Progressive blind spots
David Henderson has an excellent post pointing to the flaw in Matt Bruenig’s claim that there is 24% poverty in the “market economy.”
In a July post, Matt Bruenig estimates that in the absence of government programs to alleviate poverty, the percent of Americans who would be officially classified as poor would be a whopping 23.8% versus what it actually is: 15%.
Go to his article and figure out how he estimated this. It’s relatively straightforward–it’s straight arithmetic.
Now put on your economist’s hat and see if you can find anything wrong with his methodology. I don’t mean that you might find some government program he failed to take account of: he already admits that his measure isn’t perfect from that viewpoint.
Here’s a hint: what is he assuming about human behavior?
I seem to recall that in the old Soviet Union, 25% of food production occurred on the one percent of land set aside for private gardening. I suppose one could claim that the “market economy” in the Soviet Union only produced 25% of the food needs of the Soviet people. For readers of this blog the knee jerk reaction would be to mock or ridicule the blindness of Bruenig. How could Bruenig overlook the obvious?
But in truth this is a common mistake, which suggests to me that the brains of progressives are simply wired differently than the brains of libertarians. I recall that when I was a sophomore at Wisconsin my professor made a similar claim to Bruenig. I raised my hand and made David’s point. The professor graciously agreed. And this was a leading expert on poverty at a top 20 economics department. He just didn’t see the obvious, before I raised my hand.
People don’t like to be ridiculed. It’s a mistake to think progressives understand this point and choose to omit it. If they saw it, there would at least be a “to be sure” snuck in somewhere. Here’s another example from the Bruenig post:
The most frustrating thing about poverty (disposable income poverty, not market income poverty) is that it’s unbelievably easy to reduce. In newspapers and blogs and even some think tanks, people scratch their heads into bloody messes acting (or maybe genuinely being) puzzled by this as if it is some great policy challenge. American pundits speak about poverty reduction as if it is a new frontier that nobody has ever figured out.
But it’s not a new frontier. Other countries have figured it out. Our own country, in its better moments, has figured it out as well. Since 1967, the only thing that has reduced poverty in this country is non-market income. We cut elderly poverty down by over 70% through non-market incomes. We cut disabled poverty rates in half each year (we should do more) through non-market incomes. Super-low poverty countries get that way through non-market incomes as well.
In fact, we spent trillions on the War on Poverty. Unfortunately, poverty won and we lost. Don’t believe me? Isn’t the blogosphere full of progressives complaining that the poverty rate is just as high as in 1967? I’m actually more optimistic about the living standards of most poor people than the typical progressive. Their living standards have risen with the general population. But if “non-market income” actually explains the gains made by the poor, then this suggests that non-market incomes have merely crowded out market incomes.
It’s absurd to claim that it’s “easy” to solve a problem like poverty. Yes, it’s easy if you are dealing with a group of people for whom you don’t have to worry about work disincentives. Obviously it’s easier to reduce poverty for the elderly, since they are mostly retired. Nixon did that. That would also be true of the disabled, if we could accurately measure disability. (The fact that we cannot partly explains the huge surge in disability, even as Americans are healthier than ever before.)
That’s not to say we can’t do anything. I’d eliminate all occupational licensing laws and all minimum wage laws and all “welfare.” Legalize employment contracts between consenting adults. No more chronic involuntary unemployment. Then I’d institute a large wage subsidy for low wage jobs. But it wouldn’t be “easy,” there’d be lots of fraud in my preferred program.
In fairness, the way libertarian brains are wired also leads them to overlook lots of obvious points. Which ones? How the hell would I know, I’m a libertarian! Ask Bruenig.
PS. I have a response to commenter ‘Fed up’ on the “middle class squeeze” over at Econlog.
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26. September 2014 at 07:12
Multi million dollar windfalls can’t permanently eliminate poverty as demonstrated by the ~10-20% of basketball and football players who are flat broke within years after retirement.
26. September 2014 at 07:41
1800-level poverty was essentially eliminated by 1900. 1900-level poverty was essentially eliminated by 1950. 1950-level poverty has been essentially eliminated today.
The real problem with “relative” poverty measurements is that they don’t measure anything useful.
http://www.heritage.org/research/reports/2014/09/the-war-on-poverty-after-50-years
Today, 80% of the poor in the United States have air conditioning, which almost no one had in 1950 — which at the time, was the highest living standards, by far, that any human civilization had ever enjoyed.
If we were a more reasonably society, we’d all use absolute measures of poverty.
