tag:blogger.com,1999:blog-60520977812139736532024-03-13T16:17:51.580-07:00TzimiskesTzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.comBlogger605125tag:blogger.com,1999:blog-6052097781213973653.post-86648410345527476812017-03-02T14:51:00.002-08:002017-03-02T16:59:33.356-08:00A Theological Aside on Modern Liberalism and Christain PlatonismThis is a subject that I hardly consider myself an expert on, but I do have a strong interest in religious history. I don't really consider myself religious, but I do take it seriously. And the main reason I take it seriously is that I have trouble understanding how we could have gotten from the slave holding, hierarchical, and patriarchal culture of the Greeks and Romans to modern western liberalism which takes as its guiding principle that all individuals deserve to be acknowledged as being morally autonomous, to be acted upon only with their own consent, and to be able to hold accountable those that act upon them without the Christian religion. Admittedly, we still have have a long way to go to disassemble those institutions that date from our wicked past but, despite some set backs, I look at the good so many people are doing today and see hope for the future.<br />
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Now, since my own faith is deeply tied up with the recognition that modern society has, for the first time, made a real effort to embody Christ's principles, primarily the golden rule (love they neighbor as thy love thyself, also I realize the term golden rule is non-Christian in origin and basically universal) but also other common biblical themes, such as our support for the poor, emphasis on non-violence, and recognition that we are each alike created in the image of God, I find myself particularly troubled that so many who claim to speak with a Christian voice see us as so fallen in comparison to past ages. Admittedly, we don't do so well on piety, but other eras were pious but fell far short of us on just about every other aspect of Christ's teachings. I am especially troubled to see so many claim that the modern concept of consent is non-Christian, for if one does not take consent seriously how is one to love one's neighbor? If one does not take another's autonomy seriously how is one to take seriously the idea that we are all created in the image of God? Accountability has less direct ties to scripture, but indirectly we see throughout the Bible Christ questioning the authority of those that claim position and wisdom in the ancient world. Without these hierarchies how can we organize ourselves without accountability?<br />
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So, in my view I see modern liberalism as congruent with Christ's teachings. Not to say there are not some difficult passages, but it is surely easier for us to approach scripture than it was for the Greeks and Romans. Our culture, while not an end point, is surely one that has been worked upon by Christ's teachings.<br />
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I should pause for a moment to make explicit my approach to Scripture since it is not fully orthodox. My assumptions are as follows:<br />
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1. Free will - while I have read many arguments against it I am not convinced that these discussions matter in its absence, so whether or not it is a defensible doctrine it is best to assume it and move forward<br />
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2. Context matters - God does not do things by accident. Christ was made man for a reason, we should take this seriously; not just through a spiritual perspective but as a hint at how we are to approach his teachings. He was made man in a specific time and place and his teachings are tied to it. We must understand that relations between his teachings and the culture of the time and place that he was teaching. To read his teachings as if he spoke these things today is to trivialize his incarnation.<br />
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3. Christ's is a living word. The gospels have acted on men throughout history individually and through them have reformed, to some degree, a sinful world. This is an ongoing process, but to take God seriously we must acknowledge that his Word has changed this world according to his plan.<br />
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4. God created a good world - While man can be evil, and throughout history has taken efforts to dominate others, deny the moral autonomy of others, and remove choice and consent from others, the actual world God made is good. God's world is congruent with God's teachings, it is the desire to place man over man, rather than God only over man, that leads to evil. If an interpretation of Scripture is at odds with our observation of the world, and with history, we must very carefully consider whether we are in error in our interpretation of either Scripture or of God's world.<br />
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Flowing from these assumptions I often find it difficult to stay silent when I hear those invoking God's name in support of ideas that I find antithetical to what I understand to be Christianity. Often, I have heard so called traditional Christians defend ideas that seem to me to be rooted in Roman paganism rather than Christianity. A recent <a href="http://www.theamericanconservative.com/dreher/bias-bigotry-benedict-option/">post by Rod Dreher</a> gave a specific form to this general impression. He quoted an essay by Michael Martin, the key sentences for me read thus,<br />
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"<span style="background-color: white; color: #444444; font-family: "georgia" , "times" , "times new roman" , serif; font-size: 15px;">Indebted to Plato and his Christian Neoplatonist interpreters, realism affirms the existence of universals: abstract, general concepts possessing objective reality anterior to particulars. For realism, universals, that is, are real </span><em style="background-color: white; color: #444444; font-family: Georgia, Times, "Times New Roman", serif; font-size: 15px; margin: 0px; padding: 0px;">things</em><span style="background-color: white; color: #444444; font-family: "georgia" , "times" , "times new roman" , serif; font-size: 15px;"> (</span><em style="background-color: white; color: #444444; font-family: Georgia, Times, "Times New Roman", serif; font-size: 15px; margin: 0px; padding: 0px;">res</em><span style="background-color: white; color: #444444; font-family: "georgia" , "times" , "times new roman" , serif; font-size: 15px;">). The ideas of ‘woman’ and ‘man,’ for instance, precede and inform the actualities of particular women and men."</span></blockquote>
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Dreher goes on to say<br />
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<span style="background-color: white; color: #333333; font-family: "georgia" , "times" , "times new roman" , serif; font-size: 15px;">Opponents of traditional Christians think we’re talking about morality when we talk about gender and sexuality, which, yes, we are. But more deeply, we’re talking about ontology. This may sound like philosophical jibber-jabber to you, but if you have any interest in being fair, and in understanding your opponents’ point of reference, you should explore this idea.</span> </blockquote>
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I went through a period of a few years where I was somewhat rabidly anti-Christian. It was specifically because orthodox doctrine relied on these ontological concepts. However, after reading a great deal more history, then specifically Christian history, and finally reading more of the Bible I came to realize that Christ was specifically criticizing this ontological viewpoint. One must love God, and love one's neighbor, and recognize that we are all created in the image of God. This is antithetical to the idea that there is a universal abstraction of man or woman, within Scripture there are men, women, and those that are "born eunuchs." (Matthew 19:12). This isn't exactly a modern formulation, but it is clear enough that Christ recognizes that male and female are not a Platonic duality and it follows from observing God's creation that intersex people as well as people of diverse sexual presentations and gender actually exist. God's creation doesn't fit neatly into Platonic categories, God's creation shows a continuum, not a duality, and while Scripture generally does not go out of its way to challenge pagan dualism and patriarchy regarding gender it doesn't explicitly deny the existence of a continuum and does, at least in places, specifically acknowledge the existence of those that do not follow the pagan formulation of sex and gender as universals.<br />
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Now, I get that orthodox theology borrows heavily from Platonism and Aristotelianism. But, once I read enough to consider the subject, it seems obvious why the effort to reconcile these doctrines with the Bible was so difficult, they aren't really compatible. Theology rooted in them must go to the same lengths to create a workable moral philosophy that Ptolemaic astronomy, with its Platonic roots, did to create a workable predictive astronomy creating a complex array of indirect relations to arrive at a workable system. However, abandoning the Platonic assumptions leads to much simpler solutions, such as the Copernican system. <br />
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This does mean that the reliance of the church on these philosophical doctrines need to be explained. But that is easy to do. Platonism and Aristotelianism play such a prominent role because it was necessary in order to convert people in the Graeco-Roman world to Christianity, in the same way that missionaries developed the Cyrillic alphabet, or adapted local stories to get people in them to take Christianity seriously. I just finished listening to Augustine's Confessions on audio book, something that struck me is that he specifically wrote about how important it was that Christianity was able to explain his world in a way that Manichaeism could not, something it could not have done if it did not adapt to the local philosophy. But I see this as being all it ever was.<br />
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Once people began to again explore God's world, rather than relying on the teachings of Aristotle, they found that God's world did not correspond to Aristotle's ideas. At this point, science has thoroughly refuted the Aristotelian and Platonic philosophical systems, if they could not explain the world, which they could directly observe, how is it that we should consider them experts on metaphysics? I am unable to believe that God would have so created a world that would actively deceive those that seek truth in it. It seems obvious that given a choice between believing in the reality of God's creation or the reality of a pagan's word that the choice for a Christian is obvious.<br />
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Now, to get back to the topic of sex and gender that gets so called traditional Christians so worked up, I would also note that at least most, I don't claim sufficient knowledge of the Bible to say all, instances where Christ addresses marriage and gender roles that Christ expands women's roles and autonomy relative to the practice of the day. I would note particularly 1 Corinthians 7:4<br />
"The wife does not have authority over her own body but yields it to the husband. In the same way, the husband does not have authority over his own body but yields it to his wife." Read in the context of the Roman world of the first century A.D. it is notable that a man already would have authority over his wife in this way, as would a father over his daughter. What is new is that this is being made reciprocal. Similar to much of Christ's teaching this seems to be simply applying the notion that one should love one's neighbor, or in this case, one's spouse, as they love themselves to a specific case. Also, it follows that using the Bible to restrict women's rights and autonomy is very different from using it to make the restrictions that women legally suffered under in Christ's day apply to men as well.<br />
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I really don't see the problem with applying this principle more generally, in my read of the Gospels the specific rules generally seem to be particular applications of Christ's general principles. Since this is an extremely unequal world, with hierarchy and the exercise of power justified by false doctrines such as Platonism and Aristotelianism the application of these rules often seems strange to us. But it is the Roman world that sees marriage as solely between that of a man and a woman, since Christ did not seek to reform laws but to reform men there would be no need to specifically address a legal situation that did not exist in his day. But it is easy enough to apply Christian principles to modern problems, we need only consult Scripture for an analogy. Where I see error occurring is when we take the laws and institutions that Christ is denouncing as models for today rather than seeing Christ's message as the application of Christian principles to evil institutions to advise his followers on how to live within a fallen world.<br />
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So I have great difficulty with granting Dreher his request to respect his ontology. I believe firmly that to love one's neighbor as thy love thyself requires recognizing another individual's moral autonomy, that they too are created in God's image, and that I must be accountable to them and ask their consent before I take any action involving them. In practical terms this means that I must recognize that I do not have the right to judge others, as the Platonic ontology seems to demand.<br />
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Religious liberty requires recognizing others moral autonomy, I do not get to judge for them what is sacred, I can only judge this for myself. I do not get to demand of others I can only seek their mutual consent and recognition. My, and their, religious liberty requires that we each accept the others autonomy and that we fulfill the roles given us in our common society, when we are in a role of power we must be accountable to those who are not. Christ consistently teaches that we have no right to exercise power over another, when society puts us in this position we must be as a servant and accountable to others. So a merchant, an official, or a business owner, is bound to respect the individual moral autonomy of their customers, citizens, or employees, they have no right to deny them their autonomy of moral choice and must fulfill their roles in a neutral fashion. In turn, when they are under the power of another, they too can claim that their autonomy be respected. So a merchant cannot deny their services to another of different beliefs, whether this is for a gay wedding or if it is a gay individual being asked to print a church missal. An official or business owner is likewise bound, being in a position of power they are the servant and must respect those they exercise authority over. Of course, within the church itself it is valid to demand that those who claim membership act in accordance with its teachings, so if a denomination does not recognize something as sacred, such as marriage between two persons of the same sex/gender, it is valid for a minister or priest to deny the sacrament as marriage since this directly involves the priest or minister acting in a sacred capacity as part of a church. But this is an easily distinguishable case from that of a business person interacting with their customers in a non-sacred capacity. Even if the customer believes something is sacred that the business person does not it follows only that the business owner treats this as non-sacred and acts in their normal capacity as a business person.<br />
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To wrap this up, I am somewhat chastened by remembering that Augustine did say in his confessions that we should recognize that others can have just as valid an interpretation as we do, and thus it is hard to deny Dreher's ontology. The problem I have with this, however, is that the Platonic ontology seems to foreclose on mine, by holding up ideas such as male and female as abstract, general concepts seems to be directly contrary to mine. They talk often of rigor and how difficult it is to adhere to these teachings. But this dismisses the rigor that comes with taking other people seriously and acknowledging their equal moral autonomy. There is a rigor in accepting that we must respect others autonomy, that the obligations that matter are those that are mutual and reciprocal, and that whenever we judge or exercise power that we must in turn be accountable to those we act upon. They seem to fail to understand that modern philosophy is not some kind of solipsistic worship of the self, rather it is about taking others seriously. And we could use the help of more religious moralizers, far too many are adrift through not having any authority figures to look up and teach them about how to apply modern liberalism in Christianity and in their daily lives.<br />
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So how can these doctrine's coexist? As religious conservative's keep pointing out, my belief that people must be treated as morally autonomous forecloses on their right to judge us upon our adherence to Platonic doctrine. By denying the right to judge, we do in fact judge.<br />
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Ultimately, I have to say that I do judge, I see throughout scripture the refutation of the Roman world that has come to dominate the land of Jesus's birth. I see nothing in the Scriptures that lead me to think that he does not include Platonism and Aristotelianism in this. As a historical matter reconciling the gospels to these doctrines was necessary. But this is so that Christ could be understood in native terms, there is no particular reason to think their systems of moral reasoning have any pride of place, rather the opposite. It is a simplification, but in general Medieval scholasticism sought to reconcile two things that were known to be true, the gospels and Aristotle's teachings, Aristotle was considered so important because he was thought to understand God's creation. But, once the scientific revolution refuted Aristotle the rationale for interpreting the Gospel's through an Aristotelian lens collapsed. I often hear conservative Christian's wonder why so many have turned from Christianity. I believe this is the answer, we are not Romans. Why would any modern person be convinced by a Christianity filtered through Graeco-Roman philosophy? Instead, the task still stands, to interpret Christ's teachings through the world that God has made. If the goal is a more Christian society this is the task that is set. Aristotle and Plato distract from this task, moreover, with people as transformed as they are it actively drives them away. Modern people see Platonic and Aristotelian reasoning as something wrong and repugnant when they encounter it. And they should! We are an improved people because of Christianity, it is not right that we fall back on these evil times. To misapply a Biblical quote, "Render to Caesar the things that are Caesar's, and to God the things that are God's" (Mathew 22:21). As Caesar is dead it is time to bury his philosophy along with him. It is time to interpret God's Scripture through God's creation rather than through that pagan philosophy whose truth has been denied.<br />
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[Edited to correct some minor errors]Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com3tag:blogger.com,1999:blog-6052097781213973653.post-54641656848653649552017-01-23T18:59:00.000-08:002017-01-23T18:59:17.404-08:00My Trump NightmareI've seen a number of posts recently trying to show some humility regarding Trump being a disaster and giving some boilerplate regarding hoping he does make things better. I had my own moment of this right after the election. Most of this seems to hinge on Trump using relatively traditional tools to enact economic and social policy. Now, if Trump backs away from everything he has said, I guess I have no problem with this position.<br />
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But, after some reflection, my thoughts are that I hope Trump doesn't succeed. Even in its mildest form a Trump success has the potential for people to associate racism and misogyny with economic success for a long time to come; this isn't a price I'm willing to pay for a bit of GDP growth.<br />
