Monday, November 21, 2011

This is How They Lie to You: Paul Ryan Edition Pt. 2

The introduction has little wrong with it, but I will touch briefly on two key points that I disagree with.  The reasons why will be argued more fully with data when I come to them in the report.

The question for policymakers is not how best to redistribute a shrinking economic pie. The focus ought to be on increasing living standards, expanding economic opportunity, and promoting upward mobility for all.

This displays rules of propaganda two and three, discrediting the opposition by a parody and manipulating the consensus values of the target audience.  No one in American politics is discussing redistributing a shrinking economic pie, there are disagreements over the causes of growth and over how to share the burden of expenses that have been democratically agreed upon.  This statement radically manipulates the opposition's position into something distinctly unAmerican and portrays them as opposed to the universal values of better living standards, opportunity, and upward mobility while portraying Ryan and the Budget Committee as its champions.  My disagreement with Ryan is that I think his proposals degrade all three of these, not that I believe there is a shrinking economic pie to cut up.  It is also true that expenses simply are a pie that needs to be distributed, our debt isn't going to go away by wishing it would so that particular pie does need to be shared out, confusing this with wanting to share out the economic pie, rather than the debt pie, is just transparently manipulative.

My second issue with the first page is this:

Conventional wisdom on government’s role in inequality often has it backwards: tax reforms have resulted in a more progressive federal income tax; government transfer payments have become less progressive (due in large part to growing entitlement payments to wealthier seniors).
 Explaining what is manipulative about this will take some length, I'll get into it in more detail in the relevant sections of the report.  It will become apparent as we proceed that much of the increased progressivity of the tax code is due to shifting anti-poverty measures from other departments to the IRS, this has also made transfers less progressive as the more progressive transfers are the ones that have been shifted to the IRS.  I don't really understand why shifting government assistance from Health and Human Services to the IRS should be understood as having changed the overall progressivity of American transfer programs, it is simply pedantic hair splitting meant to score political points.

This is How They Lie to You: Paul Ryan Edition Pt. 1

The House Budget Committee, under Chairman Paul Ryan, has put out a report on income inequality that basically seems like a rebuke of the CBO report on inequality.  Reading over the Budget Committee report, I was struck by how dishonest it was.  It is my purpose to expose this dishonesty.

To do that, it is my purpose to go over the report with a fine toothed comb.  Where it is inaccurate, I will point this out.  This will be rare, blatant dishonesty is generally avoided with this kind of publication.

What I will be focusing on instead is a few things.  First of all, lies of omission.  In a number of places information that should be known to any budget analyst that would cast doubt on the commission's conclusions is withheld.  Inequality is a topic I've done a significant amount of writing and research on, when possible I will provide exact information to show how deceptive the selective information in this report is.  Unfortunately, however, I am not an expert on this.  Where I do not have a current citation on a specific piece of information I will be forced to more generally direct you to a set of works that deals with the topic, rather than provide a specific citation.

The second major focus will be on deceptive manipulation of the numbers.  There are a number of places where changes in type of expenditure are presented as if they were reductions in expenditure and other abuses of trust such as this.  I will discuss these at some length.

The third focus will be on the rhetoric, which has been a topic of great interest to may lately.  This report displays a number of the rules of propaganda (summarized in Europe by Norman Davies on pages 500 - 501 for an easy reference).  In particular, the report tries to drive home a narrative that I see as dominating far right discourse, that individual responsibility and social responsibility are mutually antagonistic.  Also, that equity concerns are necessarily in competition with efficiency concerns.  Neither of these narratives have empirical supports, I will be showing where they are simply assumed.  This flaw in reasoning falls under "the rule of unanimity: presenting one's viewpoint as if it were the unanimous opinion of all right thinking people" (in this case, it is displayed as a self-evident fact of the world, with no alternative conceptions even being addressed).  The other main rule is the rule of simplification, for instance whereby the Budget Committee expresses the choices facing us as pie-growing vs redistribution, rather than differing views on how best to grow the pie (this also falls under rule 2, "the rule of disfiguration: discrediting the opposition by crude parodies).

I expect the analysis of this to take quite some time and a number of posts.  Hopefully I'll be able to drive my point home of just how deceptive ideologues like Ryan are being in reports such as this.  I believe that a primary cause of our current polarization is that manipulation such as this has inserted memes into our culture that have served to corrode what was a previous since of the country sharing our burdens at all levels, individual responsibility reinforced family responsibilities which reinforced community responsibility all the way up to the national level.  By contrasting individual responsibility with social responsibility the far right corroded this basic consensus breaking down the bonds of trust that linked shared responsibility into a circle with each stage reinforcing the next.  This was achieved not through the content of what was being argued but rather by framing and by controlling the narrative, my focus is on exposing the frame and narrative for what it is to expose the weakness of the content of these arguments.

I do wish to briefly address why I think inequality matters so much.  It's not because of fairness, or even because I think inequality threatens growth and stability (which I think it does).  It's because growing inequality has not been met by a corresponding increase in responsibility, for a given burden of costs the share of taxes paid by the wealthy has increased more slowly than their share of income.  This means that the rest of us pay relatively more with a relatively lower share.  Not only has income median income growth been comparable to 18th century rates of growth, we've seen our share of the burden of government increase proportionately faster than our share of incomes has declined.  There is also the social problems that income inequality has historically led to, but fundamentally the issue is that the growing inequality has resulted in a real increased per capita burden on the rest of us.

I will also state that I come from an intellectually different universe than Ryan.  His economics starts with an assumption that all economic growth is essentially consumption driven, the tendency to invest is ultimately driven by people deferring present for future consumption at a discount rate.  From this view, increasing the gains to be had by success and the penalties to be had by success will motivate people strongly because their consumption function will alter more drastically.

