Read posts carefully

People tend to misread my posts.  The recent post on poverty is a good example.  Here’s what I believe.

1.  On average, the poor tend to be less talented and hard working that the rich.

2.  There is nothing “wrong” with poor people.  They are just as good as rich people.  Being more talented doesn’t make you a better person than being less talented.  Being hard working doesn’t make you a better person than being less hard working.  The government should not encourage people to become more educated and harder working.  But they should stop discouraging people from working hard.

3.  Culture is not carved into stone.  China and Singapore circa 1976 were both largely “Chinese” cultures, but one was hard working and increasingly affluent and one was less hard working and extremely poor.  That doesn’t mean that Singaporeans were better people than the Mainland Chinese.

4.  I am not “fatalistic” about the poor, about drug addicts, etc.  My blog is full of public policy proposals to ameliorate these problems.  I’m optimistic that these problems will become less severe over time.

5.  But I’m also not a dreamy-eyed utopian.  Even with perfect public policies, there would be all sorts of “gaps” between different ethnic groups, and between men and women.  That’s because culture changes slowly, and human capital takes time to accumulate.  Perhaps American Christians will eventually catch up to American Jews in terms of average income, but it’s not likely to happen in the 21st century.  Sorry Christians, but your going to just have to accept that cultural change occurs slowly.  (That’s one area where I agree with conservatives.)

6.  Some of the gaps between groups may be partly genetic, but that’s never been my working assumption.  All groups have good enough genes to be at least middle class by American standards.  Good enough genes to be a truck driver or mailman or plumber or the vast majority of other jobs.  So we might as well focus on public polices, not genes.  (That’s one area where I agree with liberals.)

In general, my views lie completely outside the standard “victims and villains” debate between liberals and conservatives.  I don’t blame blacks and Hispanics and Native Americans for their lower (average) income, nor do I blame “white privilege.”

Again, there is nothing wrong with having a low income.  If you are reading this blog then you probably make more money than Mother Theresa did.  That doesn’t make you a better person.  Nor are you a better person than the desperately poor Indians she helped.  I prefer lots of the low income people I know to lots of the higher income people I know.

Tom Cruise didn’t choose to be born Tom Cruise, nor did I choose to be born me, nor did the homeless guy down the street choose to be born homeless.  Stop thinking in terms of “deserve” and start thinking like a utilitarian.

PS.  NR has a very good post on Trump by Jonah Goldberg, and a great one by Kevin Williamson.


I was wrong about Trump voters (plus “get stuff done”)

During the campaign I insisted that Trump had no actual beliefs, and that all his campaign promises were merely empty rhetoric—telling us precisely nothing about what he’d do as President.  And of course I was completely right.  No repeal of Obamacare, indeed he never even came up with a proposal to do so.  No slashing of income taxes down to a top rate of 25%, indeed his administration never even put together a tax plan.  No infrastructure.  No wall on the Mexican border.  He also abandoned his promise not to intervene against people like Assad (except to protect Americans.) He abandoned his pledge to go after China on trade.  Etc., etc.

But I was wrong about Trump voters.  Like many other people, I wasted many hours during 2016 reading thoughtful opinion pieces by left and right wing intellectuals, discussing “what the voters were telling us”.  One common theme was that voters were becoming more nationalistic and anti-immigrant.

Then when Trump reversed course on DACA and signaled he wanted to deal with the Dems to protect those illegal immigrants, the right exploded and warned darkly that his “base” would not stand for this.  Oh really?

Donald Trump’s tough talk on illegal immigration was a big part of the reason Dave Hagstrom and many others in this booming Phoenix suburb supported him for president. “Walls make good neighbors,” Hagstrom said.

So when the president moved this week to cut a deal — with Democrats no less — to block the expulsion of 800,000 immigrants brought to the U.S. illegally as children, was Hagstrom disappointed?

Not at all.