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My nightmare scenario comes from remembering that Hitler ushered in a pretty good economy for Germany before military reverses began to bite. While I don't think Trump will be another Hitler this has made me consider that there are a number of polices that are long term destructive that could let Trump meet some of his promises in the short term.<br />
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The first scenario would be a policy of explicitly targeting his supporters and screwing over everyone else. This isn't that uncommon in one party states. Given the level of support Trump received in rural areas, small towns, and small cities it seems not impossible for Trump to reallocate funds to benefit these areas at the expense of America's urban areas. Think the Japanese LDP's bridges and highways focused in rural areas.<br />
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To make this scenario a bit worse, imagine if Trump funded programs targeted to his supporters through discriminatory taxation policies. On a small scale this could be Federal excise taxes on things urban dwellers are more likely to buy, such as Uber rides, or it probably wouldn't be impossible with a unified House, Senate, and Judiciary to cut off funding for liberal states while leaving it in place for conservative states provided some paper thin justification is given. Simultaneously, we could see an income tax surcharge on immigrants followed by making it more difficult to gain US citizenship. Trump could also balance the budget in the short term by selling off assets such as Federal land. In a real pinch he could even resort to tax farming to recognize multiple years of tax receipts during his time in office, like the city of Chicago did when it gave the rights to collect parking meter fees to a private firm.<br />
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To continue my trip into economically successful nightmare, imagine if Trump started using forced labor. Detained immigrants could be leased to companies for below market wages. Prison work programs could be expanded. Welfare programs, including food stamps and Medicaid, could have work requirements added complete with a waiver for the minimum wage for these workers. To add to these, new laws, beginning with anti-press legislation, could be drafted which would provide legal mechanisms to seize companies that offend Trump and sell them off to the highest bidder.<br />
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To complete my decent into nightmare, Trump could also embark on a campaign of outright plunder. He has brought up Iraq's oil more than once. I believe it seems obvious to most people that war costs more than it could possibly return, but remember that Trump also seems enthralled by our nuclear weapons. While it is far too costly to hold large population centers, a complete monster could simply nuke these and then embark on ethnic cleansing to clear out any remaining people in the area that has the oil. This would be rather economical and help Trump to hit his impossible growth targets.<br />
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Very little of this is stuff that I think has any chance of happening. However, when people write that they hope a racist, misogynist, authoritarian warmonger succeeds economically they should be stopping to consider that such a person will not feel restrained by liberal democratic norms. We have seen many dictators in the third world that managed a few economically successful years as a result of policies that we find highly distasteful. This isn't good for these countries in the long term but if you have no respect for others it is not difficult to post good economic results for a few years by simply taking what others have.<br />
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So I hope he fails, if a racist succeeds in his policies it opens the way for the next one to do something worse, this is a script we have seen before. The only path to long term growth lies through inclusiveness but Trump reminds us that we can achieve personal success through hate and divisiveness. I don't want to see this extended into the economic sphere, this creates a world whose horror we haven't seen in decades. Again, none of the above seems likely but I think it needs pointing out that economic success over two or four years can be obtained through policies that are horrible to contemplate; judging Trump solely on economic performance just isn't enough.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-37549798291768732972016-12-08T19:49:00.003-08:002016-12-08T19:49:53.662-08:00What If A Real Populist Had Run?My second take on Trump, which I never got around to writing, boils down to the observation that Trump offered rural whites an explanation as to what has caused them to fall so far behind and a way to reassert control over their own lives. While his explanation is bullshit, it's at least an explanation. Democrats offered concrete policy improvements but they didn't offer what mattered to voters, an explanation, a solution, and most critically a way to have some control over their lives, such as whether or not their local plant closed. My impression is that rural voters are a lot less worried about wages than they are about the mere continued existence of their jobs; in low wage, less urbanized areas a higher wage through policies such as a minimum wage hike could often be seen as a threat to the continued existence of the crap job that's at least a job.<br />
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But what if Democrats had offered something more concrete then the 30 second hate offered by Trump about devious, cheating foreigners stealing our jobs through some magical, unspecified mechanism? The following is a brief outline of the dream speech of my idealized next populist candidate. Warning, it's NSFW, I believe that a key way to connect with low information voters is to violate elite norms, swearing like a sailor is a norm violation that doesn't involve racism and misogyny.<br />
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<a name='more'></a>Every day I hear from Americans frightened that the plant they work for will close down, their company will fold, or that they'll get laid off. They tell me about how they're so frightened that they can't say not to anything the boss asks of them. They're working so many hours that they hardly see their kids, that they're stressed all the time, and that they feel work has taken over their lives. Then they repeat the lies they've been told every day of their lives, that this is because of foreign competition, robots, or because they don't have the right skills.<br />
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This is bullshit. The person to blame for the hours you work, the local plant closing down, and your home town withering isn't some faceless foreigner or market forces. It's the guy that closed the plant. It's the motherfucker sitting in a board room claiming he's doing it because stockholders are demanding higher returns, he traded your life and everything you value for a fucking one cent increase in the damn share price. To make it even more insulting, something my MBA taught me is that the majority of offshoring fails. They know this, they aren't doing it because that one plant was a bust. They're doing it because they know that if they close this or that plant that you're going to be fucking scared. And if they can keep you scared they know they don't have to give you a raise, that you won't join a union to stand up to them, and that they can keep fucking you however they damn well please while your life falls apart around you.<br />
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To add insult to injury, they don't think there's anything you can do about it. They own the fucking media and most of the fucking politicians so they know that there's no way to organize opposition to them, whenever you get mad enough they'll just fill the news with some bullshit about foreigners while they reach into your back pocket and steal your wallet.<br />
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Well, it's time that we take our country back from these lying motherfuckers. I am going to propose a constitutional amendment to recognize employee's property rights in the companies that they work for. You built those companies, not some rich asshole who bought a bunch of stock and tours a facility now and then to look self important and make everyone bow and scrape.<br />
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Anyone that has held a job knows that they, and their coworkers, often go above and beyond to make things work in their business. They build up best practices, innovate new ways of doing business, make suggestions, work a bit off the clock to make things run smoothly, and do hundreds of other little things that are necessary for a real organization to work and improve. This is all investment. But unlike the asshole that ponies up a few bucks for a share you don't get shit for all this hard work.<br />
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My pledge to you is that this will change. We will create a national corporate law which recognizes an employee's contributions to the company and which gives employees a right to representation on a corporate board. Employees rights will be proportional to their contributions relative to those that contributed capital, so in the oldest, largest companies employees will get to choose the vast majority of board members with stockholders only having a handful, while in smaller, newer companies the founder will maintain control until the company grows beyond what it can be reasonably said one man had built. We will further extend provisions for employees to choose their own management, in the largest companies only the employees being supervised are really in a position to understand what they need in a manager, I'm sure you've all seen how often disasters are picked by those higher up the ladder.<br />
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I can be certain that these proposals will be met with the most vicious opposition by the managers, large stockholders, the media, and the other powerful members of the elite. We are going to be taking away their power after all. But we will be leaving them with their wealth, we aren't taking anything from them but their power to treat you as a dependent and make decisions for you. What they're really afraid of is that you will take personal responsibility in your workplaces and hold these assholes accountable for their fucking actions. They've taken the dignity of independence and responsibility from you, it's time to take rewrite our corporate laws to hold those guilty of this accountable.<br />
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They're going to be lying about how important they are, calling themselves brilliant and necessary for the functioning of the economy. But don't listen to their propaganda! The only thing they know how to do is to take credit for the investments you are making in these companies. They'll tell you how important they are for making investments, but all they're doing is taking the advice of a finance department. Each and every one of you would be a brilliant investor too if you had millions to invest and a staff doing nothing but tell you where to put your money. They'll tell you that they're necessary for making business decisions. You are the ones that meet with customers every day, know the problems and bottlenecks production is facing, and do the daily work of the business day in and day out. You know more than any outsider can, you're the ones with the special, firm specific knowledge necessary to choose a CEO. There's a reason that so many CEOs are bad fits for the company, that so many fail, and that so many do little other than collect fat paychecks for failure. It's because it is some outside investor, with their hands in so many other companies, are the ones choosing executives and not the employees. And they're choosing these executives from the same narrow, elite group that has been doing nothing but fucking up the economy for the past 10 years.<br />
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They'll tell you they're the best, the brightest, and have most merit. Well, not only is this easy if you have a staff, but even if it's true who do you think is going to do a better job, someone chosen to work in your interest or someone brilliant but chosen to work in someone else's interest? I think the answer is obvious, but if you ever wondered why the rich keep getting richer even though Americans lack jobs, our companies are only doing OK, and everyone is pissed off and angry you need to look no further that our companies are run in the interests of outside shareholders rather than the employees that make up the company. They talk about the importance of having skin in the game, but who has skin in the game? You, whose mortgage, car payment, groceries, and maybe your kids education are on the line, or the diversified stockholders who will write off any losses as they manage the rest of their portfolio and write off your plant, and your life, failing as nothing but the cost of doing business.<br />
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So what can you do to change this? You can vote. Not just for me, the President can't do this on their own, but for my party in offices at every level. We will need Congress, both the Senate and the House, to pass the bills. And we will need large majorities, I know the elites are running scared and are going to do everything they can to subvert the will of the people. But it's not even just the national level, I know at least half the Supreme Court will be in the pockets of the elites they attend cocktail parties and play golf with. They will do everything they can to stop this, even though we clearly have Constitutional authority under the commerce clause. To forestall this we will need a Constitutional Amendment so that even the most corrupt Supreme Court can't tear down what we've built. This will mean controlling the state legislatures and Governors, we will need three quarters of them to make this vision a reality.<br />
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Now, I know, many of you like divided government. But our system is built the way it is to prevent major changes like this unless there is overwhelming support. So to do this, to take America back from the elites that have stolen it from us, we will need overwhelming support. No matter what the other party once stood for, with this proposal the elites will unify behind them to stop you. And we can't let that happen.<br />
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To do this we will need every American to vote. Our victory must be overwhelming to overcome America's checks and balances. And everyone has a stake in this. For those without jobs, who do you think is more likely to increase staff levels, employees at local firms who are sick of 60 hour weeks or the stockholders who are profiting from those long hours? Who is more likely to invest in new plants in America, the employees of profitable companies or the stockholders who will turn around and use those profits to "diversify" their portfolios? For everyone that has ever said that both parties are the same or that both sides do it in this election there is a clear choice, a party that believes that everyone should have a say in the big decisions that effect their jobs and lives and the other party who believes that the elites should be making the decisions that effect you for you. In this election, with the forces arrayed against us, every vote will count. You might be the straw that breaks the camel's back. But you can be more than a single straw! Make sure your friends vote, your relatives, you can even harangue strangers at the bar to vote! This election can be what puts America back on track, the one day that can finally stand up to those that have taken so much from you and say I built that, this is mine, and I need to have a say in the company that I built! We will no longer stand for boards of directors chosen by shareholders claiming to represent the companies Americans work for. The employees are the fucking companies! NO MORE REPRESENTATION WITHOUT ACCOUNTABILITY! Those that claim to represent us WILL BE ACCOUNTABLE TO US!Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com12tag:blogger.com,1999:blog-6052097781213973653.post-52808479248140566692016-11-09T15:28:00.002-08:002016-11-09T15:28:57.043-08:00What if Politics Can't Deliver What Americans Voted For?While I don't agree with it, part of the purpose of the electoral college is to prevent "tyranny of the majority" and to make sure that a President takes into account a strong, unified minority. That seems to have happened with this election.<div>
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While we are still waiting for more data, my first take on this is that the much wider margins in rural voters was a key point. I am sure we have all read far too many articles about how rural voters feel ignored and that policy isn't responding to them.</div>
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If you can excuse my strong language, while the feeling is obviously real, this is complete bullshit. As long as I've been conscious of politics we've been deluged with articles about real Americans. Small town citizens have been shown as the quintessential American for most of my life; though I think this has begun to change over the past few years. The Federal governments spends at least as much on rural citizens as it does on urban ones; though the exact ratios depend on if you only count direct subsidies, which according to some analyses are slightly lower for rural citizens, or if you also count the siting of Federal facilities, such as prisons and military bases, whose sites are often chosen partly for consideration of the jobs they bring.</div>
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Now, this doesn't change the fact that rural areas are suffering, both in absolute and comparative terms. I've written before about slow income and job growth in rural areas and there is a great deal of evidence that rural areas have been growing slower than urban areas and losing relative, and in recent years, absolute population.</div>
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While I ultimately have to agree with <a href="http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/11/my-trump-fear.html">Chris Dillow</a> that we have to hope that Trump succeeds in helping these areas to recover and grow, angry people are likely to stay mobilized and vote against progressive reform, I don't believe that there is any real chance of his policies succeeding.</div>
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But not just his policies, I don't think there are any policies that would help rural areas catch up to urban. <a href="https://www.hillaryclinton.com/issues/rural-communities/">Clinton</a> <a href="https://medium.com/hillary-for-america/the-future-of-america-s-rural-economy-5176e6201777#.o42ww9kag">had</a> <a href="https://medium.com/hillary-for-america/building-a-future-for-appalachia-thats-worthy-of-its-past-59b98041b2b2#.9wrhuga7r">numerous</a> <a href="https://www.hillaryclinton.com/issues/small-business/">policies</a> <a href="https://www.hillaryclinton.com/issues/manufacturing/">that</a> <a href="https://www.hillaryclinton.com/issues/jobs/">would</a> help rural communities and constituencies that they particularly care about, like <a href="https://www.hillaryclinton.com/issues/veterans/">veterans</a>. It would have helped if the press had covered actual issues and policies, but it is notable that Obama has tried to do a lot for these communities as well. But the new policies proposed seem far too minor to close the gap, and the policies that have been enacted obviously haven't done the job.</div>
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To me, the deeper issue is that there is no political solution to their relative decline. Something I gathered from my MBA courses is that the advantages to density, human capital, and diversity are becoming much more powerful forces in modern society. A modern business needs a diverse set of specialists to succeed, it needs an accounting group that can use a modern ERP system that can interface with major vendors, it needs people that can properly use CRM systems, management that can integrate all of this additional information, and IT personnel that can keep it all running. In an urban environment a small business has a decent shot at cobbling this together through a combination of outsourcing and strategic hires. </div>
