From the Inbox

From her corner office in New York’s Rockefeller Center, [Rebecca Patterson] the chief investment officer of Bessemer Trust Co. is putting $55.7 billion in client assets under geopolitical stress. ... 

Patterson joined Bessemer, the world’s third largest multi-family office, from JPMorgan Chase & Co. two years ago. The average family has $43 million in assets under supervision at Bessemer and the wealth of its founder, steel-mogul Henry Phipps and his descendants, remains the largest  ... 

Phipps founded Bessemer in 1907 to manage his wealth after selling his interest in Carnegie Steel to J.P. Morgan. The company is named after Henry Bessemer, the inventor of the steel-making process that was instrumental to the success of Carnegie Steel, according to Bessemer’s website. The closely held firm opened to other families in 1974 and now has about 2,200 clients, according to the website. It offers services including investments, estate planning and tax advice, and supervises $97.5 billion in total assets.

Link.

Meanwhile...

But Ferguson has also been home to dramatic economic changes in recent years. The city’s unemployment rate rose from less than 5 percent in 2000 to over 13 percent in 2010-12. For those residents who were employed, inflation-adjusted average earnings fell by one-third. The number of households using federal Housing Choice Vouchers climbed from roughly 300 in 2000 to more than 800 by the end of the decade. 

Amid these changes, poverty skyrocketed. Between 2000 and 2010-2012, Ferguson’s poor population doubled. By the end of that period, roughly one in four residents lived below the federal poverty line ($23,492 for a family of four in 2012), and 44 percent fell below twice that level. 

Link.

Megan's Myopia

I feel inhibited about joining the affray over Megan McCardle's non-review of the Piketty sensation.  Unlike Megan (and unlike her most affectionate critic), I actually have read the book--okay, 80 percent of it.  Enough to know that, whatever one's tendency to mock, she probably has read enough (i.e., zero) to permit her to mount her soapbox and deliver her exhortation on the virtue of not giving a rat's ass about indifference to the privations of the great unwashed.  She knows, in short, that Piketty thinks there are too damn many rich people and she's willing to go to the mattresses to make sure that none of their comforts and consolations are disturbed.

She knows, in short, all she needs to know for her purpose and reading more wouldn't be likely to improve her understanding.  I'll grant her that and I'll grant her more; she actually sketches out an attractive model of the good life:

1. Finding a job that allows them to work at least 40 hours a week on a relatively consistent schedule and will not abruptly terminate them.
2. Finding a partner who is also able to work at least 40 hours a week on a relatively consistent schedule and will not be abruptly terminated.
3. Maintaining a satisfying relationship with that partner over a period of years.
4. Having children who are able to enjoy more stuff and economic security than they have.
5. Finding a community of friends, family and activities that will provide enjoyment and support over the decades.

Yes, well put, dear heart, and thanks so much for saying so.  But it would be fine to hear you say just a word as to how we got pushed so badly off track on this one or, perhaps, just who it was that gave us all so abrupt a nudge in the direction of that particular cliff.

You there, Megan?  No: she seems to have only one positive message: pay no attention to the grinning clown behind the curtaian.   She is, put differently, right enough to say that vulgar wealth transfer is not going to solve the problems of a sick society (though I'd add that it might help a bit at the margin). Yet she seems unwilling to reflect--or to want us not to reflect--on how it is that such absurd imbalance may generate the kinds of problems she professes to abhor.

She doesn't seem to consider, for example, that a society with this (our) kind of wealth imbalance is bound to be a sick society: that the imbalance leeches away not just money but the very civility and good order for which she professes to desire.  She doesn't seem notice the erosion of trust, of civility, of common decency that she so much laments, are perhaps the product of the distortion she wants us to ignore.   We're all hurtling somewhere in this handbasket together; count Megan among those willing to tap the driver on the shoulder and say "tut tut--drive on."

Afterthought: I wonder why she focuses her laser-like attention on "the middle class."  Do we assume that the poor are those who do  not want to find a job, to find a partner, to maintain a satisfying relationship, blah blah?  Perhaps she needs to meet a better class of poor people.  

