Archive for the ‘Economics’ Category

How Not to Save the Planet – Naomi Klein’s “This Changes Everything”

November 27, 2014

imagesGlobalization. Trade. Market Economics. Capitalism. Corporations. Economic growth. Writer Naomi Klein hates it all. Her book, This Changes Everything, argues that global warming’s terrible effects require junking that “neoliberalism,” for a different and more humane economic model. What, exactly? Don’t know.

Kleinites think globalization, trade, and capitalism worsen poverty and inequality. That’s just as factually wrong as climate change denialism. UnknownIn the previous century – despite all its upheavals, the Depression, world wars, Russian and Chinese craziness – worldwide average real dollar incomes rose five-fold – 500%. The average person wound up five times better off than at the start. Poverty ranks plummeted. That didn’t happen through socialism.

Klein believes the only thing trade, capitalism, and “extractive” industries produce is profit – the only reason they exist. It’s just “greed.” There’s no recognition that industry produces stuff people want. Fossil fuel extraction is profitable because it creates energy we need and use (which Klein hates too).

images-1She demonizes free trade without understanding it. Yes, it does make some people richer – a lot of people. Trade happens only when both sides benefit. That spreads prosperity. Freer trade enables poor people in developing countries to sell their products in richer ones. Protectionism keeps them out – and poor. So does “buy local.”

Partly, Klein hates trade because of what’s traded – our “wasteful, materialist, consumerist lifestyle.” (“Consumerism” is buying something someone else disapproves.) Consumerism, extractivism, and economic growth are what cause climate change. We’ve heedlessly raped the planet, and global warming is our “comeuppance.” We’ll be cooked, and drowned by rising seas, unless we stop making electricity with fossil fuels, driving gasoline cars, flying planes, etc. Unknown-1The political right, Klein says, realizes this, and hence rejects climate change science because it blows up their ideology of market economics and unrestrained capitalism. (While Klein loves climate change because it feeds her ideology of blowing up market economics and capitalism.)

Yet science tells us that blowing them up won’t halt climate change. If tomorrow we stopped everything – cut carbon emissions to zero – global warming would continue, only slightly slower than if we do nothing. Klein acknowledges this.

So does she welcome other approaches? No. Klein sees any answer that smacks of technology as just “doubling down” on what got us into trouble in the first place –  like geo-engineering to remove carbon from the atmosphere, or cool the planet by blocking some sun radiation. images-2Replacing fossil fuel power generation with nuclear? That’s so capitalist/industrialist. And if global warming will hamper food production, how about genetic modification techniques that boost crop yields? GAAAA!

While bashing right-wing science denialism, Klein does acknowledge denialism on the left – mentioning the anti-vaccine movement – but denies the science telling us genetic modification is safe and beneficial. And nuclear energy is such an obvious no-brainer in terms of climate impact that many greens are finally embracing it. Klein is actually somewhat persuasive that geo-engineering is problematical, but urges banning further research. Who’s anti-science?

Further, if climate change will mean big trouble, wouldn’t having more money to deal with it help? But Klein hates economic growth, writing zingers like, “having more money won’t help you if your city is under water.”

Unknown-3Ha ha. Well, actually, it would. In fact, Klein bemoans that richer people can escape warming’s ill-effects. The Netherlands has already started raising buildings in anticipation of higher sea levels. Such efforts are costly, and Klein foresees trillions needed. Without economic growth, where will the money come from? Simple: guilty energy companies must pay. But she also says they should be stopped from drilling – so their trillions in future earnings won’t exist.

Klein’s hatred of economic growth (shared by climate zealot Bill McKibben) is also bizarre in light of their anguishing about inequality, poverty, and human deprivation. Growth does make the rich richer, but makes the poor richer too. How can they expect to beat poverty without a bigger economic pie? Just by redistribution? Seriously? With a billion or so people still living on less than $1 a day, I have no patience for those with cushy lives who superciliously call for ending economic growth. (And they are the ones charging capitalists with callousness.)

images-3While Klein wants to dismantle “the system,” her alternative is never clear. But it is clear that stopping the industrial market economy and consumerism would (far from her dream of ending inequality) drastically shrink the economic pie, creating mass unemployment and impoverishment. Klein fantasizes that unemployment would actually be solved with all the new clean energy jobs. How those jobs would be supported, without a consumer economy, is a mystery.

By the way, poorer people tend to have more children – and higher populations are bad for the environment and climate.

Klein faults most environmentalists for misleading people that some modest lifestyle tweaks will suffice. But, reviewing the book, science writer Elizabeth Kolbert (though generally sympathetic) says Klein peddles a similar “fable” in failing to explain just how much energy consumption and consumer spending would have to be cut. images-4Kolbert references a Swiss study predicated on a target “2000 watt society.” Americans currently use 12,000. The only hypothetical person in the study under 2,000 was a woman living in a retirement home with no TV or computer, traveling only rarely, by train.