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However, there just aren't that many urban professionals that want to move to rural areas. It doesn't help that most of these rural areas or small towns have businesses that attempt to specialize in the low cost sections of the market. Back when I was looking for a job I would see insanely low wage posting week after week asking for someone with good educational credentials and experience to come work in these areas, it didn't look to me like many of these ever got filled. While there are a lot of young graduates looking for work, the problem is that most of these small businesses needed someone that could function as the entire department themselves, this required someone with experience. And someone with experience would only move for a huge premium, like what my wife sees when she looks at rural medical jobs paying 2 to 3 times the salary of what we can make in a metro area.</div>
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So, the bottom line to my mind is that the problem rural areas are facing is due to changing economies of scale and to competitive pressures changing businesses from being organized around production to being organized around processing information.* My fear is that Trump's policies will fail, likely making the situation worse, and that Trump's supporters will simply become further enraged by the political system's inability to restore what they feel the natural order is. </div>
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What happens after this I don't know. I don't think there is any set of policies that can win over Trump's supporters because I don't think there is any set of policies that will work or even seem plausible to them. But it seems difficult to get urban and inner ring suburban voters to turn out in the necessary numbers to win elections against united white, rural opposition. My only small consolation is that myself, and most of my friends and relatives, are well off enough to be sheltered by the direct negative consequences of this election. But I worry a great deal of what happens over the next several years.</div>
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*This needs some explanation. Basically, my view is that with capital so abundant there are too many concentrations of capital able to produce goods chasing too little demand. What distinguishes businesses is their ability to process, and act on, information. So no matter how good of a product you make and how hard your work force works it isn't worth anything if you can't gather, analyze, and act on timely market information. And that process relies on people that just don't want to live in rural areas.</div>
Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-85233515563029667682016-11-06T19:28:00.001-08:002016-11-06T19:28:47.226-08:00Trump, Trust, and Our Political DivideI was reading an article about trust today and it made something I've observed both anecdotally and in articles about the election click for me. Something I've noticed in sales meetings and some other interactions is that, very broadly speaking, there are two essentially different ways that people go about establishing trust (there are many potential other ways to divide this phenomenon, my interest here is in this one particular divide). One is to establish that you have something in common with each other, often through actions with cultural significance such as a firm handshake or bringing up a controversial subject and seeking agreement (such as "locker room talk"). The other way is to simply stay focused on the goal of the interaction, establish the framework of rules that govern it, and to build out from there.<br />
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While some people function well in both worlds, in my experience it's not that uncommon for people to have very strong feelings one way or the other. The most awkward professional interactions I've been a part of have a resulted from the clash of these two sets of expectations. A couple of examples would be someone who harangued several people, rather loudly, about the most recent book they read denying global warming and someone who had everyone, including a couple of people who were non-Christian, to say grace at a work lunch. There are lots of smaller instances, but the attempts to establish rapport through these methods can fall very flat and make everyone awkward. I am sure that someone else could have examples from the other side, I've experienced some push back from being more standoffish and not wanting to get too personal, but my preferences are pretty strong towards formal structures so I can't speak for the other side.<br />
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What this has to do with Trump and the election is that I think this represents a fairly fundamental divide in outlook, as well as something that at least a portion of Trump supporters feel they stand to lose. Their frequent complaints regarding political correctness remind me of this, opening a professional interaction with an off color joke or controversial topic is something I've run into enough to realize this is a real problem for many people. But my experiences have also led me to believe that it is generally meant to be friendly, they're doing this to establish rapport. But instead of gaining trust with strangers they are instead met with hostility. From a liberal perspective there is a sense that you can't work with someone if they don't take the time to actually listen and understand you, someone that charges in with an off color joke marks them as someone that will be difficult to work with. From the other side, the formalism liberals insist on is often off putting, an attitude I've run into is that the formalism and paperwork is somehow being used to hide things or trick them (how disclosure is supposed to hide something that could instead be sussed out with a firm handshake, a drink after the deal is made, and some non-pc bullshitting is beyond me but I have met people that feel this way).<br />
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My observation is that these people are growing increasingly enraged at the increasing dominance of formal structures and at the corresponding narrowing of their world. They come from a culture which sees their habits as being strong positives, they are surprised and upset when the joke that was well received back home makes them pariahs at a national sales meeting or conference. Then, when they get home they are left feeling that godless liberals hate Christians,* never considering how their actions look to the diverse crowd they are interacting with. At the same time, when they are at these events they often express scepticism, they often express doubt regarding the presenter and this leads them to doubt the rest of the presentation, whatever the facts presented are (I admit I am stereotyping from a few anecdotal observations, but it is consistent with what I've read about the far right's attitude towards a number of subjects).<br />
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Something these experiences have led me to realize is that navigating the more formal structures involved with interacting with diverse people is a learned skill. It is second nature to people that have lived in diverse areas, it just seems natural to pay attention to how another person is acting and what they are saying to discern how it is best that we interact. But I've realized this isn't natural for everyone, some people just barge ahead and act the same way towards everyone, often in a way that someone else will find offensive. It reminds me of the article that was talking about rural Trump supporters and describing how they felt like they were doing everything right but that others were cutting ahead of them.<br />
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I may be reading too much into it, but it seems like these people think that there should be a certain way that you act and then you're OK; they just don't get that doing everything right means recognizing the agency of others and actively involving them in building up discussions and ways of doing things. Instead, they want there to be a set of rules that they're OK if they follow and that they can judge others for if others don't follow. But this is the anti-thesis of modern liberalism which demands that others be given respect, which means actually involving them rather than just judging them. And people are enraged that they're being asked to adapt to a world that they never learned how to interact with; especially since it's one that doesn't recognize their rules and that keeps calling what they call right, wrong.<br />
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Given the very different conceptions of what it takes to build trust, and right and wrong more generally (since I somehow ended up there), I don't find it surprising that both sides are talking past each other. But I don't see how this is resolved either, treating other people as having agency inherently means that you can't simply hold people up to a code,** and vice versa. There simply isn't a possible compromise, these moral positions are mutually exclusive.<br />
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*I have heard people say that Christians are disliked a few times. I have never seen or heard anyone make an anti-Christian comment about someone that professed religious belief or did something like cross themselves and say grace over their lunch. What I have heard is outrage when someone doesn't bother to try to be sensitive to people around them, it's really rude to just assume that other people share your beliefs and to make them say grace with you. YOU ARE MAKING THEM TAKE THEIR GOD, AND YOUR GOD, IN VAIN!!!! In my experiences these actions are well meant, the person is just so sheltered that they can't really conceive that they are surrounded by people who hold different deeply held beliefs. But it really shows that you don't really care to learn about the people around you, respect their beliefs, or to involve them in deciding even the little things, like how to eat their lunch.<br />
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** Well, beyond a minimal code like respect others, be tolerant, and follow rules once established. This means, of course, that just about the only thing that can't be tolerated is intolerance or attempting to wield power over someone else without accountability and consent. But traditional morality is largely about assigning roles, thus removing agency, and about stipulating who has power over whom. So about the only rule that the liberal perspective has is at the core of the more traditional culture. Another area where compromise seems defeated at the start.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-71780909786943259592016-09-27T19:11:00.001-07:002016-09-27T19:11:27.903-07:00Trying to Wrap My Head Around Trump 1st TakeThis is my attempt to wrap my head around the appeal of Donald Trump. I have two different takes on this dealing with what I think are distinctly different sources of support. I'm going to be tying my anecdotal experiences to what I've seen of Trump on TV and what I've read in the news.<br />
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My first take on Trump comes from a certain type of business owner I've run into frequently in sales, both in person when I worked in Toledo and around the country when I've worked the phones. This is the type of guy that is going to buttonhole anyone he can to spout right wing propaganda and decorates his office with Ayn Rand books, Republican calendars, and Gadsden flags. Not to mention some of the more unsavory racist stuff I've heard a few of this type spout.<br />
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Something I've noticed in doing business with these types is that they always seem to make business very personal. Their business approach emphasizes personal relationships and doing business locally. They're the kind that prefers to do business with a handshake and dislikes the paperwork and formality associated with modern business. They're not the kind to have up to date ERP or CRM systems that are able to extract the maximum value from their knowledge base and business operations. Instead, their approach, which I personally find unprofessional and off-putting, is to try to establish a bond with the people they're interacting with. Their message is always that we're just like each other, sharing similar beliefs, political views, etc. and establishing the bond of being minor common criminals together through expressing anti-PC views, usually tinged with racism and sexism.*<br />
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In working with these folks, something I've often heard is how under threat they feel from big business. They often see the competition as unfair, they're firmly grounded in their communities and see the outside competition as an interloper. And they don't know what to do about it; they simply don't have the skill sets necessary to add value to their business beyond their personal relationships and their capital. But they don't see it this way. Instead, for all their talk about free markets, they seem to see business through a prism of personal relationships, while they may feel that they're a pillar of the community locally they seem to assume that all of business runs this way and that they're simply closed off from the important networks and that they'd be a smashing success if only they could get the right contacts.<br />
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Trumps rise has strongly reminded me of this kind of person. Trump seems to be this kind of small time operator scaled up massively. For this kind of person I think he confirms their view of business, it isn't the impersonal transactions of the market, using technology to leverage information, or efficiencies gained through careful planning that matter, instead it's the mano-e-mano cut and thrust of one on one deal making and the relationships made through a life time of business that matter. Trump confirms for them that they're right about how the world works, Trump knows the best people and he's successful because of his personal qualities, not because of running a tight business organization. Given these assumptions he must confirm for these folks what they "know" deep down, that they are falling behind because coastal elites have reserved the important networks for themselves and locked people like them out. They're pissed off because they see programs like affirmative action providing an alternate way into these networks that are closed off to them. They want access to these networks and they see Trump shaking things up enough that there might be some openings. Especially if trade is reduced, then those business elites will have to do business with them because they can't turn to Europe or China for suppliers and will have to turn to the small businesses in the US.<br />
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Just to make sure it's clear, I don't see all or even most small business owners as thinking this way. In truth, many of them are finding valuable niches in the modern economy. But these businesses are nothing like what I've described above. They tend to be professional, have skilled people able to leverage low cost technology options, and are able to work with people that aren't like themselves. One particular example I remember was a four man shop I walked into that specialized in doing custom work for China. These folks were the polar opposite of the kind of guy that would buttonhole me to talk about whatever Limbaugh has been going on about that day. So it isn't a small business thing, but if you're going to try to build your business on nothing but relationships with people like you its a given that you're never going to be anything but small. We live in a world that big or small you just can't get by acting like a Trump style business; our world no longer has a place for these people. And there's a lot of them and they're really, really mad about the fact that the world has changed to favor people that know how to work in an environment where trust is established through formal agreements rather than through bullshitting in a smoky back room.<br />
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* As a side note, this is a major source of white privilege. When I was in sales I had a lot of interactions where people told me really racist stuff shortly after meeting me just because I was a white guy in a suit willing to make polite noises while they told me terrible shit. These people universally considered themselves non-racist. To them, the key test would be that a person could pass a test of proving that they're culturally the same. For me, this would just be assumed and the person would feel they're in a safe space and spout off. But these people act a bit different if a woman is brought along on a sales call (in my personal experience I never had an actual minority member with me when meeting with these folks). Someone who isn't a white male willing to go along with their bullshit is being constantly tested. I'm sure they consider themselves non-sexist because they're willing to hire a woman willing to put up with raunchy jokes and maybe getting slapped on the ass; the same probably would go for an African-American willing to put up with rants about the difference between an African American and an N word (I've been subjected to this rant, just because this is the kind of thing these people feel the need to share with strangers). As long as you agree with them on everything, you're one of the good ones in their book, whatever the color of your skin or gender. I think the racism and misogyny here is obvious, but they see themselves as colorblind. Never mind that I never get tested because I'm a white guy while someone that doesn't look like me is tested every time in their presence. Never mind that there's no way they're promoting the woman whose willing to let her ass be slapped at work, no matter how good of a job they do. But to them, it's not racist/sexist because all they're doing is establishing that you share their culture (they'd say, being one of the guys), which is what is really important to them. I'm trying to be somewhat sympathetic in my writing above this note as a way to analyze this issue, but my personal feeling is that I'm glad I'm in a position where I don't have to put up with this shit anymore. Fuck these people, I have no fucking sympathy for assholes that act like this. Given how often I've run into them it's a terrible fucking thing that there are so many of these folks that run businesses and are certainly giving short shrift to hard working men and women who are better at their jobs then I could ever be. But I was the one getting appointments and sales with these assholes because I looked like them and could do a decent enough imitation of their bullshit to establish trust and close the deal. Left me feeling dirty every day I ran into one of them, but incentives in that field when starting out being what they are you put up with it and close the deal anyway.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-27441118250345082422016-03-14T19:30:00.002-07:002016-03-14T19:30:50.576-07:00What Are Their Self-Interests Anyway?It has been a long time since I wrote a post. I started a new job as an auditor and that has been leaving me sufficiently occupied to not feel the bug to write. It has also meant this has taken a rather long time to finish writing, I have retained references from before it was obvious Trump would dominate the Republican primary. I must also note that I am not trying to explain Trump here, his appeal does not appear to differ significantly between rural and urban areas, but rather to look at how the Republican Party as a whole may be representing the interests of the people that vote for them and not just the donor class.<br />
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However, I have been bothered by the re-emergence, more so in comment threads than in articles or blog posts, that right wing voters do not recognize or vote for their own best interest. I have read some excellent writing on how class and race play into this to define interests beyond income but what really jumps out at me regarding the identify of the right wing are maps like this which shows how concentrated Democratic voters are, primarily in urban counties, though the northeast and some other areas are exceptions:<br />
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<a href="https://commons.wikimedia.org/wiki/File:2012_Presidential_Election_by_County.svg#/media/File:2012_Presidential_Election_by_County.svg"><img alt="2012 Presidential Election by County.svg" height="401" src="https://upload.wikimedia.org/wikipedia/commons/thumb/8/8d/2012_Presidential_Election_by_County.svg/1200px-2012_Presidential_Election_by_County.svg.png" width="640" /></a><br />
"<a href="https://commons.wikimedia.org/wiki/File:2012_Presidential_Election_by_County.svg#/media/File:2012_Presidential_Election_by_County.svg">2012 Presidential Election by County</a>" by <a href="https://commons.wikimedia.org/wiki/User:Kelvinsong" title="User:Kelvinsong">Kelvinsong</a> - <span class="int-own-work" lang="en">Own work</span>. Licensed under <a href="http://creativecommons.org/publicdomain/zero/1.0/deed.en" title="Creative Commons Zero, Public Domain Dedication">CC0</a> via <a href="https://commons.wikimedia.org/wiki/">Commons</a>.<br />