26. September 2014 at 07:55
Given that liberals and conservatives have different personality profiles — which are some of the most stable individual traits in psychology — I think we can have a strong prior that libertarians and progressives *are* wired differently.
— and of course, in a totally useless and reductionist sense– two people who believe different things must be wired differently, given that beliefs reside in the brain.
26. September 2014 at 07:55
“I’d eliminate all occupational licensing laws and all minimum wage laws and all “welfare.” Legalize employment contracts between consenting adults. No more chronic involuntary unemployment. Then I’d institute a large wage subsidy for low wage jobs.”
Question. Does the no more chronic involuntary unemployment statement rely on the supply corrections you advocate or are you implying an unstated targeted NGDP world?
Another question: What do you think of a universal minimum income as an alternative to a wage subsidy? Isn’t it more neutral?
26. September 2014 at 08:08
“In fairness, the way libertarian brains are wired also leads them to overlook lots of obvious points. Which ones? How the hell would I know, I’m a libertarian! Ask Bruenig.”
Brilliant.
26. September 2014 at 08:08
So I understand, the blind spot is that absent the after-market transfers we would have less poverty because the recipients of the transfers would change their behavior?
The US didn’t have many after-market transfers for a long time. Why did we institute these programs if rational individuals modified their behavior to avoid poverty?
26. September 2014 at 08:23
Talldave, Yup.
Elwailly, It depends to some extent on how good or how bad monetary policy is. I’d prefer to deal with cyclical unemployment with self-funded unemployment insurance, not welfare.
I see a universal minimum income as more distortionary, as it discourages work. But it’s certainly an option. My guess is that it would be set too low, or if it was set high enough it would severely discourage work. People would be content going through their entire life living off of it. To prevent that, society would make it too low to support the disabled.
26. September 2014 at 09:11
And legalize pushcart vending too!
26. September 2014 at 09:46
To be clear, a basic income might lead some folks to exit the workforce, if it was set high enough. That might be politically unpalatable to some. OTOH, the folks who would choose so are those with lowest marginal product, so it’s arguably not a significant loss from an economic POV. Anyway, perhaps the most politically acceptable policy would be a combination of (mildly expanded) EITC + a low but unconditional BI, to improve poor folk’s bargaining power in the labor market.
Redistribution is not the only relevant policy here, education and healthcare are also important.
26. September 2014 at 09:53
Some people advocate “open borders”. Would that make a wage subsidy a *global* wage subsidy? Sounds too expensive or not “large”. Even semi-open borders could be problematic, if we have an immigration system that favors lower productivity workers.
Your suggestions that reduce friction (open licensing and contracts, deregulation) are great. Another key item is portable health insurance. When people feel free to quit their jobs and start up a business, we will have more income mobility.
26. September 2014 at 10:30
The anti-Bruenig;
http://www.amazon.com/Please-Stop-Helping-Us-Liberals/dp/1594037256/ref=sr_1_1/185-8849044-7093632?s=books&ie=UTF8&qid=1411756039&sr=1-1&keywords=please+stop+helping+us
‘In Please Stop Helping Us, Jason L. Riley examines how well-intentioned welfare programs are in fact holding black Americans back. Minimum-wage laws may lift earnings for people who are already employed, but they price a disproportionate number of blacks out of the labor force. Affirmative action in higher education is intended to address past discrimination, but the result is fewer black college graduates than would otherwise exist. And so it goes with everything from soft-on-crime laws, which make black neighborhoods more dangerous, to policies that limit school choice out of a mistaken belief that charter schools and voucher programs harm the traditional public schools that most low-income students attend.
‘In theory these efforts are intended to help the poor””and poor minorities in particular. In practice they become massive barriers to moving forward.’
26. September 2014 at 11:23
Hopefully you are right.
I often find it hard to believe that progressives possess much intellectual integrity.
26. September 2014 at 11:47
Dear Commenters,
Yikes!
Is the graph of inflation expectations at Sober Look accurate???
26. September 2014 at 11:57
Kevin Erdmann: Uh-oh……..
idiosyncraticwhisk.blogspot.com/2014/09/inflation-etc.html?m=1
26. September 2014 at 13:11
I’m not a leftist, but I would imagine that they would argue that the biggest libertarian blind spot is failure to see social pressures as coercive. for a lot of people getting fired would be a much more serious issue than breaking a leg, but libertarians have a much bigger problem with “do this or I’ll break your leg” than “do this or I’ll fire you” for any value of “this.” Of course, libertarians would respond that threats of violence are categorically different than other types of threat, and I tend to agree with them, but the progressives I know seem to see things a little differently.
