Just deserts
In some recent posts I’ve seemed to imply that our entire policy-making apparatus (for controlling AD) is behaving stupidly, and thus we are getting what we deserve. But on another level, this sort of argument is kind of, well . . . stupid. I’m with Karl Smith, the entire concept of “just deserts” is rather dubious. None of us asked to be born into this perplexing universe. And even if we’re glad to be alive, we certainly didn’t choose the way our brains were wired, the families that raised us, or the cultures that shaped us.
Let’s take a few examples. I pointed out that we Americans refused to hold accountable the officials responsible for determining aggregate demand, particularly the Federal Reserve. Instead we blame bankers. Another example might be the Greek public. I recall reading that Greeks were much less likely than the Irish to admit that they were mostly responsible for their own debt crisis. Instead they blame outsiders. Tyler Cowen recently linked to a third example, from an essay by Tim Parks:
Responsible for one of the most stupid shipping accidents of all time, not to mention the death of thirty or so passengers, Schettino was nevertheless greeted in his home town of Meta di Sorrento (on the south side of the bay of Naples) by a crowd waving banners in his favor and complaining, priest included, that the man’s bad press was the result of a general prejudice against their community. “Every Italian,” Giacomo Leopardi dryly remarked in 1826 “is more or less equally honored and dishonored.”
Kahneman once said:
Nothing in life is quite as important as you think it is while you are thinking about it.
I’d add that no cultural flaw is as bad as it seems when we are thinking about it. The average American would probably lower his opinion of the Greek and southern Italian culture when hearing the two anecdotes I just provided. But they won’t reduce their view of their own culture nearly as much when hearing about our flawed approach to AD, because we know much more about our own culture, and thus this flaw seems (relatively) much less important. It doesn’t fill up our image of ourselves, in quite the same way those snippets of information can begin to dominate our views of Greece and Naples, unless we are careful.
So here’s where I end up. The Greeks, Neapolitans and Americans don’t deserve to suffer. No one does. But as long as cultures avoid accountability, and look for scapegoats, then one should expect disappointing economic outcomes. That’s the nature of the universe we happen to live in.
Karl Smith has an excellent post on why he doesn’t buy the standard view of just deserts:
Why does this matter: Well on one level I simply appeal to the aesthetic. We try to understand our world and our intuitions about it in a consistent way because doing so is beautiful.
In practice I would say it puts an increased focus on the ability of our technology to support the deserving poor without encouraging fakery.
In a very practical sense it might suggests that programs which depend on 1-1 relationships should be given high levels of moral praise as poverty elimination systems. So, that might mean local charities and organizations with the discretion to support individuals or not based on a long history of working with them should been seen as working a special good.
. . .
Is this just more Pity-Charity Liberalism: Yes. And, I think it’s an ethically more meaningful enterprise than getting up in arms about failures of the meritocracy. I don’t know any moral reason why the talented deserve to prosper and the untalented to fail and so the leveling-of-the-playing-field is of purely instrumental importance. It matters if it makes a more productive society or increases personal fulfillment, but it is not a moral cause unto itself.
Karl is saying that there are traditionally two arguments against redistribution, the disincentives argument and the just deserts argument. And he’s saying that the just deserts argument is bogus. I agree.
That doesn’t necessarily lead to progressive liberalism, rather it leads to liberalism broadly defined, including the classical liberalism of Bentham (or the University of Chicago.) And it doesn’t even weaken the argument against redistribution as much as you might think. As soon as you pull out the rug from under just deserts arguments, you force people to take “disincentive effects” arguments more seriously. Indeed even our scolding of lazy people can be seen as a way of incentivizing them to work harder.
I consider myself a moderate on the inequality issue. Once you remove just deserts, it’s pretty hard to argue that zero redistribution is optimal, as our intuition strongly points toward sharply falling MU of an extra dollar at high incomes. On the other hand the Kahneman quote may tell us something about the unhealthy obsession with “income inequality” that you see among many progressive economists. Let’s grant the need for government to provide access to goods like health care and education. And to have a better demand-side policy for smoothing the business cycle and promoting a healthy labor market. Then ask yourself the following question: Of all the poor, middle class, and rich people you’ve known during you life, how much of their unhappiness was due to pure income inequality (other than lack of health care, poor education, and unemployment?) And how much was due to psychological issues and various ailments? In my view the group in America most disadvantaged by pure income inequality is migrant farm workers, and perhaps low skilled immigrants more generally. They often suffer despite having: a job, good health, and a good outlook on life. But they are also a group that greatly benefited from being able to immigrate to America. And that’s exactly the argument that people like Bryan Caplan use against redistribution—open borders can do much more good for the poor than welfare. And we can’t have both.
The debate over consequentialism vs. just deserts is interesting, but it has surprisingly little to tell us about redistribution policy. Philosophy is hard. But social science is much harder.
PS. There is only one exception to Kahneman’s maxim: NGDP.
PPS. Jesus understood.
Tags:
8. February 2012 at 06:45
Forget Just Desserts.
Remember “Beggars cannot be Choosers.”
The real discussion is not about income it is about healthcare.
The poor get all the food, housing, clothes, electronics they need and that stuff gets cheaper to provide.
On healthcare, the crucial thing we haven’t established is that there are PREMIUM services (new inventions) and there are BASIC services.
We can give beggars X-rays, we won’t give them MRIs and CT scans.
We can give them out of patent medicine – and their drugs only trail by 12 years.
—–
The fun part about the argument is that once you grant that we’ll give other people aid, you get to appeal to the deep belief that beggars cannot be choosers.
Personally, I think we ought to only allow food stamps to buy hard staples – flour, sugar, eggs, milk, margarine, fruits veg etc.
We ought to require recipients to learn to cook, give them cookware, make their need to eat force them to learn to improve the quality of their lives.
Learning to cook dramatically increases the quality of life…. it is as valuable as learning math, and since we’re going to give Food Stamps, we might as well turn the thing into an education.
8. February 2012 at 06:54
I strongly disagree with the concept that you cannot have open borders and welfare.
My arguement is simply that it’s unlikely that immigrants will have a different propernsity to take unfair advantange of the welfare system as the native population.
If anything, they have 2 advantages: they are likely to be young and heathly and they have shown initiative by giving up the familiarity of their place of birth…
There are 2 ways to get more people in the country: a baby or an immigrant… I think in expectation they are likely to have the same marginal utility to society. You’d have to argue that poor people shouldn’t have children in order to support a similar position.
Maybe if you could prove to me that a lot of old people are immigrating just before pension age in order to get medicare benefit, I would believe you. Until then you are finding a solution for a problem that doesn’t exist.
I am a (legal) immigrant myself and I am sure I have been a net gain (and a loss for my country of origin, where I got educated for free)…
8. February 2012 at 07:11
Philosophy — useful philosophy — is work on the hard stuff other sciences have botched or find too hard. See, for example, the philosophy of biology.
(See also Popper for a discussion of the whole topic.)
I.e. philosophy is everything that is too hard for the others …
You find the same thing in the philosophy of economics — philosophers of economics work on the hard stuff economists have botched or find too hard.
When economists have punted or fumbles, the philosopher of economics points it out and works out what has happened and how to proceed.
This is how Hayek got the reputation as a ‘philosophy”, esp. a philosopher of mind, economics, and law. Economics has crashed into a brick wall, and Hayek pointed it out, and pointed out how to put things back together. (Among other things.)
“Philosophy is hard. But social science is much harder.”
8. February 2012 at 07:12
Good philosophy is often the very best social science. See the work of Kuhn, Wittgenstein and Hayek …
8. February 2012 at 07:15
You must admit that MU and maxU and optimality arising from that are all flawed concepts. MU of extra dollar earned is probably falling, but MU of extra dollar withheld from my income is not equal to MU of extra dollar given by me to charity of my choice. There are intangible dimensions in U.
8. February 2012 at 07:23
Bill Clinton – yes Bill Clinton – had a very intersting oped in FT a while back, basically extolling the virtues of capitalism . How I would paraphrase the open is that the best redistribution policy is one that helps people help themselves and provides the right long-term incentives.