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This leads me to believe that to understand what is happening in the right wing, and with political polarization more generally, we need to look through the lens of rural vs. urban America. The lenses of class and race, while relevant to these problems, miss many aspects of the urban and rural divide.<br />
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Looking through this lens we see very different lived experiences. While Obama could rightly state during his State of the Union Address that the US unemployment rate has been cut in half during his presidency this likely rang hollow to many rural voters. While US urban employment had risen above its pre-recession level by 2014, rural employment remained <a href="http://www.ers.usda.gov/media/1952235/eib145.pdf">3.2 points below its pre-recessionary level in 2015</a> (page 1 and 2). Furthermore, the period of 2010-2014 marks the first time that rural America as a whole has faced population declines, with a loss of 116,000 people over this period. While overall poverty rates are comparable with past history in rural areas, the poverty rate for children living in rural areas has continued to climb through the recession and recovery, from <a href="http://www.ers.usda.gov/media/1952235/eib145.pdf">21.9% in 2007 to 24.2% in 2009 and to a further 25.2% in 2014 (page 3). Poverty in working age adults has risen from 14.6% in 2007 to 17.6% in 2014</a> (page 3). This was offset in declines in poverty rates among seniors. (both links in the paragraph are to USDA Rural America at a Glance report)<br />
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These statistics reflect a reality that many liberal pundits are missing when they react to Republican statements such as Bush's "The idea that somehow we're better off today than the day that Barack Obama was inaugurated president of the United States is totally an alternative universe," or Kasich's "In this country, people are concerned about their economic future... And they wonder whether somebody is getting something to — keeping them from getting it." A few hours outside their urban liberal bastions lies an America a few hours outside of urban America which has a declining population, job numbers that haven't recovered to pre-recession levels, businesses permanently closed, and at least in some areas (my knowledge is anecdotal) property values which continue to decline. (quotes from <a href="http://www.motherjones.com/kevin-drum/2016/01/america-dystopian-hellhole-and-dont-you-forget-it">MotherJones</a>, also see <a href="http://www.msnbc.com/rachel-maddow-show/the-dystopian-nightmare-only-republicans-can-see">MSNBC</a> for another liberal article striking the same theme) While these statements do not reflect America as a whole, I have little doubt that many conservative politicians are hearing from supporters who feel everything is getting worse for themselves and for just about everyone like them. They aren't sharing even in the little bit of prosperity being experienced in urban and suburban areas, instead they are in both absolute and relative decline. They feel that people not like them, and from the rhetoric I think this would include urban hipsters and pundits as well as other groups, are receiving all the gains and that they are being left out. In their view, they want to be listened to and important, like they were through most of America's history, and resent being left behind.<br />
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In addition to this recent decline, liberals should consider that rural areas, particularly in the south, had very different experiences in the past as well. Liberals tend to hold up the high wage, high security union jobs in the rust belt cities as an ideal to go back to, however, much of the initial de-industrialization came from competition from more rural, and particularly southern and western, areas where companies could pay lower wages and labor had more difficulty organizing. The experiences of these areas was that union-busting and long, hard work for less saved towns and small cities that seemed doomed due to declining employment in agriculture and other resource extracting activities. Many corporations and businessmen who would be decried by liberals for their labor practices are looked at much more positively by people that depend on that plant for the survival of their town.<br />
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This translates into support for policies that liberals consistently claim is not in these people's best interests. However, if your interest is in preserving your community, your property, and your way of life it may be entirely consistent to support low taxes on the rich, low wages, and low regulation; after all, these are the policies that attracted to the local factory to your town in the first place. It may seem very likely in these cases that supporting more of the same is the only path forward that would preserve the things these people value most.<br />
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Now, we can recognize that this was always an unstable equilibrium. In practice companies used these areas as leverage to lower labor standards, environmental regulation, and wages throughout the U.S.; for instance 25 states now have right to work laws removing the comparative advantage that states gained by pioneering these laws. Wage growth has been slow for decades eroding the cost differences between states for low skill manufacturing jobs. Furthermore, international competition has left a very small gap in which these companies can exist, there has to be a reason for these companies to stay in the US rather than seek even lower wages elsewhere but not a need for them to locate in a higher productivity area with more access to specialized skills. For the US as a whole, trying to be a low cost competitor means pay cuts and a much worse quality of life to most of us, but it may be entirely consistent that pursuing this strategy would be in the interest of rural communities having trouble competing in the modern economy.*<br />
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But what alternative do rural areas have? Even in the best days their low wage, low tax strategy meant that they never had the revenue necessary to build up the infrastructure, institutions, and human capital necessary to be competitive in the knowledge economy. Due to these deficits in investment as well as the disadvantage of low population density, these rural communities lack the diversity of skilled professionals needed to staff a well managed business as well as lacking the close proximity to related businesses and customers that fosters innovation. A movement back towards unionization, higher wages, and stricter regulation on a nationwide scale threatens the only business model available to these communities, in these conditions what business would choose not to locate near an urban area?<br />
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These concerns also tie in with the cultural issues that have become so prominent in Republican rhetoric. This subject deserves a full post on its own, which I may or may not get around to writing, but reading a lot of Rod Dreher (<a href="http://www.theamericanconservative.com/dreher/">http://www.theamericanconservative.com/dreher/</a>) and Ross Douthat (<a href="http://douthat.blogs.nytimes.com/">http://douthat.blogs.nytimes.com/</a>) has caused me to reflect on how modern values are causing great harm to some communities. However, their perspective runs into the fact that, in aggregate, kids these days are doing better on pretty much everything (see <a href="http://theincidentaleconomist.com/wordpress/healthcare-triage-kids-today-are-pretty-great/">Healthcare Triage</a> for the most recent thing I've seen on this). In aggregate, adults are doing better too, crime rates are down and marriages are more stable. My view on this is increasingly shaped by an urban vs rural divide, traditional morality taught how to live life in a small, rural community. The modern norms we see developing through campus protests and other forms of activism are about how to live in a modern, urban setting. But only one of the two sets can be normative across a society as a whole, and as urban and suburban views become more dominant people that live in and prefer small town and rural life naturally feel dislocated and marginalized.<br />
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These issues have created a large minority who are left feeling that no one is responding to their problems. Despite net income flows to their communities from government they see the communities they live in crumbling around them. They grew up with an image of small town America being America's true self, they feel dislocated in a country that is increasingly presenting a suburban and urban face to the world. They don't see either government or business responding to their concerns, and they are very, very angry about this especially because they see their version of America as being the true America, and they can point to support going back to Thomas Jefferson for this view. They are looking for someone to blame for their fall from influence, it appears that it has become easy to focus this on outsiders but they also cast blame on moochers in their midst, such as those receiving government assistance. It would be hard for them to admit that there is simply no way to develop these areas and that many of those on government assistance are likely those who feel too closely tied to their community to look elsewhere for work.<br />
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This leads to the deep problem however, there is no plausible policy path within US political traditions to help these regions. A report by the St. Louis Fed finds that convergence to the national average income across people is driven by urbanization, they find that non-metros areas converge to a lower income. They state the prospects for non-metro areas very bluntly, "<a href="https://research.stlouisfed.org/wp/2008/2008-002.pdf">Our results provide evidence that the idea of preserving rural economies while achieving significant gains in per capita income (or slowing divergence) in the long run appears to be far-fetched</a>." (<a href="https://research.stlouisfed.org/wp/2008/2008-002.pdf">Income Convergence and in the United States</a>, page 12) It is worth noting that things have only gotten worse in rural areas since 2008 relative to the rest of the United States. Most policy paths that could have helped are now no longer possible, I remember back when I was an undergrad taking economics courses hearing about how terrible the employment preserving European Common Agricultural Policy was compared to our efficiency focused policies; however, as I grow older I am forced to reflect on the fact that an awful lot of people desire to live in rural communities and that it is rather peculiar that our socio-economic system has little way of prioritizing how people want to live but instead only what they want to purchase. People feel the political system has failed them because it cannot preserve their communities, they are enraged because they see that the political system is helping many people build and maintain stable communities in urban areas; communities they do not desire to be part of. Ultimately, however, I don't see how the system can respond to their desires. Even a Japan style massive building program would be temporary and it wouldn't stop the kids from wanting to leave. Government can help stabilize urban communities because they ultimately have the density to support the modern, highly complex production process that businesses require to be competitive. Rural areas don't so there is no political fix available.<br />
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You can get mad and you can block responses to the problems of an increasingly urbanized America trying to adapt to the dominance of multi-national firms, but there just isn't anything to bring back a country dominated by small towns and small businesses so there is nothing for a political party focused on America's small towns and rural areas to do but block and obstruct. The problems these areas face aren't fixable so the party that does nothing is acting in the interests of their constituents by doing the only thing they can, holding back everyone else so they at least lose slower than they would if America's problems were addressed. And with no prospect for better wages in an area whose competitive advantage is low costs, a tax cut may represent the only chance for an increase in real take home pay, so there's some small prospect of improvement there.<br />
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*I don't mean for it to sound like all rural areas are suffering. Rural areas blessed with outdoor amenities are doing quite well. In addition to attracting tourists they also attract well educated individuals lucky enough to have jobs that they can do remotely. However, this does nothing for an old coal town or agricultural community, instead it generally means the growth of new areas and the growth of these new communities is likely masking an even sharper decline in the health of older rural communities in the aggregate statistics.<br />
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<br />Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com1tag:blogger.com,1999:blog-6052097781213973653.post-4961079537835804852015-07-12T18:13:00.000-07:002015-07-12T18:13:07.780-07:00What is the Inequality for Our Age?The article, "<a href="http://www.nytimes.com/2015/07/10/opinion/to-each-age-its-inequality.html?partner=rss&emc=rss">To Each Age Its Inequality</a>," presents a concept that in broad outline reflects my own view. Underlying economic conditions lead to differing levels of inequality being efficient giving differing economic conditions. The key concept is this:<br />
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<span style="background-color: white; color: #333333; font-family: georgia, 'times new roman', times, serif; font-size: 16px; line-height: 23px;">So, just as in the farming and foraging worlds before it, our fossil fuel world has a “right” level of inequality, and societies that move toward it will flourish, while those that move the other way will not. Successful governments know this and apply taxation and other measures to push economic inequality toward what they hope is the sweet spot.</span></blockquote>
However I have a major problem with the next passage:<br />
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<span style="background-color: white; color: #333333; font-family: georgia, 'times new roman', times, serif; font-size: 16px; line-height: 23px;">The big question, of course, is just where this sweet spot is. By 1970, the Organization for Economic Cooperative and Development nations had driven post-tax income inequality down into hunter-gatherer territory, averaging just 0.26 on the Gini scale. The economic difficulties of the following decades, however, suggest that this was perhaps too low. Most people apparently thought so, electing governments in the Reagan-Thatcher era that allowed the rich to keep more of their gains.</span></blockquote>
My issue with this is that while we can be fairly confident that over the millenia agrarian societies had plenty of time to reach their equilibrium levels of inequality the same cannot be said for modern ones. While powerful groups did an excellent job selling low inequality as a source of the problems of the 70s the economic history that I've read focuses on other factors, primarily the oil shock and the beginnings of adjustments to globalization. It does not follow from the fact that various groups in favor of higher inequality successfully sold their ideas to the public that this was in fact the correct diagnosis. It may or may not be, but we lack the evidence to call this one accurately and this particular observation is basically irrelevant to the question as to what inequality is in truth demanded by our age.<br />
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To get at this, I suggest we should explore the concept a bit more deeply, and think about what underlying economic factors drive the variance in efficient levels of inequality. This is straightforward enough for pre-modern agrarian societies. Everything I've read on this topic is in agreement that inequality arises because the variance in the productivity of the land is far greater than the variance in the output of individuals. Some societies tried various schemes to reduce this inequality, such as periodic rotation of fields between households, These societies proved less successful because of a second factor, while land could be improved rates of return were very low for investments in early periods. To create incentives for long term investment it was necessary to make land holdings perpetual, if a household could pass down the improvements to subsequent generations then the investment looked more attractive then if the land was likely to be redistributed at some future point. Since the variability in an individual farmer's skills were less important than the variability in the land itself it was inevitable that highly unequal societies would emerge.<br />
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The above is of course vastly oversimplified but it is far more difficult to tell a similar story for the modern world. We are still faced with the fact that human ability just doesn't vary that much, while some individuals can pick things up quicker than others with enough time most humans will perform most tasks with relatively similar ability.* Another factor is that unlike with land most plant and equipment used in the modern productive process can be replicated, there isn't a similar dynamic with land where high variance in the productive qualities of plant and equipment would lead those that have it to get high returns.<br />
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Since it can be taken as a given that any firm could acquire both people and the plant and equipment necessary to perform economic tasks with similar efficiency as existing firms we are left with intangibles as being the driving force behind the efficient level of inequality. Firms do differ with respect to their internal culture, the efficiency of their organization, and factors such as reputation and market position. These are the factors that lead firms that are otherwise similar to experience greatly different returns. The question that arises is what does this imply for the efficient level of inequality? In my opinion, I see the differences as arising primarily from the bottom up, emerging from the solutions reached by workers within the firm to gradually become institutionalized in the practices of the firms they work for. But this is contained within structures of property rights which evolved to create incentives for the development of land in agrarian societies, with something of an overlay to encourage agrarian land owners to transition their wealth into property, plant, and equipment instead of agricultural land, and not to create incentives for the development of the intangibles necessary for success in the market.<br />
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Given the extent to which our property laws continue to resemble those of the agrarian era rather than those that would create incentives for those traits needed in modern market economies, my view is that current property laws tend to lead societies to have much greater levels of inequality than would be ideal for a market economy. While competition between societies is resulting in some experimentation towards more efficient forms of organization they power granted by current law allows those with that power to exploit openings, such as the economic turmoil of the 1970s, to reassert their historical dominance and roll back the evolution towards more efficient forms of economic organization. Over time, competition between societies will decrease the power of these groups but this is likely to be a very slow evolution, just like the transition from the egalitarian world of the foragers to agrarian societies was very slow. But I see power structures that give outsize influence to owners to be essentially similar to that of agrarian societies that tried to rotate their fields to make people more equal, an inefficient set of institutions that will cause these societies to decline and to eventually be replaced by societies that recognize that underlying economic conditions have changed and that society must reflect the underlying more egalitarian requirements created by modern systems of production if they are to flourish.<br />