26. September 2014 at 13:57
Cassander,
Good point. In general, I think that coercion is hard to define because (a) the psychological involuntary harm vs. physical involuntary harm distinction is hard to define and (b) that distinction probably doesn’t fully map with the coercive/non-coercive distinction.
26. September 2014 at 14:24
TravisV, perhaps strong economic news
http://www.marketwatch.com/story/us-second-quarter-gdp-growth-revised-up-to-46-from-42-2014-09-26
leads markets to expect the Fed to continue/accelerate tapering.
What is clear is that, since rates bottomed out on August 28, real yields have jumped smartly (up more than 0.3%) and breakeven CPI has come down more than 0.1%. Sure looks like expected tightening, but maybe that’s OK if the economy is close to being able to stand on its own two feet.
26. September 2014 at 15:17
Bruenig specifically compares the US in this regard to places like Denmark and Sweden to rebut Henderson’s point. Most of these countries – including the US – have quite similar pre-transfer poverty rates, but after transfers the poverty rates in some are vastly less than those in others. Ergo, it’s the transfer that’s making the difference.
Maybe the poverty rate would be slightly less than the pre-transfer rate if the program didn’t exist, but I’m skeptical they’d be better off than with the transfers. You can see that in the data on elderly poverty in the 1960s, which went down considerably in the 1960s with the addition of Medicare and the set-up of a regular system for indexing payment amounts to inflation.
@Scott Sumner
I don’t. What actually happened was that we fought a war on poverty from the mid-1960s until the late 1970s, and poverty was decisively losing – the poverty rate in 1975 (in the midst of a bad downturn, worse than the Great Recession) was about the same as that in 1999, at the height of the tech boom with low unemployment and a tight labor market.
But after the 1970s, we more or less gave up on fighting poverty. A whole range of programs targeted at the poor – ADFC, public housing/housing subsidies, food aid – were allowed to stagnate until the 1990s. At which point, the fact that conditions had gotten worse from the programs being neglected was used as proof that they were bad programs, and they were weakened. Poverty wasn’t too horrible because welfare reform happened in a boom, but once the boom went down the poverty rates went back up.
26. September 2014 at 16:15
It is well to remember that the US government also spends one trillion dollars a year on “national security” and we never seem to win the war for national security either. DoD, VA, DHS, blab budget, pro-rated debt payments.I am happy to question the efficacy of social welfare spending, but why is “national defense” spending always sacred?
26. September 2014 at 19:21
The silliest part of Bruenig’s article is the assumption that poverty among the elderly would increase from 9.1% to 46.5%. If you assume no social security and medicare payments, presumably you should also assume no prior social security and medicare taxes. Obviously, in that world people would have saved more.
But we can certainly agree that the social security system has substantially reduced poverty among elderly. To my progressive mind, it’s a great system, providing social insurance without a lot of bad incentives: it applies mainly to workers over 65 and scales by income. (Okay, there are likely some recently increasing problems with SS disability payments.)
Incentives matter. I agree we shouldn’t have subsidies with thresholds that effectively penalize someone for working more.
Blindspots of libertarians? Perhaps: seeing licensing and minimum wage laws mainly as restricting supply and access to work, and not as providing wage leverage. The theory is that in a free market, a worker should earn the marginal value of his labor. But in practice, things seem a *lot* more complicated. Does the union worker generate twice the marginal value of a non-union worker? Have CEO’s become insanely more productive in the last 30 years? Do janitors for financial firms produce substantially more value than janitors at restaurants?
If you get rid of minimum wage and then provide a large wage subsidy, how do you stop Walmart or Target from paying $2 an hour? In that case, you’d be giving a big chunk of the subsidy straight to the Walmart shareholders.
26. September 2014 at 19:35
Okay, a bit further thought about no minimum wage plus large wage subsidies. If Walmart and other stores could get people to work for less (since they’d net enough with the wage subsidy), then presumably the cost of what they sell would go down. Walmart couldn’t keep the profit. If they tried to, someone else would come in and undercut them (while paying their workers a low wage).
So is the effect of the wage subsidy to make things cheaper for everyone? Is that the intended mechanism?