DeLong on Piketty; Economist on Banks

Two can't miss weekend reads:  One. the  "Economist Essay" on the history of financial crises; and two, DeLong on Piketty--i.e., P's magisterial new study of inequality.  The Economist piece explains itself and I stand ready to offer it to anybody who needs an updated analysis of why banks ye have always with you and why they are such a damn nuisance. DeLong is a bit more technical and abstract, but he makes a couple of thoroughly accessible points that I hadn't seen elsewhere. One, that Piketty (this isy) seems to assume that “wealth” in a society = concentration. Perhaps it does, but it need not; we can imagine a society that piles up wealth and spreads it around so everyone becomes a rentier. Likewise I suppose we could imagine one where wealth concentrates even as it declines.

Two, DeLong points out that Piketty is shaky on what means by “return.” DeLong suggests four candidate-meanings and I think I get the drift although I'll admit I'm a little unclear on just how he draws his lines (hey, I was a little drunk last night and I didn't get to class until half an hour late—can I come by your office hours?).

Untangling the Wealth (Income) Puzzle

Twice this week, I've heard versions of the same story.  Paraphrasing:

--I look at my investment accounts and I can't believe what a lot of money I've got; and
--I'll never be able to retire.

Say what?  Does this compute?  I think it may; I'm not sure I can do it but I'm game to try.

One: I always like to start with Heidi Fleiss (remember her?) telling Larry King (remember him?) --"Oh Larry, you have no idea how many really rich people there are."  Well she's right.  Well maybe not about Larry but most of us don't seem to know how many rich people there are--at least in the sense that most of us consistently underrate the real imbalance of wealth in the nation (or the world), so much held by so few.

But two, what kind of income does it take to make into "the ten percent" in the US today? Kiplinger pegs it at $120,000 (taxable adjusted gross income, this must be family, not individual).  For readers of this blog, comparing to all those stories of great wealth, I suspect $120k doesn't sound like all that much.  Yet remarkably. for a lot of them, it probably describes most of the people they know.  A professor and a lawyer.  A dental hygienist and a cop.  Hell, a doctor and a mailman (we meet one such couple, just a few years ago).  These folks may (or may not) think they are doing okay but they certainly don't think that they (or their friends) are among the "wealthy."

So, what's going on here?  Let me toss out a number of possibilities (and BTW, none of these points are original with me; they all come stuff we've all been reading lately--I'm just too lazy to footnote).

One  is, I suppose, the simple distinction between "income" and "wealth."  A couple of things about wealth: one, it's harder to measure--harder to value, easier to hide. And two, wealth disparities are virtually always greater than income disparities" the "bottom 50 percent" may lead lives of squalor and desperation but at least they have some income: of wealth, they have almost none (but what abut land-poor farmers?--ed.).

Two: it is just now beginning to sink into his how long the tail is on the wealth distribution--on the upside.  It's not the 10 percent; it's not even the one percent, it is the one tenth or even one hundredth of one percent, the crowd you could pack into a single conference room at Davos, who have been really racking up  the really obscene impressive gains. As Heidi might say, you have no idea, except maybe slowly it is sinking in.

Three, back to us ten per centers: maybe we don't live like lords but we kind of think we ought to be able to.  Ski vacations in the Pyrenees, weddings on the Great Wall.  Isn't that what being wealthy is all about?  And isn't that supposed to be us?

Three and a half, a sub point about living well: we worry about pensions, but I think the plain fact is that it has never sunk in on most of us just how costly a good pension really is.  Suppose you retire and went to collect $50k a year (chump change!) for 20 years.  At zero interest rates, that's a million bucks.  And how much will it take us to save that over 40 years?  Divide that million by 40 and you get $25k, and good luck in piling that on alongside the student loan debts, the mortgage and, oh yes, the ski vacation.  Those numbers are not new, of course; my point is that they've been mostly concealed from us by the way we financed (or failed to finance) our pension benefits.  Most of them came (or were supposed  to come) from employer-sponsored plans, so structured that we never really understood the true cost (of course, I should factor in the fact that most of those "promisors" never intended to keep their promises anyway).

