Archive for the Category Misc.

 
 

Matt Bruenig trashes his fellow progressives

Sometimes it’s best to just cut your losses after making a silly mistake.  Matt Bruenig has decided to double down on some deeply flawed arguments, which I criticized in an earlier post.  He begins by showing that he knows nothing about my blog, and ends by demonstrating that he knows nothing about my views on libertarianism. But let’s focus on the middle part:

The primary thrust of Sumner’s post is to say that, because I do not have a libertarian-wired brain (read: smart brain), it doesn’t occur to me that poverty-reducing transfer programs can have dynamic effects that also affect the market poverty rate. Although Sumner’s psychoanalysis is creative, it sadly misses the mark. Here I am in 2013, with my progressive-wired brain, somehow getting my head around the idea of dynamic effects that heretofore only libertarians have understood:

So I tried to give him the benefit of the doubt, by assuming that he merely overlooked dynamic effects problem, just as one of my professors at Wisconsin did when I pointed out the mistake back in 1974.  But Bruenig now says he knew about the problem, and still made the deeply silly claim that income minus transfers is a good proxy for what market incomes would look like in an economy without welfare.  (BTW, he later quotes me suggesting that a libertarian brain did not mean smart brain, so his aside here is puzzling, unless you assume he doesn’t care about accuracy.)

So if welfare didn’t exist the millions of poor people who live off of welfare would do what?  One possibility is that the poor would do what they actually did before the welfare state was created, they’d work much harder than the rich.  Don’t the progressives always tell us that in the bad old days the rich aristocrats did little work, and the poor worked extremely long hours, because they had to do so to survive?  In Bruenig’s view the people who currently have no income, and live off of welfare, would continue to have no income if welfare was cut off.  And how exactly would they survive?  And why would they behave differently from the way the American poor actually did behave before the welfare state?  No answer is provided.  And don’t progressives always tell us that in the bad old days workers had no Social Security, and usually worked until they dropped dead?  Is that argument also no longer valid?

Using market poverty (sometimes called pre-tax, pre-transfer poverty) as a comparator for disposable income poverty (sometimes called post-tax, post-transfer poverty) is extremely common in comparative welfare state literature, which I am sure Sumner has no familiarity with. It’s not used because the economists and economic sociologists who operate in that field have never realized that dynamic effects are possible. It’s used because it’s the best measure available to capture the effect of transfers on poverty and cross-country comparisons do not reveal high-transfer countries to have higher market income poverty rates than low-transfer countries (even though their disposable income poverty rates differ dramatically).

So now he tries to smear the reputation of other progressive economists, by claiming that they are also in denial about the importance of dynamic effects.  As far as poverty rates among high transfer countries, does anyone seriously believe the Nordic countries are a good comparison for the US, or even for Portugal?  Algan and Cahuc have showed that the welfare state is endogenous, and that it is more generous in places where dynamic effects are weaker.  So Bruenig’s cross sectional argument proves nothing.  Time series effects and common sense are enough to show how absurd it is to assume that the welfare does not significantly affect reported market income.  (Another problem with Bruenig’s claim is that people on welfare may have unreported income.)

The War on Poverty, as you probably know, was a massive smashing success. From 1967 to 2012, the disposable income poverty rate fell from 26% to 16%, a decline of 38.5%. During that same period, the market income poverty rate increased from 27% to 29%. Over the course of those years, transfer programs reduced poverty by a total of 1.2 billion people-years.

You’ve got to love the precision of the 1.2 billion people-years, and the optimism of his post title “Cutting Poverty is Super Easy.”