So Klein’s program is really to give up modern life; while she vilifies politico/economic “austerity” policies, the austerity she herself advocates is far more draconian. What writers like her (and James Howard Kunstler) seem to want is everyone living on small farms, growing their own food, eschewing manufactured goods, and riding bicycles. Probably 80% of today’s Americans would literally die. Pre-industrial farm life was no bucolic paradise.

But in the end, Klein recognizes that de-growth is just not plausible, perhaps even “genocidal.” Yet still she envisions mass movement resistance overthrowing capitalism and extractivism, in favor of what she finally calls “regeneration.” Kolbert calls it “a concept so fuzzy” she “won’t even attempt to explain.” But she quotes Klein: “we become full participants in the process of maximizing life’s creativity.”

That sounds nice.

images-6We have not heedlessly or foolishly raped the planet. Extracting and using energy was necessary for lifting billions out of squalor into decent lives, and still is. There’s no free lunch. Everything has a cost; economic growth does degrade the environment and climate. We will deal with that. Economic growth will help us do so – making life better in spite of warming.

Who Gets to Sit in First Class Airline Seats?

October 25, 2014

This was a question exercising Richard Wolff, a self-styled Marxist economics professor, in a recent talk on Alternative Radio. Its programs monotonously demonize capitalism or U.S. “imperialism.” Wolff’s talk was in the former category, mocking the idea that the market is some perfect mechanism for producing ideal economic outcomes (an idea nobody actually holds).

UnknownHis airline seat conniptions were prompted by being flown First Class to some speaking gig. He liked it – in contrast to flying “steerage,” and as a card-carrying leftist was rankled by the inequality.*

What we have here, Wolff said, is a “distributional problem.” And he held forth at some length with alternative, putatively fairer ways to (re)distribute First Class seats. Anything but just selling them, to people willing to pay.

manna-from-heavenThis “distributional” fixation shows the fundamental mistake of lefty economics. Wolff sees First Class seats – and, by extension, any other good or asset – as just out there, as though created by some sort of spontaneous generation, like manna falling from the sky, the only question being how to divvy them up (with everyone, presumptively, having equal entitlements).**

Wolff recognized that if First Class seats are conferred by one of his egalitarian methods, rather than sold, airlines would make less profit. But, he said, “who cares?”

images-2This too shows the magical thinking of leftist economics. As though profit is somehow ill-gotten, illegitimate, exploitative, and all goods and services ought instead to be forthcoming, somehow, free of profit. Magically.

Now here’s reality. If airlines couldn’t profit, they wouldn’t fly. You wouldn’t have seats, First Class or Sardine class. And all the people who work for airlines wouldn’t have jobs.***images-3

Maybe you think air travel, and all other goods and services, should be provided by government, for public benefit, with no dirty profit. Some countries actually do have government-run airlines. They tend to be mismanaged white elephants that suck money from taxpayers and out of public budgets, subsidizing air travelers at the expense of everyone else.

First Class seats, that Wolff calls a “distributional problem,” are not in fact some good that’s out there waiting for an economics professor to allocate. They would not exist if they weren’t profit centers. And, while it’s true that to fetch high prices UnknownFirst Class seats have to be cushy, the takers are less beneficiaries than they are victims, albeit voluntary victims; sheep being sheared. Because in relation to “steerage,” and the amenities First Class seats entail, they are stupendously overpriced (that nice glass of wine effectively costs you hundreds). It’s really an extortion racket: pay up or suffer the indignity of mixing with the peasants.

In fact airlines get the bulk of their profits from First Class. Without that, regular seats would have to cost much more, probably pricing out most travelers, who wouldn’t fly at all, making the whole enterprise unviable. images-1First Class travelers subsidize the rest, so air travel is affordable to ordinary folks, and planes get filled, airlines can operate and make a little profit, and everyone is better off.

That, Mister Marxist Professor Wolff, is market economics, and it’s a damn good thing.

By the way, when I said “a little profit,” I wasn’t being cute. In fact, the airline industry, over its entire history, has made very little profit at all, in relation to the vast amount of investment. Unknown-4Competition has seen to that. So the public has received the colossal benefit of trillions of miles of transportation, provided essentially at cost. The meager profit garnered by airlines is surely a small price to pay for what we gain.

That again is market economics. A damn good thing.

* Though, as my wife noted, he didn’t refuse the seat, switch with some more deserving traveler, or fly economy and donate the difference to the poor.

** I’ve written about John Rawls’s famous book, A Theory of Justice, similarly treating wealth as just something out there, to be distributed, with nary a word about its creation.