I believe this is hogwash, I see people as being primarily status driven with a secondary concern of maximizing security.  Investment and growth occurs because people strive for a greater relative position, when they see the path to this broken because all their efforts are taken up by necessary consumption, whether status consumption or the fulfillment of physical needs, they cut back on work and investment because they fail to see the point, they're not motivated by the potential future consumption but by instead the prospects for relative gain.  In highly unequal societies people see their efforts as being insufficient to compete with others with so many advantages so they stop trying.  The secondary goal is security, lacking a secure means of subsistence (which has expanded with expectations to include goods such as healthcare) means that people will fail to act on opportunities or take risks for fear of losing what little they have.  People with a family based safety net tend not to consider this, the worst prospect of failure they face is moving home with the parents.  This makes them believe that long term payoffs and risk taking are natural, having never had to face the prospects of living on the street they don't fully understand how this would shape their behavior if faced with this scenario.

As per usual, this introduction expanded beyond my original intention.  I will now begin to dig into Ryan's report in earnest for future posts.  I'm not sure how long this will be, but I can promise several posts for the level of detail I intend.

Sunday, November 20, 2011

Why the Last Post was So Strongly Worded

After a bit of thought, I realized that the last post was rather strongly worded and I should explain why.

I have no problem with the basic observation that family is more important than teachers in determining a child's success.  If Friedman's post had simply been a laudatory shout out to parent's of every socio-economic status that were doing things right, since it doesn't take money to follow your kid's academic performance and read to them, this would have been a good column.  These factors are a powerful observation of how individual and family traits matter and an explanation for how upward economic mobility occurs.  A parent that discovers late in life the importance of education and learning, or that is an immigrant who never received the opportunities, can pass good habits onto their children so they have far more opportunities than their parents had.

The problem is when the focus is on changing these kinds of characteristics.  I tend to believe there is a hierarchy of what determines success, the first is individual level traits, the second is family, and the third is social constructs such as culture and institutions.  The third is by far the weakest, but its the one that has proven historically malleable to concerted action.  The first two interact with the third, thus we get far more people participating meaningfully in society and making large contributions than occurred in earlier eras.

For an example of this interaction, think about modern disability policy compared to that of the past.  Today, we have people in wheelchairs in our office building and blind people teaching our college courses.  This would have been very infrequent in the past.  In one time period, these individual level traits would have been basically the sole determinants of the success of an individual that had them, today, these individual traits are secondary to other because of changed cultural and institutional circumstances.  For a less extreme example, think of someone with strong leadership but weak academic skills.  Today, such an individual's participation in student council, athletic teams, and other activities will give them a shot at college and later a good job that will emphasize their leadership traits over their weaker academics.  In previous generations, this individual may never have risen above a laborer because their lack of ability in school may have never presented them with opportunities to display their traits, which modern society now does.

And this is the problem with Friedman's column.  We can do very little to change individual characteristics such as how good of a parent someone is directly.  However, we can create cultural shifts and institutions that will change these things.  Focusing on the individual level trait however, perpetuates inequality of opportunity, someone whose parent's don't read to them probably won't read to their children.  However, better schools that seek to compensate for the child's lack of parental guidance can help improve that child's chances somewhat and perhaps even more likely create new opportunities for that child's children by teaching them to read to their children, thus breaking the cycle of poverty.

This is the contribution that studies that emphasize the parental role make.  They show that interventions to help one generation are something that creates a virtuous circle, intervention at one point pays off for future generations as well.  It also shows that vicious circles are just as potentially determinative, a child with bad parent's will likely be a bad parent themselves.  This doesn't lesson individual responsibility, it broadens it.  We are to some degree what our parent's made us, and our parent's are to some degree what society made them.  As a society we can intervene only at the third, and least influential, point.  However, investments will be paid off with ever greater returns across a generation, teaching a kid to read, even too late, may lead to them reading to their children, breaking the vicious cycle a generation down.

However, this also shows how reactionary and regressive column's such as Friedman's are.  It justifies existing inequalities, since even a poor parent can read to their children they become responsible for the failures of their children, who in turn will be responsible for their children's failures.  The rest of us get a pass, bad parents ruin their kids chances just as good parents help their kids chances.  This focus is ultimately destructive, society and mobility has quite obviously changed over the centuries and this didn't happen as a result of some sort of moral evolution or genetic shift, it happened because of policy changes.  Sure, we can do far less for a kid's chances than their parents can, this has always been known.  This doesn't change the fact that we can't choose a kid's parents, but we do have some influence over a kid's teachers.  Focusing on what can be changed, rather than what can't, holds the promise of a better world.  Wishing people were better does nothing but make our problems permanent and delivers onto the son the sins of the father.

This isn't a world I'm willing to live in and I'll speak out against it every time I encounter it.

How Exactly Do We Get Better Parents?

Thomas Friedman has a column today that is in the genre of advice that is utterly useless because it is not something that can be changed.  He cites a bunch of data that indicates that parental involvement, and more particularly the right kind of parental involvement, has a major impact on test scores.

Well, duh.

This is so widely known, even without the study, that it doesn't really need to be pointed out.  This falls in the category of stating the obvious.

Friedman states this, which is one of the most useless statements I have ever heard:

To be sure, there is no substitute for a good teacher. There is nothing more valuable than great classroom instruction. But let’s stop putting the whole burden on teachers. We also need better parents. Better parents can make every teacher more effective.

The problem with these types of columns is that how good a parent is isn't really subject to change.  People have known this for so long that it's implausible that any amount of moral exhortation will get more parents reading to their children, this is a cultural habit that would have been known in a rough form in ancient Rome or China.  We don't really know of any reliable way to make better parents, though redistributive policies like income supports, child care subsidies, and better transportation policies do help indirectly.  This kind of statement is like saying the solution to our health care problems is for people to become healthier.  No shit.  Where's the magic wand that will achieve this?  We could also stop war if people were less violent, church attendance would go up if people were more godly, and our political system would be less of a mess if people were more trustworthy and less selfish.  But they aren't.