“If you were to deport them, where would they go?” Hagstrom, 60, a car-warranty manager, asked on his way to a Bible-study dinner at an upscale shopping mall. “To send them across the border would be inhumane almost. There’s no life for them there.”

It turns out that all of those opinion pieces on what the voters were trying to tell us were completely worthless.  The Trump voters have no principles at all.  They will support Trump in whatever he does.  He could install a Maoist economic policy, or a fascist regime, or a libertarian paradise, and his base would be equally happy. They just like the guy.  (Which is weird, as he has the most unlikeable personality I have seen in 62 years of existence—worse than Nixon.)

You’ll probably claim that I’m overreacting, that Hagstron is just an outlier, a 1 out of every 100 Trump supporter, while the other 99 are tough on immigration.

Then consider this:

In more than a dozen conversations with Trump voters in this sweltering Sonoran Desert oasis, not one found fault with Trump’s abandonment of his vow to deport the young immigrants, often referred to as Dreamers. In the bargain, he said, Democrats agreed to much tougher border enforcement, though not construction of a physical wall.

The odds of interviewing “more than a dozen” Trump people (in Arizona!) and finding that all just happen to be among the 1% of Trump supporters who are soft on immigration is . . . well I think it’s less than one in 10 to the 24th power.  I’m not good enough at math to describe those odds, but I think it’s roughly one in a septillion.  Or, maybe those “more than a dozen” are actually pretty common among Trump voters.  That’s the hypothesis I’m going with.

And this is really good news!  Trump has no fixed values.  His base had no fixed values.  It’s a complete crap shoot as to what will happen.  That might not seem good, but it’s less bad that the alternative—that Trump and his supporters actually believed the things they said in 2016.  It also suggests that Trump has no coattails—when he leaves the scene no one will able to pick up his voters, even with the same position on issues.  The issues never mattered.

PS.  This comment from America’s favorite racist cop brought a tear to my eye:

Indeed, even Arpaio seemed willing to go along with the compromise reached this week, if Trump thinks it best.

“He’s trying to make deals and get stuff done,” said Arpaio, a staunch supporter of the president who faced a prison sentence for racial profiling before Trump pardoned him last month.

That suits people like Joseph Wise just fine.

“I know a lot of these kids,” said Wise, 75, a retired electrical engineer from Gilbert, who paused to talk about Trump and immigration as he loaded groceries into the back of his sport utility vehicle. “They’re good kids. I’ve talked to some of them about how they crossed the border and barely survived.”

That’s right, get tough on “illegals” just as long as you don’t hurt any actual, physical, flesh and blood human beings.  As always, when the public is educated into the inner feelings on “the other”, utilitarianism wins.  Sorry Ann Coulter, but you are on the losing side of history.

PPS.  Oh, and Trump’s broken promise on Syria?  That was caused by pictures of children horribly maimed by poison gas.  Utilitarianism wins again.


Poverty does not cause social problems (and the cream rises to the top)

Pity poor New Hampshire:

Manchester is at the heart of New Hampshire‘s opioid epidemic, which has first responders, lawmakers and health care administrators scrambling for solutions before the situation spirals further out of control.

Though other New England states such as Vermont and Maine have seen spikes in opioid-related deaths, the granite state ranks No. 2 in the nation, behind West Virginia, for the number of opioid-related deaths relative to its population. It ranks No. 1, though, for fentanyl-related deaths per capita.

So what makes New Hampshire so special?  Why so many deaths of despair? Perhaps because it has arguably the most successful economy in the entire world, with extremely high income, high education and extremely low rates of poverty:

Pop quiz:

Which U.S. state had the highest median income in 2016? . . .

New Hampshire.

The Granite State’s median household income last year was a whopping $76,260, nearly 30 percent higher than the national median of $59,039, according to the Census. . . .

One of the chief drivers of New Hampshire’s high median income is its poverty rate, which is the lowest in the nation. Only 6.9 percent of the state’s residents live below the poverty line, compared with a national average of 13.7 percent (in Mississippi nearly 21 percent of people live in poverty).