*** On one flight I was treated to an ad wherein the airline’s head extolled all the numerous employees who made the flight possible, many unseen by passengers. I was indeed struck by the vast complexity of the enterprise, and how oblivious most of us are to all the cooperative efforts of the legions of people who make our civilization work.

Rationality, Optimum Crime, Individualism vs. Collectivism, and the Gambler’s Fallacy

September 24, 2014

UnknownThe Economist’s 5/10 issue* had a piece about the recently deceased Gary Becker – an economist and, really, sociologist. His work centered on the idea that “individuals maximize welfare as they conceive it.”

This “homo economicus” concept has taken a beating lately. Books like Dan Ariely’s Predictably Irrational show how our decision-making is skewed by illogical biases; and Daniel Gilbert’s Stumbling on Happiness how we’re bad at foreseeing what will make us happy. imagesThus, some trash free market economics because it supposedly assumes an economic rationality by market participants that doesn’t exist. And nanny-state policies are often premised on people not knowing their own best interests.

However, while of course we aren’t perfectly rational, nor are we perfectly irrational; we do have some idea of our own interests and desires, and the means to advance them. Hence one’s welfare is more likely enhanced by making choices to serve those interests and desires than if there is no choice. Moreover, Gary Becker importantly argued that maximizing welfare doesn’t just mean income. People understand that money isn’t everything. Health counts 10%.

images-3That was a joke. Actually, health counts a lot, and so do many other things (though money does help getting them). Again, people understand all this and live accordingly – even if not with computerlike rationality.

One sphere to which Becker applied this paradigm was crime. He doubted all crime is deviant or sociopathic, reckoning that some at least represents rational weighing of costs and benefits. While moral inhibitions do come into play, for many they’re not absolutes and can be overridden if the balance of payoff versus risk seems sufficiently favorable.

Unknown-1Becker also pondered crime’s costs. Crime, he realized, is akin to what economists call “rent seeking”—contending over the spoils of productive activity rather than creating new wealth. Conversely, rent-seekers trying to get government subsidization, to others’ cost (trade protectionism, for example) can be likened to robbers. The resources invested in all such activities (whether doing them or combating them) would be better spent on wealth producing efforts. And Becker also suggested there’s an optimal amount of crime in society – while it pays to get crime down to a low level, the cost of eradicating the last bit surely exceeds the benefit. (Certainly in the war on drugs, that excess is huge.)

Unknown-2Two pages later The Economist reported on a study suggesting why Westerners have a more individualistic psychology than collectivist-minded Asians. Led by Thomas Talhelm at the University of Virginia, it focused on whether the main crop has historically been wheat or rice. The relevant difference is that rice required about double the labor per calorie. This forced rice farmers to share labor, evolving a deeply rooted collectivist cultural ethos. And sure enough, the study found that, based on attitudinal questionnaire answers, a collectivist mentality in a locale correlates strongly with an agricultural history centered on rice as opposed to wheat.

Unknown-3The next page: gambling. Many believe in “winning streaks;” and also that bad luck is bound to reverse itself so that losses are recouped. The latter is known as the gambler’s fallacy; because statistics would instead predict reverting to the mean – i.e., “normal service resumed.” And in casinos, “normal service” means the house wins more than it loses (how else would they profit?).

Well, comes a study by Juemin Xu and Nigel Harvey finding, counter-intuitively, that winning streaks are real, while losing gamblers do even worse than reversion to the mean. That is, compared to what pure probability would predict, a win is more likely to be followed by a win, and a loss by a loss. How could that possibly be? The answer lies not in laws of probability, but in behavior. A winning better’s next bet has a tendency to be slightly more conservative and a loser’s next bet a little more reckless.

images-2This is why I read The Economist.

* I’m a little behind in posting these things, I have a backlog.

Three Exciting Candidates

September 15, 2014

UnknownI first noticed Neel Kashkari in 2008 as a remarkably young Indian-American, standing beside the Treasury Secretary and being tasked with sorting out the floundering banking system. Having accomplished that, he’s now the Republican candidate for California governor.

Jerry Brown (first elected 40 years ago! – seems like yesterday) has actually been a great governor this time around, resurrecting the state with reforms that few once thought doable. But there’s more to be done, and Kashkari is the one who gets it. In a nation whose economy is hobbled by too much business regulation, California may be the most regulation-happy state of all, virtually building a moat to keep new businesses out, and a catapult to eject existing ones.* Unknown-2No surprise that its unemployment rate is among the nation’s highest.

Kashkari wants to fix this, and also another part of the problem, education, which in California is abysmal and strangled by bureaucracy, which Kashkari pledges to slash. He sensibly favors charter schools too (not that they’re necessarily better than public ones, but because both will likely be better if in competition with each other).