The world has problems because people aren't perfect.  The question is how do we deal with imperfect people who aren't perfect.  Wishing people were better is worse than useless, it is actively harmful because it attempts to shift the locus of change from things we actually have some control over, like the incentives to attract good teachers and policies like the length of the school day, to things we have absolutely no power over, like how good parents are.  How good of parents the people having kids are isn't really a manipulable variable, unless you're an advocate of draconian social darwinism (or willing to embark on widespread redistribution that wouldn't otherwise be embarked on as a result of it spurring better parenting, which seems implausible).  The purpose of this research is to help understand which kids are going to have difficulties so that we can focus research on those kids which have the biggest deficits.

Indirectly, it does also emphasize the importance of non-educational factors leading to social breakdown on education and thus upward mobility.  But we know with certainty that simply pointing out individual's failings does little to spur better behavior.  Its best we focus on what we can control with social action and policy rather than getting distracted by factors that, while powerful, are completely outside our realm of control.  Of course, this kind of dialogue does seek to shift things towards individual responsibility, but this does little but reinforce existing inequality of opportunity because we know with some certainty that people have always been about the same.  Knowing that many people aren't good parents, and doing nothing about it because things would be better if more people were good parents, is simply an abdication of our individual responsibility to seek to grapple with or world as it is, rather than as we wish it would be.  Everything would be great if everyone was good at everything they did and thus raised children that would be great at everything they did too, but this isn't Lake Wobegone, so we need to focus on things like better teachers and schools that can make up the deficits for bad parents.  Change the things we can, rather than wish our troubles away by pushing responsibility for them off on someone else.

Thursday, November 17, 2011

Bundling and the Importance of Standardization

I have done more than a few posts discussing how concentrated medical expenditure in the US is.  Ezekial J. Emmanuel does a good job discussing one way to focus on this problem, bundling payments.

What I want to bring up in particular, is this:

The last big barrier to switching from fee-for-service is to get Medicare as well as the other insurers to change how they pay in unison. It is extraordinarily difficult for doctors and hospitals to change how they practice if they are partially paid via fee-for-service and partially through bundling — especially if the bundles differ between insurers. The incentives pull in opposite directions — fee-for-service to deliver more services for sick patients, bundled payments to be efficient and keep patients healthy. But if Medicare and private insurance agreed to coordinate a switch to bundled payments, doctors and hospitals could follow suit. This will not be easy, but it is absolutely necessary if we want to save real money and improve care.

This brings up one of the big issues for people that like to argue health care should be more decentralized.  The lack of standardization in payment systems is one of the big inefficiencies in our health care system.  Bundled payments aren't the kind of reform that is likely to happen spontaneously across the US, it takes someone with coercive powers to make all of the actors move together.  A decentralized system is highly unlikely to be able to institute the kinds of reforms that we need on a broad scale.  While individual institutions can pursue this, it only takes one powerful actor, such as a hospital group, to prevent this kind of reform in an area.  The reality of the economic system is that in complex markets like health care, a number of actors serve as veto holders.  To get them in line requires a centralized coordinating body.

While this example is specific to health care, it can also be applied more generally.  Some systems require greater specialization and competition, others require greater coordination and standardization.  Areas requiring standardization virtually always require a degree of coercion to be able to reach an efficient equilibrium.  Properly identifying which is which is a critical challenge for every society.  Insisting that all situations are one or the other is just plain unhelpful, both kinds of problems exist and require an evolutionary case by case response.  Ideologues, either those that insist that everything requires competition and unique solution or those that insist everything is reducible to basic principles to be determined by centralized planning (rare today but a significant historical viewpoint) both threaten one of the fundamental tasks of society and social evolution.

Wednesday, November 16, 2011

What the Story of the Four Little PIGS Tells Us about the Welfare State

I often hear that the European debt crisis is an example of the evils of government spending and the welfare state.  However, something shared by at least three of these little PIGS (I don't know about Portugal) is that all had fairly rough transitions to democracy and retain some powerful clientelist features.  A recent Economist article reminded me of these features, which to be completely honest, I've been waiting for an excuse to blog about.

Italy, especially, has been used for a comparative case of a remarkably poorly functioning public sector and state spending that bears the form of rents more than it does characteristic welfare state features (Greece is probably an even starker example of this, but for various reasons, it is less frequently used for comparisons).  In all three of these countries, and perhaps Portugal, state spending serves largely to create political support for the existing regime and to support the legitimacy of the state.  These features largely date from the transition to democracy from their autocratic regimes, it was necessary to win over powerful constituencies that otherwise posed significant threats to the democratic transition.  While this was likely a necessary aspect of their transition, unfortunately none of these states managed to unwind these features while they had the freedom to do so.

It is undeniable that state spending used for clientelistic purposes is extremely damaging, the situation in Europe only confirms this.  However, it is a huge stretch to generalize from these cases to the idea that all state spending is unsustainable or a negative risk.  The main lesson to be drawn is that most mature democracies don't look anything like this, in most democracies most state spending is widely shared with its skewness being towards the poor generally, not towards specific privileged groups.  Attempts to say that all state spending leads to clientelism or to buying support from beneficiaries runs aground on the fact that benefits in states such as France, Germany, or Sweden are widely shared while other states, like Greece or Italy, have far more of their spending going to privileged groups and in particular highly paid and pensioned public employees.

The lesson here is about particularism and clientelism vs the welfare state, not one about spending vs. austerity.  Particularistic spending and benefits tends to lead towards imbalances and a higher possibility of economic stagnation (Spain certainly took off for a while despite these problems, if the crisis had been delayed for another decade or two things may have been very different), broad based policy and spending tends to be far more effective.

On top of this, of course, are the usual labor and business rigidities that plague Europe.  But this is shared across Europe, what is different in the experiences has a lot to do with the relative maturity of the democracies, their ability to rely on broad based legitimacy for their governments as opposed to particularistic interest groups, and the method they use to disburse state spending, broad based benefits vs. jobs.

This theme is worth developing further, I see it brought up far too much despite being a variable that occurs a lot in the political science literature regarding Italy especially.