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* I realize this is a fairly strong statement, and there are obviously tasks where some trait is hugely beneficial, but most workplace tasks are of the type that any individual performing them repetitively for a long enough period of time will perform similarly. Of course, since some tasks are valued far more than others those that take to them easily will tend to get the high valued tasks to perform and leave others for the lower valued tasks; opportunities are just never given for these slower individuals to perform high value tasks.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-86386444062501886152015-06-23T18:39:00.000-07:002015-06-23T18:39:28.135-07:00Some Brief Thoughts on the Team Production Theory of the CorporationI wanted to briefly react to Justin Fox's <a href="http://www.bloombergview.com/articles/2015-06-16/who-is-the-modern-corporation-supposed-to-serve-">post on the team production theory of the firm.</a> His contrast between the shareholder and team production view of the firm, and the recognition that the broad acceptance of the shareholder view of the firm is of recent vintage, provides a great short overview of the topic.<br />
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These are topics we spend a great deal of time on in my business ethics classes. The focus was on the stakeholder theory of the firm rather than the team production theory, but the idea that the shareholder value theory of the firm is not efficiency maximizing is a common element. There are very good reasons to think that the shareholder value theory of the firm fails to maximize value for any of the interested members of the firm, whether employees, customers, neighbors, or, at least in the very long run, shareholders.<br />
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My problem with these conceptualizations is that while the behavior of institutions like boards of directors does show that the interests of other stakeholders have some impact, this impact is generally fairly minor or lasts for only a short period. Doubtlessly, the period when norms involving strong stakeholder interests dominated in the immediate aftermath of WWII and the Great Depression involved great gains for corporations and widely held prosperity. But this period lasted for only a generation, the norms that held this consensus together quickly unraveled as those shaped by these experiences lost their influence. In the long run, formally and explicitly granted rights, such as those governing corporate control, will always win out against informal rights; no matter how effective those informal rights. Since shareholders are granted ultimate control they will always come out ahead in the long run, no matter how inefficient this outcome is.<br />
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No large organization can ever function effectively when control is vested in external elites who are not part of the day to day operation of that organization. The problem faced by business in the modern market economy has close parallels to the issues faced by aristocratic societies before democratization. When a group is run for the benefit of a few, no matter what norms seek to impose good behavior on them and how honestly they try to act for the betterment of the group, the reality is that their interests necessarily diverge from those of the other members of the organization. Elites try to make their interests appear invisible, either by claiming their interests are natural or identical to those of the organization they are influencing, but historically it has always been obvious that once their power is limited that their interests diverged sharply from the interests of others.<br />
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This is why I find the current property laws governing corporations so troubling. Similar to how aristocratic land ownership lent special privileges and influence to aristocrats under the <i>ancien regime</i> property rights concerning corporate property grant rights and privileges to those that own enough corporate property to exert control. They can circumvent campaign finance laws, speak with the corporations voice to claim broad support, and furthermore can protect themselves and their wealth and station through limited liability laws.<br />
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The solution to this isn't terribly difficult. It is simply to grant explicit and formal rights regarding control of the corporations they work for to labor as part of our laws governing corporations. Shareholders, can, and should, retain voting rights and rights regarding residual returns. But unless labor is granted an equal voice I do not see how any stable solution is possible to the problems of governing a corporation. While I admit this is radical the more I learn about business the more inescapable I find this conclusion; the same logic driving democratization of states ultimately holds for firms. I also see no reason to think this would deter investment, aside from an initial downward valuation as control premiums get wiped out, shareholders adjust to lower total returns, and shareholders overreact (yeah, this would be very costly short term, but so is democratization and since this is ultimately an adjustment of claims to wealth and income value is ultimately redistributed not destroyed). In the longer run, however, investors would continue to receive cash flows, incentives to create new businesses would increase since shareholder power would be diluted in more mature businesses, and incentives throughout large organizations would be improved as control comes to align more closely with the interests present in a corporation. But without this change, no matter what the normative appeal or positive benefit a different conception of the corporation has, I do not see how corporations will do anything in the long run but serve shareholder interests since their formal claims to control are given primacy and other claims have little force in law.*<br />
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* At least not beyond some minor rights at the margins. But other interests can hardly be said to have much in the way of rights governing control of a corporation in the US; other jurisdictions differ. There are also some situations where specific corporations have granted specific rights, or distributed stock in ways to give other stakeholder groups a capital stake, but these are exceptions to a general rule.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com2tag:blogger.com,1999:blog-6052097781213973653.post-60986777031792387562015-06-21T19:16:00.001-07:002015-06-23T18:42:33.028-07:00The Taboo of Discussing Hours and the Alleged Skills Shortage[Edit: Added links I meant to go with the original post}<br />
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In sales, an effective technique is to identify your prospect's pain point and to offer a solution to their problem. The idea is that while there can be multiple benefits your product offers getting someone to switch requires identifying a real problem that they currently have and fixing it.<br />
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So when <a href="http://www.cepr.net/blogs/beat-the-press/how-about-the-stupid-boss-theory-of-why-it-takes-so-long-to-fill-vacant-jobs?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29">economists question</a> (I'm also reacting to <a href="http://www.vox.com/2015/6/20/8815561/job-vacancy-duration">Matthew Yglesias</a>) why aren't we seeing wages go up among high skill workers if there is a skills shortage my thought is that maybe this is indicating that the pain point for high skill employees* isn't their wage level. Instead, my experiences with being in an MBA program and speaking with other people who would be considered high skilled is that generally the concern is with the long hours and level of commitment required. High skill employees are generally relatively satisfied with their income levels, their unfilled needs lie elsewhere.**<br />
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This is a major problem for employers since one of the main traits that employers are looking for is a willingness by the employee to be exploited. They tend to phrase this as a willingness to do what it takes, employees as family, a corporate culture where employees work hard and play hard, or "some overtime required," but the bottom line is that the employer expects the employee to be their dependent and to subordinate the employee's goals to the business's goals. Intense pressure to keep labor costs down, even if a business is incredibly profitable already, limits an employer's ability to differentiate itself by offering easy hours.<br />
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These limitations are reinforced by a set of beliefs which regards not wanting to take on additional work as laziness, an attitude of entitlement which regards the demands of an employment contract as being unlimited in return for a wage, and a general view that someone that objects to ever increasing demands on their time as an undesirable employee. By defining a good employee as one who does what it takes and making this a minimal qualification for most any high skill jobs employers render themselves unable to attract people talented on other dimensions, employers want employees that will let them run their business a certain way and put business priorities first and what employees really want is an employer that respects them and their priorities outside work; the goals of each group are mutually incompatible.<br />
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The result is a deeply dysfunctional labor market. How can the market price labor efficiently when an individual has no way of knowing how much labor they are selling in a given transaction? While high skill employees are confident that they can meet their minimum salary expectations, they find it much harder to get solid information on how much labor they are selling for this salary. Any source of interview advice will emphasize not asking about how long a workweek is or about vacation and leave policy; too many employers regard it as an automatic disqualification. Employers that are well staffed and don't require long hours are afraid to advertise it for fear of attracting the wrong sort of worker.*** Potential employees also know that employers advertising being one of "the best places to work in X" and to give good work life balance are suspect.**** With all other information sources regarding actual hours worked cut off employees are left trying to piece together the bits of information they can find to help them choose where they want to focus their job search. Problematic for trying to recruit based on the one dimensional measure of salary, one of the key beliefs among most job seekers is that a relatively higher salary for a similar position means more hours. Since this is rarely the pain point among high skilled individuals this means the price signal can't work; since a business won't make any firm statements regarding hours, much less a credible commitment to respect an employees time, the price signal just ends up signalling that a job has potentially undesirable characteristics as it does a higher willingness to pay for the same labor input. Among already employed skilled employees why should they take the risk of jumping to a new employer for a higher wage when their wage isn't their main problem? There is simply too much risk for a marginal 10 or 20% pay bump when what they really want is an extra week's vacation and a 40 hour work week so they can be in time for dinner while still making the same wage they currently are.<br />
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There are a number of other issues that I think are leading to broken labor markets. One additional point that I do want to briefly mention is that there is a disconnect between when employers talk about skills and much of what I see in the press. I haven't heard anything from businesses that makes me believe that there is a shortage of trained people with the desired skills, the problem arises from businesses wanting proven talent. This is highly problematic, individuals have no way to respond to these incentives and create additional supply since it requires that an individual gain experience from another employer; something that the other employer has an active interest in NOT providing to an employee who will leave in response to the incentives from another employer. There is no way for the market to respond since the source of supply, the competing employer, gains nothing from the transaction between the skilled employee and the new employer.<br />
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* It is a very different situation for low skill employees but with growing inequality it is unsurprising that situations would differ among low and high skill employees.<br />
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** There is a small percentage of people willing to do whatever it takes in return for status and remuneration who don't fit this description. My experience in an MBA program at a state research university would put this number at maybe one in ten among this group. For the population as a whole, I would think it is much lower, though for people in elite programs at top schools the percentage is likely much higher. However, for these few individuals we are seeing incomes skyrocket as employers bid for them, these are the folks that are ending up in industries like banking or in leadership programs at top firms. Most people, however, have preferences which begin to discount income relative to leisure pretty steeply once they've reached an upper middle class lifestyle.<br />
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*** Of course, these employers often have no trouble recruiting through personal networks because so many workers want jobs that don't ask for insane hours but still pay a wage comparable to the more demanding employers on an hourly basis. Obviously, however, personal networks are the exact opposite of a market and are a throwback to the aristocratic pre-market society of past ages. The fact that personal networks are such an important means of getting a decent job, with a broad understanding that most jobs found on the market are crap jobs, is another strong indicator that the labor market is badly broken.<br />
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**** I interviewed at one place that advertised itself as such. Their idea of work life balance is that you had considerable freedom to schedule your work hours but should expect 60 hour weeks, declining to 50 with seniority. Hardly the 40 hours which most naive individuals think is implied by work life balance.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-51258395044649260922015-06-16T18:07:00.003-07:002015-06-16T18:07:48.377-07:00The Influence of Institutional Disparities on Bargaining Power Between Capital and Labor<a href="http://www.thefiscaltimes.com/Columns/2015/06/02/Overcome-Rising-Inequality-Workers-Need-More-Bargaining-Power">Mark Thoma has an excellent column</a> regarding rising inequality and the role that the relative bargaining power of workers and employers plays in this. I am in complete agreement as to his points and to his opinion that market power has not received enough attention.<br />
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I do want to drill down further regarding the concept of economic power. To understand the disparity in bargaining power we need to be aware of the institutions and norms which give rise to it. Our institutions and norms are simply not those of a world of "the textbook ideal of competitive markets." Instead our institutions have evolved in a direction that serves to greatly reduce the inherent organizational problems of capital without serving a similar role to reduce similar problems faced by labor. Our institutions make it easy for capital to organize itself in the form of corporations and contain elaborate protections to safeguard the rights of owners of capital against others claiming interests and rights in these corporations. Easily available information on the performance of capital investments similarly serve to reduce coordination and collective action problems among individuals who control capital.<br />
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Corporate law is the major culprit in this unequal institutionalization. It is obvious enough why early modern legislatures would have seen it necessary to grant very strong rights to capital in order to induce investors to take capital out of land and put it to more productive uses in the under-capitalized world of the time.* It is less obvious why this continues unremarked in market economies that are far from their agrarian past. The problems facing the modern world, and more narrowly modern businesses, are not those of capital scarcity. Sufficient capital exists to easily replicate any given concentration of property, plant, and equipment. What distinguishes businesses is the quality of their internal institutions, the policies, procedures, norms, knowledge, and other intangible qualities that separate the leaders of an industry from those with similar capital accumulations but lesser results.<br />
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In the kind of competition that determines success in modern business it seems obvious that the disproportionate rights granted to the capital interest in an organization leads to inefficient incentives. The intangible elements which lead to business success develop at least as much, if not more, out of the labor element of the productive process rather than from the capital investments of owners. Yet, control in the modern American corporation rests with owners and management rather than the lower levels of organizations where institutional norms generally develop and are then propagated within the organization.**<br />
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It is not difficult to imagine how laws governing corporations could be changed to more closely conform with the market ideal of equal individuals bargaining from legally equal positions of power freely and without coercion. To a certain extent, the Rhenish model of capitalism already does this, providing some proof on concept. A more complete system would be corporate law which explicitly recognized that employees contribute to an organization in ways not explicitly reimbursed through market income and required that corporations grant employee organizations explicit voting rights and control that grew along with a corporation. As an ideal end point a mature organization would completely extinguish its equity accounts returning capital to investors to be reinvested in new enterprises and leaving control entirely with employees. Current corporate law obviously doesn't allow for this, but it would much more closely resemble the market ideal of the textbooks where capital and labor are equal partners and where the market tends towards a normal rate of return leading investors o continuously seek new and innovative investments in search of higher returns to capital rather than accumulate massive capital stocks in mature blue chip companies.<br />
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A second notable institutional disparity is the set of institutions that have evolved explicitly to protect the rights of capital. These are both public institutions, such as the SEC, and private organizations such as the AICPA or the ratings agencies. By providing investors with high quality information, explicit sanctions against violating accepted practices, and making this information readily available these organizations contribute greatly to capital interests overcoming the collective action problems they would otherwise face.<br />
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This isn't to say that these organizations aren't enormously beneficial, but why do similar organizations not exist to help labor overcome similar problems? How much better would the labor market function if regular audits were conducted of labor practices and annual reports were made available regarding salary ranges for positions, actual hours worked by position and department, adherence to labor standards, and other characteristics of interest explicitly to labor? What if government organizations existed which regularly policed statements made by companies regarding their efforts to attract the labor the way that the SEC policies registrations of publicly traded corporations?<br />