I know a boatload of people who, really, should just consider themselves lucky to have a job over the last several years – i know i consider myself lucky not to be living from a cardboard box – yet they have moved from job to job because that job over there will make them happier (then it turns out, not). These are people in the top 15% of income so money is not buying happiness (same goes for celebrities or people who have hit the lotto). The beauty is that life is full of second, third, fourth, fifth, and more chances (“adaptation”). proper redistribution policy IMO enables adaptation and change and incentivizes people to help themself.
8. February 2012 at 07:25
hope this link works
http://www.ft.com/intl/cms/s/0/544c317a-42a2-11e1-93ea-00144feab49a.html#
8. February 2012 at 07:54
Dr. Brin recently wrote an article that touched on similar issues:
http://davidbrin.blogspot.com/2012/01/is-libertarianism-fundamentally-about.html
The most relevant point being that policy decisions should center around the question of:
“Will this help to increase the number of skilled, vigorous competitors?”
All other moralistic and paternalistic attitudes are just noise on the way to that central point. So what if there are some lazy people or people who squander the opportunities given to them; if those people are at least ensured enough income that we can say they’re squandering it, then it’ only serves as more employment opportunities to those that don’t squander it and who want to enjoy more than the minimum acceptable standard of living.
The is especially true in when the market is in a state like ours is currently- when the total available work to be done is far less than the number of people available and ready to do it. The possibility of certain policy creating a slight disincentive to fight for work in swamped market rather than giving people the necessary freedom to reeducate themselves and seek new markets that need more workers enough to pay sufficiently to attract them is actually a useful mechanism once divorced from a blind moralistic drive to force people to work immediately regardless of whether there is a net benefit from that work.
8. February 2012 at 07:58
Scott, you write:
“Once you remove just deserts, it’s pretty hard to argue that zero redistribution is optimal, as our intuition strongly points toward sharply falling MU of an extra dollar at high incomes.”
So here’s the pragmatic argument for just deserts: It’s wrong, but it’s useful as a social construct to mediate disagreements. Social scientists have known for a long time that there is no such thing as a rationally stable equilibrium for the allocation of resources. No matter the coalition, there is always another coalition that can beat it. The question, then, is what makes the current equillibrium “sticky”. The notion of Schelling points just doesn’t cut it here – it’s more than simple attention since there are specific interests in shifting the equillibrium (indeed, interest groups are ALWAYS trying to shift the equillibria).
This is another way of saying that quant-social-scientists have been trying to get “culture” out of social/institutional interaction for decades, and have largely failed because they can’t solve some deep questions. “Just deserts” is a useful conceit because it solves those problems in a way that contributes to a functional society (stable, and more productive than the alternative configuration).
One of THE CLASSIC debates in philosophy is the Mill/Kant debate, sometimes framed as ACT vs. RULE utilitarianism. This debate is well framed in any number of places, but one of the key points that is often missed is that EVEN IF MILL IS RIGHT, it might be USEFUL (even under Mill’s own constructs) if everyone believed Kant was right.
I could reframe this in any number of ways regarding the dysfunctional tendencies of economic education on social cooperation – which has been the subject of many studies of undergrads and altruism. Outside the university, many of the most successful companies are ones that defy microeconomic “optimal” incentive theory.
The flipside of this is that moral action often leads to immoral outcomes. The challenge, then, is to find moral action standards that are most consistent with long term moral outcomes. Economic inquiry has sometimes helped in this endeavor, and sometimes introduced incredible cultural biases of its own. Friedman’s take-no-prisoners position that the purpose of corporations is to maximize profits for shareholders NO MATTER WHAT has been incredibly destructive in ways that Friedman never foresaw. Here are a few:
http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/
BTW, NGDP is not an exception to Kahenman’s rule – as soon as we all start paying proper attention to it, it will cease to be important. Kahneman, of course, was just rephrasing earlier scholars.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Twain
8. February 2012 at 08:06
@acarraro: I think I agree with you. Chronic medical conditions account for 75% of healthcare spending, so if migrant worker populations are, as you suggest, generally healthier than the population at large, the we should be able to avoid the welfare state/open borders false choice.
8. February 2012 at 09:35
The missing discussion (never mentioned by those in favor of massive redistribution schemes) is about the plight of the rich. You quote Karl smith as saying “ I don’t know any moral reason why the talented deserve to prosper and the untalented to fail and so the leveling-of-the-playing-field is of purely instrumental importance.” in an effort to morally equate the poor with the rich. Why not also ask if it is ok for the poor to have their limited means confiscated? If the poor and rig are morally equivilant then why is taking from he rich (who by definition have little control in our majority rules democracy) acceptable? You can go on about societal benefits etc etc but the bottom line is that theft is theft regardless of he purpose.
Another somewhat tangential point is that many wealthy persons do not have a complete ad version to a redistributionist policy. They have an aversion to the backwards way we do it. Would it not be more effective to simply transfer cash to every poor person in the country via a central agency?
8. February 2012 at 09:40
OT, but worth thinking about. If you sat on the FOMC and helped make monetary policy, would you take extremely large positions (in your own portfolio) in ultra-short funds?
Richard Fisher, Dallas Fed President, amassed positions in the millions of dollars in ultra-short ETF funds in 2010. They appear to be his largest discrete disclosed investments.
see http://www.nytimes.com/interactive/2012/02/01/business/01fed-docs.html
Does this pass the smell test?
8. February 2012 at 09:44
Scott: After writing, “Let’s grant the need for government to provide access to goods like health care and education. And to have a better demand-side policy for smoothing the business cycle and promoting a healthy labor market,” you should call yourself a “market progressive.” That is, a “liberal,” but without the classical liberal aversion to government intervention in health care, education, or business cycle on the grounds that it’s government intervention and without the progressive liberal aversion to distributed market calculation.
8. February 2012 at 09:59
‘Friedman’s take-no-prisoners position that the purpose of corporations is to maximize profits for shareholders NO MATTER WHAT has been incredibly destructive in ways that Friedman never foresaw.’
That is clearly not Friedman’s argument, as can be seen by reading it here:
http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
Denning’s cliche-ridden article in Forbes is essentially about fraud by corporate executives, which Friedman specifically denounced;
‘But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a “fundamentally subversive doctrine” in a free society, and have said that in such a society, “there is one and only one social responsibility of business-to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”‘
Friedman believed that businesses would accomplish their ends by serving their customers (by their own lights). Which is what Denning seems to want too.
8. February 2012 at 10:32
So….does this mean I’m supposed to call up the Fed and ask that they print money for themselves and their friends, lower the purchasing power of my income and cash balance even further, and thus reduce my standard of living even further?
You mean you want MORE real wealth to be transferred to those who receive the new money first, and that those of us who don’t demand that our standard of living be decreased, are “getting our just deserts” in having a higher purchasing power and higher standard of living than we otherwise would have had?
You know what? This is the first time I agree with Sumner. Yes, I am getting my just deserts for not being able to bring about more inflation. I am getting the sweet, sweet taste of having a higher standard of living than I otherwise would have had if I took your advice and succeeded in decreasing my purchasing power and standard of living.
8. February 2012 at 10:45
Wait a minute…
It’s JUST DESSERTS
not JUST DESERTS!
8. February 2012 at 11:05
And there was me expecting a post EXCLUSIVELY about the economics of living in deserts: transportation costs, heating/cooling costs, the economic of self-sufficiency etc.
Oh well- one day there’ll be a blog on that subject.
8. February 2012 at 11:13
Matthew, whose gospel you cite, was a tax guy until Jesus convinced him (and Levi) to quit the IRS of its time.
Verily, Matthew the Tax Collector would enjoy Jesus saying, “Love your enemies and pray for those who persecute you.”
8. February 2012 at 11:18
Patrick R. Sullivan,
Agreed. I’d happily have every corporation give up their “social responsibility” projects, if only that would mean we didn’t have corporate deception or fraud.