26. September 2014 at 20:14
Hello Professor Sumner! It’s been quite some time. Although I don’t have a comment on the topic itself, I did find some articles in History of Economic Ideas and in the History of Economics Review that I thought you might be interested in. I hope you find them useful!
http://www.hetsa.org.au/pdf-back/29-A-5.pdf
http://www.hetsa.org.au/pdf-back/29-A-6.pdf
http://www.hetsa.org.au/pdf-back/20-A-9.pdf
http://www.hetsa.org.au/pdf-back/17-A-4.pdf
http://www.hetsa.org.au/pdf/41-A-6.pdf
http://www.jstor.org/stable/23722355
http://www.jstor.org/stable/23723201
http://www.jstor.org/stable/23722750
http://www.jstor.org/stable/23723578
http://www.jstor.org/stable/23722751
http://www.jstor.org/stable/23722834
http://www.jstor.org/stable/23722408
I know this is a lot of links and that you have only so much time, but in them, there are articles about Irving Fisher, the Chicago Plan, Italian views on Free Banking, and colonial currency boards. I hope I have been of some help!
26. September 2014 at 21:11
Way OT, but I know there are a lot of China-watchers here.
From Dow Jones:
09/24/2014
Chinese Leadership Is Considering Replacing Central Banker Zhou Xiaochuan, Party Officials Say
Lingling Wei and Bob Davis broke the news that China’s long-serving central banker Zhou Xiaochuan may be shuffled out of his post.
BEIJING–China’s long-serving central banker Zhou Xiaochuan-the face of the Chinese economy to markets globally-may be swept out of office.
Chinese leader Xi Jinping is considering replacing Mr. Zhou, say party officials, as part of a wider personnel reshuffle that also comes after internal battles over economic reforms.
The discussions occur as Mr. Xi, now two years in office, tries to place more allies into top positions in the government, military and Communist Party, according to the officials with knowledge of the plans. The personnel shifts are expected around a major party conclave to be held next month, the officials said, while cautioning that no final decision about Mr. Zhou has been made….
–30–
I have long contended that part of China’s success is a pro-growth central bank that answers to the CCP. The PBoC has been undershooting inflation targets of late, in the 3-4 percent range. The CCP wants more growth, and dislikes some reforms they think will curtail growth.
Ironically, the commies may be better central bankers than capitalists, the latter obsessed with even minute inflation.
See this:
“In China, the central bank-known locally as “yang ma,” or “Big Mama”-isn’t independent. For major decisions, it needs approval from the State Council, and sometimes the ruling seven-member Politburo Standing Committee, the inner sanctum of party power.”
Well, maybe we can take in the departing Mr. Zhou at the Federal Reserve. The FOMC could probably learn a lot from the PBoC.
26. September 2014 at 23:43
It’s easy to win (or lose, whichever you prefer) the war on poverty. You just control the definition of “poverty”.
And, if you think you might be losing the war on definition, you can always start another war, such as the “war on inequality”.
There is no shortage of wars to be fought!
27. September 2014 at 02:37
Off topic,
It’s fairly well-known that people working in active financial management tend not to be keen on the Efficient Market Hypothesis, but there is one professional investor I know who mentions it in every other interview: Mark Matson. His company’s entire approach it based around (a) handling portfolio diversification across hundreds of investments and (b) persuading clients not to panic when e.g. stocks go down. And, it seems, very little else.
I mention this because he’s one notable investor I know who views the world in quite a market monetarist way, e.g. when he has been asked about inflation, he says he doesn’t worry about it because the market doesn’t expect it. I doubt he supports NGDP targeting (although he may) but I do find him a useful reminder that the world of finance isn’t full of Peter Schiff/Warren Buffet types.
27. September 2014 at 04:47
Brett,
Sweden and Denmark are very different countries with very different populations than the U.S. As Milton Friedman remarked when people pointed out that Sweden had eliminated poverty, Swedes in America have eliminated poverty as well. As Scott has pointed out so many times, the thing that plays the biggest part in determining income equality is ethnic diversity. Even in African countries, some ethnic groups like the Ibo in Nigeria, make more money than the rest of the population. The Chinese seem to do well whether they are in Uganda or Singapore. You can’t just copy one country’s policies and expect the same result.
27. September 2014 at 05:53
Anon, I’ll do a post on the GAI today.
Don, Yes, it would make the program far harder to implement.
Cassander, Good point.
Brian, So RGDP grew at a 1.25% rate in the first half, and they expected 3%, and they are going to respond with tighter money?
