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04/18/2010

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John

Again, Posner remains as apologist for all that is wrong with our economy and basically uninformed.

OPEC was formed in 1960. It gained control over the price of Oil in 1973-74. Since that time we have paid trillions in tribute for oil, reducing our standard of living of those most impacted by higher oil prices---those in our lower income brackets.

Until the United States does whatever it takes to re-gain control over the price of Oil (and Energy) we will continue to decline on all fronts.

For example, we could easily pay the burden of increase Social Security or Medicare, if we were not spending billions and billions, every day, for imported Oil

NEH

Chris, "whether or not the private sector can effectively run such programs is also another matter". Look at what K-Street, Wall Street and the Finance Industry and what they have wrought as of late when allowed to run free.

As for "Justice"; distributive, social, economic, or otherwise, this reminds me of a trial where the defense pleads for Justice, Justice, Justice, and the Judge prior to deliberation by the jury says, "This ain't no Court of Justice. This is a Court of Law". And who and what promulgates Law?

Brian Davis, Austin, TX

Truth be told, we haven't moved the living-wage riddle a centimeter. We can continue to let the corporations and Wall St push the middle class down until it vanishes here and flourishes elsewhere. But that's counterthetical to good order, positive morale, healthy living, stable families, and people's constructive dreams - comparing, at least, the U.S. I grew up in with today's. You shouldn't HAVE to chase piles of money to live a respectable and rewarding life. Lots of needs, wants, and bridge trolls - like entitlement taxation and spending, healthcare and educational expenses, growth of government, indulgent consumption, foreign oil, - have pushed ordinary working people - in turn our economic society - too close to the brink. I don't claim to have better answers than the next wag. I was listening to President Obama today talking about income tax rates. He proposes we revert to the Clinton era ('93 tax bill) marginal rates on taxable incomes above $250K. I thought to myself, "You know, Barry, you didn't pass healthcare swinging for singles. Why don't you go back and look at where income tax rates went under Dick Nixon. We were paying for a war then. Now we're paying for two, PLUS everything else." I'm willing to take a chance on that brand of trickle-down because SOMEBODY has to lead, SOMEBODY has to lift America's spirits, SOMEBODY has to expand opportunity, and Ronald Reagan has left the building. (P.S. Healthcare was a grossly bad bill. But it can be fixed before it does any terminal damage.)

Jack

Chris: With all this focus on "right" and "nature" I'd say you're on thin ice in the globally warming subarctic spring sunshine.

How far would you take this "right?" and the current trouble trend? To an endstage where a tiny percent of us own 95% of the wealth of our once fine nation? While the rest return to a wretched serfdom?

Perhaps you could get a glimpse of "nature" by going back to the Indians who cooperatively managed the grasslands for bison, but since they didn't "own" land and food couldn't be stored for long, there wasn't much reason for them to try to amass "wealth". Once "wealth" could be stored it was, to say the least, a game changer.

No, all these societies are man made constructs and subject to both the wisdoms and follies of man. Just now trying to harness the power of capitalism seems our best shot, unless, as you touch upon in mentioning the SC's outlandish and uncalled for activism of deeding yet MORE power over our democratic institutions to "our?" souless, mid-ocean based corporations busily engaged in abusive tax transfer pricing schemes and "offshoring" our very seed corn.

Given the mess we're seeing, and its paralells to the 30's and its skirmish with socialism and even communisn, I'm not sure we won't be called upon to either greatly reform what's left or design something else.

You did "argue" for there being plenty of room for private charity, and Ha! I'd have to give you that point -- plenty of room! But hardly the volume to cover for a system that isn't working for some 30% of its people and becoming some badly disfigured monster that instead of freeing people to pursue their dreams is sweeping 30% of all the wages paid to a top 6% who then whine about the percentage of taxes they pay.

Nothing that I wrote could be misconstrued as "paying tribute" to "buy off criminals". But, say there was a choice between letting things ferment in areas where 30% unemployed is not far from the norm leaving all too many to live on wits and whatever, for the few years before they're imprisoned at $50k per year, and offering them productive work, from the government as employer of last resort if need be, that they'd have a chance to develop work habits, have some pride of accomplishment and become a functioning member of our society. Does one sit around pontificating about "right" and "nature" while the starve where they stand, engage in vice? or foment revolution and tear down the whole works?