It’s funny how statements like “a charity’s sole social responsibility should be to use donated money to further the cause for which that money was donated” or “a church’s sole social responsibility should be to worship and practice the tenets of its faith” are uncontroversial, whereas Friedman’s view is so controversial. No-one argues that charities or churches should use donated money to invest in order to make a profit, do they?
Friedman’s position is actually astonishingly bland when one generalises it: organisations that receive money have one responsibility, which is to carry out the function for which that money was given while staying within the bounds of the law.
Anyway, as a philosophy student who has read a lot of social science, I’d say the difference in difficulty is almost always one of type rather than one of degree. The main exceptions that come to mind are borderline cases, like Hayek’s later work (which is mostly great philosophy AND great social science) or experimental philosophy which is arguably a branch of psychology.
Where the two usually meet is in the fact that philosophers very often use assumptions about society and social scientists always use assumptions about philosophical issues.
Greg Ransom,
“Philosophy “” useful philosophy “” is work on the hard stuff other sciences have botched or find too hard.”
I prefer the way that J. L. Austin put it: solving (or dissolving) a philosophical problem often involves knocking it into a difference department, which usually means creating a new science.
8. February 2012 at 11:34
Patrick –
First, that (force & fraud) was a qualification Friedman later emphasized, though I have no reason to suspect he did not implicitly carry this view when he originally wrote his little book. Second, even other libertarians question Friedman’s purpose and lack of other qualifications…
http://marginalrevolution.com/marginalrevolution/2005/10/what_is_the_soc.html
Tyler offers 6 possible interpretations of Friedman, and expresses the most support for 5 and 6:
“5. It is a public choice argument. The claim is a noble lie, for otherwise business will be regulated by government in a counterproductive manner.
6. So much anti-corporate nonsense has been written, so we need to shock people with an extreme claim in the opposite direction.”
I agree with Tyler – but the problem (as I not earlier) is that too many people took Friedman at face value, or even adopted an even more aggressive set of views than he expressed. Friedman’s followers did to Friedman what Marxists did to Marx.
Also, Patrick, you write:
“Friedman believed that businesses would accomplish their ends by serving their customers (by their own lights).”
That is not true. The one (getting profits) did not necessarily imply the second (customer value), though I’m sure Friedman believed it did more often than not. But this was NOT a precondition of Friedman’s stated morality. He makes a _moral_ case that executives are executors of shareholder interest based not on ends but on a construct like “duty” or contractual obligation, and that as agents they have a _moral_ responsibility to pursue the stated goals of their agency contracts (increase shareholder value). I think he hesitated to base his moral argument fully on outcomes, because that opens it to empirical criticism.
8. February 2012 at 11:43
W. Peden:
“a charity’s sole social responsibility should be to use donated money to further the cause for which that money was donated” or “a church’s sole social responsibility should be to worship and practice the tenets of its faith”
These are non-controversial in what universe? So you are telling me that EVERYONE AGREES Doctors Without Borders should not be concerned about the safety of its volunteers in the Sudan? Even churches, which have vastly more encompassing mission statements than corporations, encounter disagreements over things like whether churches should stay out of politics… Or the degree to which a church (ahem, catholicism) should always put the interests of parishioners ahead of the organizational interests of the clergy.
What about using funds to secure future fundraising? Or building a corporate headquarters? Or paying the director of the red cross like a major CEO?
No controversy here…
8. February 2012 at 11:48
W. Peden
Surely, SURELY, we can all agree that an organization like the Girl Scouts should have one, and only one goal – to better the development of young girls. Nothing, NOTHING should stand in the way of that goal.
http://www.boston.com/bostonglobe/editorial_opinion/blogs/the_angle/2011/03/girl_scout_cook.html
SURELY we can all agree…
And CERTAINLY the efforts by an organization as seemingly innocuous as the Susan G Komen foundation would prove non-controversial.
(I miss being a young, naive libertarian)
8. February 2012 at 11:49
Morgan, How much electronics someone needs? Isn’t that zero?
acarraro, That’s true for current immigrants, but the immigrants with open borders might look quite different. Suppose a 100,000,000 million came in during one eyear, almost all low income. What’s the impact on Medicaid?
Not saying you are necessarily wrong, but I think the perception that you are wrong would prevent the experiment from occurring.
Greg, So Hayek has the answers? As I recall he favors redistribution, which is also my view.
Vacslav, That may be so, but I don’t think the intangibles are important enough to overturn the presumption of some redistribution.
dwb, I agree.
KRG, You said;
“The is especially true in when the market is in a state like ours is currently- when the total available work to be done is far less than the number of people available and ready to do it.”
“Desire is a valley that can never be filled.” More AD is needed.
Statsguy, A couple points:
1. That wasn’t Friedman’s position, he was misinterpreted.
2. Society’s view of “just deserts” is always changing–mostly in the direction of utilitarianism, so I wouldn’t be so pessimistic about further moves in the direction of utilitarianism.
What did ante-bellum whites think of the “just deserts” for slaves? Do we want to rely on these moral intuitions?
Chacokevy, If 100,000,000 very poor peasants suddenly moved here, what would be their average income? How does that compare to per capita Medicaid expenditures.
I’m not saying open borders are a bad idea, just a tough sell in a welfare state.
Ryan, Democracies have the right to set up the economic system they want. Calling it “theft” adds nothing to the discussion. It simply assumes the conclusion. It assumes market incomes are deserved. But why assume that?
You said;
“Would it not be more effective to simply transfer cash to every poor person in the country via a central agency?”
Wouldn’t that discourage people from working?
Ben, Interesting.
Neal;
You said;
“That is, a “liberal,” but without the classical liberal aversion to government intervention in health care, education, or business cycle on the grounds that it’s government intervention and without the progressive liberal aversion to distributed market calculation.”
Two points. Classical liberals do not oppose intervention in those areas. And second, I favor less intervention than we have today. Everyone from Adam Smith to Mill to Hayek to Friedman favored intervention, and those are usually viewed as classical liberals
Patrick, Yes, that’s my reaction as well.
Major Freedom: You said;
“Wait a minute…
It’s JUST DESSERTS
not JUST DESERTS!”
I hope to God you are just kidding.
W. Peden, Maybe next time.
Bababooey, That’s interesting. My ancestors were people who summoned others to court.
W. Peden, I don’t think that Friedman had a well thought out position, but certainly it wasn’t as silly as Statsguy made it out to be.
8. February 2012 at 11:55
“[I]t’s pretty hard to argue that zero redistribution is optimal, as our intuition strongly points toward sharply falling MU of an extra dollar at high incomes.” But that’s such a short-term argument, involving only the present consumption opportunities of presently-existing people, with no consideration for the long term. A better point would be that only by a miracle would the process by which wealth or income is distributed result in eudaimonic optimality (in the long run, which I assume is the proper goal): in any distributional system that has ever existed some possible modification””some “redistribution” (by *deus ex machina*)–would have increased overall long-run happiness. Of course, in the absence of a god from the machine that doesn’t suggest any definite policy.
If we do engage in abstract social thinking with an eye to extracting policy proposals, we must think clearly about the target at which the proposals are to be aimed. The possibilities (leaving God aside): at me as an individual, at you as an individual, at the two of us as a collective agent, at some other individual or some other collective agent””in the extreme case, at all of us (presently existing people) as a collective agent. But take the last of these: Suppose I knew which joint action by all of us together would produce the most happiness (in the long run). This information would be practically useless to me, since it would certainly include many actions by many individuals (as parts of the collective action) that they obviously were not going to perform. Really, I am directly interested only in what *I* could do to make things better, since the only person whose actions I control is *me*. (To be sure, perhaps my most beneficial action would be to try to influence someone else’s behavior.)
On another topic, here is some wisdom that, unfortunately, is in too short supply: “[O]pen borders can do much more good for the poor than welfare. And we can’t have both.” I wonder how many of the politicians who support the welfare state understand this, and are just pandering to the prejudices and special interests of various groups of voters in their own countries.
Examing your claim to be a “moderate” on redistribution, we find that you are in favor of *dismantling the welfare apparatus* and *opening the borders*. That sounds suspiciously like *extremism* (of a virtuous rather than vicious sort)!