But nonetheless doubts creep in.  After all, 45 years is a long time.  What happened to the well-being of the poor in the 45 years before the highly successful “War on Poverty?”  Obviously the data Bruenig cites don’t have much persuasive power unless the poor made much less progress before the War on Poverty.  After all, if the War on Poverty were a “smashing success,” then you’d expect the lives of the poor to improve more rapidly than the general improvement you see in any growing economy.  But here’s my problem.  For years the progressives have been bombarding me with exactly the opposite argument, that poverty fell very rapidly from 1922 to 1967, but that the gains of lower income people slowed sharply after the 1960s.  So which is it?  How do we know that poverty didn’t fall just as rapidly before the war on poverty, say from 36% to 26%?  No data is given for the previous 45 years.  As far as “market income poverty” rising after 1967, that’s exactly what the conservatives would have predicted in 1967, and it’s exactly the effect the left would have denied in 1967.  The left would have predicted that civil rights gains and improvement in access to education in the 1960s would increase the market incomes of the poor. But now evidence of bad “dynamic effects” is twisted into evidence of the success of the War on Poverty!  The view seems to be “Look at the huge increase of in the number of the poor who don’t work at all—and imagine how much worse off they’d be without all that welfare!!”  And we are supposed to take this argument seriously? You have to give progressives some points for creativity.  They can turn data that looks like a sow’s ear into a silk purse.

At the end he tries to bait me into a debate over philosophy with some outlandish comments that he thinks will be provocative:

Second, libertarian brains desperately crave the feeling that they are super-logical and super-rational and that other brains don’t get it. Which is funny because libertarian political philosophy is the most logically incoherent political philosophy, perhaps ever. Lastly, libertarian brains generally (Nozick excepted) fail to realize that property is theft, which it is.

It’s fun to be “misunderestimated” by a deep philosopher like Bruenig. Especially by someone who thinks words “really mean” something, rather than that the meaning is merely socially constructed.  So I’ll take the bait.  I agree that property is theft.  Or at least I’m willing to grant permission to Bruenig to define words however he wishes.  So what next? Property is theft, where to we go from there?  That’s easy, we start thinking about what sort of theft to allow, and what sort to make illegal.  Let’s ban theft that reduces aggregate utility, and legalize theft that raises aggregate utility.  After all, words are just words, what matters is meaning.  So here’s my suggestion:

1.  We ban bad theft like burglary, slavery, and intellectual property rights for business practices.

2.  We legalize good theft like the privatization of Chinese and Cambodian communes, which prevented millions from starving to death.  Or stealing from the super rich with a progressive consumption tax and giving the money to low wage workers.

I wonder how Bruenig feels about theft?  Does he oppose all theft, or does he agree with utilitarian libertarians like me?

PS. I forgot to mention that he completely mischaracterizes my views on wealth inequality.  For instance here:

One of the more glaring versions of this creep is his armchair commenting on wealth inequality. Again and again, he has called wealth inequality data “nonsense on stilts” because it ignores the fact that wealth inequality is just a life-cycle phenomenon. This is straightforwardly false, but to know it’s false, you have to actually be familiar with the wealth data and ambitious enough to run some age-controlled wealth inequality calculations. Sumner is neither of those things.

Bruenig mischaracterizes my views in the post he links to in multiple ways.  I discuss the life cycle problem in the context of income, not wealth, and clearly explain that it’s not the only factor involved in inequality, which everyone agrees is true.  So what precisely is he objecting to?

Krugman reviews Madrick

Here are the first two paragraphs of Paul Krugman’s review of a new book by NYT writer Jeff Madrick:

The economics profession has not, to say the least, covered itself in glory these past six years. Hardly any economists predicted the 2008 crisis — and the handful who did tended to be people who also predicted crises that didn’t happen. More significant, many and arguably most economists were claiming, right up to the moment of collapse, that nothing like this could even happen.

Furthermore, once crisis struck economists seemed unable to agree on a response. They’d had 75 years since the Great Depression to figure out what to do if something similar happened again, but the profession was utterly divided when the moment of truth arrived.