Monday, November 14, 2011

How I Think about Nature vs. Nurture

The last post may have raised some questions about how I am conceiving of the timeless debate of nature vs. nurture, I seem to be claiming that providing income can change individual behavior.  This isn't entirely how I see it, I see providing income as changing aggregate but not necessarily individual behavior.  The distinction is important.

How I see this working basically goes like this.  Assume the population has a normal distribution (or other kind of distribution, it doesn't really matter as long as an assumption of unequal talents is used) of traits that lead to what most would recognize as success.  This doesn't mean just the success of wealth, few would consider a lottery winner to possess any particularly meritorious traits and most would consider astronauts or Olympic gold medal winners to possess traits leading to success, even if they aren't at the top of the income distribution.

Now, we'll assume that a certain portion of these people will always succeed in life under any conditions, it doesn't really matter if it's 1% or 5% as long as we assume it is a minority (since the majority was oppressed throughout most of history it has to be a minority, I'm assuming success in any institutional environment).  Also, we'll assume that a certain portion of people will be unsuccessful in any institutional environment.  Doesn't really matter how many, but since some European countries have achieved poverty rates of below 5% it probably isn't a large proportion.

These people we can ignore.  They'll do well under any setup, so who really cares?

What matters is the roughly 90% of people that are responsive to policy.  This is what we have to focus on.  That there are Bill Gates or Steve Jobs out there who probably would have had incredible ideas that would have made them money, whether born as medieval peasants or where they were, doesn't really matter for policy.  These stories get trotted out, but upward social mobility existed in ancient Persia or Sumer, that these people exist isn't an argument against policy since they've been present even in the most oppressive of social circumstances.

For most of the people, most of the time, the environment is a better predictor of behavior than individual level traits.  In previous eras it was believed that few people had the mental faculties to be literate and participate in politics, it should be obvious nowadays that instituting policies to open up these advantages to the masses have proven these prejudices wrong.  For these people, institutional circumstances matter very much, if they feel relatively deprived they may become depressed and not invest themselves and become upwardly mobile.  However, a simple windfall, whether something random like the lottery or a social reform such as the EITC, can spur a portion of these individuals to greater efforts.

Theoretically, of course, the question exists of what motivates more people to succeed.  Doubtless, there are some people that given a basic income will become indolent and lazy and not work.  There are others that will do well only if deprived, they feel the need to overcome adversity and this is what drives them to success.  The question is really, what is the proportion of the types of people that respond to different incentive structures?  This is an empirical question, providing more supports will motivate some people while reducing the motivations of others.  There is no way to target these interventions.

The data points really strongly to the idea that the portion of people that respond more strongly to having their relative deprivation lowered, rather than raised, is quite a bit higher.  Comparative evidence regarding Europe points to this, give people more support and income mobility increases (of course, make it harder to work and unemployment increases, I'd really like to separate European style income supports from their labor market and financial policies which I think are atrocious).  Also, looking at US mobility supports this, easy access to land and high wages rates promoted upward mobility.  As relative wage rates fell, so did upward mobility.  We can also look at workforce participation, incentives such as the EITC lead more people to work and out of poverty, before we had most modern social programs poverty rates were vastly higher and many people, particularly in rural areas, had very limited contact with labor markets.  Give them some supports, and they integrate with markets and start becoming upwardly mobile.  They weren't like this however when they were at their poorest and most deprived, it was only after something was done about it that things change.

I kinda went on a tangent, but my basic point is that I think of the population as a distribution.  Any reform will help some people and hurt others, and stasis should also be though of as helping some people and hurting others, it's better to think of a menu of potential policies in order to not introduce status quo bias, this isn't a reason not to engage in change.  The question is, what is our data of the portion of people that will be helped relative to those that will be hurt, to the best of our knowledge.  Both individual level traits and the social environment matter, however, since policy doesn't generally impact individual level traits these traits are essentially irrelevant for policy purposes.  The question is how the broad majority that is more responsive to environment in regards to their economic success responds to policy changes.  This matters not only for some conceptions of social justice but also for economic growth.  It matters very much for the capitalistic process of creative destruction that new ideas and challengers are constantly rising to challenge old notions, promoting the chances of a greater range of individuals will enhance this process and thus economic growth.

What Really Leads to Hard Work and Discipline

Tyler Cowen had an interesting article in yesterday's NY Times regarding the dialogue of wealth and values.  It's a good article, though I disagree with much of it.  There's a few things I could pick out, but I think the end of the article displays the points I disagree with best.

The counterintuitive tragedy is this: modern conservative thought is relying increasingly on social engineering through economic policy, by hoping that a weaker social welfare state will somehow promote individual responsibility. Maybe it won’t.
For one thing, today’s elites are so wedded to permissive values — in part for their own pleasure and convenience — that a new conservative cultural revolution may have little chance of succeeding. Lax child-rearing and relatively easy divorce may be preferred by some high earners, but would conservatives wish them on society at large, including the poor and new immigrants? Probably not, but that’s often what we are getting.
...Nonetheless, higher income inequality will increase the appeal of traditional mores — of discipline and hard work — because they bolster one’s chances of advancing economically.That means more people and especially more parents will yearn for a tough, pro-discipline and pro-wealth cultural revolution. And so they should.

The issue I have with this is that while the narrative sounds nice, does this really describe what is going on?  This touches on a basic critique that I keep bringing up again and again on this blog, I think the basic frames of capitalism and socialism are dead wrong.

What does this have to do with Cowen's piece?  Well, there are a few curious things happening when the United States is compared with Europe and social groups within the US are compared.

The first one is my basic critique of the guiding ideologies of the US in Europe.  A common frame is that US policies are efficiency driven while Europe is equality driven.  There's some truth to this.  But, within the narrow question of what each system is doing to values, we see a few peculiar things.

First of all, while data is fairly sparse, most who study the question seem to agree that the US used to have far more income mobility than Europe.  However, Europe has matched and exceeded our income mobility over the last few decades, and there is some evidence that US income mobility in the bottom half of the distribution has declined over the past 30 some years.