8. February 2012 at 12:09
StatsGuy,
“Surely, SURELY, we can all agree that an organization like the Girl Scouts should have one, and only one goal – to better the development of young girls. Nothing, NOTHING should stand in the way of that goal.”
No-one saying that nothing should stand in the way of corporate profits. In addition, no-one is saying that an organisation should have a once-and-for-all fixed goal.
I like your imaginative analogy; it’s just a shame that you aren’t successfully talking to anyone.
8. February 2012 at 12:09
Re “just deserts”: http://www.snopes.com/language/notthink/deserts.asp
8. February 2012 at 12:10
ssumner:
“It’s JUST DESSERTS”
“not JUST DESERTS!”
“I hope to God you are just kidding.”
Yeah, bad joke.
I tried to make a pun on how having a higher standard of living is so sweet, that it’s like a dessert.
8. February 2012 at 12:10
Bababiiey, even more interesting, Matthew was actually a publicanus, i.e. a private tax farmer who had bought the right of collecting taxes from the Roman government. Tax collecting was privatized in this way because it was infeasible to maintain a vast bureaucracy. We know from ancient sources that tax farming was a rather speculative activity which also required some inside connections (as with other things the government also contracted out to private citizens), and many publicani became very rich.
8. February 2012 at 12:38
Stats Guy, did you really think I’d let you get away with blaming Friedman’s friends for what YOU wrote, which was;
‘Friedman’s take-no-prisoners position that the purpose of corporations is to maximize profits for shareholders NO MATTER WHAT….’
Those caps are YOURS. You then buttressed that with a link to an incredibly lame (made worse by its length) Forbes piece about corporate fraud. Implying Friedman was okay with that fraud.
I also caught your sleight of hand about the ‘moral point’ of serving the customers’ wants. That’s also about exactly backwards.
8. February 2012 at 12:49
@Morgan Warstler,
I like your comments on cooking. A valuable skill indeed.
8. February 2012 at 12:57
Statsguy,
“These are non-controversial in what universe?”
No-one disputes the goals. Your examples are all examples of the means of pursuit being controversial. I don’t think anyone is suggesting that the best way to pursue any given organisational goal within the laws is uncontroversial…
8. February 2012 at 13:03
This just isn’t empirically true — it doesn’t fit the facts:
“I prefer the way that J. L. Austin put it: solving (or dissolving) a philosophical problem often involves knocking it into a difference department, which usually means creating a new science.”
8. February 2012 at 13:04
????
“Greg, So Hayek has the answers? As I recall he favors redistribution, which is also my view.”
8. February 2012 at 13:15
Greg Ransom,
I disagree. Psychology, economics, linguistics and the natural sciences are all the children of successes in philosophy.
8. February 2012 at 13:32
How about the argument that just deserts is utilitarianism based on principle? In an a world with too many unknowns we fall back to a position that just deserts is logical and has been time tested and has held up. It is an admission that we do not know what policies will maximize utility so we must rely on principle of just desert which has been time tested.
8. February 2012 at 14:26
Perhaps I should have said, modern libertarians who self-style as classical liberals. The type you find at Ron Paul rallies.
8. February 2012 at 14:52
The leading thinker in this field has a different argument.
The argument is that the increased welfare of any random individual depends on an institutional framework of negative rules of just conduct (e.g. Hume’s rules), and that no one can come up with any coherent principle that lays down principled rules of redistribution which doesn’t throw a pathological monkey wrench into the institutions of negative rules which are required for the use of distributed information.
That’s that argument. The preference of those who can’t fit an argument into a math construct is to pretend the argument doesn’t exist.
Scott writes,
“Karl is saying that there are traditionally two arguments against redistribution, the disincentives argument and the just deserts argument.”
8. February 2012 at 14:54
Peden,
I’m talking about the contemporary academic world.
And I still don’t buy this claim even as it applies to the pre-scientific era:
“I disagree. Psychology, economics, linguistics and the natural sciences are all the children of successes in philosophy.”
8. February 2012 at 14:55
Descartes physics was an achievement of the natural sciences, until it was re-labels “philosophy”.
Reminder — words are used for to do many different jobs.
8. February 2012 at 15:08
Philo, If you are saying that there may be no real world politically feasible set of redistribution policies that are better than no policy at all, I agree. That’s possible (although I doubt it.) See my very last reply in this comment.
I actually didn’t endorse Bryan Caplan’s argument, although he makes a very strong argument in favor. I do favor some redistribution, even with open borders. But a much different system from what we have now.
Greg, I agree with W. Peden on how philosophy gives birth to other fields.
Floccina, Yes, there is an argument that if one defines “utilitarianism” broadly enough that all moral systems are utilitarian. That suggests we need to be careful about our terms.
Neal, OK, but I don’t consider those classical liberals. I call them dogmatic libertarians.
Greg, Regarding your last point, suppose a system was instituted where the payroll tax was 10% on incomes below $100,000, and 12% on incomes above $100,000. I would consider that redistribution, relative to a flat tax. Why is that not workable?
8. February 2012 at 15:56
Scott, it’s not “workable” as a principle of justice that can be relied upon as a rule, and appealed to as a principle of justice, e.g. as a rule which will be respected as a rule of justice by a politician or a voter who contends against your rule that “a system of payroll taxes of 9% on incomes below $100,000, and 13% on incomes above $100,000 is more socially just than a payroll tax of 10% on incomes below $100,000, and 12% on incomes above $100,000.”
And because there is no principled basis for the rule and there is always a case to be made from the same sort of appeal to social justice for the rule to be changed, then there is no principle of redistribution which will keep the “principle” from becoming a basis for politicians to discriminate between classes of voters & buy their votes.
Scott,
“Greg, Regarding your last point, suppose a system was instituted where the payroll tax was 10% on incomes below $100,000, and 12% on incomes above $100,000. I would consider that redistribution, relative to a flat tax. Why is that not workable?”
8. February 2012 at 16:08
“Philosophy” often constituted a lead door to the birth of various special sciences until the philosophical tradition was violated & abandoned.
For a case in point, Ernst Mayr’s account of the history of the special science of biology found in his book _The Growth of Biological Thought_ is a powerful bit of evidence.
You could argue the same thing about modern philosophy of science / epistemology. The justification tradition blocked progress for thousands of years, until it was violated & abandoned by folks like Kuhn, Wittgenstein, Popper and Hayek.
I have argued that same philosophical tradition has undergirded pathology in 20th century economics — e.g. the explicitly cited Mach/Operationalist picture found advocated by Schumpeter & Samuelson, the instrumentalist/statistical Baconian empiricism explicitly cited and argued by Friedman and Lipsey, among many others, and the pathological nomological-deductive ideal explicitly argued and advanced in economics/ social science by JS Mill and many others.
Scott writes,
“I agree with W. Peden on how philosophy gives birth to other fields.”
8. February 2012 at 16:09
Neal & Scott,
I’m not saying you are making this argument, but let’s be clear that Ron Paul’s ‘supporters’ are NOT dogmatic libertarians. There is a subset of dogmatic libertarians among them. Ron Paul is mostly a dogmatic libertarian. But the majority of his support comes from libertarian-leaning people who have a wide range of views that don’t necessarily match up with the candidate’s views.
There is a strong pragmatic argument to vote for Ron Paul if you have views that lean libertarian or support smaller government; you simply are not going to get that from any other major party candidate. Even if he doesn’t win the nomination he might be able to influence the GOP platform in this cycle and beyond.
8. February 2012 at 16:14
Greg Ransom, why do you put the comment you’re replying to at the bottom of your comments? It makes them unnecessarily difficult to read.
8. February 2012 at 16:32
David Hull’s point that concepts are historical individuals (see David Hull, Science as a Process) is an important reminder — i.e. “philosophy” is not a natural kinds, and people have used the word for various purposes within very different historical context.
For example, Newton called what he did “natural philosophy” and the word “science” hadn’t yet been coined.
8. February 2012 at 16:38
I should say, our modern notion of “science” had not yet formed — what was current was Aristotle’s rather different notion, and “natural philosophy” connoted something closer to our notion of “science”, and “scientist” had not yet become current, and “natural philosopher” did the work of “scientist”.