Well said.  That’s why Krugman earns the big bucks and I merely earn the upper middle class bucks.  I actually don’t think we should be blamed for not predicting the crisis (and I think Krugman would agree.)  And while I never claimed it was impossible, I plead guilty to believing it was very unlikely.  Krugman was ahead of me on that point.  On the second paragraph I think he’s actually being too kind.  It’s not just that economists are “utterly divided,” even where they agree they are often wrong.  Thus I’m pretty sure that Joe Stiglitz and John Cochrane both believed Fed policy was expansionary in late 2008, and both were wrong, as were almost all other economists.  I am pretty sure they both believe the Fed was out of ammunition by the end of 2008, and if so they were wrong on that point as well.  So it’s not just that economists were divided on many issues, even where they agreed they were often wrong.  Krugman continues:

In “Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World,” Jeff Madrick — a contributing editor at Harper’s Magazine and a frequent writer on matters economic — argues that the professional failures since 2008 didn’t come out of the blue but were rooted in decades of intellectual malfeasance.

As a practicing and, I’d claim, mainstream economist myself, I’m tempted to quibble. How “mainstream,” really, are the bad ideas he attacks? How much of the problem is bad economic ideas per se as opposed to economists who have proved all too ready to drop their own models — in effect, reject their own ideas — when their models conflict with their political leanings? And was it the ideas of economists or the prejudices of politicians that led to so much bad policy?

I haven’t read Madrick’s book, but as Krugman describes his views I’m pretty sure I would disagree with Madrick on virtually everything.  But I am puzzled by the mysterious accusation in the next paragraph.  Who might Krugman be referring to?  Are there any famous economists who had conventional neoliberal policy views in the 1990s, but then suddenly seemed to adopt policy views that were very different in the 2000s?  Is there someone who developed a model of the liquidity trap for Japan, and argued (in the 1990s) that it showed that Japan should rely on monetary stimulus, not fiscal stimulus, who then switched to supporting fiscal stimulus in the 2000s—using the same model?  Someone who moved sharply to the left, from being a moderate neoliberal who favored free trade, to one that now expresses doubt?  Someone who used to claim unemployment compensation reduces employment, and no longer does?  Can anyone help me out?

HT:  Cyril Morong

Are Americans Maoists?

I’ve done many posts explaining why public opinion polls of Americans on numerical questions are utterly meaningless.  The public is horrible at math, and their answers tell us almost nothing about what they actually believe.  One bogus poll that keeps getting touted by liberals claims to show that the American public has views on income distribution that are far to the left of those of Mao, perhaps even to the left of Pol Pot.  I don’t really know why liberals want to tout these poll results, as if this sort of policy regime were actually implemented we would all starve to death, just as many tens of millions starved in Cambodia and China under much less extreme attempts to impose equality.

Jordan Weissmann is the latest liberal to be sucked in by this nonsense:

Subjects estimated that the top 20 percent of U.S. households owned about 59 percent of the country’s net worth, whereas in the real world, they owned about 84 percent of it. In their own private utopia, subjects said that the top quintile would claim just 32 percent of the wealth. In fact, the ideal looked strikingly like Sweden.

If every single America had EXACTLY the same wealth at each age (i.e. all 20 year olds had identical wealth, as did all 55 year olds) then wealth inequality would still exceed the figures that Americans supposedly prefer, purely due to life cycle effects.

To give you some idea of just how ridiculous this claim really is, consider the last line of the quotation.  The comparison with Sweden made me pull my hair out. Tyler Cowen recently quoted from a study of wealth inequality in Sweden:

What some may not know is that wealth-inequality is relatively high in Sweden. The top one percent own around 35% of wealth in the United States. In Sweden, because of extensive tax evasion, the number is harder to calculate. When including estimates of wealth held outside of Sweden, Roine and Waldenström estimate that the top one percent richest Swedes own 25-40% of total wealth, not far from American inequality levels, and increasing more rapidly.

At the same time, the intergenerational mobility of top wealth is chokingly low. A recent study found that a astonishing 80-90% of inequality of top wealth is transmitted to the next generation in Sweden!