Lets think for a moment about what this might mean for both ideologies.  Much of European policy is predicated on the idea that class identities are effectively set in stone, the proletariat and managers are essentially at odds and it is necessary to support incomes in order to prevent relative deprivation from breaking apart the social fabric leading to instability and human misery (vast oversimplification, but I'm writing a blog post not a book).

However, looking at the data, the motivating structural factors seem to simply not be true.  Once a person's income is supported their class characteristics seem to drop away, they start doing distinctly bourgeoisie things like investing in their children's education, deferring gratification by going to school rather than directly to work, and saving and investing more.  The class rigidities that motivated many of these interventions seem to disappear once these interventions are in place.  This doesn't prevent a number of damaging interventions based on notions of class rigidity from becoming institutionalized as well, Europe is famous for its labor rigidities, but when it is specifically welfare state policies under discussion they seem to erode class distinctions and promote behavior that most conservatives associate with personal responsibility.

By contrast, the measures promoted by conservatives in the US to promote personal responsibility seem to have the opposite effect.  As income disparity has increased, our social mobility has gone down, not up.  The incentives get larger every year yet we don't see any remarkable increases in social mobility in response to this.  A lazy answer would be that many of the poor simply don't possess the merit to rise above their station.

However, there are two easy answers to this.  First, every society ever has always argued this but with every reform that broadens access, such as the elimination of legal class distinctions, increased access to eduction (GI bill for an example), and income supports like those in Europe, we see an increase in the number of people able to rise above their station.  Each time we're told that there is something essentially lacking from those failing in the current system, but sooner or later there is always a reform that works and we find more people than we ever thought possible proving their worth and becoming upwardly mobile where before we thought of their class or social position as essentially stagnant, or at least that upward mobility was already at the maximum possible rate.  The second easy answer is why was our upward mobility once higher than Europe's but now isn't, there hasn't been a fundamental demographic shift that would locate the difference within the ranks of the bottom 50% of each society.

The second thing I want to pick up on is Cowen's bit about contrasting permissive values with discipline.  The problem here is that either with an in US comparison or a US-Europe comparison you don't see a simple dichotomy of discipline vs. laxness.  Rather, the approach seems to be either one of saying what we should or doing what we should, never both.

This is hard to explain briefly, so some examples.  In the US, it may be that divorce has become more lax.  However, the wealthiest groups have become far less likely to divorce, it doesn't seem to be their behavior driving the more permissive society, while the rules have become lax their actual behavior has become more disciplined.  Poorer people, who are more likely to express the more disciplined viewpoint, remain far more likely to have broken homes and to divorce.  One component of this seems to have been the development of informal rules among more elite groups, don't have sex until you love someone, not necessarily leading to marriage but reducing the number of sexual encounters while also leading to more stable future marriages.  Among poorer groups, the tendency to marry your high school sweetheart, and then get divorced within a few years of mental and emotional maturity in your mid to late 20s, seems more common (also, I think this partially explains why divorce went up among the wealthier before coming down, my parents generation retained the ideal of the highschool sweetheart early marriage, and got divorced when it was more permissive, my generation gets a career established before marrying and is thus more stable, no chance we're going to be virgins till we're 28-30 though so we need some kind of rules regarding when to have sex that don't involve marriage, the middle class and wealthy seem to have developed this but don't seem to be proselytizing about it to the disadvantaged).

The contrast is also marked with Europe, out of wedlock childbirth is way up compared to the US in many European states but cohabitation is far more common, providing the same benefits as marriage (marriage does increase the stability of cohabitation, but given that stable cohabitation is more common in some countries with lower marriage rates it seems that other factors are more important to stable cohabitation than marriage).  Also, teen births are much lower in Europe than they are in the United States, while you're far worse off for engaging in these undisciplined behaviors in the US these behaviors are far more common here.  It's hard to find a better explanation than the relative degree of support available, give people support, and they act disciplined.  Don't give it, and they act wild and reckless.

To sum up, my basic problem with Cowen's argument is that if you want people to act disciplined and to advance themselves in a capitalistic sense, the best way to promote this is to simply give them money.  This isn't counterintuitive, it only seems so if you believe that the primary reason for work is consumption, if you believe instead that it is status and social position it all begins to make sense.  People that are just having to work to survive don't tend to engage in long run behaviors, they don't see there being any potential to advance themselves so they may as well live for the moment and not act in a disciplined fashion.  After all, if any increase in their wealth will just go to the next meal or for rent, why bother?  They get nowhere.

Supply these basics, let them know that they'll have what they need to get to work, that they can have enough to eat, that the money they earn won't all be consumed by daycare, and that they have a roof over their heads, and they start shifting towards being disciplined savers (in an aggregate sense, individual results will vary).  This seems to be basically what the data says.  Provide income supports and most people become more bourgeoisie in their habits, there's nothing essential about class.  Don't supply these supports and something that looks very like class comes into being.  Cultural cleavages develop, those that have resources begin to save, invest in their future, and grow in wealth.  Those that don't have resources spend almost all of what they have instantly, realize the pittance left over can't provide them with capital to start a business or send their kid to school, and decide to piss it away drinking.  Market outcomes, while they reward discipline, don't seem to lead to it in an aggregate social sense.  Providing necessities, however, does.

In the end, I fully support the conservative vision of a more wealth friendly, disciplined, and hard working society.  I just disagree that moral exhortation and carrots and sticks can get us there.  I see discipline as the result of being able to focus on improving ones position rather than providing for necessities, this seems very descriptive of both economic change in a historical sense as well as descriptive of contemporary cross state data.  There isn't a disagreement about where we want to go, the disagreement is about how to get there.  While I disagree with much of the article, I do applaud Cowen for raising the question.

Wednesday, November 9, 2011

What America Needs is Some Prominent Conservatives

The title of this post may seem strange but I've been reading a bit about historical political beliefs and structures and it strikes me that America lacks any real conservatives.  Who do we have that promotes the value of existing institutions and seeks to draw on the lessons learned from them to channel the changes forced upon us into existing channels?  I simply don't hear anyone promoting slow, gradual evolution and learning by doing.