Brett, You said:
“Maybe the poverty rate would be slightly less than the pre-transfer rate if the program didn’t exist, but I’m skeptical they’d be better off than with the transfers.”
That’s quite a sentence. “Maybe?” You mean there is some doubt? Has American liberalism really declined that far in the age of Piketty? “Maybe” the millions of people with zero income today might arrange their affairs differently if there was zero welfare and they preferred not to starve to death? Maybe we can stop using the term “maybe.” Can we at least move to “probably?” Or better yet “certainly.” Sorry for the snark, but the error in Bruenig’s claim isn’t even debatable.
The second part of the sentence “may be” true, but of course has no bearing on either my post or David’s post.
As far as the rest of your post, I disagree entirely. I already addressed the issue of the elderly in my post, read it again. You say the fall in poverty in the late 1990s was distorted by the booming economy, but then you tell me that poverty fell in the late 1960s because of government programs. Weren’t we booming just as much as the 1990s? And wasn’t the rate of poverty falling even before the late 1960s? And wasn’t the fall in the 1970s due to the big jump in Social Security benefits?
If the War on Poverty was abandoned in 1975, then where has all that spending gone? And does this mean you won’t object if the GOP tries to eliminate the War on Poverty, because it’s already gone?
maxk, You said:
“Does the union worker generate twice the marginal value of a non-union worker? Have CEO’s become insanely more productive in the last 30 years? Do janitors for financial firms produce substantially more value than janitors at restaurants?
If you get rid of minimum wage and then provide a large wage subsidy, how do you stop Walmart or Target from paying $2 an hour? In that case, you’d be giving a big chunk of the subsidy straight to the Walmart shareholders.”
Yes, the Union worker generates twice the MP, even if the workers are equally skilled. The MP also depends on numbers of workers.
Yes, CEOs have become vastly more productive recently, as CEO skills are vastly more important to a modern firm than to a firm of the 1960s.
Janitors at a financial firm may have a greater MP than janitors at a restaurant. The financial firm has more at stake from good service, and may prefer to hire the cream of the crop of janitors.
Markets are far more subtle and sophisticated than you imagine.
I see you’ve saved me an answer on your second assertion–now use that sound reasoning on the claims in the first paragraph I quoted.
Blue, How will those articles change my current views. Be specific.
Vivian, Good point.
27. September 2014 at 07:30
“Isn’t the blogosphere full of progressives complaining that the poverty rate is just as high as in 1967?”
Policy turned to the right with Reagan/Thatcher and with Clinton who dragged Democrats to the right. Remember he “reformed” welfare and gave it to the states?
As policy has been pushed to the right, so has poverty increased. Which makes since since eliminating poverty isn’t one of the Republicans’ priorities. They just blame the victims.
The Fed is the main anti-poverty program, unlike in Europe. So as the Fed has failed to keep NGDP up, so poverty has increased. Poverty is much less of an issue in Europe. Basically progressives would like our social insurance to be more like Europe’s. But this progressive believes the Fed has done a better job than the ECB. Others don’t focus on this as they have a weird blind spot when it comes to monetary policy as Yglesias points out.
27. September 2014 at 07:42
W. Peden:
“It’s fairly well-known that people working in active financial management tend not to be keen on the Efficient Market Hypothesis”
I think it goes deeper. Capital markets cannot even function without active investment. It is not about investors believing in an esoteric financial theory or not, it is whether that theory really even describes what is going on. The more intelligent among the EMH theorists know it doesn’t describe what is going on.
27. September 2014 at 07:59
‘What actually happened was that we fought a war on poverty from the mid-1960s until the late 1970s, and poverty was decisively losing.’
As it had been in the two decades preceding the announcement of the War on Poverty.
27. September 2014 at 08:06
I would like to hear Matt Bruenig define poverty in concrete consumption terms.
Also our system has increased the temptation to work for unreported cash.
27. September 2014 at 08:08
Also according to this we have won the war on poverty.
27. September 2014 at 16:02
@Scott Sumner
I don’t think it would be Bruenig’s full 46.5% estimate, but I almost certainly think it would be much more than what it is now. Again, look at the poverty rates among the elderly before Medicare and the standardization of Social Security payout indexing.
Why do you think I pointed specifically to 1975? Go look at the data on unemployment and GDP for 1975. As I pointed it, 1975 was the trough of a recession worse than what happened in 2007 in terms of the sheer size of the contraction. If growth was primarily responsible for the dropping poverty rates, they should have shot back up hard like they did with the recession in 2007. They did go up, but not by much – and as I pointed out in my post, the level of poverty in the middle of that recession was lower than that in the height of the 1990s tech boom. Think about that.