Four: as others have noted, maybe the recession ended, but we didn't get the memo.  Maybe we used to be ten percent but one or both lost jobs and we're now teetering on the edge of long-term unemployment. If this is recovery, maybe recession itself doesn't look all that bad.

Finally, a tip-o'-the hat to Chris Hedges Hayes, who wrote what remains one of the most insightful books I read in the last year.  Paraphrasing (and perhaps distorting) Hedges, I'd venture that we all live in a world where, even if we are not actually more insecure, still we feel more insecure: things may be going okay at the moment but there's an invisible blackbird on our left shoulder whispering "remember thou must die."  That phenom provides  least raw existential angst, but we can also monetize it: one of the reasons we spend so much money is that we feel we have to shore up the castle walls for our children, and build the moment, and feed the alligators.  But the line down at the alligator food supply store seems longer every day.

Whew, how depressing.  Meanwhile, I hear the angel of death is in town, and that he has been asking after me.  I think I'll light out to Samarra for a while.

Update:  Then there's this.

Update: So, you think $120k is hard?  What do you think is going on with the other 90 percent? 

Did America Enjoy a "Trente Glorieuses"?

One recurrent point of reference in Thomas Piketty's fascinating Capital in the 21st Century is the "trente glorieuses," the  30 years between 1945 and 1975 when the French, to their own astonishment and that of everyone else, somehow restored, nay created for the first time, their functioning first-world economy.  Piketty treats it as a defining event in modern French life and I am in no position to gainsay him.  But then he says:

In North America, there is no nostalgia for the postwar period, quite simply because the Trente Glorieuses never existed there: per capita output grew at roughly the sme rate of 1,5-2 percent per year throughout the period 1820-2012.

Um.  Well, I'm not disposed to dispute him on data; let's assume he is right that growth in the US has been slow but steady since before forever.  But I'm not at all sure this is the only index upon which gloriousness may arise.   Employment, plus employment security, for example.  I think I've said before (too often?) that the period 1947-1973 in America counts as just about the only time in any country where a person of ordinary ability (I'm talking to you, little Homer Simpson) could hold down a job that would support a non-working spouse and 2.3 kids in a suburban ranch-style home with at least one car in the garage.  Call it vingt-six glorieuses, at least within its narrow limits.

I mean this, I should stress, as only a minor point: Piketty's is a fascinating account which I am taking deliberately at a slow pace, the better to assimilate its charms--a bit like one of those classic novels he likes so much to cite.  Minor, but still a point, and perhaps a caution that he still perhaps knows more about France than he does about the United States.

Okay Everybody, Line Up....

Yesterday's number, $10 billion, being the aggregate compensation last year for the 10 best-paid hedge fund operators.

For comparison, how many people still live on a dollar a day?  Oh, it's a squishy number a bogus question; still, a good guess would be about a billion (there's a pretty good Wiki discussion); that would be $365 a year.  So $10b/$365 = 27,397,360, which is about halfway between the population of Nepal and Venezuela.  Okay everybody, line up, there's gruel.

Afterthought:  shed a tear for Daniel Loeb who weighs in at number 10 on the list with $380 million.  He's probably not dining on gruel tonight, but my guess is that he is the kind of guy wakes up mad every day that there are nine guys on the list who made more money last year than he.

Am I Reading this Right?

That Denmark, with the world's lowest Gini index measured by income, also has the  third highest measured by wealth?  Different years. but still.  For income use the World Bank number.  And kudos to plucky little Namibia, first in wealth inequality, third for income.

I see Wiki provides data on pre-tax income Ginis, but also pre- and post-tax for selected (first-world) countries (OECD data, a bit different from the World Bank stuff above).  Anyway, this one shows Denmark  Ginis of 0.416 pre- and 0.248 post; for the United States, the numbers are 0.486 pre- and 0.378 post.  These pencil out to a ratio of 1.66 for Denmark, 1.28 for the US.   Can we take this as a quick-and-dirty  index of the relative component of wealth transfer in the two tax regimes (i.e., much higher for Denmark than for US)?