Instead, it seems that radicalism dominates our discourse.  I hear nothing but utopianism derived rationally from rather suspect first principles.  It's as if all of our knowledge and all of our institutions must be swept away to prepare for some perfect world derived from a set of axioms no one can agree on.  It's madness.

We hear about throwing out our entire tax code to be replaced by a flat tax, we hear about scrapping Medicare and Medicaid for vouchers, scrapping the Department of Education for vouchers, we hear about having the fracking government define when life begins, and scrapping Social Security.  It's crazy, it's radical utopianism at its worst.  Virtual Jacobism.  I don't understand it.

The Democrats are at least somewhat better, they are advocating building on existing institutions to solve our problems.  But none of them show any real philosophical commitment to this, they're using the tactic because they believe it's all that can be done in our modern political climate.  Free of this, I don't really trust them.

So where is anyone willing to advocate for old school pragmatic conservatism?  I want two steps forward, one step back change.  I want every move forward to be met be a reassessment and course correction before moving forward again.  I want policies advocated for based on previous and comparative experience, not grand ideological schemes based on the mad scribblings of two bit hack op-ed columnists.  I want course corrections when problems come up, like middle class income stagnation and the correlated growth of top percentile incomes, not competing camps of denial based on ideology on one side and irrational ideologically driven rage on the other.  I want leaders that will recognize reality, deal with it based on past experience and examination of what works.

I want leaders that will say Fuck Ideology, the world is too complex for that.  We can't derive solutions rationally from first principles or build a world that will conform to them.  All we can do is rely on the slow, evolutionary method of change and democratic accountability to identify our problems.  We can recognize what works, correct our course when we have problems, and move forward that way.  Every change will bring problems that have to be resolved before making the next change, that's the way it always is.  Sweeping the board clean has never brought anything but grief.

So why is that I hear nothing but radicalism and Jacobinsm in modern American politics?  What is this madness, where is anyone in favor of gradual change?  Why does everyone want to redefine what it is to be American into bizarre caricatures of our history, like the Tea Party?  What is wrong with our country right now?  Where are the freaking traditionalist conservatives who will go to bad for minor course corrections and building on our existing foundations?  Where are you?  Who will denounce this radicalism that we are drowning in?

Confusing Language and Ballot Initiatives

So yesterday me and my girlfriend participated in the rather well publicized Ohio election.

This is what the initiative read:

A majority yes vote is necessary for Amended Substitute Senate Bill No. 5 to be approved.

Amended Substitute Senate Bill No. 5 is a new law relative to government union contracts and other government employment contracts and policies.

Other initiatives contained considerably more explanatory language.  The brevity of the language for issue 2 was confusing, my girlfriend voted the opposite way she intended because while she had been reading about the bill and remembered the general issues involved she couldn't remember the particulars.  A simple line about the bill pertaining to restricting collective bargaining rights would have led her to voting the way that she intended to vote.

This is generally a problem with ballot initiatives.  Given their brevity it is very easy to write them in a way that leads to misvoting.  It would be very beneficial if more comprehensive information was made readily available at the polling places, and even in the voting booth, for voters to refresh themselves on the content of these initiatives.  It can be difficult for even a politically savvy person to weigh them properly once at the booth and its especially likely for someone to slip up after a long day of work when they are already tired.  More information is badly needed.

As an aside, I am still baffled by the opposition to the ACA.  Issue three passed, I just fail to comprehend what it does to preserve choice.  Having moved recently I've been trying to deal with buying insurance on the existing market, such as dental insurance, and it is a major pain in the rear end.  It's hard to find information and the companies don't seem to believe they'd benefit from giving more information to consumers.  Health care exchanges would make this task far easier, avoiding the free rider problem through mandates would make things far cheaper.  I just don't comprehend the opposition, our health care system is the biggest problem facing America today and the opposition to doing anything to fix it is beyond bizarre.  Somehow the belief is prevalent that the problem can magically fix itself by just leaving things be, despite getting worse year after year.  We've seen dozens of countries get their health care system under control, yet, we're unwilling to attempt tried and true methods to fix our problems.  It's beyond me.

The Childishness of Extremist Morality

Reading Hirschman made me reflect on a symmetry between the far left and far right worldviews.  I've talked to probably more than my fair share of ideologues from both sides and something I've noticed is that they both tend to create a moral system, sometimes quite elaborate, that has first principles that lead inevitably to the views they hold.

For the far right, this tends to be a moral system that is all about responsibility for the actions you take.  There is very little about responsibility for the world as it exists, morality and responsibility are solely about the direct consequences of what you do, little, if anything, is said about inaction.

For the far left, the moral system is all about responsibility for the world as it is.  We are responsible to seek to change it, inaction is morally culpable.  It doesn't much matter if you can change the world, as long as you try.  Little is said about the consequences of our individual actions, what matters is that we seek to change

Both views reduce human beings to moral immaturity by denying any responsibility for consequences.  Both make moral action simple and prescriptive, we are responsible solely for intent, in the far right view only for our direct actions and not for any aggregate systemic effects and on the far left view only for our intent of changing the system and not for the immediate consequences of our actions.  Neither pays much attention to our action/inaction's consequences.

Moral maturity, however, requires accepting responsibility for both intent and consequence, individual and aggregate.  Children can get away with the argument that they were just doing what they were told, adults can't.  We must accept both that we have the capacity to change things and that we are responsible for the consequences of our individual actions of our attempts to bring about change.  We must act, but we must act responsibility.  The intent of our action does not excuse its consequences, neither can our fear of taking action excuse the consequences of being idle.  Denying either is immoral.

A corollary of this is that we have a responsibility to seek to understand the consequences of our actions.  We cannot plead ignorance when we have not tried to learn.  Ignorance is inevitable and will lead us astray but it is not ignorance that leads us to ignore inconvenient facts or to be idle rather than seeking to understand our world.  We can act only on our best knowledge of the consequences of our actions, but we must accept that we bear responsibility for the state of that knowledge.