So not only is it not true that the top 20% in Sweden own about 32% of the wealth, it seems the actual figures are closer to the top 1% owning 32% of the wealth, similar to the US.  So even if we switched to Swedish levels of wealth inequality, we’d make almost no progress toward the supposed ideal of Americans. Indeed given the large rural/urban differences under Mao, I’m confident that even Maoist policies would not be enough for the average American (if you believe these polls). We’d need to go all in, and like Pol Pot confiscate all eyeglasses (which help nerdy students to get smarter and make more money than jocks), and then push everyone out to the countryside.

Please, no more polls on what Americans “really think” about complex issues that require numerical answers.

Now that Matt Yglesias has left it’s becoming increasing frustrating to read Slate.  It is starting to remind me of a publication written by college students.  But that’s probably just because I’m becoming a grouchy old reactionary, and recently everyone seems young to me.

Sorcerer

Even though I’m a huge movie buff, I rarely make film recommendations.  That’s mostly because everyone has different taste, and I like lots of boring artsy films that many of my readers would hate.  But Sorcerer is an exception.  Friday night I joined a sellout crowd at Harvard, and then afterwards we were entertained for an hour by the director (William Friedkin), who had lots of great stories.  The film has been beautifully restored, and Friedkin insists the visuals and sound are much better than even the original 1977 release (which I saw twice in 1977, something I rarely do.)  Try to see it on the big screen.

The film was one of a string of intense macho films from the late 1970s, including Taxi Driver (1976), The Deer Hunter (1978), Apocalypse Now (1979), and to a lesser extent The Shining (1980).  Somehow it got lost in the shuffle, despite being one of the great films of the 1970s, which was a great decade for Hollywood.  Friedkin is better known for The French Connection, The Exorcist, To Live and Die in LA, etc., but he said this is the one film he wants to be remembered for, and I agree that it’s his best. In the discussion afterwards I noticed that many of the women in the audience were blown away by the film, so it’s not just something that would appeal to men.

It was released the same year as Star Wars, which might have hurt its box office.  I loved Star Wars, but in retrospect it led Hollywood down the road to predicable corporate “spandex and CGI” superhero films, a result that both Friedkin and I lament.  I miss seeing great action films that looked real. Of course if my dad were alive he’d be complaining they don’t make films like The Treasure of the Sierra Madre, The Searchers, and The Man Who Shot Liberty Valance anymore. It’s all relative.  By the way, Friedkin says Sorcerer was influenced by that great John Huston film, as well as Wages of Fear, the earlier French take on the same book that inspired Sorcerer (and also a great film, maybe even better.)

Friedkin said he didn’t attend college and barely finished high school, although he’s obviously well read and pretty intelligent.  Yet his films also remind me a bit of James Cameron.  The dialog is certainly far superior to Cameron films (a low bar), yet as with Cameron the overall impact is more visceral than intellectual.  He’s superb at the technical side of filmmaking.

Friedkin had lots of funny stories, unfortunately some I can’t repeat here. Like me, he seems obsessed with the “anxiety of influence” concept.  He talks about how it’s all in Citizen Kane.  He’s said he’s glad he didn’t see the works of Buster Keaton until after the French Connection, as he would have been embarrassed to try a car chase scene after seeing Keaton’s masterful chases.  On the other hand, how can any director attempt a “shaky rope bridge in the jungle” scene after Sorcerer?  And I’m almost certain that Sorcerer influenced Apocalypse Now, and some of the Tarantino films.

Friedkin also said the 1970s films couldn’t be made today, as there are now so many “audience tests” and other forms of corporate interference that originality is increasingly difficult.  Maybe that’s why the spectacular action films of today are often less original than the small films with low budgets. He said that back in the 70s the studios let directors pretty much do as they wanted.

Some other bloggers recently debated the merits of calling it quits at age 75.  I’m tempted to quote the old saying; “Give me the first 6 years of a child’s life and you can have the rest.”  Beyond my family, it’s things like next month’s career retrospective of Hou Hsiao-hsien at Harvard that would be the main thing stopping me from pulling the plug at 75, in the unlikely event I get that far.