If you don’t bother increasing funding levels and programs in the face of inflation, they just become less and less effective over time. And it’s not just income supports like the AFDC – programs for additional public housing, or even additional subsidies to build more housing for low-income people (like Section 8 vouchers) dropped off.
That didn’t happen to Social Security, which was indexed properly to a measure of calculating inflation and thus didn’t suffer declines in the real purchasing power of the income support it provided to old people. Not surprisingly, it’s still a very effective anti-poverty program.
27. September 2014 at 21:44
Well, I wasn’t thinking about how they would change your views, so much as whether they would provide support for them. I believe Malcolm Treadgold’s article in the History of Economics Review would provide some historical insight into the way a currency board operated, though I am fairly certain that you are well read in economic history.
There is a piece by Sean Turnell in the History of Economics Review that reveals the influence of A Tract on Monetary Reform by J.M. Keynes upon the minds of Australian monetary reformists that I thought might be of use.
George Towadros and Imad Moosa have an article dealing with foreign exchange rates in the history of economic analysis in the same journal…I don’t know whether you have tried to make a globalized version of Market Monetarism yet, but I think that this piece might aid your thoughts on how to make one. (I also believe that a pattern would form if one were to trace your writings on the economies of foreign nations like China.)
There is also an article on the gold standard and the New Deal by William Coleman that I thought would interest you in the same outlet.
As for History of Economic Ideas…I feel I’ve gone on long enough, so I’ll just name two.
There is an article by Estrella Trincado Aznar in Vol. 13, No. 1 (2005) of this outlet that discusses the philosophical underpinning of “Authoritarian versus Libertarian Monetary Policies”, which examines the utilitarianism of Jeremy Bentham vis-Ã -vis David Hume and Adam Smith.
But I think the article that you will find most useful and interesting of all is Carl C. Wennerlind’s article (“The Humean Paternity of Adam Smith’s Theoryn of Money”) in Volume VIII, No. 1, 2000 of History of Economic Ideas. David Hume and Adam Smith were contemporaries and correspondents, so it is no surprise that Adam Smith took a lesson or two from his fellow Scotsman.
28. September 2014 at 05:28
Peter, First of all if you were to measure poverty by American standards you’d find plenty of poverty in Europe, probably moire than in the US. When you think of “Europe” recall that Romania and Bulgaria have far more people than Scandinavia. The Roma in Europe are much poorer than African Americans. So their welfare state certainly has not solved the problem. Most poor in America get free education and health care. They also live in bigger houses and have more “stuff” (cars, appliances, etc) than the poor in Europe.
I was not aware that Reagan and Thatcher sharply cut back on the welfare state. I lived through that era and don’t recall anything like that happening. Government spending under Thatcher was stable, and is currently higher in Britain than in Germany, as a share of GDP. In the US reductions in “welfare” were more than offset by increases in food stamps, EITC, and other poverty programs.
I do agree that there is less poverty in Switzerland, but of course Switzerland has much lower public spending than the US. Do you want us to copy Switzerland?
Floccina and Patrick, Good points.
Brett, You keep mentioning the elderly, which I specifically exempted from my criticism of Bruenig.
I guess you keep mentioning 1975 because you don’t know the history of Social Security in America. Ignoring the elderly, there was lots of reduction in poverty from 1945-67, and then the fall in poverty rates for the non-elderly stopped just a few years after the War on Poverty STARTED in the late 1960s. This has all been documented. Read Losing Ground, for instance, which has all the data.
I agree that Social Security has reduced poverty, but a program that was somewhere between the US and Singapore programs would have been even better.
Thanks Blue.
28. September 2014 at 18:06
Scott: “Yes, the Union worker generates twice the MP, even if the workers are equally skilled. The MP also depends on numbers of workers.”
I don’t have the background to really judge that statement. I’m still dubious, but maybe that’s a blind spot of mine, or plain ignorance. In that case, why do companies fight so bitterly against unionization of their workforce? Have American workers always and everywhere been paid their marginal product? And if not, what’s special about today?
As for CEO’s, again I don’t know the theory but again I am dubious. I see abstracts of papers that imply correlations between high salaries and poor corporate governance (but lack the time and background to judge the details). Your explanation – “CEO skills are vastly more important to a modern firm than to a firm of the 1960s” – is plausible sounding. But to me, so are alternatives. The circumstances of CEO salary decisions – small numbers of individuals, each job different, etc. – must be quite far from the assumptions of any model that implies wage = marginal product. Certainly you’ll admit there are particular cases where an individual CEO salary was crazily wrong.