Kashkari also thinks Brown is nuts to budget a gazillion dollars on a high-speed rail boondoggle when California has much more pressing needs, like a water supply crisis.

But, unusual in today’s GOP, Kashkari combines all that economic good sense with classical liberal social views. He’s marched in a gay pride parade. He wants a more humane immigration policy. He wants others to be able to follow him in achieving the American dream.

This is my kind of Republican, embodying the reasons I became one myself, in the Pleistocene, when it was not a party with its head up its rear, but stood for values good for all Americans (and would-be Americans). This kind of Kashkari Republicanism might have a future. A Republicanism of grumpy old white men who don’t believe in evolution will prove themselves wrong by going extinct.

Unknown-1Speaking of grumpy old white men, Kansas Senator Pat Roberts, 78, trying to fend off the Tea Party, turned himself into one of them stoopit Republicans. Kansas hasn’t elected a Democratic senator since 1932, and Roberts’s Democratic opponent has withdrawn, leaving him up against independent candidate Greg Orman, who’s getting much support from Republicans of the non-stoopit variety (yes, there are many of us, even in Kansas). Orman says he voted for Obama in ’08 and Romney in ’12, and, much like Kashkari, seems to make good choices in selecting from both the right and left sides of the policy menu.

Greg Orman,. cartooned in The Economist

Greg Orman, cartooned in The Economist

But Orman’s real attraction is his assertive critique of the partisan enmity that so afflicts today’s U.S. politics, with each side demonizing the other as not just wrong but evil. We need to can this, and boost up that “radical middle.”

Next, Brazil. The line goes, it’s the country of the future and always will be. What keeps Brazil from being an economic dynamo is big government. Yes, even worse than America’s; Brazil’s economy is so strangled with regulation and government meddling that businesses just throw up their hands in despair.

The current caretaker of this stultifying system is President Dilma Rousseff, a standard-issue unimaginative old lefty (sees nothing amiss in Venezuela, etc.), up for re-election. Many Brazilians are fed up and realize something must change. But, frustratingly, the best candidate, offering real change, Eduardo Campos, with a program of unshackling the economy, was running a distant third. Then in August he died in a plane crash.

Marina Silva, an ascetic black woman, risen from dire poverty (taught herself to read at 16!); former environment minister; had run third in the previous election. But trying again, she was blocked from the ballot on a technicality. So she joined Campos as his vice-presidential running mate.

Marina Silva

Marina Silva

And with Campos’s death, Silva has replaced him as their party’s presidential candidate. This seems to have electrified Brazilians. Partly it’s a personality thing – in a country plagued by repeated scandals, Silva’s backstory and perceived unimpeachable integrity are highly attractive. But she also appears to have bought into Campos’s agenda of economic liberalization. And she now looks likely to win the election. It would be a bracing breath of fresh air for Brazil.

* I’ve written about this here, and here.

Net Neutrality, and Regulation by the Unicorn State

September 3, 2014

images-4Net Neutrality” is a hot issue. It refers to equal service quality for all web-based traffic, against a fear that Internet providers (like Verizon) will allow (or effectively force) some to pay more for faster data delivery, making others second class netizens. So some advocate designating the Internet a “public utility” subject to FCC regulation to enforce net neutrality. This plea is highly seductive.

UnknownSimilar regulation by the Interstate Commerce Commission was imposed on railroads in 1887. No; “imposed” is the wrong word; actually the railroads wanted this, seeing ICC regulation as a tool to protect their market power against upstart competition.

I spent my professional career as a public utility regulator. One of my first cases targeted a small moving company breaking the rules. Its transgression? Prices too low. Were we protecting the public? Certainly not; we were protecting the established moving companies. This is the face of regulation in the real world.

Columnist L. Gordon Crovitz in the 8/18 Wall Street Journal notes that the ICC enforced a kind of “net neutrality” on the railroads: prohibiting “discriminatory” volume discounts or other market-oriented pricing schemes.* Result: a stagnating U.S. rail industry. The ICC was finally abolished in 1995, but the lingering effects of this deadening regulation leave American train service shabby compared to spiffier European or Far East rail systems.

images-1Crovitz also discusses the heavily regulated taxi industry. He quotes the New York City regulator’s website explaining that before it stepped in, the taxi business was a free-for-all with numerous competitors using “underhanded tactics” – like “drastically lowering fares to get more business.” The horror! The horror!