New Hampshire’s workforce is also among the best-educated in the country, according to previously released census data. Better-educated workers tend to make more money.

New Hampshire also has a very low level of inequality.

Of course it’s silly to argue that affluence causes addiction—correlation doesn’t prove causation.  But it’s equally silly to suggest that people in West Virginia become drug addicts because they are poor.  There are a billion poor people (by American standards) in China, and very few are heroin addicts.

Liu Qiangdong is one example of a Chinese poor person who did not become a heroin addict:

Liu Qiangdong is making up for lost time — and with vertiginous speed.

Again, like so many of China’s new titans, Liu’s family was so poor that until he went to university aged 18 he only tasted meat once or twice a year. His family, peasant farmers in arid coal country, 700km south of Beijing, had a few rice fields but they also had to hand over the crop to the government; these were the dire days after the Cultural Revolution. “From June until September we were able to eat corn — cornmeal porridge for breakfast, corn pancakes for lunch and dry cornbread for dinner; cornbread so tough it made your throat bleed,” he tells me. “The other eight months we ate boiled sweet potato for breakfast, sweet potato pancake for lunch and dried sweet potato for dinner.”

Now he is 43 and worth nearly $11bn.

Yes, that’s anecdotal, but consider this:

Virtually every Chinese millionaire or billionaire is self-made because capitalist reforms to the centrally planned communist economy only began in the early 1980s and did not really take off until the 1990s. But the modern super-wealthy often turn out to be descended from an earlier capitalist class. Richard [Liu] is no exception. Before the 1949 revolution his family were wealthy shipowners who transported goods along the Yangtze river and the ancient imperial canal from Beijing in the north to Hangzhou in the south. They lost everything when the communists took over and were forcibly resettled at least twice. One academic survey found more than 80 per cent of Chinese “elites” (those with income at least 12 times higher than the average in their area) are descended from the pre-1949 elite. Richard puts this down to “family culture”.

“My parents and grandparents taught us a lot — not Chinese or maths but a sense of values, of how you should be and how you should treat others,” he says. They also drilled into him the knowledge they had once been very rich but everything had been taken away — a lesson all too relevant even now.

You often hear a debate about what would happen if everyone suddenly lost everything, and the entire population was equally poor.  Liberals claim that people like Bill Gates become rich because they come from upper class families, with all sorts of advantages.  Conservatives claim that even if income were made 100% equal, within a few years the rich would regain their position and the poor would fall back.  Mao’s China provided a near perfect test of this theory, and we now know that the conservatives are right about this issue.  The cream does rise to the top.

Of course this is not true in every single case.  Sometimes highly talented people have bad luck and end up homeless.  Occasionally an idiot will win $100 million in a lottery, or maybe even get elected President.  But on average the more talented, more ambitious and harder working people will tend to succeed.  Being born white in America does give a person some advantages, but that doesn’t really explain very much.  Certainly not income gaps between American whites and Asians, or between Christians and Jews, or between immigrant blacks and American born blacks, or between Korean-Americans and Laotian-Americans, etc., etc.

PS.  RIP Cassini.  This is my all-time favorite NYT article, and it contains almost nothing but pictures and a video. In my view, Saturn (and her moons) is the most beautiful object in the Solar System.  This is also worth examining.

PPS.  RIP Harry Dean Stanton.

“Our grass roots are very confused”

Isn’t politics fun?

“If you just dropped in from outer space, you wouldn’t know what the last eight months have been like,” said Rep. Peter King, R-N.Y., recalling the friendly exchanges between Trump and Schumer during the meeting with New York and New Jersey lawmakers.

That would be the same Schumer whom the president had previously slammed as a “clown” and “Cryin’ Chuck.”

And now?

“In some ways it’s almost like they were completing each other’s sentences,” King said.

On display at that chummy scene Thursday was the Trump who’s emerged in full this past week: Trump the independent.

A president who spent months catering to the Republican conservative wing now appears unbound by ideology and untethered by party allegiances.