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The disparities in access to information and the relative institutionalization of the interests of both capital and labor are stark and obvious if even a moment's thought is paid to them. Organizations such as labor unions or the NLRB are poor substitutes for the alphabet soup of organizations dedicated to assisting with the efficient allocation of capital. If our society placed a similar priority on the efficient allocation of labor how much more efficiently could our economy allocate resources and how much more closely would it conform to the textbook ideal? Instead, we put up with a situation where capital enjoys disproportionate influence and there is little discussion, or even recognition, that our society has granted capital these rights and that other sets of choices can be made.<br />
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Unless something is done at the basic level of institutions I do not see how our economy can be either equitable or efficient. The happy post war period rested on an exceptional set of circumstances, given the unequal distribution of rights in our economic system I do not see how it is possible to reach a stable equilibrium. Instead, the kinds of inefficient disparities we see today, and that we say at the turn of the 19th century, are what I see as the norm. Rights are too unequal for anything else to be the case.<br />
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* As I gain greater knowledge and experience of the private sector I am coming increasingly to appreciate how our institutions serve to recreate the dependency networks upon which the power of gentry and nobility rested in previous ages. I am increasingly moving against the idea that market institutions resulted in modern problems, rather the preservation of many of the rights and obligations of the landed class in modern law regulating capital creates a clash between values rooted in status and dependency and markets which function best when status distinctions are eliminated and people are given equal voice in their dealings with each other. Modern structures governing capital, however, violate democratic and market norms and provide perpetual rights to individuals disproportionate to the contribution they make in the success of the organizations they contribute to while disregarding the claims of other individuals that participate in these organizations. This seems to me to be a perpetuation of status and the bundle of property rights from a previous era rather than the bundle of rights that would be institutionalized in a society that started with market assumptions.<br />
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** My MBA program did emphasize the role of management in the formation of these institutions. Based on the organizations I've been a part of my belief is that the role of management in these changes is greatly exaggerated. Business tends to overemphasize the role and importance of leadership and fails to deal in a meaningful way with the more inchoate and difficult to attribute contributions made by employees as a collective. There is a great deal of great man of history feel to business thinking and far too little appreciation for institutional development and the organic development of cooperation in groups. The incentives facing the writers of business publications and of business schools training students for participation in business leading to this bias are sufficiently obvious that I doubt I need to belabor the point.<br />
<br />Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-49742930092809329212015-04-28T10:10:00.000-07:002015-04-28T10:16:25.178-07:00Too Much Stuff Means There is a Distribution ProblemBusiness school has been making me think a great deal about the mismatch between our economic institutions and the actual practice of business. There are many aspects of this which I plan to explore over the summer but one aspect of this is the apparent glut of capital and other goods written about <a href="http://equitablegrowth.org/news/problem-much-stuff-sloshing-around-global-economy/">Nick Bunker in this post.</a><br />
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I have to confess, I find the concept of a global oversupply of capital to be incoherent. It can certainly be the case that a nation, or an individual, has more capital then they can possibly use efficiently. But the globe as a whole? How could this be?<br />
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The answer, of course, is that its a problem of distribution. If poor people had more capital they would use it more efficiently than rich people that have capital. A poor African like I saw in Zambia could trade their traditional hut with no plumbing for a house with plumbing, let their kid go to school, or possibly invest in a small business. If they had it, they'd put it to good use. Meanwhile, we have a global capital glut because the capital is in the hands of rich folks who are more interested in preserving their capital than putting it at risk. Want to solve the problem? Get it out of the hands of those who don't have a current use for it and into the hands of those that do.<br />
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In the context of property rights, I am beginning to see the transition from the feudal era to the capitalist area largely in terms of providing institutions which caused capital to flow from those that sought safety in the form of land to those that were willing to take risks. Our current business friendly regulatory environment has resulted in a social context that is beginning to look more like the feudal era, capital is concentrated in large, mature, stagnant enterprises controlled by people whose goal is to minimize risk rather than maximize growth. If we want to jump start growth we are going to need to rewrite our property laws to get capital back in the hands of risk takers and out of the hands of those that currently have it.<br />
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Never thought business school would radicalize me the way it has, but there you go. More on this to come.<br />
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*Meant to add an analogy. I don't see how the global glut of capital is any different from America's glut of food. There are lots of starving people that would benefit greatly if we could deliver our excess food to them. However, the infrastructure, institutional and physical, is not present to deliver this bounty to them. The problems don't lie with the quantity of produced goods, they lie with institutions meant to deliver them. Fix these and you fix the problem. Of course, like with the glut of capital, the current situation benefits a lot of people and they don't want them changed.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com3tag:blogger.com,1999:blog-6052097781213973653.post-75276788357046768752015-03-19T10:18:00.001-07:002015-03-19T10:18:07.966-07:00You Could, You Know, Actually Talk to ManagersSorry for the long hiatus in blogging, I overcommitted between work and my MBA and something had to give.<br />
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<a href="http://esoltas.blogspot.com/2015/03/the-rent-hypothesis.html">But a rather good post on rents in the modern economy by Evan Soltas</a> mentioned something that I had to talk about. It's a great post with some great ideas about how to build a research program within economics that would better define and detect rent seeking. However, it also exposed gave full display to some of the frustrations I have with the pedestal given to economic thinking when it is so limited in its methods.<br />
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Specifically he mentions "Is it really possible that, as Bloomberg put it, Larry Ellison is "<a href="http://www.bloomberg.com/news/articles/2015-03-11/ellison-s-103-million-pay-seen-as-a-good-deal-for-shareholders"><strong><span style="color: black;">still
a bargain</span></strong></a>" to Oracle at $100 million a year?" and later mentions "To Bivens and Mishel, executives would still do what they do even if they were
paid less -- Larry Ellison is not about to sail off in his America's Cup yacht
-- which means that executives are, in fact, being paid above their opportunity
cost. (The logic here is, if their pay falls below opportunity cost, they would
go do that other, next-best project which determines the opportunity cost.)"<br />
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The problem is that a fairly big chunk of this compensation problem is commonly and openly talked about in businesses, limiting your methodology as strictly as economists do cuts them off from picking some really low hanging fruit to resolve this problem.<br />
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Firms pay top management outrageous salaries because it is a way to reduce total compensation costs. You pay everyone else in the firm far less than they are worth and motivate them by getting them to struggle to gain that golden ticket that will lead them to the top. It reduces total compensation, motivates employees, and shifts consumer surplus from consumers and employees to shareholders and top executives.* Its no mystery, many of my management professors have mentioned this in passing, its widely accepted by both the left leaning members of the profession and the staunch right wing members. This is a natural, and probably inevitable, byproduct of shareholder capitalism.<br />
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The social costs of this are, in my opinion, terrible. Many people are unwilling to join the rat race, they want to be compensated fairly now not compete for decades in the hope of a reward that may or may not be rewarded on merit. These people never choose to compete for high power careers, sharply reducing the talent available to business, of course businesses never observe this since these people are not on their radar. Furthermore, there are not enough top positions to go around, this results in up or out promotion systems in many firms, practices such as forced rankings, and in some firms, mandatory retirement to keep the system going; further limiting the matching of available talent to open positions. Other problems are associated with the demands put on lower ranking employees, they have signed up for a major gamble and this drives reckless, and sometimes unethical, behavior, which harms their health, leads to psychological and physical stress associated with poor quality decision making, and drives many talented people to self select out rather than continue in high powered careers. The remnant which eventually gain leadership positions tend to be highly narcissistic (since they don't realize early on how low their odds of making it to the top are), highly motivated by money (since why give up so much of their life to get where they are), and prone to reinforce these norms because they take rightful pride in having made it to the top in such a cutthroat environment after having sacrificed so much.**<br />
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This results in an awful business culture that is highly self destructive. The norms formed by it are very powerful, which is the answer to the inevitable question of the libertarian is why doesn't a company defect and recruit the people dropping out of the rate race. Of course, these norms mean that you know before you even start that you are facing 60+ hour weeks, that you are expected to sacrifice your health and well being to the company, and that you need to show early on a willingness to put the needs of the company before your own to get to the top. This means that the best people never step forward, people suited for top management positions tend to be socially and group oriented and value their lives and families above the company, they are never in the running. There is no way to select for them because young people today know what is required of them and the best of them choose careers that will not demand this level of sacrifice, knowing the odds and having a realistic idea of the possibilities and sacrifices involved mean that you have to have a very specific type of personality to even consider aiming for a high powered career these days. So the company seeking to defect from these norms can't find anyone to select for because the people they need know better than to advertise the character traits that the rest of the business world is selecting against.<br />
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It's a huge collective action problem, a rather classic one actually, well explained in social sciences outside of economics. It's obvious that companies have developed norms designed to drive income to the top, to use this to motivate employees rather than to induce them monetarily, and that this serves to maximize profits for shareholders more readily than actually focusing on building long term careers for people while recognizing their other needs. It makes everyone but shareholders and winners of the career lottery worse off and since it is social and normative there is no way for markets to correct it. But while this can easily be observed through interviews or even through questionnaires it remains invisible to much of the economics profession.<br />
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*Most people in business seem to believe that this also helps to recruit quality people and get the most out of them, though I believe this is a bunch of self justifying bullshit and have yet to discover any methodologically sound evidence of this. Though there is a lot of self confirming nonsense of the form that everyone does this so it must be good, with no effort to reject the hypothesis that this is simply normative behavior disconnected from performance. <br />
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**Something I noted from a lot of my management classes is that the managers that outperform the average are people that are not on the fast track to top spots, they tend to be group oriented people unwilling to make the sacrifices required of a high powered career. They tend not to get noticed but in the cases they get tapped they perform well. Current selection methods do a great job at motivating and selecting for front line and mid level management but there are sharp discontinuities between what selects for these individuals best vs. what is necessary at the top. Since proven performance is what boards and managers are looking for by the time they are selecting individuals for the top spots there is no one ideal left because the selection methods used at earlier levels of the process have selected against all the good people. It's crazy, but that's what it is.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com1tag:blogger.com,1999:blog-6052097781213973653.post-22945394989134125432014-10-14T10:11:00.004-07:002014-10-14T10:11:56.188-07:00Quick Thoughts on Norms, Institutions, and InequalitySomething that has been really bothering me since starting my MBA is the extent to which the actual operations of business are run by norms and institutions rather than by economics. Specifically, we seem to have a serious hangover of agrarian norms and institutions that cause serious damage when applied to a market based society. Instead of studying for auditing like I should be I am going to try to use my lunch hour to use this concept to tie together a few disparate blog posts that I believe are tied together by this concept.<br />
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Yesterday, <a href="http://www.nytimes.com/2014/10/13/opinion/paul-krugman-how-righteousness-killed-the-world-economy.html">Paul Krugman wrote</a>: <blockquote class="tr_bq">
Why are debtors receiving so little relief? As I said, it’s about righteousness — the sense that any kind of debt forgiveness would involve rewarding bad behavior. In America, the famous <a href="http://abcnews.go.com/blogs/headlines/2009/02/cnbcs-santelli/">Rick Santelli rant</a> that gave birth to the Tea Party wasn’t about taxes or spending — it was a furious denunciation of proposals to help troubled homeowners. In Europe, austerity policies have been driven less by economic analysis than by Germany’s moral indignation over the notion that irresponsible borrowers might not face the full consequences of their actions.</blockquote>
It isn't clear to me why righteousness is so one sided, on what ethical or moral basis does the debtor bear more blame then the creditor? Going back to biblical times wasn't usury considered sinful and the lender not the debtor the one morally suspect?<br />
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Linked to this question we get <a href="http://www.thefiscaltimes.com/Columns/2014/10/14/What-s-Best-Way-Overcome-Rising-Economic-Inequality">Mark Thoma's column today regarding the best way to fight rising inequality</a>. In it he writes that "This debate brings up an important question: what is the best way to fight economic inequality? I think most people would agree that the best approach is to provide good jobs to working class households, and to make sure workers receive their fair share of the value of the output they produce." And further down he adds "And if workers have not received the income they deserve – their contribution to the value of the output they produce – as has been the case for the last several decades, then progressive taxation and redistribution returns income to its “rightful” owners. It’s the fair and right thing to do," with some excellent analysis and suggestions in between.<br />
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What is tying these concepts together, I think is mentioned in a post by <a href="http://angrybearblog.com/2014/10/bill-gates-agrees-with-me-on-piketty.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Hzoh+%28angrybearblog.com%29">Steve Roth at Angry Bear commenting on Piketty and some remarks by Bill Gates</a>. Steve makes some excellent points on the need to distinguish wealth from capital, however the part I am interested in is his point that:<br />
<br />
<blockquote class="tr_bq">
Important: that stock of real assets is not just the “fixed capital” tallied (because it can be measured) in the national accounts; that’s actually a small part. Knowledge, skills, and abilities (think: education, training, health), business/organizational systems (this is huge), and similar unmeasurables constitute the bulk of real capital — the stuff that allows us to produce in the future. Most of that stock is not specifically claimed, but it is that whole body of real capital that the market it trying to value properly via pricing of claims — basically, holding up its collective thumb and squinting.</blockquote>
To me, this is the crux of the problem regarding widening inequality. How do we as a society assign claims on capital in the form of "knowledge, skills, and abilities, business/organizational systems, and similar unmeasurables"?<br />
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In my MBA program we focus a great deal on the stakeholder perspective of the firm. This is all well and good, this is pushing back against the norms portion of those agrarian attitudes that I mentioned or that Krugman is describing as the sense of righteousness about debt. This is probably far too little to have a measurable impact on its own, though shifting norms is a necessary first step for social change.<br />
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The deeper problem here is institutional, in our society providers of fixed capital generally have a stronger claim to those "unmeasurables that constitute the bulk of real capital." They receive this claim through a series of institutional features. The first is the relative ease with which providers of fixed capital can combine together in unions of capital, commonly called corporations. This provides them with far greater bargaining power regarding the bulk of capital in our society than other stakeholders with an equal, or greater than, interest and role in the production of the unmeasurables which constitute our capital.<br />
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[Lunch hour is over and I am posting this incomplete as I do not know when I will have time to continue this. Hopefully there will be a part two in a semi-reasonable timeframe.]<br />
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<br />Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com1tag:blogger.com,1999:blog-6052097781213973653.post-59061162117976810462014-09-20T18:58:00.000-07:002014-09-20T18:58:38.413-07:00How Much of Our Current Political Insanity Can Be Attributed to Early Childhood Brain Damage?<a href="http://www.motherjones.com/kevin-drum/2014/09/prison-rates-are-down-thanks-lead-theyre-going-stay-down">Kevin Drum had a recent blog post</a> on how incarceration rates are down among younger people and up in older populations and the links between this and lead.<br />