But today, across the globe, the taxi business is being up-ended by innovators like Uber and Lyft giving smartphone-using consumers service better tailored to their needs. And a battle royale is underway between these feisty upstarts and the old regulators (backed by the stodgy old taxi firms) struggling to hobble them. A similar war pits the old hotel industry against newcomers like Airbnb disrupting their business model by providing alternatives more attractive to consumers. This is what economist Joseph Schumpeter famously called “creative destruction” – it’s how an economy progresses – a great virtue of a truly free market.

imagesDo we really want to give the FCC regulatory power to squelch this by enforcing its ideas of service and pricing for the Internet? Or let creativity rip, with businesses free to innovate on services and pricing tailored to a swiftly changing technological landscape, responding to market forces and consumer preferences and needs?

Business-hating lefties think government must keep them on a tight regulatory leash lest abuses occur. And absent regulation they would occur. But I believe the costs and harms to consumers would be simply overwhelmed – overwhelmed – by the benefits in better products and services, lower prices, and greater overall societal wealth, if all regulation were abolished.

Think I’m nuts? Then look at China, where that’s exactly what happened. Since 1978, China’s private sector has been virtually free of regulation. And, yes, abuses have occurred. But meantime average per-capita income has grown 3000% – thirtyfold. I repeat: thirtyfold. (99-percenters take note.)

I wrote recently about an abuse by government, the unjust prosecution of innocent Muslim-Americans on phony “terrorism” charges. I marched in protest with local liberals. But they, I said, are like battered spouses who still profess undying love for their batterers – no matter how much it tramples their ideals, still liberals love government. images-2The same Wall Street Journal issue elsewhere quotes economist Michael Munger: “My friends generally dislike politicians, find democracy messy and distasteful, and object to the brutality and coercive excesses of foreign wars, the war on drugs, and the spying of the NSA. But their solution is, without exception, to expand the power of ‘the State.’ That seems literally insane to me . . . Then I realized they want a kind of unicorn, a State that has the properties, motivations, knowledge and abilities that they can imagine for it. [They] imagine a State different from the one possible in the physical world.”

I just got a call from a car repair business asking if I was “completely satisfied” with their service. I’ve never received such a call from a government agency.

* America’s first federal conviction of a corporation, in 1909, was for a railroad’s crime of cutting prices.

Why Both Left and Right Are Wrong

June 26, 2014

The Left’s calling itself “progressive,” while in some ways annoying, isn’t entirely wrong. A key element is caring about other people, including those outside the traditional ambit of human concern (our own families and tribes), and even sometimes including non-people. UnknownThis is indeed progressive; this widening of human concern, working toward a better, fairer world, with lessening conflict and violence, compared to the past, reflects very real progress. It’s ironic that another typical attribute of the “progressive” temperament is denial of such progress.

It’s because being critical and cynical flatters the Left’s intellectual vanity. Indignation is a satisfying emotion. To be an optimist, on the other hand, to believe well of others, and that we’re making progress, seems just too sappy. It isn’t hip.

The Left views market capitalism with hostility, as though it’s some kind of perverted system artificially imposed by a conspiracy of a few to enrich themselves at the expense of the rest; which could be changed if we wanted to. Not a single element of that catechism reflects reality. A market economy is merely the natural, indeed inevitable, way that any bunch of humans interacts. Yes, with friends and family, we do a lot of sharing. images-1But otherwise if you have something of value – be it an object, or your labor – you won’t give it without getting something in return, indeed the most you can get (bar fraud or cheating). That is in fact merely justice (a word the Left loves). Striving to do well for oneself isn’t wrong; mostly people do that by creating value for others who’ll pay them for it. And this is how we’ve made a better, richer world — by people putting in efforts in order to improve their own situation. Is this the “greed” we hear so much about?

And the Left’s conception of justice tends to omit what ought to be its principal component: deservingness. While they do insist no one deserves to be poor, they meantime seem to deny that anyone deserves to be rich. At least they don’t see any entitlement to keep riches one has earned.

The right is less confused about the economics, but frankly tends to be grinch-hearted. images-2Its conception of justice is flawed in mirror-image of the Left’s – believing that when people don’t succeed it’s because they didn’t deserve to. That the less successful are basically slackers and moochers (this is why Romney’s infamous “47%” comment was so resonant). The right doesn’t sufficiently acknowledge how much luck determines one’s situation. And if the Left is overly obsessed with inequality, the right is too complacent about it.

Even cave people were humane enough to take care of the sick, infirm, or injured. Today’s right no longer seems to regard this as a fundamental societal obligation. Part of the problem is that the whole issue of helping the needy is crapped up by the fact that the great bulk of “help” goes to people who aren’t needy at all (look at the farm program, for example, most of whose subsidies go to millionaires). Unknown-1This blatant milking of the government teat tends to taint all such spending.

But we are a very rich society that can easily afford to take care of those less fortunate – if only we focused on just that.