Extremists tend to deny all this in order to maintain a simplistic worldview, either one where they are solely responsible for their own lives and not responsible for the inequities of the existing order or one where the inequities of the existing order excuses responsibility for their own failings and for the potential consequences of the change they seek.  I've encountered both attitudes far too often, I see these moral beliefs as the surest sign of an extremist closed mind.  Most people realize there must be a balance, we bear responsibility for ourselves as well as for the world we live in and we assign moral blame based on both intent and consequences.  We don't congratulate someone when they accidentally benefit another nor do we condemn someone as much when their ineptitude brings about negative consequences they never intended. 

Extremist rhetoric, however, is always pushing against this basic decency.  These techniques push us to either believe that change is futile and damaging and that we should focus solely on ourselves or that change is necessary and inevitable and that we should ignore potentially negative consequences.  Both moral visions seek to reduce us to immaturity denying us moral autonomy and control over our own lives and the society we live in.  We must be on guard for this rhetoric and speak out against these narrow, childish visions when we come across them.*

*Preferably in public venues like a blog rather than at dinner parties, though at times I can't resist.

Tuesday, November 8, 2011

Book Review: The Rhetoric of Reaction

This was a really great book.  It made me reflect on just how valuable high school civics courses could be with the right curriculum.  At only 170 pages of actual text, this book would make an excellent centerpiece.

The book addresses three common patterns that reactionary rhetoric falls into, as well as three mirror image patterns that progressive rhetoric falls into.  Being aware of these tendencies is very important in a democracy, too often our political analysis amounts solely to justification rather than analysis.

Hirschman identifies three main types of reactionary rhetoric, the perversity, futility, and jeopardy arguments.  The perversity argument is the assertion that a reform will have the opposite effect intended, the futility argument says that the reform seeks to violate some kind of social law and will have no effect, and the jeopardy argument says the reform will threaten some earlier and more important achievement.  These arguments are frequently brought out as little more than a mad-lib, any issue under the sun can be put into this pattern and we react to it as if it were a plausible argument (the psychology of why this is so would be interesting to learn about, Hirschman doesn't get into that).  The thing is, when these patterns come up there is rarely any evidence to support the analysis, an assertion is simply made that things will be that way, and whatever the psychological reasons for this, we take the argument seriously despite the lack of data or evidence.

Hirschman gives examples of the basic pairs argued by reactionaries and progressives, it's kinda scary how often these arguments are seen, anyone that looks at a comments page of a blog will see them just about daily and often see them being made when there is no data whatsoever backing them up .

Reactionary: The contemplated action will bring disastrous consequences.

Progressive: Not to take the contemplated action will bring disastrous consequences.

Reactionary: The new reform will jeopardize the older one.

Progressive: The new and old reforms will mutually reinforce each other.

Reactionary: The contemplated action attempts to change permanent structural characteristics("laws") of the social order; it is therefore bound to be wholly ineffective, futile.

Progressive: The contemplated action is backed up by powerful historical forces that are already "on the march;" opposing them would be utterly futile.

Of course, many of these things may be true in part but the arguments are often made at extremes.  For instance, some anti-poverty programs create work disincentives, however this effect is far too small to offset more than a tiny portion of the overall gain (also, this particular example works well for a perversity effect because it is the policies that limit anti-poverty spending that is generally the work destructive portion, means testing, such as that of Medicaid or SSDI is well established as having a relatively large work disincentive impact, non-means tested programs less so, another good example is limits on welfare which push more people into SSDI which has larger work disincentive effects than welfare programs, perversity cuts both ways).  Reasonable people can disagree about the relative costs and benefits of policies, however, when these rhetorical methods are being used it is almost always a signal that the person engaging in argument is not being rational.  The perversity argument is rarely made to suggest specific program alterations to reduce work disincentives to a minimum, it is almost always made to tell us that the cure is worse than the disease and that poverty alleviations programs will lead to broken families, less people working, and everyone being poorer, assertions that are demonstrably false.

Of course, someone may be making these arguments in a more limited sense, as I did above in regards to means testing.  My point however, is that arguments that take these forms are a red flag that the listener should be particularly suspicious and critical of the argument being made, it is well known that people are gullible with regards to these arguments and the speaker most likely is playing off this gullibility for political ends.  This is why works like this should be taught in high school, it would greatly benefit our democracy if students were taught at a young age what kinds of arguments to be particularly sceptical of and to demand extraordinary evidence in support of.  All of the rhetorical methods described by Hirschman fit this pattern, while not necessarily false, they are arguments that any well-meaning citizen should believe only when extraordinary evidence is given for them.  Otherwise, it is best to simply ignore them as propaganda.

Thursday, November 3, 2011

Some Thoughts on Two Types of Inequality

[I realized re-reading this post that it could be summarized quickly.  Brooks adds something to the debate by pointing out the degree vs. no degree discrepancy because income mobility has declined in the bottom half of the US income distribution but if anything has increased for the top 50%.  In Europe, income mobility has increased at all levels of society.  This is linked to the arguments regarding the 1% because this change is linked to a socio-cultural complex of ideas that are most politically influential in the anglo-saxon countries, with the US being most strongly influenced by these ideas.  These ideas have led to some particularly poor policy outcomes, particularly regarding health care but in some other areas.

Comparative data seems to indicate that policy efforts to expand opportunity directly have failed, while policies aimed at reducing inequality have increased opportunity and income mobility.  This means that the anti-tax policy measures advocated by the 1% has mostly come out of the discretionary spending that does most to reduce inequality.  This is leading to lower mobility for the lower 50%, meaning that the problems pointing out by Krugman are having the effects Brooks is writing about.  This argument for this view is strengthened by social and psychological research which indicates that behavior is largely determined by situation.  This explains why US opportunity focused social interventions have failed to create opportunity while class based policies pursued in Europe rather inadvertently created income mobility and social opportunity.  Trying to focus on changing behavior will necessarily fail because behavior is largely determined by situation, focusing on changing situation through income supports inadvertently succeeds at creating income mobility by creating situations that lead to risk taking, personal responsibility, and economic growth.