Guaranteed Annual Income: Let’s talk numbers

I love simple solutions; magic bullets that make problems go away.  I really do.  Complex government programs make us poorer and less free.  So I really want to believe in the Guaranteed Annual Income (GAI) idea, which has been mentioned by a lot of commenters (and Milton Friedman.)  But I just don’t see how the numbers add up.  (For similar reasons, I’d like a single tax, but think that given our level of government spending we need a progressive payroll, property, carbon and VAT tax system.)

Here’s what I don’t get.  Imagine a single mom living in the South Bronx with two kids.  A typical poor American family.  How much do we give them?  If we give every single person the same amount, there will be too much incentive to produce large families.  Think about the amount an individual in the Bronx would need to rise above poverty, and them multiply times 5. It seems like a much better deal than for one person, especially if you assume the marginal cost of raising an extra kid is less than the cost of a single adult.

That can be fixed by giving less for kids than adults.  But how much would the family need to not be considered poor by the standard of NYC progressives?  Here I have to plead ignorance, I don’t really know.  But let’s say it’s $27,000 a year, perhaps $15,000 for the mom and $6000 for each kid.  (I assume the government still has free public education and Medicaid, all other welfare goes away.)

Here’s another problem—is this amount the same in every part of the country?   I suppose it could be adjusted to make it proportional to the cost of living in each city.  Let’s assume you were somehow able to get 60 votes in the Senate for a massive welfare scheme that favored blue areas with a high cost of living.  What then?

Basically every single homeless person in America would be better off moving to a place with a mild climate year around and a high cost of living.  After all, they are homeless, what do they care about real estate prices?  Some portion of that population may be drug users.  Is that a problem? It might be viewed that way by the city with a nice climate year around and a high cost of living. Did I mention that I hope to retire in West LA?

OK, so we’ll just go with the simple plan that most people are proposing, the same payment for every adult, regardless of where they live.  But here’s another problem.  The amount the family of three needs in the Bronx looks much better to a family of immigrants in South Texas.  For instance, add a dad and assume 4 family members, making $42,000.  With that guaranteed income would you want to work in the hot sun picking vegetables and cleaning hotel bathrooms in South Texas or Georgia?  I wouldn’t.

I know what you are thinking:  ”No problem.  We’ll have illegals do all the low paid jobs, and the American poor can relax with their GAI.  The illegals don’t qualify for the benefits, so the tomatoes won’t rot in the fields.”

But wait, I thought the left wanted to legalize the illegals.  And even if we don’t legalize them, is the following the “Great Society” the left has been clamoring for since the 1960s:

1.  An underclass of illegals doing the hard stuff, and living in shantytowns.

2.  Tens of millions of poor Americans watching TV, and giving zero incentive to their kids to study hard in school, because they’ve got the GAI awaiting them too.

3.  The upper class, in their gated communities.

I’m not sure that’s what development economists mean when they talk about “getting to Denmark.”  Denmark doesn’t have a GAI.

Again, I really want to believe the GAI can work.  It’s the type of solution I like.  Please convince me I am wrong.  It’s easier to administer than my wage subsidy idea.  But I just don’t see how the numbers add up.  At best you could do a GAI that is so small that it does not eliminate poverty. Not enough to live on.  That might help at the margin, but it would not end poverty.

The problem with simple solutions is that poor people are just like everyone else–they’re complicated.  And they have complicated problems.

PS.  I suppose there are some hidden stereotypes in this post.  That’s not my intention.  I grew up in the 1960s and 1970s and knew plenty of young white people who would love to live what was then called the “hippie” lifestyle if someone else would pay for it.

PPS.  I also doubt our tax system could raise enough revenue.  The figures I quoted would cost about $4 trillion in gross tax revenue.  Yes, the net cost would be far less due to middle class people paying taxes to themselves, but it’s still a lot of money, and would probably mean significantly higher MTRs, perhaps reducing our work effort to European levels.

PPPS.  Note to young pundits—there was a reason that Bill Clinton did welfare reform.