Piketty Poo

May 20, 2014

                  For to everyone who has, will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away. — Matthew 25:29

Piketty

Piketty

French economist Thomas Piketty’s Capital in the 21st Century is the latest book sensation. Confession: I haven’t actually read it. But I’ve read plenty about it (both pro and con) — hardly avoidable lately. “Progressives” are gaga over it*, a confirmation bias feeding frenzy. People love having their pre-existing beliefs flattered. Piketty strokes the left’s inequality obsession: he predicts the gap worsening, saying returns on capital tend to outpace economic growth, so wealth tends to concentrate; and to combat this he proposes a worldwide wealth tax and punitively high (80%) income tax rates for the rich.

images-1Piketty’s predictions of slow growth and consequently increasing inequality have been challenged for faulty economic assumptions and analysis. The Left imagines a coming dystopia where a corporate 1% hogs all the wealth and the 99% have nothing. The absurdity is: who would buy all the products and services that make the 1% rich?

Meantime, Piketty’s fans also strangely overlook a glaring political correctness no-no. The book is Western-centric, focusing on the “First World” and pretty much ignoring the rest. But this is no mere cosmetic flaw — it goes to the heart of Piketty’s presentation. Wealth and equality are global matters, and if you only look at part of the globe, you can’t get it right. The big story is that while inequality may indeed be rising in Pikettyland, it’s not rising, in fact it’s falling, globally.

That’s unarguable fact, because for some time, Western economic growth rates have been materially exceeded in the poorer countries, notably India and especially China (together comprising over a third of world population). That means the global gap between rich and poor must be narrowing (even if within countries it’s not).

Moreover (fatal to Piketty), trends in rich nations and poor ones are not unrelated. As we know well in America, a big reason for rising inequality is the disappearance of high-paying factory jobs that used to raise up the less affluent. images-2Many of those jobs have gone to poorer countries — raising up their lower classes. In other words, global inequality is shrinking because wealth is shifting from richer countries to poorer ones; though it’s flowing from the less wealthy people in the rich countries which thus become more internally unequal. So the U.S. lower and middle classes are being hurt more by poor foreigners than rich Americans.

Piketty calls rising inequality “terrifying.” It would be, if the poor were getting poorer; yet they’re not. While the rich are getting richer, so are the world’s poor, albeit not as fast, but with hundreds of millions rising out of poverty in recent decades. Even in advanced countries, the poor are not falling, what with all the social safety nets. (Entitlements to Social Security, Medicare, and other government benefits are a form of wealth Piketty seems to ignore.) And poverty ain’t what it used to be: the living standard of Americans now classed as “poor” would have been considered solidly middle class a few decades ago (and would be considered rich in much of the world today).

But inequality is really the wrong concern, because the problem of the poor is not that others are rich. The problem of the poor is instead their poverty, which cutting down the rich won’t solve. images-2The left’s big error is thinking the rich “extract” their wealth from the rest; that there’s a lump of wealth to be divided up. Not so; wealth is created by productive effort. Steve Jobs got rich because people gladly paid more for his products than they cost to make. That added value made everyone richer. Had Jobs and his products never existed, his wealth would not have been spread among everyone else; it would not have existed either!

True, if you simply grab money from the rich and hand it to the poor, they’d be less poor and unequal — for the moment. But it won’t solve why they’re poor in the first place. What’s needed is not redistribution of wealth, but of the ability to earn wealth. That would be good for everyone, and without taking anything away from anyone; but it’s a much tougher problem. (Piketty does acknowledge that expanding education must be part of the answer.)

UnknownYet the left’s inequality obsession is not truly a social conscience thing. It’s not so much compassion for the poor as envy and hatred for the rich. It’s wealth and the power it brings that they find so intolerable (because they lack it), and are so rabid to tear down. Thus their swoon for Piketty’s global wealth tax proposal (how innovative). How to use the tax revenues, to raise incomes at the bottom, is barely a concern; it’s mainly to make the rich less rich.** And of course Piketty and his fans ignore how their vendetta against the rich, if enacted, would gum up the economic growth machine. Now that would really be terrifying — for rich and poor alike.

But in a commentary on Piketty, in Salon, Jesse Myerson says the solution to inequality is really simple. Instead of letting the returns on capital assets flow to their owners, we can just have the returns flow “democratically” to, well, everybody! imagesAs Red Green would say, “It’s just that easy!” Why didn’t Piketty think of that?

If you don’t find Myerson enlightening, you might try more of Robinson: here, and here.

* Visiting SF’s famed City Lights bookstore last week, the guy ahead of me was buying their last copy.

**This was demonstrated by the string of hostile comments to a version of this review on Amazon. It was all “the rich this” and “the rich that” and why they should be made less rich, with nary a word about making anyone less poor. Will there be similar comments here?