28. September 2014 at 19:40
You’re welcome, Professor Sumner. Does the Bentley University Library have a subscription to either the History of Economics Review or History of Economic Ideas?
29. September 2014 at 05:22
maxk, I discuss all this at Econlog.
Blue, I don’t know.
29. September 2014 at 06:29
“Yes, the Union worker generates twice the MP, even if the workers are equally skilled. The MP also depends on numbers of workers.”
– !@#$!@ Whah!!! This seems to fly in the face of every right wing argument I have ever heard about unions. I thought Unions killed detroit? Now, I read you saying they produce twice the MP….
“Yes, CEOs have become vastly more productive recently, as CEO skills are vastly more important to a modern firm than to a firm of the 1960s.”
– Really? Maybe I am ignorant here but why would this be? Why are their skills more important in what way are they more productive?
Janitors at a financial firm –> may have <– a greater MP than janitors at a restaurant. The financial firm has more at stake from good service, and may prefer to hire the cream of the crop of janitors.
– Completely disagree. Customer service is the restaurant biz. Bad service = out of business, period.
"Can we at least move to “probably?” Or better yet “certainly.”"
– I don't know, can we?
29. September 2014 at 15:53
[…] recently, Sumner’s mission creep has him opining rather strangely about poverty in America, with a focus on yours truly. The post is […]
29. September 2014 at 17:01
Scott, perhaps you’ve already seen it, but Matt Bruenig has written a rather nasty reply to you.
I wont post the link because whenever I do my comment gets held up. Just google Matt Bruenig dot com to find his blog.
29. September 2014 at 18:16
Bruenig:
“Lastly, libertarian brains generally (Nozick excepted) fail to realize that property is theft, which it is.”
Property is theft? Property is a template for resource use. Too bad we don’t have property templates for our time use.
29. September 2014 at 19:20
LOL, property is theft.
Has Bruenig even gone into the details of Proudhon’s writings, and the various critiques? Of course he didn’t. If he did, then he would have learned that theft implies property. You can’t claim something is being stolen without tacitly assuming that it is owned.
Proudhon also wrote that ‘Property is Freedom’:
“In the System of Economic Contradictions, having recalled and confirmed my initial formula, I added another quite contrary one rooted in considerations of quite another order””a formula that could neither destroy the first proposition nor be demolished by it: Property is freedom. […] In respect of property, as of all economic factors, harm and abuse cannot be dissevered from the good, any more than debit can from asset in double-entry book-keeping. The one necessarily spawns the other. To seek to do away with the abuses of property, is to destroy the thing itself; just as the striking of a debit from an account is tantamount to striking it from the credit record.” – No Gods, No Masters: An Anthology of Anarchism, pg 55-56
30. September 2014 at 05:11
Guys,
I and another fellow have a standing offer for $250 for Bruenig if he debates me for 90mins. Bruenig deletes anything I write at his blog that mentions my takedown of his property arguments:
https://medium.com/@morganwarstler/whack-a-bruenig-d6a1f0489ebd
30. September 2014 at 05:41
This was the first one:
https://medium.com/@morganwarstler/do-progressives-fake-naivete-94eedc4c961d
—–
The CATO / Bleeding Heart Libertarian crowd bring it down on us IMO…
There’s no reason to get bogged down in Non-Aggression trying to make some righteous moral argument.
Ultimately, some of us will use force to claim things as ours, and the terms of the debate are within the boundaries of the normative frame maintained by the hegemony (generally those who spent part of earning life in top 20%).
GICYB isn’t my perfect anarcho-capitalist prototype, is it formulated by me staying INSIDE the box of what is will be required and allowed by the hegemony.
I learned Libertarian theory from Bruce Goldberg who converted Nozick, and had a couple of campus debates between Bruce and myself and I never had a problem arguing Libertarian theory without any kind of moral claim – that stuff is just a nice religion.
Some guy says he believes in God. God says he has property.
What do I care? What it comes down to is what the guy willing to keep his property?
His rationale is meaningless.
And I’m certainly not going to spend time arguing about whether there is a god.
And I’m certainly not going to let go of my property if 50% of the population decides there is no god.
And I’m not interested in publicly backing some religious zealot screaming god ordained his property by divine right.