This isn't meant to advocate copying European policies which are associated with a number of destructive labor market policies and social attitudes that tend towards discouraging entrepreneurship.  Rather, we should pursue income supports and public health care with the explicit goal of changing social situations so that people are more prone to taking risk, responsibility, and investing in themselves. ]

This seems to be a hot topic and I've been spending some time putting my thoughts in order on it.  I initially reacted very negatively to David Brooks' column on red vs. blue inequality.  I still don't think it's a good column, but after some thought it did make me realize that an important detail seems to have dropped out of the debate.  This detail is that while income mobility has declined in America, and Europe's has increased beyond ours, this decline in mobility is largely confined to the bottom 50%.  By some measures, income mobility in the top 50% is actually slightly higher in the US than Europe.

Where I disagree with Brooks is this, "If your ultimate goal is to reduce inequality, then you should be furious at the doctors, bankers and C.E.O.’s. If your goal is to expand opportunity, then you have a much bigger and different agenda."

Unsurprisingly, columnists have piled on for and against (notably Krugman) this idea.  There is a real difference, the explanation arguing for opportunity is basically sociological and Krugman's story is basically political.

Here's the thing though, there's no particularly good reason to believe these effects are distinct.  The more plausible story is that the two are feeding each other.

The scenario I have in mind is basically this, the primary driver is ultimately socio-cultural, specifically a set of beliefs that filtered through the anglo-saxon political world and became influential in the 1980s.  Across all these countries we see income inequality go up.  There is undoubtedly a political component but politics alone can't explain things like why CEO compensation is so much higher in the English speaking world than it is in the rest of the world.

Both the political and socio-cultural pieces are likely impacting income mobility.  While a simplification, it is possible to describe what has happened to social policy in America since 1980 as an experiment to do more with less by focusing on opportunity while Europe, and other developed nations (while inequality has increased in other anglo-saxon states to my knowledge there has not been a similar reduction in bottom half income mobility, though I believe Britain's remains high but this is unchanged whereas the US used to have a high income mobility in the lower half of our income distribution) stuck to the traditional mission of trying to deal with equality more generally.

The results are in, and it seems our experiment has failed.  Our attempt to increase incentives by increasing the punishments and rewards of higher income doesn't seem to have led to greater efforts by those losing out, they've only fallen further behind.  Focusing our resources on creating opportunities for these groups seems to have led to them having less opportunity and to them doing less to get themselves out of poverty than they had before (given changes in opinion poll data, they may be feeling greater responsibility for their poverty rather than blaming it on society, but if anything this is leading to discouragement rather than motivation).  It seems that the traditional approach worked, by addressing inequality largely in terms of income and providing people with security we create an environment where individuals are willing to take greater risks without fear of failure.  By increasing the rewards to success and the penalties for failure we simply made people risk adverse, if they don't have the assets to pay for housing, food, shelter, and healthcare on their own, they don't try harder, they simply freeze in place.

This perspective makes the changes in income mobility between the US and Europe easily explainable, the poor are risk adverse, they respond only weakly to incentives.  If red inequality is what we're worried about, then we need to focus on broad based income security measures; only then will we see school attendance rise, college graduation rates rise, and family breakdown slow.*  All of which has happened in Europe.**  Focusing on opportunity, as we have done in the US, likely does create greater mobility among the top half, that certainly seems to be what is going on in the comparative data.  I don't think this is where Brooks was tying to go though.

So what does this have to do with the top 1%?  The big thing is that the programs that create income security for the poor are largely discretionary spending programs, which have been under a great deal of pressure for the last 30 years.  A large part of the political story of rising wealth inequality has to do with tax changes that have resulted in less revenue, and particularly, the top 1% having their share of the tax burden increase more slowly than their share of income.***  Since non-discretionary spending has grown pretty inexorably, this means that it is discretionary spending that is getting cut.  This necessarily means less income security for the bottom half of the income distribution, as they get less resources they will become less risk taking and thus progressively less able to compete in an economy and society that privileges risk taking.

Only by restoring the proportionate taxation on the wealthiest one percent can we have much hope of building the security that people need for income mobility to be a reality.  Without that security they won't take risks, it would be irrational for them to do so.  We can see this from the comparative data, our focus on opportunity just hasn't shown any real successes, those societies that focused instead on equality ended up delivering opportunity while still retaining great, unequal rewards for their best and brightest.

And this is what I think is behind a lot of our political dysfunction.  Here in America we very much want certain things to be distinct, even if there is growing evidence that they are not.  We want to be able to create opportunity without having to also focus on inequality.  We want harsh punishments and lavish rewards and we want people to respond to those.  We are frustrated and angry that this doesn't seem to be working, that increased incentives seem to be impacting only a few people (I'll do another post on this, but I think a lot of our merit based rewards do more to reward people that react strongly to incentives then they do to reward people with great merit.  I believe that responsiveness to incentives varies separately from the qualities we wish to encourage, making most incentive systems poor at fulfilling their purpose).  The problem is that equality of opportunity seems to be something that can be logically distinguished by reason but doesn't seem to be something that can be acted on discretely by policy.  This shouldn't be surprising, a great deal of psychological and sociological work shows that people react very strongly to their environment and social situation, they're acting how they are based on the situation they are in, not on the opportunities available to them.  Change the situation they are in, and they're create the opportunities for themselves.  Change the opportunities and not the situation and nothing happens.

But we're still refusing to learn from the repeated failures of our opportunity focused interventions and trying to come up with new ways to leave people's situations as they are while cajoling them to act differently in those situations, despite increasing evidence that situation is the largest determinant of behavior.  We can change someone's situation and thus behavior, what our policy interventions have shown is that we can't change their behavior in order for them to change their situation for themselves.  But we keep trying anyway.