Cheryl Strayed: Wild

April 16, 2014

imagesThis best-selling memoir relates Cheryl Strayed’s 1995 1100-mile Pacific Crest Trail hike, from lower California through Oregon. I’d urged it on one of my book groups, but an outdoorsy member objected vehemently: “You don’t go on such a hike as unprepared as she was. It’s just stupid.”

I finally persuaded her that the stupidity was actually what the book was partly about, so we read it.Unknown-2

Strayed, then 26, was kind of messed up, from her mother’s death, her recent divorce, and a heavy heroin bout. She embarked on this extreme hike – without much relevant experience – hoping to find herself. Or something.

Well, she wasn’t totally unprepared; in fact, did quite a lot of planning and prep work, including acquiring a ton of gear, and arranging a series of resupply boxes to be mailed to her along the route. But for all the actually meticulous planning, she did stupidly omit something obvious: a trial run.

“Ton of gear” was a slight overstatement, but only slight. The book describes her organizing it in her motel room the day before starting out, cataloguing all the items. While reading, I’m thinking, “how much does all this weigh?”

Unknown-1So she gets it all packed into (and dangling from) her huge backpack, which is sitting on the floor, and only now, for the first time, tries to lift it. Guess what? Can’t budge it an inch.

Well, somehow Strayed did manage to maneuver what she dubbed “Monster” onto her back, and even to stand up, and walk with it. Eventually a more experienced hiker she meets on the trail persuades her to offload some of her excess burden.

The other obvious (even to me) thing you’d want to test out beforehand is how the boots fit. Fairly critical, you’d think. They seemed to fit fine, in the store. On the trail, not so much.

In fact, the book startlingly opens with her accidentally losing a boot over a cliff edge. One boot being useless, she then throws the other over too.images-1

But later we learn this wasn’t as disastrous as it might seem. The ill-fitting boots were from a company called REI, and after suffering in them for hundreds of miles, wrecking her feet, another hiker tells Strayed to call REI and they’ll send her a larger pair, free. She did, and they did. So after losing the first pair, she managed to hobble on makeshift duct-taped sandals to the next settlement to collect the replacement boots.

Unsurprisingly, Strayed has some glowing words for REI and its customer service. This points up something I’ve stressed often. With all the “corporate-this, corporate-that” invective, many people view businesses in general as impersonal malefactors caring only for profits. And admittedly some are. But this ignores a basic aspect of the human character, and businesses are human enterprises. Most people don’t want to see themselves as evil but, rather, as doing good.

Thus REI’s kind of customer service is not in fact uncommon. (I’ve mentioned my terrific experience with 48 Hour Books.) Many businesses realize it’s actually good for the bottom line. In the long run, it’s those behaving like REI and 48 Hour that succeed and prosper. And, if you think about it, the great majority of your interactions with businesses are altogether positive.

But competition is a crucial factor here. I’ve also written of my less-than-terrific experience with enterprises that don’t really have to compete for my dollar (eBay and the Postal Service). That’s why I’m a believer in free market economics. Any government intervention should aim at greater competition, but too often actually undermines it (by aiding some businesses to the detriment of others).

Unknown-3Another company Strayed lauds is Snapple, whose lemonade was a sublime treat at civilization stops after long hiking stretches. Likewise she makes the reader almost salivate at how luscious a cheeseburger tasted on such occasions. images-2This points up another of my pet themes: how we take civilization and its benefits for granted. Cheryl Strayed, after a couple of weeks roughing it, most certainly did not. Coming out of the woods, a Snapple lemonade and a cheeseburger were for her a Very Big Deal.

So, did the hike straighten out her life? As we used to say in grade school book reports, read Wild and find out.

Finally, you might ask, is there any sex in it? There is. Only one episode, really. But hot enough that it made me put the book down and go looking for my wife.

Do Women Earn Less Than Men?

April 12, 2014

President Obama’s been loudly hitting the supposed pay gap between women and men. All too typically, this is a phony issue distracting from our true economic problems he should be tackling.

Unknown-1Obama dismisses pay gap deniers by saying, “It’s just math.” I’m reminded of the old line, “figures don’t lie, but liars can figure.”

True, if you average all American women, and all men, women earn less. But what’s the significance of this? Not much – because it ignores differences in jobs, industries, career paths, etc. The fact is that women and men don’t have comparable working lives. Women – for a host of reasons (many having to do with differences in psychology and temperament; male and female brains don’t work identically; not to mention divergent parenting roles) – tend to have different talents and proclivities, to want different things, and to choose different careers and jobs than men. They tend to interrupt their career paths more often. And to be less aggressive in seeking advancement.

Such factors explain why, on average, women earn less. But – studies have found that if you control for these factors – that is, you analyze women and men following comparable career paths in comparable jobs – the pay gap is practically zero.