We need some answers here soon as our economy did not approach full employment during the eight years of low taxes (for some) and hefty deficits. Housing was the last leg of that economy and it is now just one fifth what it was at the peak. The joblessness is not cyclical, at least in the near term, but structural with our not seeing anything close to full employment for the next decade.

So what's the prescription? To gamble that a combo of misguided Tea Partiers and a very long "hot summer" doesn't turn into something much worse?

Chris Graves

Question for Jack and NEH: So what is wrong with inequality in income distribution and the shenanigans on Wall Street if they acted within the current statutory law, or even serfdom or slavery as long as we repealed the 13th Amendment, if there is no rational standard for justice?

Roger Chittum

Jack and Chris: From Theodore Roosevelt’s speech at the dedication of the new House Office Building on April 14, 1906, as quoted by Edmond Morris in Theodore Rex at 442:

"It is important to this people to grapple with the problems connected with the amassing of enormous fortunes, and the use of those fortunes, both corporate and individual, in business. . . . No amount of charity in spending such fortunes in any way compensates for misconduct in making them. As a matter of personal conviction, and without pretending to discuss the details or formulate the system, I feel that we should ultimately have to consider the adoption of some such scheme as that of a progressive tax on all fortunes, beyond a certain amount, either given in life or devised or bequeathed upon the death of any individual—a tax so framed as to put it out of the power of the owner of one of these enormous fortunes to hand on more than a certain amount to any one individual."

Looking at "rights" and ignoring "power" and other socially important factors is an incomplete analytical framework. It shouldn't take much argument to establish that enormous concentrations of wealth use the resulting enormous political power to rig the rules even further to their advantage. However, if you want the longer version, read Kevin Phillips, "Wealth and Democracy: A Political History of the American Rich." If the rich have the "right" to rig the system in their favor, then everybody else also has the right to cause the system to prevent that. Breaking up dynastic wealth by the operation of law is as much a "right" as concentrating wealth courtesy of a captured or ineffective legal system that allows "misconduct." There is more than one Road to Serfdom, and extreme concentration of wealth and power is one of them.

Chris Graves

Roger, the problem with giving the state unlimited power to do whatever is necessary to maintain a certain income and wealth distribution is that such power will inevitably lead to a totalitarian state. As the Founders of the United States realized, if the state's power is not clearly delineated and restricted to an agreed upon role, then its power will grow and become arbitrary. That is why the American constitutional system is based on the rule of law and the principle of limited government.

I agree that there are inherent tensions in our system. I think the root of your criticism of it is one of the best. Marxist theorist G.A. Cohen criticizes Robert Nozick's defense of private property and free exchange on similar grounds that I see as one of the most penetrating criticisms of the classically liberal political and economic framework. Aristotle warned of some people gaining so much more wealth than other citizens that the integrity of the community could be weakened by such inequality of power.

So, the concern you and others have on this score is real in my estimation. But I do think we must work within a framework that does not compromise the personal liberties of average people just to reign in some rouges who game the system. If we consider the insights of Public Choice theory, we can see that simply because a problem crops up in the web of private, voluntary relationships we should not uncritically turn to the government to remedy it. State intervention relies on the same humans who share the same selfish human nature as those creating the problems in the private sphere. Government intervention might very well make the problem worse or generate other problems that are worse, the old problems of unintended side-effects. There might be a role for state action to prevent or rectify reckless behavior or where the natural harmony of interests can break down such as prisoner dilemma-type situations. But we must be very careful with increasing the power of the state if we do not properly circumscribe that power as well as those in governmental positions of power exercising prudence in attempting to alter the laws that have become part of an organic system that is beyond any one person ever understanding in detail.

I would also argue that we also have to lay out basic rules that encourage a greater sense of fraternity that would head off these problems as people see their irresponsible behavior as endangering their fellows whom they have personal regard for. I also see religion as working to internalize a sense of personal responsibility as well as respect for their fellow humans created in God's Image.