An Assignment for Somebody: Wal-Mart Wages

Here's a job for which I am too old and sick and stupid and tired and lazy to do myself.  But it  society shouldn't be too hard.

Background: I've been boning up a bit on a particular notion of economics, once in fairly wide currency, now mostly unfashionable (excepting possibly Joseph Stiglitz).  That is: the idea that "spreading the wealth"--union wages, just better wages--might make the whole society richer in that you provide money to the people who will spend it.  Yes, it is akin to the current kerfuffle over Keynesian pump-priming: whether you can ever make the world richer by taking the money out of the hands of one and put it into another.  But I'm thinking of a a slightly different spin: the idea that the boss might  make make himself richer by raising the worker's pay insofar as it churns more money through the whole community.

It is a view exemplified, I think, by Henry Ford when he undertook to pay workers $5 a day so as to raise the general wage level and sell more Model Ts.  Reading Michael Lind,  I infer that it was, if not widely popular, still part of the common parlance in the 20s. Surprising how completely it has vanished from public discourse lately.

But here's my assignment for somebody.  Estimate Wal-Mart's payroll.  Multiply it by 1.5--i.e., give everybody a 50 percent raise.  Go to the P&L and adjust  bottom-line net income accordingly.  I.e., in terms of that holy of holies, "shareholder value," how much would it cost?  My guess is "not a lot," but if so, try it with 1.2--a 20 percent increase. Or just for fun, try 2--double the wages.  

For extra credit, identify a representative member of the class of Wal-Mart trust fund babies--i.e., the ones on the Forbes billionaire list.  Identifying (or estimating) their current shareholdings, estimate how many Mercedes they would be deprived of if the proposed innovation were put into effect.  My guess is: not a lot.  But if you come up with an answer, tell me and I'll blog it.

Makers and Takers Again

I didn't pick up on it right away, but while we were watching The Apartment the other night, I could swear I heard something that must count as a cultural marker.  That is: assuming memory serves, I heard somebody refer to some other folks as "takers."

The 47 percent, you say? Ah no, that's just it; not the 47 percent.  The point was that the "takers" here were the rich folks, the ones with the royal jelly on their fingertips, who took (sic) what they wanted and didn't have to pay.  As Marx might say, the unearned increment.

When, do you suppose, did "takers" pass through the singularity, reverse polarities, and acquire the meaning that Mitt Romney and his pals give it today?

Krugman, Unions and the Good Old Days

It's becoming more and more the meme to remember the period 1947-1973 as a kind of good ol' days: dynamic growth, sponsored (and unhampered) by high taxes,  supported by strong private sector unions.  I lived through those years and I'd have to sign on to a lot of that.  I'd add the qualifier that in many ways I hated the good ol' days: smug, narrow-minded, paranoid, racist times with tacky TV shows and maddeningly trite pop music.  I grant the economic virtues although in fairness, they are easier to see in the rear-view mirror.   I also join the chorus of those that believe the good ol' days nestled in an accidental sweet spot,  where major employers enjoyed semi-monopoly protections, generating incomes that they could share with semi-monopoly employees--and when we all (did I say this before?) drove crap cars.

I was therefore intrigued earlier this week to see Paul Krugman abandon his wonted tact and decorum and go to Defcon IV against the golden-age deconstructers.  He calls it "The Europe-in-Rubble Excuse."

Whenever I point out how well America did with strong unions and highly progressive taxation after World War II, I can count on conservatives trying to resolve their cognitive dissonance by saying “but it was easy then — all our competitors were in ruins!” ...

Sorry, guys, but that’s bad history and very bad economics.

 And:

[A]nyone who reflexively reaches for the idea that we were actually better off because Europe was in ruins as a way to explain the postwar economy should take a hard look in the mirror. Did you think this through? Or were you just grabbing for something, anything, to explain away a fact that your ideology says can’t have been true?

Now by disposition I tend to be a Krugman fan, but I think he misunderstands the argument here, and also draws the wrong inference.