The President might reply that, well, women can’t necessarily get the jobs men get. But that’s wrong for the same reason that pay for comparable jobs really is virtually equal. imagesBecause in today’s highly competitive globalized economy, businesses cannot afford to discriminate against women, instead needing to get the best talent, irrespective of gender. In fact, if it really were true that firms could hire women with equal qualifications for less pay than men – why would they hire any men?

Undoubtedly, at one time women did face severe career limitations. images-3But that time is long past, and so this latest presidential crusade is disgracefully bogus; a cynical political ploy to posture as the champion of women (against a purported Republican “war on women”) and to perpetuate a gender gap that really does exist – in voting.

But it actually sends women a bad message, falsely warning that they face workplace discrimination. How many young women will thereby be discouraged in their career choices? Wrongly imagining they’d be blocked in their true ambitions, and choosing lesser ones instead? And I don’t think the politics of stoking resentments is good for the country.

Nor are the remedies Obama seeks for this largely nonexistent bugaboo of discrimination. All would reduce flexibility while adding bureaucratic and paperwork burdens for businesses, and pretexts for proliferating litigation, making it harder and costlier for firms to function. Yet again we see a president who constantly whines about jobs and pay yet constantly does things that handicap the businesses that provide jobs and their ability to pay workers.

images-4Meantime he ignores what is surely our biggest economic problem: ever more retirees soaking up pensions and health care, with an ever shrinking percentage of working people taxed to pay for it. That’s our real pay gap, and borrowing cannot bridge it forever. It will end in an equal-opportunity catastrophe, for all Americans – working and nonworking – and women as well as men.

Our Dubai Trip: Shopping Mecca

March 29, 2014

Unknown-1Dubai’s main attraction is shopping. Maybe not an obvious vacation choice for us non-shoppers.

Luckily, there was a big international art fair, with worldwide dealers exhibiting cool modern work. Almost as cool was ogling the other attendees.

Dubai is not a place of historicity. IMG_3215It has the feel of one that arose from the desert yesterday, which is pretty much true. Patches of desert remain, among the skyscrapers. Dubai is also one of the most internationalized of countries – indeed, the natives are a small minority of the population, which is not even mostly Middle Eastern, a great many inhabitants being from India, Pakistan, the Philippines, and elsewhere.

But back to shopping. The Dubai Mall is the world’s largest, with 1200 stores (and it sprouts the world’s tallest building, the Burj Khalifa). imagesRight inside the entrance we were greeted by a dinosaur, and her handler. The dino was a full size fossil skeleton of an 80 footer. The handler was an attractive young Filipina whose job was to explain about the dinosaur to passing visitors like us. UnknownShe was well schooled in all things dinosaurian, properly scientific; but at the end sweetly confided that she had trouble reconciling that science stuff with her “beliefs.”

We spent an hour sauntering through The Mall of the Emirates, though without setting foot inside a single store. The anchor attraction there is the indoor skiing facility – yes, in fact, an entire enclosed snowy winterland, with the temperature kept below freezing. Visitors can rent cold weather gear – padded jackets, woolen caps, mittens, boots. Sure amused us, coming to Dubai to escape such weather in Albany, NY. In Dubai, they pay to experience it.

Dubai is a wealthy country and the glitz of its malls makes ours here seem almost shabby in comparison. This is not a place for Abdul Sixpack to shop. images-1As my wife remarked, “You’d think the world runs on shoes and handbags.” Designer shoes and bags at that. Are there enough wealthy people to keep so many upscale stores in business? Apparently. Wearing a full burqa is not incompatible with carrying the most chic designer handbag. Not to mention a bag of purchases from Victoria’s Secret.

Sinful you might call this conspicuous consumption, no doubt bringing in the word “inequality” and drawing invidious contrast between the pampered, privileged folks buying Hermès bags and Prada shoes, and the unwashed masses who can’t feed their children. As if (many imagine) children go hungry because others have wealth they spend on luxuries.

Also in Dubai (photo by Elizabeth Robinson)

Also in Dubai (photo by Elizabeth Robinson)

But that’s not how the world works. In fact such spending by the rich supports a slew of jobs that make the poor less poor. Sneer if you like at the trophy wives buying Prada, but be careful what you wish for – without that spending, the poor would be a lot worse off. And don’t imagine that if the rich had less in the first place, others would have more. The world doesn’t work that way either.

Anyway, I wasn’t put off by watching Dubaians thronging to the malls to shop till they drop. I love it. Better this than grim-faced austerity (and poverty). images-2And I couldn’t help thinking, strolling the mall while the news was full of Crimea, that this is a far better model for how life should be.

Gucci, not guns. Make money, not war.


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