Jack

Chris:

"Aristotle warned of some people gaining so much more wealth than other citizens that the integrity of the community could be weakened by such inequality of power."

Prescient indeed! And considering his warning of nealy 2400 years ago "some things never change", with that wealth power being used to erode and destroy our democracy.

The worst messes of recent years seem largely due to too little government oversight and regulation.

Consider the S&L crisis after a sloppily written, most likely lobbyist fueled "dereg" allowed them to go beyond the simple institutions of saving and lending their name implies. Off they went, these relative small town rubes to play with the big boys of much more complex commercial lending, or in the case of Neil Bush and Silverado into outright oil wildcat speculation with the backing of the SLIC and the taxpaying bagholders to the tune of $100 billion and the disruption of commercial R/E for a decade or more.

Another sloppy "dereg" let the Enron and other energy monsters loose. First tripling the utility bills of the UK where the scam originated and then in the US.

Today's huge mess is certainly due to too little oversight and regulation. In addition to the Anti-Trust Division of Justice having apparently gone surfing for a decade as these mega-financial beasts consolidated beyond any economic justification, the largest and worst of them operated beyond banking oversight while the SEC had insufficient and perhaps not the technical expertise to divine the emperor being stark naked. No surprise there as is putting those of hundred thousand salaries up against the foxes "earning" millions for finding holes in the fences.

"........ the problem with giving the state unlimited power to do whatever is necessary to maintain a certain income and wealth distribution is that such power will inevitably lead to a totalitarian state."

So too will gifting unlimited power to the "private sector" as we've seen with the life-long retirement planning of tens of millions and the businesses of many more wiped out by yet another wave of unregulated excess.

"Government intervention might very well make the problem worse or generate other problems that are worse, the old problems of unintended side-effects."

Oh? I don't see any downside of government mandating the underwriting standards that served us well for half a century or so that WS and our "modern" bankers seem to have forgotten. And surely it has to be government intervention that will limit gambling on a "sure thing" at ratios of 30 times their investors assets.

There will always be those, as the President says "...trying to game the system" thus to maintain a functioning capitalism that is supposed to deploy scarce resources to their highest and best use (for the society) will always require oversight, tweaking regulation and enforcement. Like our icon of competition, football, were there not rules or umpires calling fouls, it would quickly become a very different game.

Chris Graves

I agree with you, Jack, that government can and should carefully adjust the rules when systemic problems occurs. But as I said, these changes have to be made carefully and enforced with prudence. What I am objecting to is giving the state complete discretionary power to arrange people in a pre-established pattern. That is the recipe for a total loss of individual liberty. But changes in rules of the game such as re-instituting Glass-Steagall or increasing capital requirements in financial institutions might very well be justified in terms of the recent financial crisis in addition to being justified normatively as the government should be empowered to provide basic rules of order as it prevents fraud and a complete breakdown of the monetary system.

We have to keep in mind Friedrich Hayek's insight that as we give greater discretion to those in power, we lessen the discretion of individuals to make informed decisions in their own lives within their social context.

Jack

Chris: Much agreement! Care is good whether tuning an economy or a diesel or anything else. Once again...... I favor a less rigged game that provides for most of our people and "arranging" is an overstep.

Yes! Had there been debate and a responsive and responsible Congress when Gramm slipped in the repeal of GS it would have likley been modernized in a careful fashion instead of dumped entirely. After all there WAS a reason GS was implemented after the similar excesses of the 20's gilded age.

Yes, against fraud! and finally! news of all three, perhaps four, "rating agencies" who greedily sold off reputations built over nearly a century hit our front page today.


"We have to keep in mind Friedrich Hayek's insight that as we give greater discretion to those in power, we lessen the discretion of individuals to make informed decisions in their own lives within their social context."

"Government power" SHOULD be US! instead of the legions of corporate fueled lobbyists. Some day (perhaps!) we'll have a proper campaign reform that frees our "representatives" of the need to slurp up millions only to haul it down to OUR broadcast airwaves to address us and put forth their campaign issues. We'd never imagine carting money off to a judge before our civil or ciminal trial took place and it's equally ludicrous that the system addicts electeds to the cash made readily available to them by a host of special interests looking for favoritism and some sort of edge.

