for being confirmed by the facts, we believe the empirical evidence is conclusive. Compare the two sides of Germany during the era of the Berlin Wall or the China of today with the China that hadn’t yet embraced an (admittedly imperfect) form of capitalism. The results are not ambiguous.
To this I would add that it is a mistake to confuse material inequality with poverty. Which is better: everyone being equal but poor, or inequality that makes 'the poor' better off than they would have been been without the inequality? Clearly, the second. After all, there is nothing morally objectionable about inequality as such. Or do you think that there is a problem with my net worth's being considerably less than Bill Gates'? There is nothing wrong with inequality as such; considerations of right and wrong kick in only when there is doubt about the legality or morality of the means by which the wealth was acquired. My net worth exceeds that of a lot of people from a similar background, but that merely reflects the fact that I practice the old virtues of frugality, etc., avoid the vices that impoverish, and make good use of my talents. I know how to save, invest, and defer gratification. I know how to control my appetites. The relative wealth that results puts me in a position to help other people, by charitable giving, by hiring them, and by paying taxes that fund welfare programs and 'entitlements.' When is the last time a poor person gave someone a job, or made a charitable contribution? And how much tax do they pay? There are makers and takers, and you can't be a giver unless you are a maker, any more than you can be a taker if there are no givers. So, far from inequality being the same as poverty or causing poverty, it lessens poverty, both by providing jobs and via charity, not to mention the 'entitlement' and welfare programs that are funded by taxes paid by the productive.
You don't like the fact that someone has more than you? Then you are guilty of the sin of envy. And I think that Francis is aware that envy is one of the Seven Deadly Sins. Here is a question for socialists, redistributionists, collectivists, Obaminators: Is your redistributionism merely an expression of envy? I am not claiming that envy is at the root of socialism. That is no more the case than that greed (also on the list of Seven Deadlies) is at the root of capitalism. But it is the case that some socialists are drawn to socialism because of their uncontrollable envy, a thoroughly destructive vice.
There’s a more fundamental misunderstanding at work here, however. When Francis talks about “economic power,” he misapprehends a fundamental aspect of free markets – they only provide power consensually. Apart from government, no one can force you to buy a product or purchase a service. There’s a similar error in his citation of Saint John Chrysostom’s aphorism: “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood.” The economics of capitalism are not zero-sum. Trade only occurs when both sides are made better off by the transaction. The wealthy don’t get rich at the expense of the poor.
Lefties hate business and especially big corporations. I give the latter no pass if they do wrong or violate reasonable regulations. But has Apple or Microsoft ever incarcerated anyone, or put anyone to death, or started a shooting war, or forced anyone to buy anything or to violate his conscience as the Obama administration is doing via its signature abomination, Obamacare?
On the other hand, did the government provide me with the iPad Air I just bought? You didn't build that, Obama! Not you, not your government, not any government. High tech does not come from politicians or lawyers, two classes that are nearly the same — yet another problem to be addressed in due course.
Be intellectually honest, you lefties. Don't turn a blind eye to the depredations of Big Government while excoriating (sometimes legitimately) those of Big Business.