First: I don't think those of us who gaze back at the golden age are focusing only on Europe-in-rubble (he could have added Japan.  And China).  For one, if we're being fair we'd have to grant that the ravaged nations mostly recovered far  more quickly and successfully than most people expected (and thank you, General Marshall).   And we'd have to grant that healthy trading partners can make us healthier: beggar thy neighbor is never a good long-term bet.

But rubble is only part of the story.  As Brink Lindsey aptly observes, there was a whole lot more going on in the golden age:

There was a pent-up demand for goods and services after the privations of the Great Depression and the mobilization of World War II. There was also a pent-up supply of new products that couldn’t be brought to market during the depression and war years. That pent-up supply was augmented by technological and organizational breakthroughs accelerated by the imperatives of total war. Big advances in transportation, communications, and air conditioning stimulated catch-up growth in the underdeveloped South and underpopulated West. And rapid upgrades in human capital (first explosive growth in high school graduates, then explosive growth in college graduates) doubtless helped to spur productivity gains.

Link  Reading Lindsey, DeLong concludes  that Lindsey drops an own-goal on his vaunted libertarianism.  DeLong is narrowly right  but it's irrelevant to my point.   For my money, Lindsey is quite right to argue that the old times were special in ways that might not be easy to replicate.

But here is where I think Krugman misses the point.  That is:  he could perfectly well concede that the old times are special without accepting that "speciality" as an argument against unions.  He might say: yes unionism was easier in the good ol' days.  But that doesn't mean unions are any less necessary in a different kind of economy.  It just means we have to work harder to explain and justify their importance to a functioning democracy, and that we must work harder to assure these virtues are preserved.

He could argue that.  For myself, I would argue that, kinda.  As I said above,  I lived through those days.  I remember railroad featherbedding, bogus type in the print shop.   I remember how big steel and the steel unions bound themselves together in a dance of denial that would do Kubler-Ross proud, until it virtually destroyed them both.

But I also believe in the kinds of insights Joseph Stiglitz argues for (in the book which, ironically, I trashed just the other day).  A functioning workforce is the very definition of a healthy society.  Masses reduced to pauperism and beggary are no good for themselves and, paradoxically, not much good for their overlords either.  Some sort of union movement is almost certainly part and parcel of such that healthy society   So I can understand Krugman's eagerness to defend the golden age.  I just think he'd be on firmer ground if he went about it a different way.

Resolving the Pension Crisis, Part II

Here's a man who needs no introduction so I won't give him any, except to say here's Robert Frost with "Provide, Provide!"

The witch that came (the withered hag)
To wash the steps with pail and rag,
Was once the beauty Abishag, 

The picture pride of Hollywood.
Too many fall from great and good
For you to doubt the likelihood. 

Die early and avoid the fate.
Or if predestined to die late,
Make up your mind to die in state. 

Make the whole stock exchange your own!
If need be occupy a throne,
Where nobody can call you crone. 

Some have relied on what they knew;
Others on simply being true.
What worked for them might work for you. 

No memory of having starred
Atones for later disregard,
Or keeps the end from being hard. 

Better to go down dignified
With boughten friendship at your side
Than none at all. Provide, provide!

Afterthought: Humphrey Bogart (yes?) said the nicest thing about having money is that you can tell other people to go to hell. Steve Randy Waldman spells out what he really meant.


Previous: link.

I Prefer "We are the 6.30E-06"

Link.

Thank God I'm Not Like Other Men...

My buddy John is chewing the chair legs:

The NYT article on Chisago County continues to nag at me – not sure why. I guess the major mystery to me is why these folks – who are on the edge of existence – are so determined that raising taxes on the likes of the Kochs is bad – are taking that position. They don’t seem to have much stake in the system – they pay essentially no taxes and many of the interviewees are one carrot away from starvation or malnutrition – and actually are net beneficiaries of the safety net. Yet they attack the government and taxes like it would affect them. Why?