In the "lessening discretion" area, that's why I favor an increased min wage and hope for the return of bargaining power for other low income folk. Where dollars are few it's all the more important that the individual has decision making power instead of being steered by the whims of a host of costly and wasteful transfer programs.

Morgan

American wages are stagnating meanwhile the rich are being bailed out and still rich as always if not more so. It's a travesty, really. Almost as much of one as the slow erosion of the separation between church and state: http://lawblog.legalmatch.com/2010/04/20/family-court-wont-stop-non-custodial-parent-from-taking-child-to-church/

Seriously, now the courts are just being ridiculous.

Chris Graves

Jack, as I suggested above we need to be realistic about the nature of the political process realizing that those who determine and carry out governmental policy are humans who share the same depraved human nature as those in the non-governmental sector. So, naturally many in government as well as the voting public pursue the same selfish strategy to gain power and wealth as those who act in the marketplace. The fundamental motivations are the same in both the private and public sectors, but the constraints are different and so are the stakes.

In the context of the marketplace as firms that I choose to do business with please me, I reward them by continuing to purchase their goods or services or work for them. As they displease me, I can choose to discontinue my business relationship with them. If these firms are acting legally, then they have no power over me in the sense of being able to inflict physical pain and suffering on me. In contrast, offending those who wield governmental power can lead to my death or deprivation of liberty. Government can also shut down by violence or threat of violence avenues by which I could escape their reach. Now, if a powerful individual, corporation, or other institution can use their financial influence to buy favors from government, then they could gain a similar power over me by inducing the state to violate my rights. But as long as these non-governmental actors remain within the bounds of their lawful sphere, they lack such power and authority to abuse. That is why I am receptive to G.A. Cohen and Roger's Chittum's concern about those who possess greater wealth using their resources to buy special influence with those in governmental power to violate the natural rights of those who are less well-connected.

One might say, well, government can be properly constrained not to abuse the public interest in the way that I fear. But the history of government reminds us that my fear is a real one. Consider for example in our own country the history of governmental regulation that was instituted ostensibly in the public interest but ended up doing exactly the opposite of its intended purpose as described in the so-called "Capture Theory" of regulation. This view claims that even if government regulation has a benevolent and impartial beginning, over time it is "captured" by the firms that the agency regulates so that it comes to protect these firms from competition.

http://www.gwu.edu/~ccps/etzioni/documents/A400%20Society,%20Capture.pdf

Another set of fundamental problems with governmental intervention in order to play the active role that you advocate is identified by Public Choice theory. I mentioned this perspective on public policy above in passing as offering good reason to be wary of delegating too much power to the state, even if there is a genuine "market failure." Just below is a link to an overview of Public Choice theory that discusses an alternative to the view of government that you seem to have uncritically accepted. I understand you as claiming something to the effect that democracy can be an effective means of discerning the "will of the people." Some conservatives also seem to have bought into this elevated view of democratic government. If you take a look at this link, you will see why someone might very well disagree with this image of democratic government.

http://www.econlib.org/library/Enc/PublicChoice.html

Here is a passage from this article that strikes at the heart of my disagreement with your characterization of democratic government from your last post, and why I see the need to emphasize the protection of a private sphere for each individual:

... [P]ublic and private choice processes differ, not because the motivations of actors are different, but because of stark differences in the incentives and constraints that channel the pursuit of self-interest in the two settings. A prospective home buyer, for example, chooses among the available alternatives in light of his personal circumstances and fully captures the benefits and bears the costs of his own choice. The purchase decision is voluntary, and a bargain will be struck only if both buyer and seller are made better off. If, on the other hand, a politician proposes a project that promises to protect the new homeowner’s community from flooding, action depends on at least some of his neighbors voting for a tax on themselves and others. Because the project’s benefits and costs will be shared, there is no guarantee that everyone’s welfare will be improved. Support for the project will likely be forthcoming from the owners of houses located on the floodplain, who expect to benefit the most. Their support will be strengthened if taxes are assessed uniformly on the community as a whole. Homeowners far from the floodplain, for whom the costs of the project exceed expected benefits, rationally will vote against the proposal; if they find themselves in the minority, they will be coerced into paying for it. Unless the voting rule requires unanimous consent, which allows any individual to veto a proposal that would harm him, or unless those harmed can relocate easily to another political jurisdiction, collective decision-making processes allow the majority to impose its preferences on the minority."