8. February 2012 at 17:00
In some respects the just deserts argument is actually easier to navigate than the argument of redistribution. Briefly the clouds clear again to illuminate the poor (Jesus is that you?)but what if we really had an answer? For all the ‘sharply falling’ MU of the middle to upper classes has been mostly claimed by knowledge-based services, or else saved for knowledge-based services one would need later on. In other words, a set point (of profit) exists for important consumer goods of the middle classes which would be difficult to change, and yet government tries to make some of that same basket of goods available to the lower classes. Arguments about changing the set point will be interesting but as you said, social science is more difficult than philosophy, this time.
8. February 2012 at 17:20
Again, if you just switch from “just deserts” to “beggars cannot be choosers”
you get all the joy of making losers change their behavior WITHOUT having to listen to liberals say you are horrible and mean.
That is the practical trade of almost all right-left arguing.
The right delivers what the left CLAIMS to want (aid), without delivering them what they really want (free rides).
—-
There’s not reason to philosophize where language can consistently move majorities.
Beggars can’t be choosers is a profoundly positive American Puritanical saying.
It works because it carries the outright promise of aid, it ends the suffering… and still pisses off liberals.
8. February 2012 at 17:21
Cthorm,
I don’t mean to contradict you — although a lot of Ron Paul supporters may be pragmatic libertarians, I think the vast majority of them are more dogmatic. The situation seems to be much as Mill described: “I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative.”
8. February 2012 at 17:41
Floccina,
limo liberals all understand the joy of food, they understand it far better than they understand the joy of work, the joy of feeling like they earned something.
so you can forgive them for wanting to deny the bottom half the latter, but not the former.
Why their food stamp thinking doesn’t cross over into slow food elitism annoys me to no end.
8. February 2012 at 17:45
johnleemk,
I think you’ll find that those who are spouting dogmatic libertarian talking points are not really dogmatic libertarians. Ron Paul has done a lot to popularize these ideas, and because the competition is so intellectually incoherent these people latch on. Most were probably apathetics, non-voters, or disenchanted liberals and moderates. The libertarian movement has many deep divisions, and the dogmatic faction (e.g. Mises institute) has never been as large as the more pragmatic elements (e.g. CATO, Reason, GMU).
8. February 2012 at 17:54
johnleemk: “although a lot of Ron Paul supporters _may_ be pragmatic libertarians, I _think_ the vast majority of them are more dogmatic”
Emphasis mine. Irrelevant speculation yours.
8. February 2012 at 18:04
Cthorm,
I’ve always felt a real libertarian will put up with military BS if and only if it helps them get taxes and regulations cut…
To many of Ron Paul’s guys seem to be anti-war hippies who don’t care as much about economic freedom. I know that’s a caricature, but I think the real test is:
once the dollar is going to be collected as a vulgar tax, is it better to waste it on military shit or use it to buy votes for the taxman.
the correct answer is always wasting it on the military, it is the lesser of two evils.
8. February 2012 at 18:26
Surely the desserts question is wrongly framed. It’s not whether the poor deserve the money, it’s whether the more wealthy deserve to be deprived of it. In what circumstances is G forcing A to give money to B a moral act, if A earned the money honestly?
The starting point for any discussion of fairness must be the realisation that unfairness is the natural state and therefore cannot be intrinsically wrong.
No morals are absolute, but the judgement calls about self-defence and white lies are some orders of magnitude easier than the judgements about the fair or moral level of redistribution.
Utility has always seemed to me to be a pragmatic, as compared to moral, argument. Once you’re doing pragmatism the only real issues are efficiency and sustainability because there is no correct answer.
8. February 2012 at 19:02
Naturalistic fallacy.
8. February 2012 at 19:29
Peden:
“Your examples are all examples of the means of pursuit being controversial.”
No. The critique of Girl Scout Cookies is that an organization like the girl scouts should not be peddling harmful sugar products to an obese nation to earn money – that the organizational goals should extend to social responsibility involving food products.
Have you bothered paying attention to the Susan Komen / Planned Parenthood controversy? How – exactly – is this an issue about “means of pursuit” and not the goals of the Komen organization? Are you serious, or making off-the-cuff statements? I can’t tell.
8. February 2012 at 19:56
ssumner:
“He [Friedman] was misinterpreted.”
Yes, both by his enemies and by so many ardent young libertarians… Just like Marx by so many ardent young Marxists. I’m sorry, but even Tyler Cower suggests that Friedman didn’t really believe what he wrote at face value, and partly wrote it for shock value.
Patrick/ssumner:
Here is one of his more interest later conversations, which I remember reading back in the day. He explicitly rejects John Mackey’s assertion that serving the customer is primary focus, and basically calls out John Mackey for being a hypocrite… citing himself from 1970
“In the present climate of opinion, with its widespread aversion to ‘capitalism,’ ‘profits,’ the ‘soulless corporation’ and so on, this is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest.”
http://reason.com/archives/2005/10/01/rethinking-the-social-responsi/singlepage
In his 1970 piece, he did not speak highly of the types of corporate executives who would stoop to that level.
When Friedman asserts that Mackey and he are essentially in agreement, Mackey explicitly rejects this. In essence, he’s agreeing with much of the Denning article.
Generally, I don’t particularly like John Mackey, mostly because I dislike Whole Paycheck (er, Foods), but let me conclude with Mackey’s rejoinder to the CEO of Cypress Semiconductor during that debate:
“Of all the food retailers in the Fortune 500 (including Wal-Mart), we have the highest profits as a percentage of sales, as well as the highest return on invested capital, sales per square foot, same-store sales, and growth rate. We are currently doubling in size every three and a half years. The bottom line is that Whole Foods stakeholder business philosophy works and has produced tremendous value for all of our stakeholders, including our investors.
In contrast, Cypress Semiconductor has struggled to be profitable for many years now, and their balance sheet shows negative retained earnings of over $408 million. This means that in its entire 23-year history, Cypress has lost far more money for its investors than it has made. Instead of calling my business philosophy Marxist, perhaps it is time for Rodgers to rethink his own.
Rodgers says with passion, “I am proud of what the semiconductor industry does–relentlessly cutting the cost of a transistor from $3 in 1960 to three-millionths of a dollar today.” Rodgers is entitled to be proud. What a wonderful accomplishment this is, and the semiconductor industry has indeed made all our lives better. Then why not consistently communicate this message as the purpose of his business, instead of talking all the time about maximizing profits and shareholder value? Like medicine, law, and education, business has noble purposes: to provide goods and services that improve its customers’ lives, to provide jobs and meaningful work for employees, to create wealth and prosperity for its investors, and to be a responsible and caring citizen.”
8. February 2012 at 21:26
This was Wieser’s original “scientific” argument for progressive taxation.
Steve writes,
” it’s pretty hard to argue that zero redistribution is optimal, as our intuition strongly points toward sharply falling MU of an extra dollar at high incomes.”
And Hayek’s Flat Tax argument was a response to that argument — from Wieser’s closest graduate student.
A bit of history of thought …
8. February 2012 at 22:11
“The debate over consequentialism vs. just deserts is interesting, but it has surprisingly little to tell us about redistribution policy. Philosophy is hard. But social science is much harder.”
I would define this as an argument between Consequentialism and Deontologicalism. We’ve been over this ground before.
I agree, Philosophy is hard. And Economics is that much harder.
8. February 2012 at 23:20
Statsguy,
“The critique of Girl Scout Cookies is that an organization like the girl scouts should not be peddling harmful sugar products to an obese nation to earn money – that the organizational goals should extend to social responsibility involving food products.
Have you bothered paying attention to the Susan Komen / Planned Parenthood controversy? How – exactly – is this an issue about “means of pursuit” and not the goals of the Komen organization? Are you serious, or making off-the-cuff statements? I can’t tell.”
I think the problem is that you are gesturing at arguments rather than making them, which makes it rather hard to know what you mean.