I think I can offer an answer to that. It's a two-parter. Part One I blogged about a couple of weeks ago (though I am too lazy to track down the cite). Call it the rule of "thank God I'm not like other men." More precisely: I may be down, but I'm not as far down as they are--"they" being anyone who seems more marginal and beleaguered than I am.  Why the most vicious  racism came not from the planters (who could be polite about it) but from the white trash, many of whom had barely seen a slave, much less actually owned one.  I'm recalling a scene in a novel--I'm betting Jerzsy Kosinski--where he hero wakes up and finds himself in a cattle car on the way to a concentration camp. Worse than that, he is among Jews.  What am I, a good Catholic, doing in a herd of Jews?  Note, this is what passes for humor in Kosinski.

The corollary flip side--part two--is that I like to associate myself with the hottest alpha in the pack.  Partly this is pure instrumentalism--he might take care of me, or at least keep me from being hurt.  But more, I think, it is just a matter of display.  You think I am a simple tattoo artist?  Hah!  I am one of Koch's boys.  So no matter what you think, same answer as before: I am not like other men.nbsp;

Ths Just in: World Going to Hell

I'm a big Kevin Drum fan--and Charles Murray gets up my nose--but for once I think  Murray has the better of it (link). Kevin, I was there, and he is right: we have slid downhill since the 60s.   More people are disconnected, with no real stake in the community. One in eight of us is on food stamps (one in four of children) (link) Fifty-one percent of us pay no income tax (link). And don't misunderstand, I'm not having a Michele moment here: I do not resent these folks but I do think we're seeing a society seriously out of whack.

Here's another point Kevin didn't discuss: the rich and even the well off are finding more and more ways to insulate themselves from the common ruck.   Anecdote: 1963, I was a fledgling newspaper reporter and word got out that the town's leading auto dealer was double-selling his receivables. It fell to me to find him and confront him.  I took my little aqua-blue Renault Dauphine out to his snooty east end stomping ground; I found the circular driveway in front of his columned (no kidding) mansion.  About 645 am I pulled up and parked by his front door.

Sure enough, about 20 minutes later,  he popped out and hustled down the grand front stairway, Tony-Soprano-like in his terrycloth bathrobe, steam exuding from each ear.  Short of it is he harangued and berated me for 20 minutes or so. When I had enough of his bluster to satisfy the city desk, I climbed back into my sewing-machine-powered sardine can and drove away.

Point is, aside from the comic absurdity of it all, these days I wouldn't have got close. A security guard would have stopped me at the project gate. Had I somehow slipped through, once he saw me from the window, he would have called the neighborhood contract cop who would have physically removed me and sent me on my way (probably without a savage beating, but still with nothing to satisfy the gents on the desk).  I--and so much of the detritus of humanity, would just not be his problem.

Here's another take from Underbelly's Wichita bureau--another old guy, albeit actually ten years younger than me:

  We recently were in Minnesota while I toured the Mayo Clinic – (unfortunately they don’t have much of a cure for advancing age). I grew up in Rochester and it was about a quarter the size of the current city. ...  I was appalled at how visibly and aggressively religious the city had become. Not surprisingly, there was a substantial Arab presence – with at least one mosque. And there were at least three Jewish centers – one for the Chabad group. Those make sense due to the people seeking medical care at the clinic. But there were  many  religious schools for kids and lots of ‘Pray for ______’ signs. And more churches than ever. It was depressing. 

 "Oh," adds Wichita, "and big box stores – many many big box stores."  Copy all that, but speaking as a longtime pagan, I have to acknowledge a certain ambivalence on the religious thing.  One the one hand, I'm as offput as you can be by the resentment and rancor that seems to pass for religion in so many quarters--not to mention the intrusiveness.  On the other hand, I acknowledge that there is all sorts of evidence that the sincerely religious are far more likely to be plugged into the world than us heretics.   Oy, young folks nowadays.  Complicated world.   

More on Fighting Back

My friend Ignoto weighs in on the 99 percent:

The ideologue sees the pepper-spraying and gets indignant. The intelligent ideologue sees the pepper-spraying, gets indignant, and then figures out how to make and sell gas masks and organic pepper spray.

Isn't all pepper spray organic?