The Founders of the United States as well as other classically liberal theorists were dubious about democracy along the lines of Public Choice analysts since democracy diffuses responsibility among everyone so that no one person can be held accountable in a way not dissimilar from a mob. Democracy can also be at odds with individual liberty since one must gain the permission of a majority to act, so that instead of having one tyrant as in a dictatorship, we are subjected to many. This insight prefigures Robert Nozick's depiction of modern day social welfare democracy as "Demoktesis," a political/economic system where people contract with one other to own, in part, everyone else, so that they can jointly control each others' lives.

In dealing with the entire range of these interrelated issues, especially questions revolving around equality, I think it is important that we consider the centrality of the quest for status in addition to economic well-being. I suspect that even if we could come up with some sort of solution to the conflicts that we have been hashing out this week over income inequality so that everyone in the United States had comfortable and secure material provision, there would still be dissatisfaction among many of the same folks who are now arguing for greater equality of condition. That is because human happiness seems more related to positions of relative economic well-being than reaching a specified economic plateau. What is most disturbing to many people is the comparison they make between their own financial position and others'. Aferall, we tend to develop our self-esteem from comparing ourselves with others more broadly. In short, we may be missing the main event in discussing ways to improve people's absolute standard of living in simply economic terms when what really counts for most people is status.

Philosopher Brian Barry has observed that status is a zero-sum game. This makes the problem of income inequality an intractable one. Individuals and groups formed by similar individuals will always be in a vicious competition to dominate others in some sort of way. Today, the way that we have chosen to play out this struggle is via economic competition. Of course, this is a vacuous pursuit since economic achievement does not necessarily correlate with intrinsic merit as Frank Knight has shown in his *The Ethics of Competition.* Be that as it may, envy will always motivate those who feel marginalized, even if they have plenty and their liberty is not violated, to lobby government to take action to raise their status at the expense of someone else who will take offense and respond by taking similar action. That is why I am not sanguine about any program(s) that purports to resolve income inequality because whoever loses relative status will feel aggrieved. The pursuit of equality is doomed from the beginning as it leads to constant and unrelenting state action as one group uses the political process to "one up" the other group. Hence, we have "[t]he history of all hitherto existing society is the history of class struggles."

Here is a link to an insightful discussion of the problems of vying for status by novelist Tom Wolfe that cuts to the core problem of understanding human interactions:

http://www.neh.gov/whoweare/wolfe/lecture.html

I believe that a more achievable alternative to government taking aggressive action to actually equalize income, wealth, and political influence of all people is to instill in people a realization that all people are moral equals qua human apart from any accomplishment or trait each person has or lacks. We owe each person a certain respect simply out of deference to each person's essential humanity, which we all possess equally. This moral truth was articulated by Immanuel Kant's famous second formulation of the Categorical Imperative: "Act in such a way that you treat humanity, whether in your own person or in the person of any other, never merely as a means to an end, but always at the same time as an end." I would hope that we could come to accept the truth that all people, in their own way, contribute to the general welfare of society as they play out their proper role. As each person carries out his calling to the best of his ability and with integrity as he adds his own personal flair, each person should be honored for his contribution even if it is not with an equal amount of income or overt influence. Without each person's contribution, no one could succeed. We are all interconnected as we live in an organic process even as we live and act as individuals. As each human being comes to be respected as a person, I would hope that the resentment that has come to be displaced onto these discussions of economic distribution will lose their edge. But perhaps, I am being a bit utopian here as well.