For instance, I don’t know what “Planned Parenthood” is (I assume it has something to do with contraception) and I’d never heard of Susan Komen until you mentioned her. Doubtless your arguments are excellent, but I can’t really comment on them without hearing them articulated clearly.
In the case of the Girl Scout cookies, I think it’s an oversimplification to say that the Girl Scouts are purely about the development of young girls.
8. February 2012 at 23:23
Greg Ransom,
I agree re: philosophy and pathologies in science. As I’m sure you are aware, Hayek’s “The Counter-Revolution in Science” is a good guide to how bad philosophy can give birth to bad science.
9. February 2012 at 04:57
Scott,
I’m pretty sure they did go abroad:
http://www.huffingtonpost.com/ellen-brown/qe2-shocker-the-whole-600_b_892621.html
And saying they can just do more is like saying we can fill a bucket with a hole in it up by pumping more water in!
9. February 2012 at 06:37
Greg, I respect the voters more than you do. Ultra-liberal Massachusetts recently had a referendum on converting our flat income tax into a progressive income tax. Voters opted to stay with the flat tax, even though we were told very few would have to pay a higher rate.
You said;
“”Philosophy” often constituted a lead door to the birth of various special sciences”
I agree.
Cthorm, Good point.
Becky, I agree that the utilitarian redistribution argument involves a lot of very tough issues. We don’t understand the economy’s supply side very well.
Morgan, It seems pissing off liberals is your main life goal.
Peter, There is no absolute measure of what the rich produced. It depends on how you structure the economy. There are very plausible arguments for laissez-faire both with and without copyright protection which creates government sanctioned monopolies. If you claim Bill Gates “earned” his money, you are implicitly arguing for one sort of regulatory set up. But all economic setups are arbitrary, so the question of how much someone “earned” is basically a political question. In a modern economy people produce in collaboration with others. How much of the joint output is “theirs” and how much belongs to others is not some fact of nature, but rather a policy question.
Statsguy, So your defense for misinterpreting Friedman was that young libertarians also misinterpret him. Does that mean you are comparing yourself to young libertarians?
I’ve never argued that business should only maximize profits.
UnlearningEcon, No, that piece says the opposite. The money went to foreign banks operating in the US. (It’s also full of other errors, as the writer doesn’t seem to know much about monetary policy.)
9. February 2012 at 07:21
Scott, I live in California.
9. February 2012 at 07:30
A society must, willy-nilly, have a “policy” (perhaps not consciously adopted) for the distribution of income, inasmuch as its functioning must result in some distribution of income or other. It may, though it need not, have a policy on *re*distribution: this would mean that it had a system or mechanism for the initial tentative distribution of income, and also a (consciously adopted?) supplemental policy on readjusting that initial stab at a distribution. But really, it is rather arbitrary to distinguish parts or aspects of the distributional mechanism as “initial” and “supplemental”: the distinction between *distribution* and *redistribution* is quite fuzzy.
A couple of side questions, about the terms ‘income’ and ‘redistribution’: (1) do gifts affect income; (2) does “redistribution” have to be done forcibly by the government, or do voluntary transfers qualify? Suppose A, out of his $100 of income, makes a charitable gift of $10 to B (who otherwise has income of $10). Is A counted as having income of only $90 while B has income of $20, or is A’s income still counted as $100, B’s as $10 (or A’s as $100, B’s as $20, or what?)? And is that voluntary gift a case of “redistribution”?
9. February 2012 at 07:33
“”Desire is a valley that can never be filled.” More AD is needed.”
Indeed- and the number one way to set up a consistent baseline of AD is to ensure that everyone always has enough income to express the demand for their baseline vital and investment/capital needs to the market. Without that AD is artificially suppressed due to people not having the money to express them and needed to resort to personal debt, barter networks, or more desperate measures to meet them. We need to throw out the moralistic arguments along the lines of “they don’t deserve that income” or “they might work a little less” and do what’s economically necessary give them the funds to express their portion of AD. And if they do work a little less at times, so what? It just means that the the overall market is a little less sticky and can better react to production improvements and day to day shifts in AD.
9. February 2012 at 07:59
The whole “redistribution” element is just a distraction, because it tries to insert an artificial moralistic concept into what should be treated as two independent elements:
-Are we spending enough in areas where more money is needed to allow AD to be expressed properly?
And
-Are we taxing enough in areas where monetary hoarding leads to bubbles, non-productive investments, or other market failures?
Let each policy operate independently of each other based on the need for those policies, then let the Fed continue work between them to actually manage the monetary supply and overall growth rates.
9. February 2012 at 09:07
W. Peden
I agree with you, the girl scout mission has morphed beyond its initial mission, or even the narrowly defined current mission:
“Girl Scouting builds girls of courage, confidence, and character, who make the world a better place.”
The Komen issue is this – their mission statement is “The Susan G. Komen for the Cure promise: to save lives and end breast cancer forever by empowering people, ensuring quality of care for all and energizing science to find the cures.”
However, they are funding Planned Parenthood clinics which do deliver breast cancer screenings, but also do “other things” that many of the more conservative Komen supporters dislike, but that many of the liberal Komen supporters like. This goes beyond best means to achieve an end (I think).
The general point is that it is not easy to know – for any organization – what its goals really are, or even should be. John Mackey’s observation about the founder of Cypress (a staunch defender of Friedman’s view and shareholder value) was that when the Cypress CEO expressed pride in his work, he didn’t say he was proud of making his shareholders money. He said he was proud of the technical achievement he’d delivered in semiconductors and the impact it had on people’s lives.
IMO, it’s a Zen and the Art of Motorcycle Repair argument.
9. February 2012 at 09:07
ssumner:
“Statsguy, So your defense for misinterpreting Friedman was that young libertarians also misinterpret him. Does that mean you are comparing yourself to young libertarians?”
Yes, that’s more or less it. 🙂
9. February 2012 at 11:04
Stats Guy, my mother used to respond to my, ‘But all the other kids are doing it.’, with; ‘If all your friends were jumping off a cliff, would you do it too?’
But, the funniest thing in your response is that you (along with John Mackey) don’t recognize that Mackey’s response to TJ Rogers was; Yes, you’re right, the purpose of a business is to make money and that’s what I do.
9. February 2012 at 11:08
And, it’s not like were short of examples right now of what happens when a business operates without bottom line considerations:
http://www.forbes.com/sites/louiswoodhill/2012/02/08/global-warming-alarmism-points-to-bad-karma-for-your-tax-dollars/
———–quote———–
The Chevrolet Volt, which was also developed at taxpayer expense, has not been selling well. Despite $7,500 (or more) in taxpayer subsidies to every purchaser, it turns out that there is not a huge market for a small, cramped hatchback that lists for $49,000 and can, at best go 40 miles before it must switch from batteries to gasoline power.
Now, try to imagine the sales prospects for a car that has a smaller back seat than the Volt, a smaller trunk than the Volt, can only go 25 miles on pure electric power, is backed by a company that most people have never heard of, and lists for $103,000.
Fisker claims to have produced 1250 Karmas and to have sold about 250 of these. Its business plan calls for selling 15,000 Karmas a year. This is more than Lexus sells of its LS460 luxury sedan, which is similar in size, much roomier, considerably quicker, gets similar mileage under gasoline power, is backed by Toyota, and lists for only $67,630.
To be sure, the Fisker Karma is a beautiful car, perhaps the most beautiful 4-door sedan in the world. It might have made more sense for Obama to funnel the $193 million to Fisker through the National Endowment for the Arts rather than the DOE. Unfortunately, however, the Karma’s commercial viability will depend upon its virtues as an automobile, rather than as a piece of sculpture.
———–endquote———–
9. February 2012 at 11:13
Cthorm,
“Most were probably apathetics, non-voters, or disenchanted liberals and moderates. The libertarian movement has many deep divisions, and the dogmatic faction (e.g. Mises institute) has never been as large as the more pragmatic elements (e.g. CATO, Reason, GMU).”