Herb Gintis Offers an Heroically Short History of Inequality

He gets it down to a page:

[H] uman technology ... is a seriously two-edged sword, in some eras liberating, and others enslaving, the human passions. Let me explain. Hominids developed lethal weapons at least 400,000 years ago, in the Middle Pleistocene ... .  Most important were sharpened wooden thrusting and throwing spears developed for hunting, but quite effective in killing or maiming the strongest male while asleep or otherwise inattentive. Because of these lethal weapons, there was no possibility of maintaining a political hierarchy based on physical prowess alone. By contrast, non-human primates never developed weapons capable of controlling a dominant male. Even when sound asleep, an accosted male reacts to hostile onslaughts by awakening and engaging in a physical battle, basically unharmed by surprise attack.

The reaction of hominid political structure to the emergence of lethal weapons was, logically, either to sustain leaderless social coalitions, or to find some other basis for leadership. The superior survival value of groups with leadership doubtless led to the demise of leaderless hominid social formations, and the consolidation of new hominid social relations based on novel forms of leadership. What might these may be? Clearly, if on cannot lead by force, one must lead by persuasion. Thus successful hominid social bands came to value individuals who could command prestige by virtue of their persuasive capacities. Persuasion depends on clear logic, analytical abilities, a high degree of social cognition (knowing how to form coalitions and curry the favor of others), and linguistic facility. For this reason, the social structure of hunter-gatherer life favored progressive encephalization and the evolution of the physical and mental prerequisites of effective linguistic and facial communication. In short, 400,000 years of evolution in the presence of lethal weapons gave rise to Homo sapiens.

If this argument is correct, it explains the huge cognitive and linguistic advantage of humans over other species not as some quirk of sexual selection (the favorite theory through the ages of Charles Darwin, Ronald Fisher, Geoffrey Miller and many others), but rather as directly fitness enhancing, despite the extreme energy costs of the brain: increased cognitive and linguistic ability entailed heightened leadership capacities, which fellow group members were very willing to trade for enhanced mating and provisioning privileges.

With the development of settled trade, agriculture, and private property some 10,000 years ago, it became possible for a Big Man to gather around him a relatively small group of subordinates and consorts that would protect him from the lethal revenge of a dominated populace, whence the slow and virtually inexorable rise of the state both as a instrument for exploiting direct produces and for protecting them against the exploitation of external states and bands of private and semi-state-sanctioned marauders. The hegemonic aspirations of states peaked in the thirteenth century, only be driven back by the serious of European population-decimating plagues of the fourteenth century. The period of state consolidation resumed in the fifteenth century, based on a new technology: the heavily armed cavalry. In this case, as in some other prominent cases, technology becomes the handmaiden to oppression rather than emancipation.

 That's Gintis reviewing Fukuyama's End of History. Jump cut to the 20C:

It is clear today that the material basis for liberal democracy is no longer the armed infantry but rather a combination of the willingness of ordinary people to rise up, fight, and die for freedom, together with modern communications and transport technologies that are virtually impossible to suppress, especially if authoritarian states have an interest in promoting economic development. ...  For the most part, modern technology is highly emancipatory. Where [Fukuyama] is wrong, however, is in not contemplating the possibility of new technologies capable of controlling masses of people by a powerful few...

Gintis gives Fukuyama four stars.

The Greens and the Subsidy Game

Some of the usual suspects are enjoying an interval of (perhaps premature?) grave-dancing this weekend over the (alleged) corpse of green energy policy.  Here's Greg Mankiw (of course) and here's Mark Perry (of course) and here's Walter Mead who lets loose:

There may be a dumber mass movement in the country than the fuzzy minded sentimentalists of the great green herd,but it isn’t easy to figure out which mass movement that would be.

...which strikes me as a bit rich for one who seems to fancy himself a gentleman of the old school (and one who betrays a weakness for opera and fish).   Still, I confess to a bit of ambivalence here because narrowly, I'm in sympathy: green subsidies probably were (or "are") a misguided and overhyped idea--unlikely at best to achieve their objective and inevitably vulnerable to corruption or outright perversion by insiders ready to scoop dollars off the table wherever they find them.