Jack

Chris: You're doing a good job of wrestling with the tensions between democracy, respect for the individual and capitalist economics. Just as the ever elusive "equilibrium" of supply and demand intersects is never found, so too will the pendulum swing (one hopes!) from too much power in corporate hands, too much in government hands, and these days let's add, in the people's hands.

So, understanding it's all a moving target, how are we doing just now? In the recent mess it was unregulated capitalism that allowed Goldman and others to become too big to be allowed to fail. But even were we to break them up or find our errant anti-trust department and limit the size to 5% of the market or less, we'd still not have been safe as the Pied Piper of cleverness and greed could as easily have led 50 lemmings off the cliff as half a dozen.

It is WE through government that allows bankers to lend at multiples of the assets they control, and in community banking back that up with "can't fail" FDIC insurance. Thus WE have every right and duty to regulate and oversee underwriting stds that seem to have been forgotten. I don't see an unsolvable problem for "FDIC" banks doing what they were chartered to do.

On the "investment banks" (scamming primarily for their own purse) there is a strong argument for letting 'em do what they want and PAY for their mistakes and failures. That would seem to point to breaking them up in chunks we could let fall by the wayside, but that still leaves the problem of all of them going nuts in concert. So again, it seems WE have to create the framework of "transparent" markets, regulate them to some extent and add watching them for signs of instability as the Fed does on money supply issues.

Let's look at another area more familiar to me. Housing. While all those guys like to think of themselves as being independent and not needing government interference, truth is homes would be junk but for a stringent uniform building code. For those who think "the market" would insure well-built homes had we not the UBC I'd point out a government mandated increase in the SEER (efficiency of HVAC) from time to time. When do builders begin putting in the new, slightly more expensive units? Just days before the deadline. How much insulation do they put in the attic? 95% of the time it's what is spec-ed by code, same with windows. Thus the 20 million new homes built during the housing boom join the millions of older homes in being somewhat obsolescent in terms of energy efficiency relevant to today's world. $500 "saved" that the builder pockets for not installing low-E insulated windows is later "fixed" at costs of $400 per window or more.

Why doesn't the consumer demand better efficiency? Well, because their average stay is but seven years and too short a time for getting "paid back". Thus the first buyer of the home creates what will be there for the next century, much to our general disadvantage.

Assuming for the moment that man-exacerbated global warming is the problem most of us think it is. Like dealing with smog in an earlier time there is simply no mechanism in "the market" that would address the problem. So it is ultimately we, through our democracy who'll force coal to figure out a cleaner way or become a part of history.

"We are all interconnected as we live in an organic process even as we live and act as individuals"

Yup!

Chris Graves

Thanks for your reply and for your reflective insights. I have no objection to the thrust of what you say in this post nor really with your previous post except that we have to be careful in how we conceive democracy and the role and efficacy of government. I appreciate the proposals and examples that you make in your last two posts since they are framed in terms of general rules laid down by the state so that people know where the lines are drawn between lawful and unlawful actions so that they are otherwise left free to pursue their own goals.

What I am concerned about in this discussion is that when the reasonable proposals that have been made fail to equalize sufficinetly, those in power will be tempted to keep tinkering with the basic rules so that the rights of individuals are violated in concert with a continually fluctuating set of fundamental rules that render individual initiative unsafe. The underlying impetus for the continual meddling is the desire for one group to dominate or exploit the other. And I do not see any action by any institution, even a totalitarian state, changing that feature of human relationships.

I am also concerned that if we see the government as US, as you point out in your previous two posts, then we lose track of the possibility of special interests capturing government to further their particular ends that threaten the liberty and welfare of those who are not members of the group that has attained power.

Finally, belief that we all make up the government can give the impression that we have either contracted all our rights away to the state or that the people, taken collectively, originally own all people's resources and even one another's person. That concern prompts me to challenge the view of the currently popular view democracy and the government as I do above. Instead, we must come to see our rights as being bestowed on each individual simply by virtue of being human as people act within the natural laws that govern their interactions that generally produce a relatively harmonious spontaneous order. I am also arguing that we also must see that organic, voluntary institutions precede the state and perform many of the functions that some see government as uniquely qualified to perform in a more personalistic, respectful, and effective way. I do agree with you though that when this spontaneous order fails, there can be a role for government to step in. Here I would appeal to the principle of subsidiarity, i.e. when the most immediate and localized institution fails, only then should we gradually move to the next level of governance until we reach the broadest, most distantly removed level as a last resort. Even here we must be on guard to find the most effective means to achieve our goals within the bounds of justice.