I think I’ve misread what you said, since it sounded like you were saying Ron Paul’s libertarian supporters are not primarily dogmatic. I’ve certainly found pragmatic libertarians to generally shy away from Ron Paul; if anything they seem likelier than the general population to be unsure about him (possibly because as libertarians they have more to lose if the label becomes associated with some of his kookier positions). But yes, most of his support currently likely comes from people who don’t subscribe to most of his views, but do vehemently subscribe to one or two of his views — and the impression I’ve consistently gotten from most of these folks is that they are quite dogmatic about the issues they do agree with him on (like being anti-war/isolationist, pro-civil liberties, etc.).
9. February 2012 at 11:13
Patrick, I’m glad I could humor you. However Mackey would definitely not agree with you:
“I strongly disagree. I’m a businessman and a free market libertarian, but I believe that the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders–for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.”
BTW, to you’re mom’s question:
My friends are smart. The last time they all decided to jump off the roof it was onto a pile of recycled mattresses. It was a lot of fun. If they jumped off a cliff, I would assume it was with good reason and proper equipment.
Context matters.
9. February 2012 at 11:29
@ Patrick –
I would not expect the Volt to turn a profit for several more years. Likewise, the Boeing Dreamliner will not turn a profit for half a decade (although it depends on how you run the accounting).
Toyota didn’t run a profit on the Prius for 4-5 years after launch at least, depending how you run the accounting…
http://articles.latimes.com/2001/dec/19/autos/hy-prius19
The first production volt was sold December 2010, so it’s been under 1.5 years. Also, GM rolled out the Volt to a limited number of states to slowly ramp production and test the vehicle.
Prius is now on gen 3, and has been a major brand for Toyota for 10 years. A lot will depend on technical uncertainties in battery R&D. Also, much of the Volt’s weakness was due to perceived fire risk in crashes. By 2015, when GM rolls out the second generation Volt, I expect costs to drop substantially due to scale production and technology improvements.
But the best thing the US should do is put a tax on gasoline sufficiently high to cover real costs of gas, not least of which is construction and operation of our 12 carrier battle fleets…
9. February 2012 at 12:14
‘However Mackey would definitely not agree with you:’
Mackey doesn’t agree with himself (as Friedman aptly pointed out).
‘Context matters.’
Duh! That’s what I’ve been trying to tell you about Friedman’s argument.
‘…to cover real costs of gas, not least of which is construction and operation of our 12 carrier battle fleets…’
Little hard to square that with Pax Britannica enforced by the Royal Navy in the 19th century, isn’t it.
9. February 2012 at 20:00
Sure Scott, but none of those truths create deservingness (sic). It’s still pragmatism.
9. February 2012 at 21:10
Scott, if a policy doesn’t piss of liberals, it won’t work.
10. February 2012 at 08:35
Greg, Touche!
Philo, All good points. I favor a consumption tax–so income that is donated should not be taxed. But in a sense it doesn’t matter, as it would then be taxed by the recipient.
KRG, Krugman says the issue of AD and redistribution are essentially separate, and I agree.
Peter, Yes, I’m a pragmatist. (Or did I miss your point?)
Morgan, The 1st amendment?
10. February 2012 at 09:08
StatsGuy,
“The general point is that it is not easy to know – for any organization – what its goals really are, or even should be.”
I think that that’s too strong. There are many cases where it is unclear. That does not mean that it is unclear in all cases; there are plenty of borderline cases of baldness, but that still means we can use the bald/not-bald distinction perfectly well most of the time.
For instance, we know that charities shouldn’t be using donated money to invest in order to make profits. Equally, I’m saying that (business*) corporations shouldn’t seek to do things other than business, where ‘business’ means the pursuit of profit and the avoidance of loss within the bounds of the law. That last caveat is important and one that isn’t taken nearly seriously enough, although anger about corporate taxation and so on is a good step in that direction.
* It’s often neglected that not all corporations are business, even if people realise that not all businesses are corporations. In the UK, companies can have corporate status without being for-profit organisations. A local development corporation or a broadcasting corporation may be a not-for-profit organisation.
10. February 2012 at 14:11
” I recall reading that Greeks were much less likely than the Irish to admit that they were mostly responsible for their own debt crisis. ”
reason:
http://www.bit.ly/AEqvQj
sorry to kill this awesome “hard working catholic acknowledges responsibility, lazy orthodox southerners blame zeus” narrative, but you’d have to be retarded to take responsibility for a crisis caused by a corrupt, nay, consciously criminal system. It’s like saying that your average 30s Chicago resident should accept responsibility for gangster criminality.
Scott, please get your facts straight, I’d really don’t enjoy making posts like this one:
http://orionorbit.blogspot.com/2011/09/while-were-at-it-let-me-kill-extra.html
10. February 2012 at 17:34
orionorbit, Your comment is almost comically inept–on so many levels I hardly know where to begin.
1. I never accused the Greeks of being lazy, indeed I’ve often pointed out to people that they work much longer hours than the Germans. So what? What bearing does that have on my post?
2. Your tax data is totally inaccurate, and in any case has no bearing on my post.
3. In response to survey questions, the Greeks come in number 32 out of 32 developed countries–dead last in terms of attitudes toward corruption. Is it any surprise that cultures with this attitude tend toward corruption to elect crimally corrupt governments? That would be like arguing that the difference in corruption between Louisiana state governments and Minnesota state governments has nothing to do with the voters that consistently elect and re-elect “lovable rogues” to the statehouse in Louisiana. Is that how your really believe democracy works? They are pure, innocent voters that keep having the bad fortune to elect rulers that turn out to be corrupt?
BTW, Greece is one of my favorite countries. I’ve never been to Ireland and am not Catholic.
And notice that in the post I didn’t make any accusations against Greece that I didn’t also make against the good old USA, where I happen to live. I guess you missed that part.
11. February 2012 at 06:00
Scott, I didn’t mean to imply that you shared the views of Merkel or that you see Greece/Ireland through the religious narrative, sorry for that. I jump straight to your 3rd point.
Your reading of the situation in Greece/Italy is mostly wrong on politics, even though your knowledge of economics allows you to avoid common errors such as those of Merkel. You had three examples, two of them (Greece, Italy) are completely wrong and one is subject to much discussion.
Now, Italy, this is so wrong that I wonder how you and Tyler can fall for this crap. The position that Italians would somehow “forgive” the captain is simply wrong. The fact that there were a couple of hundred idiots that exploited the opportunity for some publicity does not imply that there is anything relevant to this incident for the culture of the Italians as you seem to think. Italians are as outraged at the captain as you would be.
Your reading of the situation in Greece is also wrong. No, the problem is not that the people “elect lovable rogues”. Take a look at Greek governments since say 81 (when most people would agree the fiscal derailing started). The two longest serving prime ministers were a professor at Mannheim and an economics professor at UC Berkeley. There have also been two prime ministers that were former central bankers and the most obvious of all examples is the one of the conservative government between 2004-2009. The government got elected on a market-friendly state-reducing platform and its finance minister was, well, the dean of the Athens school of econ, i.e. a guy with a strong enough publication record to teach in some good US university. None of these guys got rich through politics. I.e., the Greeks could not have elected people that would be any further from the “lovable rogue” type of character, in fact they elected exactly the people you would expect them to, if you assumed they wished to do a technocratic overhaul of the country’s institutions. But what happened is that even though the right guys might get elected, Greece as a country is too small to deal with the kind of organised crime that is to large extend responsible for the present situation. I will just quote two examples, first the 1.4 billion contract that Siemens got in the 2004 Olympics, and the 2 Billion contract that Thysen Group got to develop a new type of submarine for the Greek navy, i.e. examples that the German courts have found to be the cases of corruption and only these two cases are almost 2% of Greek GDP spent on stuff we don’t need, that GE would have built at half price because the Greek state by itself and the German state by itself are completely incapable of prosecuting effectively. The Greek state does not have the resources to tackle that kind of crime, even the Germans didn’t manage to achieve meaningful convictions, just like Illinois by itself could not put an end to the Gangster issue, until the US used serious federal institutions and federal prosecution mechanisms systematically.