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This led me to thinking about how a lot of the problems of the last 30 years are commonly attributed to many of the same characteristics that are often associated with criminality such as selfishness and a short term orientation. Since behavior is highly associated with social context, it stands to reason that these traits would be expressed differently in people with higher socioeconomic status then the low status people that are often incarcerated for crimes.<br />
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If this association does exist it would help to explain how our society shifted away from the more communal values of the 1950s and 60s when business and government were both moving towards a more inclusive vision that engaged diverse stakeholders* to the time since the 1980s when ideas such as shareholder capitalism began to take hold and dominate public discourse. Today the upper reaches of business and government are dominated by people who are in the age groups that are being associated with higher crime and incarceration rates. If there is an association between lead and criminality in people of low socioeconomic status it would hold to reason that there is a similar influence on people of higher status, perhaps helping to explain some of the extremely short term thinking that has become common on issues like the environment and inequality among people of high status.<br />
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*limited of course by holdovers of earlier inegalitarian social relationships and the prejudices of the time, but these were times of progress rather than regressTzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com3tag:blogger.com,1999:blog-6052097781213973653.post-90472074054700852522014-06-30T16:40:00.000-07:002014-06-30T16:40:02.640-07:00This Week in the Supreme Court: Protecting the Powerful Against the WeakJust wanted to say that I think the Hobby Lobby decision is atrocious. The institutionalization of the corporate form is all about separating the corporation itself from those that finance it in return for the protection of limited liability. Further eroding the separation of ownership from direct control of the corporation is terrible on its own terms. Furthermore, it further reinforces the claims of owners relative to other stakeholders in a corporation. This is an appalling decision the further erodes the rational for giving corporations limited liability. If they are going to have full control over the assets their liability should be unlimited as well. There is no reason for the government to give the most powerful people in society something for nothing. Especially something that gives these powerful individuals even more power relative to ordinary Americans.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-20079593838246372242014-06-14T19:22:00.001-07:002014-06-14T19:22:22.671-07:00Didn't Weber Already Cover this Ground Adequately?Just a little annoyed at the <a href="http://www.washingtonpost.com/local/david-brats-victory-is-part-of-broader-rise-of-religion-in-economics/2014/06/13/76491e06-f26c-11e3-bf76-447a5df6411f_story.html">Washington Post presenting the linking of religion and economic growth as some new thing</a>. <a href="http://en.wikipedia.org/wiki/The_Protestant_Ethic_and_the_Spirit_of_Capitalism">Weber covered this over 100 years ago</a>. While great writing and excellent for spurring thinking on how sociology, economics, and political economy all influence each other the underlying thesis didn't hold up to careful analysis. While this is an important topic in survey courses and something any generally educated person should know I don't really see how there is much of anything new worth saying on the topic.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com1tag:blogger.com,1999:blog-6052097781213973653.post-53689305134177819122014-05-11T17:55:00.004-07:002014-05-11T17:55:56.401-07:00Individualism and RacismI'm a bit late to this, but reading about <a href="http://www.lawyersgunsmoneyblog.com/2014/04/sotomayor-equality">Sotomayor's dissent</a> in the Supreme Court's recent case regarding affirmative action has gotten me to thinking about how racist the right wing version of individualism is.<br />
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Something that always strikes me in public discussion of race is how the right wing so often proposes policies that would have disparate impacts on individuals of different races, such as cutting funding for inner cities, or to hearken back a few decades, the midnight raids to make sure people receiving AFDC didn't have a man cohabiting with them. In some cases these policies and denials of racist motivations are undoubtedly dissembling by people who are really racists, like Cliven Bundy, who are rather more common than those on the right are willing to admit<b>. </b>However, I feel that more often the policies being made are based on a deep commitment to a rather extreme form of individualism. And it is this doctrine, rather than any particular animus towards other races, that is extremely racist.*<br />
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The strong reaction to accusations of racism by the right wing, and their insistence it is the left that is racist for recognizing race matters, results from the threat that the continued persistence of racism poses to their beliefs in individualism and meritocracy. After all, if race and the previous distribution of wealth didn't matter in outcomes why is the distribution of wealth, income, and status so uneven between racial groups? In writing about these issues conservatives are forced to navigate between a Scylla of denying individualism to admit that group matters in American life and a Charybdis of making blatantly racist remarks that are a direct consequence of their individualist philosophy.<br />
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We see two basic strategies used by conservatives to cope. One strategy is to say that American culture uniquely frees the individual from group concerns, only in American culture can individuals really act as individuals. Other cultures are in some way bad and hold individuals back. If anyone actually thinks about it these kinds of arguments are obviously self-refuting, the arguer has already acknowledged that culture matters which means that more than individual merit and effort matters for results in life. This should lead to thinking about American culture a bit and realizing that there are a rather large number of factors outside the individual that matter in life. Obviously this step is not often taken, though subgroups of conservatives, like the paleo-conservatives over at <a href="http://www.theamericanconservative.com/">The American Conservative</a>,** show that there is room for conservative philosophy to abandon unrealistic assumptions about individualism to use a more accurate and nuanced conceptualization of the human condition.<br />
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The second method relies on various strains of "academic" racism, such as <u>The Bell Curve</u>.*** The common thread in these rationalizations is that they seek to preserve the myth of the individual and meritocracy by arguing that other races in general are inferior on some significant measure of ability. These beliefs help protect a belief in individualism and meritocracy by claiming that while a lack of ability leads to statistically lower achievement, individuals of high ability from these groups are just as likely to succeed as individuals from other more advantaged groups. This explanation obviously cuts rather closer to the racial animus conception of racism and gets shouted down rapidly, but it is less problematic for ideological individualism than the cultural explanations.<br />
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The hard work of refuting these claims is well beyond the scope of this post, though famous studies which compare how likely someone with a distinctly black name is to be called back for a job relative to someone with a white name are sufficiently well known that I only need mention their existence. What I am hoping to make clear, however, is that in discussions of race, conservatives and liberals are often talking past one another. When conservatives are talking of individualism, liberals hear racism, and when liberals talk about race, conservatives hear attacks on individualism.<br />
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This isn't to say, however, that there is some sort of moral equivalence to both sides. The continued persistence of racism and its well established sociological components really are arguments against strong versions of individualism and meritocracy. Liberals should do more to attack this philosophy directly, it is the root source of much of the institutional racism in American society. The facts simply don't agree with the philosophy and we should be more direct with saying this, rather than tiptoeing around it because individualism and meritocracy have positive connotations in American society. Incorrect is incorrect, whether or not we moralize the incorrect belief.<br />
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* In applying the label racist to someone I feel this is a distinction without a difference. But if the intent is to debate the issue and win arguments in the general public sphere I think it is important to distinguish between simple racial animus and ideas with racist consequences.<br />
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** Not meant as saying I've never read anything that isn't somewhat racist over there, but it is not the kind of racism I am writing about here that originates in a strong philosophical commitment to ideological individualism. <br />
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*** See this post at<a href="http://noahpinionblog.blogspot.com/2014/05/academic-racism-has-kn-problem.html"> Noahpinion</a> for some recent discussion of academic racism, particularly follow the link to <a href="http://www.slate.com/articles/health_and_science/science/2014/05/troublesome_inheritance_critique_nicholas_wade_s_dated_assumptions_about.single.html">Gelman</a>. The only thing I really have to add is that if someone really wanted to look into this there should be the possibility of looking at genetically distinct subpopulations that are sociologically similar, such as variation between groups of African Americans which are genetically distinct. This may easily have been done, but what I have been exposed to on the topic is normally looking at sociologically distinct groups, whether black/white or groups like Ashkenazi Jews, which seems a rather backward way of investigating the relative weight of genetic and sociological factors.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-9688129519537589582014-04-27T16:53:00.002-07:002014-04-27T16:53:57.903-07:00Power Disparities in the Workplace: The Indignity of Background ChecksMy current job is switching me from a contract to a permanent position, part of this involves a thorough background check. Every time I go through one of these I am struck by how undignified the whole process is and how many employees have to go through this even though it has little bearing on their actual jobs. My particular case doesn't fit this, my position in the accounting department would present a number of opportunities to an unscrupulous individual.<br />
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However, reading over the fine print of the documents shows that they are not simply seeking targeted, job relevant information. Instead, the checks are very open ended and seek to gather as much information as possible. This is what I find disturbing, its a huge invasion of privacy. Yet, it seems that few privacy advocates seem inclined to take on this issue, all I ever hear about is attempts to curtail the governments information gathering, or in rare cases companies gathering information through the web, and never serious attempts to limit companies' ability to get potential employees to piss in a cup.<br />
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This dynamic represents one of the more obvious signs of the inequality between capital and labor in our economy. If we were all equal autonomous actors freely exchanging our labor for income then surely we would demand a large premium for this intrusion into our lives. Yet, coordination* among employers has rendered this individual negotiation impossible, mandatory background checks are a requirement of employment just about everywhere. Strangely enough, where they do begin to decline in frequency (but never really disappear) is at much higher levels in the economy where companies are even more vulnerable to a bad actor.<br />
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While this kind of dynamic doesn't impact me personal, beyond the indignity of it all, these practices do serve to keep labor down by creating a pool of individuals who find it difficult to compete on an equal footing for work due to having infractions that will show up on a criminal background or credit check. It would be far more equitable if employers were required to defend their background checks to only screen for items that would be directly job relevant, like drug abuse for a pharmaceutical company, theft or other property crimes for an accounting position, or serious violent crimes for any position. Yet, we see close to no pressure to force companies to restrict this practice, and certainly no pressure from individual level market participants who have no power to press their claims against employers who have an overwhelming advantage in forcing potential employees to acquiesce this invasive and undignified sacrifice of privacy.<br />
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<a name='more'></a>All that said, another issue related to this is that employers have very little information available to them to assess potential employees, which leaves them little choice but to use resources like invasive background checks because at least this information exists and isn't filtered through personal networks which are unlikely to be objective about an individual. References can't really say anything bad for fear of legal repercussions, resumes don't tell a whole lot beyond what jobs someone held before which have their own issues for assessing performance in a new role, and less traditional methods like getting information from the internet which have their own issues regarding representativeness of employee behavior in the workplace. It is interesting how few sources of information have been developed by the private sector which would provide information regarding employees; for the most part networks are used which presents huge issues for thinking about markets in terms of autonomous actors and efficiency maximizing firms. But these are issues for additional posts.<br /><br />
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*In the forms of norms and standard practices rather than conscious coordination.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-40326710028562145062014-04-18T09:33:00.002-07:002014-04-18T09:33:27.922-07:00Are Markets Better Described as Robust than Efficient?Something that I think all of us with private sector jobs experience in our day to day lives is just how incompetent a large number of private businesses are. These may be our customers, suppliers, or another division. Yet, somehow, these businesses thrive despite not really having a good grasp of basic administrative procedures, financing, or sometimes even customer service.<br />
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Despite this, we often write and speak of private sector actors as if they are brilliant and efficient individually, despite the experiences of our everyday lives.* We simply assume as a result of mere market success that a business or individual has ability and competence. This isn't surprising, the just world hypothesis is a powerful cognitive bias which leads us to believe that the system as a whole must be more just than what our individual experiences would lead us to conclude. However, there is no property of the market system which should lead to this belief.<br />
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What's more notable is how little this impacts how we think about the market system as a whole. After all, given an immortal, perfectly rational, and omniscient central planner even the worst designed communist system would work beautifully. What's remarkable about the market system is that it should lead to ever increasing levels of productivity and efficiency even if the individual actors are all completely incompetent. Competition and creative destruction should lead businesses to be ever better even if they only differ due to random variation alone.<br />
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Yet, somehow this doesn't seem to impact how we think and write about markets and how they reward people much at all. Instead we often read in the popular press views about how market success means that an individual or business possesses unusual ability or competence despite the dearth of well established causal links between market success and any particular ability or trait. Creative destruction works as more of an evolutionary system, simple selection will lead to new forms to suit the environment they're in without the need for any conscious planning.**<br />
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An example may help illustrate this. The need for a common computing platform caused the market to require that a single operating system would predominate. In the early years of innovation in the personal computer market a wide variety of operating systems developed, all with a business plan that was more or less plausible. It was inevitable, however, that only one of these would dominate the industry due to the structure of the market. Someone was going to make billions, and did, but the need for a common platform meant that this would have happened whether or not any of the competing platforms exhibited even the barest level of competence. In addition, once established the need for interoperability mean that structural factors dominate any actual characteristics of the competition.***<br />
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This makes me think that markets might be better described as robust rather than efficient. The incredible thing about markets is that even if all the individual actors are morons the systemic factors will still lead to good outcomes, unlike other forms of human organization. But somehow this doesn't break into popular discussions of markets at all, much less into discussions about how our market system is distributing the fruits of our labors. I'm not sufficiently well versed in economic literature to know whether or not someone has done work on this, but I'm very curious if anyone has tried.<br />
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*I don't mean to imply that all, or even many, private sector actors are incompetent. While there certainly are many extremely well run firms the striking thing is how many obviously incompetent ones there are at every level; though admittedly they become rather rare among the largest firms.<br />
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** Not that being able to foresee market shifts doesn't help a great deal, but someone will turn out a winner even if there is no possibility of judging which plan will be successful from information beforehand; in other words the success of an individual strategy in no way implies that this strategy was better than the ones that failed.<br />
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***I don't mean to say anything negative about Microsoft. But there is no way to judge from its success whether it had a better business plan than its rivals or if its success was simply the result of network effects among users. Determining causes would require a more fine grained analysis that takes into account what was knowable before the market drifted to favor it rather than working backwards from its present success.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com1tag:blogger.com,1999:blog-6052097781213973653.post-52144906319999446242014-04-01T17:21:00.001-07:002014-04-01T17:21:21.984-07:00Overhead Allocation vs. TheftI was reading<a href="http://www.cepr.net/index.php/blogs/beat-the-press/high-speed-trading-and-slow-witted-economic-policy?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29"> Dean Baker's excellent post</a> today on high speed trading. My initial reaction was that this was simply theft, high frequency traders supply absolutely no value to anyone but reduce the gains made by legitimate traders.<br />
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The first comment, however, made me think. SteveB asks "I don't understand how the tax solves the problem. Wouldn't it just increase the spread between buy and sell prices, and make the exchange even less efficient?"