I, too, appreciate your willingness and ability to grapple with these very difficult issues that present us with sharply conflicting cross-currents and dangers.

Jack

Chris; to allay any fears of too much jiggering in favor of either equitable opportunity or equity of result, I offer the following graph and article:

http://sociology.ucsc.edu/whorulesamerica/power/wealth.html

If anything it looks as though our primary "worry" is that of the final rounds of a Monopoly game effect!

In pre-Thatcher England, it seems the whole nation and its output suffered from both the ills of socialism and that of the lords-to-the-manner-born. The latter didn't have to work much because they were born to the management class, while the rest knowing that foreman was about the top for them had little incentive to excel or work particularly hard.

As these and other graphs I've shown point out the consolidation of both wealth and income in fewer and much wealthier hands leaves little to maintain a healthy middle class and far less for those young, minority, or poorly educated. While some may see that as "just" or even as god ordained, truth is it won't work in America nor anywhere else. At the bottom we'll all share in the friction of those with NO hope turning to vice and other underground activity while even what had been the middle class resign themselves to having little and making no headway. Some time ago the US lost its position as the nation of most chance for upward mobility. Like Russians in the final days of the implosion of the USSR they'll adopt the attitude of "they pretend to pay us so we pretend to work".

An even tougher problem for those who like to view economics in terms of "rights" and "justice" is that we may well be experiencing a structural unemployment problem. Science fiction writers often wrote of a day when most of our goods would be extruded or made by robots with few human workers (like Intel? MSFT? Autos? Diesels?) with a great expansion of leisure time for those who had been toiling 40 hours a week or more. We've added the "twist" of relying on a near INFINITE supply of cheap labor around the world. But! we've made no facility for dealing with the "increased leisure" that is manifested today as unemployment and under-employment that does not pay the bills nor allow those folks to "go shopping", thus! the problem of surplus goods not being sold in a demand limited world of over supply. A fine recipe for continued DEvaluation and a downward spiral of more layoffs and yet lesser demand.

Like some poorly designed airplanes and kites with out a stabilizing tail, the tools for coming out of the death spiral are not aboard the planes or the kites.

Chris Graves

Thanks for providing me with the fascinating link to sociologist G. William Domhoff's website. I am still reading his essays. He is a stimulating and insightful thinker. I do not disagree with much of his factual analysis. I would disagree that private foundations are mostly moderate to ultra-conservative. Many are on the liberal-left such as the Ford Foundation. Here is a link to a summary of economist Randall Holcombe's study of private foundations in the U.S., *Writing Off Ideas: Taxation, Foundations, and Philanthropy in America,* that offers a different take from Dr. Domhoff's depiction of many prominent foundations' stands on public policy and their underlying philosophy:

http://www.independent.org/publications/books/book_summary.asp?bookID=51

His writings also remind us that facts do not speak for themselves. Professor Domhoff seems to assume an egalitarian ethic without carefully considering how such a normative view could be rationally justified. Instead, he seems to relegate philosophical analysis to "ideology." Some conservatives make a similar mistake as they resort to a crude positivism or a radical pragmatism as they seek to avoid inquiries that might lead us to an improved discernment of what is right.

But even if there is some room for improvement in protecting government from capture by special interests considering Professor Domhoff's analysis coupled with Professor Holcombe's, I see very little overall that can be done to prevent elites from arising and exercising disproportionate control over government. This unpleasant reality is one big reason to limit the scope and the power of the state. I do not think it is wise to greatly empower the state and hope the "right people" take it over and impose an equitable social order on the rest of us. That strategy is playing with fire.