It’s not a complete surprise to his fellow Republicans. They long have worried that Trump, a former Democrat, might shift with the political winds. But Trump’s overtures to Democrats have left Republicans in an awkward and perplexing position, undercut by their leader and unsure of what’s next.

“Our grass roots are very confused,” said Rep. Mark Meadows, R-N.C., head of the conservative House Freedom Caucus, on MSNBC Friday.

Grass roots “confused”?  Would those be the people who didn’t understand that Trump is a pathological liar?

And this:

Schumer announced on the Senate floor Thursday morning that Trump called him and asked how he could help advance legislation that would protect from deportation an estimated 800,000 immigrants who came to the country illegally as children.

Why am I not surprised?

Here’s what I wrote in April:

New predictions; contrary to campaign promises:

Trump won’t significantly change our trade relationship with Mexico and China.  China is not a “currency manipulator”.

Trump won’t do anything significant to help blue-collar workers.

Trump won’t repeal Obamacare, at best he’ll modify it.

Trump won’t significantly change immigration policy.

Trump won’t pay off the national debt.

Trump won’t significantly improve the economy.

Trump will hurt the GOP in the 2018 midterms.

Basically, Trump won’t Make America Great Again.  Instead he’ll mostly maintain Obama’s policies.  The economic performance will be similar to what it was under Obama.

Trump is bad in just about every possible away a person can be bad.  Fortunately some of those bad characteristics offset.  Thus his bad policy ideas are offset by his complete incompetence, which forces him to rely on experts.  Thank God there are damn few alt-righters who have the expertise required to be top policymakers.  It looks like people like Jared Kushner and Gary Cohn (who are basically Democrats) will run the show.

I’m sticking with these predictions (assuming Jared stays out of jail.)

PS.  Speaking of predictions, I’ve claimed that financial crises are unforecastable.  More specifically, I’ve been skeptical of predictions that China was about to collapse (while acknowledging that at some (unknown) point in the future they may have a financial crisis.)  Now it seems even the China bears are about to throw in the towel:

Investor Who Lost Millions Finally Gives Up on His China Bet

Mark Hart spent seven years and $240 million waiting on a crash in China’s currency.

He lost sleep. He lost clients. He damn near lost his sanity.

And now he’s lost his conviction: Hart, who called for a more than 50 percent yuan devaluation last year, has turned bullish on China and its currency.

An average rate of GDP growth of roughly 3% during the 2010s (as one expert predicted)?  I don’t think so.  More like 7.4%.


Amazon is not a macro phenomenon

I noticed a new post that pushed back against my claim that slow NGDP growth explains slow wage growth:

Amazon Has Become A Macro Phenomenon

.  .  .  There is no shortage of explanations on why low unemployment isn’t sparking any wage (and subsequent price) inflation, for instance, here are two of the most common explanations:

  • Low productivity growth
  • Low nominal growth and hence low inflation expectations

.  .  .

More convincing is Scott Sumner’s explanation that it is simply the result of low inflationary expectations, which keep wages in check. We see this even more in Japan, where the labor market is arguably considerably tighter but wages simply fail to take off.

The Amazon effect

But there could be another explanation, which centers around the huge size and growing influence of the online (and increasingly offline) behemoth called Amazon (AMZN).

Perhaps like Wal-Mart (WMT) before, Amazon exerts downward pressure on both wages and prices by its sheer scale and efficiency.

There are three problems with this explanation.  First, while rapid productivity growth in retailing might hold down inflation (if the Fed were targeting NGDP), it would not hold down wage growth.  Second, the Fed is targeting inflation, so rapid growth in productivity should boost NGDP growth, not reduce inflation.  And third, productivity growth is actually quite slow.  Although Amazon is an impressive company, it’s just a tiny share of GDP.

The economy is really, really big.  Don’t use micro reasoning to think about macro phenomena.

I keep going back to NGDP.  NGDP (i.e. monetary policy) explains the slow wage growth.  Period.  End of story.