So far, fine, but wouldn't this be a grand opportunity to morph these complaints into a more general assault on market perversion?   Grant that each of my chosen commentators may offer some perfunctory feints in that direction (and Perry is first-rate on the farce of farm subsidies).  But no one of them so far seems willing or able to face up to the broader issue: that the primary purpose of government seems more to be the lining of pockets of thee oligarchs.  Mead says "isn’t easy to figure out" who is dumber or more fuzzy minded than the greens.  Well, how about all of us who let ourselves get victimized by the public-private cartels who do such a splendid collective job of impairing the general welfare?


They could start, for example with this Citizens for Tax Justice chart of who squeezes what out of our tax system.  Wthout looking, can you guess who is at the top?  If you said "big energy" and "finance," you wouldn't be far wrong.  I'm especially impressed that "industrial machinery" weighs in with a tax rate of negative 13.5 percent (ironically, "health care" --one of our supposed "successes" --weigh in with tax rates among the highest).


The idea that government is a plaything of the well-connected is hardly new, although it seems to be gaining a kind of traction lately that I haven't noticed for a long time.
Still, or all the useful particular examples, we still tend to talk in terms of "public" v "private" as if we understood the category boundaries.   But if the connectors and the connected are part of a unified ecosystem, the old-fashioned category lines don't seem to offer much help.


Addendum:  Here, by the way, may be one more field in which my goodbuddy Michele Bachmann may be closer to the truth than her adversaries want to credit.  She's catching hoots of derision this morning for saying that America should be more like "free market" China, where people do their own saving for their own retirement.  But where, exactly, is she wrong?  If she had added "plus a ring-fenced ruling-class that drains national wealth for its own private gain," her picture might have been more complete--and might be said to describe large chunks of the rest of the world, as well.

Rentiers Again: Venice, and Ourselves

Meditating further on the phenomenon of persistent wealth, I just thought of another great example: Venice.  Seems to me that most of what we remember about Venice--the parties, the gaudy display--comes from the 16-17C.  Yet Venice's role as an economic powerhouse pretty much ended in 1497 when Vasco da Gama doubled the Cape and opened an Ottoman-free sea route to the Indies (I remember reading once that the Venetian bourse collapsed on the news, but I can't put my finger on a reference).  

Meanwhile, I read in Ezra Klein (Inc.) that among our own non-99 percent, inheritance counts for only 14.7 percent of wealth.  Ironically, this means that inheritance is more important to the middle and lower classes.  Maybe the real question is not how much of today's wealth is inherited, but how much of tomorrow's.

The 250k Obsession

Fiscal Times is  back with another one of those accounts of how life on $250k a year is not all ortolans and whipped cream.  It's temperate in its way, not early as delusional as the angry outburst of a Chicago law prof that caused such a stir last fall.  But it still fails to come to terms with its own fundamental reality, that is, how most Americans would kill for those problems.  Accepting every word the FT says as true (and I don't, really), still the fact is that we are talking about a hangnail on the body politic.  Somehow the vast majority of Americans are trudging along only only a fraction of the 250k number.  And how will they pay for maid service, dry cleaning, higher education?  And you expect them to feel any sympathy at all for the beleaguered minority at the top of the food chain?

And the Bright Spot is--Africa?

This one is getting buzz all over the place, but I just last month repeated the conventional wisdom about Africa being a basket case so I might as well join the parade. That is: we have a report saying that African Poverty is Falling...Much Faster than You Think! (link). And it's not just Botswana:

African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for
mineral‐rich as well as mineral‐poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below‐ or above median slave exports per capita during the African slave trade.

The paper can be read as a challenge to, inter alia the work of Paul Collier, whose The Bottom Billion is perhaps the most widely cited recent work on world poverty and inequality (I reviewed it here). One thing the paper doesn't do is attempt to identify just why things have gone so (counterintuitively) well in Africa and in particular, why or how Africa avoided the "resource trap," whereby resource wealth supposedly concentrates in the elites.

The authors back up their case with evidence that the Gini inequality measure for Africa has fallen from about 0.66 to about 0.63--a level not seen since the ealry 70s. That's unambiguous good news but it is worth remembering that the US Gini number typically lies in the 40s and Europe's, in the low 30s.