It seems that the natural condition of humanity is inequality and hierarchy. It is a matter of degree though, and generally the more social and economic equality, the happier are the people. Even so, there are still inequalities in all modern societies. Personally, I would like to see the natural aristocracy that Jefferson believed would arise in a regime characterized by liberty. Unfortunately, liberty does not seem to consistently facilitate such a meritocracy as I have pointed out previously. In fact, Goethe had a more realistic understanding of liberty observing that if people were freer, average people would marginalize the most talented, but leave people like himself free to pursue their own goals in peace. A hereditary aristocracy has shown that it cannot consistently produce a genuine meritocracy either. Certainly, by its very nature, any regime on the left eschews an aristocracy, at least in theory. Equality and merit are distinctly opposed organizing principles of a society unless one believes talent, intelligence, integrity, insight, creativity, etc. are all evenly distributed throughout a population. Such an assumption is obviously and tragically false. Even more certainly false is G.A. Cohen's Marxist vision where we all serve one another out of kindness and empathy allowing everyone to reach their fullest potential. Real life Marxist regimes have all been characterized by extreme inequality of wealth and power. Lenin recognized the brutal fact that the proletariat need forcible direction imposed on them by a "vanguard" if the desired distribution of wealth and power were ever to be achieved.

As David Hume observed, due to scarcity and limited generosity we need a concept of justice to regulate human society. It seems from historical experience and what we know of human nature that the best that we can do is a "circulation of elites," as Pareto put it, as we offer the most ambitious rewards to serve the public. There is never anything approaching full equality for all. If we did not offer greater opportunities for the most talented and most driven to excel, then we would not have civilization. Professor Domhoff makes this point himself as he discussed the rise of civilization. Liberal left philosopher John Rawls accepts this truth of the human condition in his "Difference Principle."

So, since we are only able to circulate elites of the various groups vying for power, we can consider the question, is a leftist elite better for the average person than a business elite? The historical record does not look good for the left. I would agree though that the focus on business practices and efficiency while having some place should not be all-encompassing in issues of governance. Nor should the technocratic reliance on social science statistics, as I have argued early-on in this week's discussion. Each of these considerations taken too far dehumanize individuals treating them as if they were cogs in a machine. Reducing all human institutions to a factory that can be organized de novo from the top down is especially demeaning to individuals as well as being ineffectual in meeting human needs as we have seen in real life social experiments. For example, in recent years China forced an indigenous nomadic tribe to live close to a city in shelters the government constructed for them on the grounds that they could have better access to government services if they were not roaming around in the wilderness. Tragically, many of these people were killed just a few weeks ago in the earthquakes that hit central China. If the nomads had been allowed to maintain their own way of life regardless of whether someone on high deemed their lives better lived in a welfare state, they would have all survived the earthquake. Even without an earthquake, people should have the freedom to form their own distinctive ways of life regardless of how they fit into some overall distribution. That is my primary objection to even considering these philosophical issues as if they were all mathematical puzzles whose abstract solution resolved the real human dilemmas that have to be lived out by living individuals in a particular time and social setting.

TF


The slow growth of household income (or a decline if you pick the right time frame) is a little misleading, since the average size of households is down.

Joseph C Goodson

Very nice blog, very interesting debates.

My question for Chris Graves is this one: what makes the accumulation of capital, Marx's M-C-M, natural? What condition of nature does this formula of capitalism reveal?

sesli chat

Economic anxiety due to stagnating wages? Try economic anxiety due to job loss not just once, but multiple times within a three to four year time frame. Something rotten in the U.S.? You bet.

Never fear, the solution is to "let them eat cake". Or is it? At least Bismark was fully aware of the value of full emplyoment at a livable wage. Something Germany still tries to practice today and because of it is Europe's largest exporter.

Tom Bosse

Anytime the government gives someone somthing, they have to take it away from someone else. While doing this, they keep part of it for expenses. It is like a poker game where they house takes a 5% cut
out of every pot. If the game is played long enough, the house or the government will have all the money. The only way to continue is
to provide more chips or in the governments case, print more money.

James Morgan - Puritan Financial Advisor

The creation and acquisition of wealth is based upon mixing one's labor with nature and voluntary transactions.

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