I’m going to make crazy new things nobody has ever seen before, identify all the the other guys who make sh*t, form an alliance with them, and attempt dominate by any means necessary whatever other framework that gets in the way of my getting to make what I want and keep what I make.
Now if you call this violence, I’ll nod and agree.
Call it theft, I’ll nod and agree.
If you say it is just, I’ll nod and agree.
If you complain a lot, I’ll try to find a new policy to get you to stfu.
If you want to make and keep new sh*t, I’ll welcome you to the team.
But I don’t wake up everyday worrying about god, or justice… I wake up everyday to make shit I want to see & stuff that will get the unhappy people to stop complaining.
But I got less than 100 years on this rock, and I’m damn sure willing to risk those years, if I don’t get to do what I want.
And Matt?
He won’t risk sh*t. He’s just a complainer. And most of the people he’s talking do, DESERVE (argumentative ethics) to know that they will likely die if they buy into no property.
They DESERVE to know, that Matt could be spending his time trying to find a policy the hegemony will accept.
They DESERVE to know Matt knows these things, but he’s got a Che T-shirt to sell, and the path for the progressive blogger is to RUN LEFT until you have a following, and then RUN RIGHT until you can get paid.
Hegemony is a fact.
Libertarianism is a part of the discussion amongst the hegemons about whether they are getting a good enough deal under their current arrangement.
30. September 2014 at 05:46
Morgan,
your argument seems to be: the rich are stronger than everyone else so everyone else should just do as they are told.
What kind of an argument is that?
I have no idea why you think the word ‘libertarian’ accurately describes such a position.
30. September 2014 at 05:54
really you’re a sort of might-makes-right authoritarian.
For some reason you have mistaken this for ‘libertarianism’.
30. September 2014 at 07:51
Student, I did a Econlog post a couple days ago that addresses your concerns.
30. September 2014 at 09:15
your argument seems to be: the rich are stronger than everyone else so everyone else should just do as they are told.
What kind of an argument is that?
I have no idea why you think the word ‘libertarian’ accurately describes such a position.
Phillippe I’m a REALIST. Scott calls himself a utilitarian, but I don’t want to get bogged down too much in hedona dn dolors…
Instead;
“Free marketers are hegemons debating whether the current government is worth it to themselves and other property owners. Most Americans / Texans / Ohioans with skills and capital are able and willing to pick up and move between US states and countries.
Own property in one place, own some wherever you go.
As such, Libertarians comfortable with the real value of their own human capital, are not arguing out of radical ideology or pure greed. They just believe the US has succeeded historically because of the procedural justice enshrined by their hegemony. It is a better environment for humans to thrive.
130K American children are not bum rushing the Mexican border.”
—-
Philippe I’m not talking about the rich. The hegemony can TAKE FROM the rich. I advocate we do. But it’s the not poor who run the battlefield…
Philippe talk to someone who was standing in USSR when it fell, about how “spontaneous order” really happened. HInt: smart guys paying big guys to protect their stuff. Look at the guys standing at the store fronts in US riots with guns.
That human instinct is the same thing driving Bitcoin, it the same thing that hackers and businessmen, and anyone who can mold the world more toward their image than others has…
And that’s not authoritarian. It’s human.
There can be charity. Privately I think there SHOULD AND OUGHT to be charity. But what I think about that doesn’t get around the baser fact:
Charity flows not from haves to have nots… that’s short term.
Long term, it flows from those who tend to not need help to those who tend to need help.
And in any system, those with who tend not to need help are going to make the rules.
—–
Put it this way, the proof of my argument is how little violence there is the world. If the hegemons weren’t benevolent, we’d have blood flowing in streets.
Instead they only set boundaries of what is not acceptable, they are required required to make a CREDIBLE THREAT of violence.
Chuck Norris doesn’t have to actually be that violent. 🙂
30. September 2014 at 10:26
“It is a better environment for humans to thrive”
do you think the aim should be to create a society in which the greatest number of people can thrive? If so, then it might be possible to have a rational debate about the kind of society that would be most likely to achieve that aim.
But then that would require you to think and argue in a clear, precise, logical, and non-contradictory manner, which you obviously find rather difficult.
30. September 2014 at 23:17
I see, Professor Sumner. Are you going to ask the staff at the Bentley University Library whether they have a subscription to History of Economic Ideas or the History of Economics Review?
1. October 2014 at 10:03
Blue, No.
1. October 2014 at 16:15
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