Regarding the survey you cited, you don’t point to the source so what I infer is that someone asked people in Greece and Ireland how responsible they feel for the crisis. You seem to think the responses have to do with culture, but there are much better reasons why the Greeks who responded would be less inclined than Irish to take responsibility, for instance the Greek state is more corrupt, unemployment and extreme poverty are more than double compared to Ireland and there’s ultimately a lot more Greeks that could not conceivably acknowledge responsibility for the crisis.
Finally, your example from the US is different. First the US is in a different league than Europe because american institutions, for all the efforts of the republican party, haven’t completely abandoned science and decided to run the country on the basis of astrological charts, which is more or less what the Germans have been doing in the last 2 years. But even there, come on, it’s not the job of the average american to make sure the Fed does its job, it’s yours. Or at least mostly yours. The average american doesn’t get what a sensible monetary policy is, you do and John Taylor does and so does Greg Mankiw. But when some idiot from Texas calls QE “treacherous”, do they come out to say “shut up, you’re an illiterate idiot”?? No, in fact, if someone like Paul Krugman comes out to state the obvious, they accuse him of being “unpolite”. So even in america, this looks more like a failure of a few people with a lot of influence that should have known better (such as Harvard and Stanford professors) than a failure of the average guy to make sure his country is run properly.
In my view, Greeks, Italians and Americans have accepted their fair share of responsibility. Even Germans, you can’t say are responsible for failing to keep their government resorting to astrology and which craft to get out of the crisis, because Merkel looked like a completely reasonable person when she was sharing power with the social democrats and it came as a huge surprised to everyone when we found out that she’s a half-crazy lying demagogue.
To me all these problems seem more rooted to failure of “technocrats” rather than voters, which also explains why the best “evidence” you can find in favor of the opposite view are two examples that are simply and plainly wrong and one example that is mostly wrong.
12. February 2012 at 09:14
orionorbit, I’m afraid you have your facts wrong.
1. The survey I cited was from before the crisis. If you are interested in the details then google my “The Great Danes” paper over at SSRN.
2. You are also wrong about Italian culture. Even the Northern Italians believe the southern culture is dysfunctional in terms of public institutions. That demonstration, even if only a few hundred people, never takes place in Denmark. When people put self-interest or family interest ahead of the common good, bad things happen.
3. You are wrong about Greece. The previous government was basically a criminal enterprise, which intentionally borrowed lots of money and lied to the EU. If they were a private business like Bernie Madoff they’d be in jail right now. Greece is the least market friendly economy in Western Europe (according to indices of economic freedom.) So you are also wrong on that point. It makes no difference what you happen to think about the leaders, I judge them on their actions.
As far as the people are concerned, how does tax evasion in Greece and Italy compare to other countries?
I’ll grant you one point; the blame for our failed monetary policy is less widespread than the blame for many other problems around the world.
12. February 2012 at 09:54
“The 1st amendment?”
Scott, it works and it pisses off liberals.
Next?
12. February 2012 at 15:11
Scott, first realize that it is simply not the case that you can look at labor market and tax statistics and infer that Greece or Italy is a country with a corrupt government. I start with your question on tax rates, yes, tax evasion is a bigger problem in Greece than Germany, but not so much that you can notice it when you look at the data. For instance:
http://www.spiegel.de/fotostrecke/fotostrecke-68269-5.html
That the previous government was a criminal enterprise that would have gone to jail if they were in the private sector is close to the truth but technically wrong. First, they did not technically “lie”, the whole point with paying GS to hide the debt in JPY swaps was that this tactic was not technically illegal. As for the point that if they had been working in the private sector they’d be jailed for the offence of using complex derivatives to Obsure debt for investors, how many AIG executives went to Jail? So yes, you are kind of close to the truth, but you are missing the crucial point that Greece is simply not an example of a country where the government consists of lovable crooks (it’s more like lovable idiots and i’m not even certain about the first part). Even though you are right about things like market unfriendliness, you are still making the mistake to think that Greece is something like UK in the 70s without the number fudging, when it’s more like 30s Chicago. Yes, some politicians are corrupt (just like some Chicago politicians were) but the main problem starts with the real criminal enterprise, i.e. executives of companies like Siemens and Thyssen, which are say 2/3rds Greek citizens running the local subsidiary and 1/3rd headquarter guys in Germany . These guys managed to get away with a 300m fine for overpricing a data system by 0.7 billion (I don’t say so, the German justice system says so) while the mastermind of the bribes remains in Germany which refuses to extradite him because of a stupid clerical error of the Greek prosecutors (imagine say, that Al Capone would get to live in peace in LA and California would refuse to extradite him to Illinois because some Clerk in made a silly or perhaps deliberate error; oh yes, this is what happened). And i’m only citing two cases here, consider for instance that greece pays 3% of its GDP on military expenditure, but if you look at who benefits, you really need to be very creative to find an explanation on why the Greek government gives more money to companies like Thyssen than its American competitors with 10 times the market cap and 20 times the revenue that doesn’t involve high level cross border corporate corruption. The Greek and German justice systems are either unable or unwilling to do anything about these guys.
Think about it this way. Greece has always had a very rigid, inefficient and corrupt bureaucracy. That is why Greek natural unemployment was say 3 points higher than German, 6% for them, 9% for us. Yes, it would certainly be nice if we could do these market reforms and take 300 000 Greeks out of unemployment in perpetuity. Just like Chicago would have benefited by ending prohibition. But if it didn’t put Al Capone in jail at the same time, he would simply find some other illegal activity to make money. So will the criminal enterprise that co-exists with Greek institutions and the issue is not as simple as voting the lovable crook out of Office.
Also, there are many other factors in addition to corruption that explain why the average Greek will be less likely than the average Irish to accept responsibility of the crisis.
Finally, note that the vast majority of the population supported reform (they even voted for the incumbent government in late 2010 local elections, 6 months after they had cut public salaries by 12%) and lost its appetite for any real change only after it became clear that the troika was planning to respond to the debt crisis with voodoo and witchcraft.
(my view on Italy is very very similar so I don’t go into detail, with the obvious exception that Italians haven’t yet had the chance to see the troika work it’s magic.)
13. February 2012 at 11:45
Morgan, They support the first amendment.
Orionorbit, So Greece has lots more criminality than Germany, and that’s supposed to somehow disprove my criticism of Greek culture? I don’t get it. You need corruption in both the private and public sector for this to work. Every single bribe involves both private and public sector corruption. It takes two to tango.
You seem to be assuming I’m claiming the Greeks are bad people. Nothing could be further from the truth. Each individual has to take as a given the culture they are surrounded with. I’m sure most Greeks feel like victims, and I can’t blame them. But I can blame them if they think the problems are caused by outsiders.
As far as the Greek government cheating on the debt, I never said they broke the law, I said if they were a private firm behaving that way they’d go to jail. Governments can break their rules with impunity.
16. February 2012 at 01:33
Scott, I’m not saying so much that you are wrong about culture, what you are wrong about is that you seem to think this is somehow relevant for economics and it isn’t, at least not as much as you think. There was an article by a Harvard professor who was technical adviser to Papandreu today where he said more or less exactly the same things as I mentioned in my post:
But almost none of the moralising clichés were true. Greek taxes were more than a third of gross domestic product, near the European average. And if Greeks were anti-business, why then were there more small entrepreneurs per capita than anywhere else in Europe? Government was not bloated in terms of employees – at a fifth of the labour force, it was about the European average. Corruption was clearly a problem, but our data showed it was concentrated – incomprehensibly to non-Greeks – in the health sector, where minor “gifts” to doctors secured early scheduling of surgeries.”
source:
http://www.ft.com/cms/s/0/48b55f8a-57d3-11e1-b089-00144feabdc0.html#ixzz1mXEr3Sd8
Notice that he makes exactly the same argument as I did about taxes, even though the choice of central government receipts is a bit strange (I chose it because it’s the most relevant data series if the allegation is that people file dishonest tax returns) as you pointed out, the picture does not change whatever data series you might prefer.
17. February 2012 at 06:42
orionorbit, I never said Greek taxes were too low as a share of GDP. They are too low to pay for Greek spending. And I never said Greeks were anti-market. So I don’t see how any of this relates to my post.