This would be an instance where the government and private thieves are doing almost exactly the same thing. So why are they different?<br />
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An easy way to answer this is to compare what the government does to overhead. While the private thieves are simply skimming other peoples money a new government tax is more like a business adjusting how it applies overhead across its various business units. The new tax assigns more of society's cost to the trading sector while allocating the costs away from other productive activities.<br />
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While perhaps not the best way to describe government's role, the overhead analogy does bear a certain appeal for communicating government's role to the business minded. As organizations grow larger and more complex their direct costs tend to decline while overhead increases. A local mechanic shop is likely to have very high direct costs and low overhead compared to a company like Ford, yet Ford will be far more efficient despite so much of its costs accruing to overhead.<br />
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Something similar is happening as government's role expands. Modern society is vastly larger and more complicated than it was a few centuries ago. Modern businesses require employees with a much larger capital investment, does anyone think the graduates of a one room schoolhouse would be qualified for a Wall Street trading job? Modern capital markets are vastly more complex and trust between corporations requires a much more active oversight role today than it did in the past. I could go on ad nauseam, but the basic point is that modern businesses exist today only as a result of a large supply of social and institutional capital. Without this capital many would still exist but in a much smaller and less productive form.<br />
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So while a financial tax would result in a roughly similar decrease in profits accruing to the parties to the transaction this money would be going to indirectly support the activities of the traders. Resistance to these kinds of taxes are ultimately akin to a business unit arguing against the allocation of overhead assigned to it. While this can increase the book profitability of the unit, this often makes the enterprise as a whole less efficient since the individual unit is unlikely to have a full appreciation of the overall costs of the organization. This makes the organization as a whole less productive since costs are misallocated.<br />
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At an extreme, anti-tax fervor can be compared to a dirty salesman who asks for his project to be costed at "true"* cost and then goes ahead and sells at near list price, driving his margins and commissions way up by robbing the organization as a whole of the portion of cost allocated to overhead (many organizations have a sufficient level of control to prevent this from being done too blatantly, I don't think the 113th Congress is one of them).<br />
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Another point is that as more of our productivity results in overhead rather than direct cost it becomes increasingly easy for the egotistical and/or unscrupulous to argue that the increased productivity is the result of their efforts rather than from efficiencies stemming from an organization as a whole. This happens at both the national level and within organizations, with direct costs so low it also becomes more difficult to assign the overall productivity of an organization to individual members. Since Americans tend to be so individualistically oriented we are rarely satisfied with assigning results to the system, instead preferring to allocate costs and production to individual people; even when this is conceptually incomprehensible.<br />
<br />
*I've run into a few organizations where the salesmen assume that the marginal product cost is the true cost. It can be very hard to make these folks understand that overhead really matters.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0tag:blogger.com,1999:blog-6052097781213973653.post-55264121323313816522014-03-14T16:14:00.001-07:002014-03-16T19:03:40.184-07:00Stockholders are Fungible, Employees are NotThis has been on my mind after reading some review's of Piketty's "Capital in the 21st Century" (which I really need to make time to read). Paul Krugman's recent post on it made a major point gel for me when he observes that:<br />
<br />
<blockquote class="tr_bq">
How relevant is this story to what has happened so far? In the United
States, as Piketty himself stresses, soaring inequality has to date been
largely been driven by labor income – by “supermanagers” (I prefer
superexecutives.)</blockquote>
<br />
Something that I've been considering as I take management classes is that it seems that a well managed firm should end up developing a strong <i>espirit de corps</i> and a great deal of management loyalty in the company. Companies should end up with long term employees and management that will oppose stockholder efforts to extract revenue from the company instead of using it to serve employees. Psychological characteristics and organizational behavior should be leading companies to have an in group of employees opposed to the out group of stockholders.<br />
<br />
Yet, instead, we've seen labor share of income decline and record breaking profits. Despite the performance advantages of developing strong employee morale and loyalty companies seem prone to emphasizing staffing cuts and biased towards hiring more aggressive, less loyal employees to the expense of a strong corporate culture.<br />
<br />
A possible explanation is that stockholders recognize that strong employee cultures can be against their interests. This forces them to compensate top management extravagantly in order to encourage them to identify with stockholders instead of the corporation they run and to engage in business practices which weaken the corporation in the long run in favor of higher profits now.<br />
<br />
This tension ultimately results from the fact that there is no reason why the corporate entity should have any preference for what sort of capital funds it or who is providing it while there is a strong mutual identification amongst the employees of an organization. In turn, providers of capital have no reason to have a preference over which corporate entity receives their funds, with only some minor restrictions they can quickly and easily trade their stock for that of other corporations. Overcoming this difference in commitment requires capital to pay large bribes if it wants to extract wealth from companies. This also helps explain how common restructurings are despite a poor record of giving expected returns as well as a tendency for boards to hire in outsiders despite insiders with better knowledge of the company.<br />
<br />
Examples of this would be a number of managers that have been hired to break strong, successful corporate cultures which led to market dominance and stable performance but relatively weak returns to shareholders. HP and Carly Fiorina being the textbook example from my classes.<br />
<br />
[<a href="http://angrybearblog.com/2014/03/guest-post-stockholders-are-fungible-employees-are-not.html">Cross-posted at Angry Bear</a>] Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com2tag:blogger.com,1999:blog-6052097781213973653.post-91629402320524902112014-03-10T18:27:00.001-07:002014-03-10T18:27:15.627-07:00Failing to Distinguish the Public and Private SelfSomething that I find consistently frustrating about the American right's worldview is that they seem to always be defending powerful individual's rights to keep their public selves private while ignoring very real intrusions into individual's private selves. These particular thoughts are spurred by reading <a href="http://www.theamericanconservative.com/dreher/on-religious-liberty-america-is-becoming-illiberal/">Rod Dreher</a> and <a href="http://www.nationalreview.com/article/372984/cross-purposes-ramesh-ponnuru/page/0/1">Ramesh Ponnuru's</a> posts on religious freedom in the context of the veto of an Arizona bill touching on these topics by Governor Jan Brewer.<br />
<br />
The problem is that the right keeps trying to expand the individual to encompass businesses they own. The problem with this is that a business is not a dirty old pair of sneakers, it is instead a web of contracts with other human beings and organizations. It is essentially public in nature in a way that personal property is not.<br />
<br />
This should be obvious but for some reason it is lost on many people. Ponnuru mentions the Religious Freedom Restoration Act (RFRA), which from what I can tell is perfectly intact and doesn't really have anything to do with how businesses interact with their customers. He makes clear, however, that the Arizona bill tries to make the bill apply to businesses as well as individuals, so it's not really clear why he brings up the RFRA at all.<br />
<br />
I don't see how this is in any way OK. The right has been trying to push this for far too long with far too little opposition. The interests of the owners of Hobby Lobby or Chik Fil A are not the same as the interests of Hobby Lobby or Chik Fil A. Well functioning markets require that these distinctions remain intact, the owners of these companies should not have any rights to impose their beliefs on their employees, their employees enter into contracts with the organization and identify with the organization's goals, which are not the goals of their owners (even if they pencil it into a values statement, anyone with any experience with a business plan knows that values and missions are linked to what the company actually does, fluffing it up is just distracting and does nothing to change how the business is run).<br />
<br />
Whenever an individual forms a business as a separate entity they give up the right to treat their efforts as purely private in exchange for the rights and protections granted to a business entity and take upon themselves a public identity and its accompanying rights and obligations. There is no public interest, or philosophical justification, in further blurring these roles. We have already gone way to far in this direction in the United States and it should be opposed at every turn.<br />
<br />
What we should be concerned about is the power that we have granted these powerful organizations to invade the privacy of individual's private selves. While business owners are doing an excellent job obscuring their public selves from private view, for example individual tax returns have not been publicly viewable since 1926 (critical if we are going to really on individuals negotiating wages rather than unions, I feel this is a non-trivial element in modern income inequality), donor's identities to political campaigns are often obscured, and owners can hide their involvement in their company's lobbying efforts, they simultaneously have been incredibly successful in gaining access to information on individual's private lives the first two that come to mind are routine drug testing (this is such an incredibly demeaning practice that I continue to be shocked that it is still legal, where is the outrage?) and credit checks for potential employees (another outrageous practice that there is no good argument for, how can we possibly consider ourselves at liberty when we often have to give up this information to get a job?).<br />
<br />
<a name='more'></a><br /><br />
To address a specific one of Ponnuru's points, I hope these concerns make it clear why his assertion of "<em>The advance of gay rights has at best an ambiguous relationship to the older conception of liberty," </em>falls on deaf ears. I don't see this at all. The older conception of liberty is the idea that individuals have a voice in the decisions that concern them. Conservatives are always trying to to confine the discussion of liberty to a discussion of a single institution, the state. But it is clear if you actually read older works on liberty that these thinkers have a much more expansive conception of it. They are focused on the state simply because in their time private concentrations of power were largely broken up, without the modern corporate form private concentrations of power are necessarily limited. Early writers, like Adam Smith, make explicit mention that they see corporate entities, which in their day had to be authorized by a specific act of government, as a threat as well as part of the pernicious influence of the state. Since the 19th century, when laws were passed allowing the corporate form to be adopted without a specific act of government, the relation between the individual and non-state institutions has changed dramatically. To state the obvious, when single corporations give individuals power over 10s or 100s of thousands of their peers we are dealing with a different animal.<br />
<br />
So the advance of gay rights is ultimately not so different. While conservatives do their best to dig up cases of a sole-proprietorship suffering from these problems the real issue at hand is whether a business's rights and responsibilities are separate from their owners. Since both use essentially the same form of organization in our market economy* there is neither the means nor a reason to make a distinction between these smaller businesses and larger ones. Like other attempts to advance individual rights and protect liberty this is a case where individuals are being protected against institutional discrimination, there is no reason to give institutional discrimination a pass because it is a business rather than a government. While an individual can have religious beliefs and rights a business that is not formed for a particular religious purpose cannot meaningfully be said to have religious beliefs to be protected.<br />
<br />
This is what Conservatives fail to understand. The cause of liberty is about protecting the individual against the powerful, and particularly power imbedded in institutions. This is the root of the thinking behind the gay rights cause. If they understood this they would understand that while liberals will continue to try to curb the power of individuals like the owner of Hobby Lobby (I'm picking on Hobby Lobby since they were in the news fairly recently and I'm not going to pick on a small photography shop) to impose their beliefs on their employees and others while organizations like the Knights of Columbus are clearly religious in purpose and so would not be subject to the same sort of legislation.**<br />
<br />
<br />
*we aren't hearing cases of part-time wedding photographers claiming self employed income, these people simply wouldn't return a call like many of the vendors we have been trying to contact for our wedding, while it's hard to get details these appear to be formally incorporated businesses whose owners should have realized that they are assuming a set of rights and responsibilities that go with owning a business as opposed to simply being self-employed<br />
<br />
** From their respective web pages:<br />
<br />
Knights of Columbus: <br />
<br />
<blockquote class="tr_bq">
<strong>Charity</strong> - Our Catholic faith teaches us to “Love thy
neighbor as thyself.” Members of the Knights of Columbus show love for
their neighbors by conducting food drives and donating the food to local
soup kitchens and food pantries, by volunteering at Special Olympics,
and by supporting, both spiritually and materially, mothers who choose
life for their babies. Knights recognize that our mission, and our faith
in God, compels us to action. There is no better way to experience love
and compassion than by helping those in need, a call we answer every
day.</blockquote>
<br />
Hobby Lobby: <br />
<blockquote class="tr_bq">
At Hobby Lobby, we value our customers and employees and are committed to:
<br />
<ul>
<li>Honoring the Lord in all we do by operating the company in a manner consistent with biblical principles.</li>
<li>Offering our customers exceptional selection and value in the crafts and home decor market.</li>
<li>Serving our employees and their families by establishing a work
environment and company policies that build character, strengthen
individuals and nurture families.</li>
<li>Providing a return on the owner's investment, sharing the Lord's blessings with our employees, and investing in our community.</li>
</ul>
</blockquote>
<br />
It doesn't take a theology degree or deep study of liberal thought to see how these two things differ. Hobby Lobby seeks to "operate the company in a manner consistent with biblical principles." However, "offering our customers exceptional selection and value in the crafts and home decor market" doesn't flow from biblical principles the same way "the Knights of Columbus show love for
their neighbors by conducting food drives and donating the food to local
soup kitchens and food pantries, by volunteering at Special Olympics,
and by supporting, both spiritually and materially, mothers who choose
life for their babies," does. This shouldn't need to be explained and if conservatives understood the meaning of liberty and individual rights they wouldn't be so confused about what liberals were trying to do when they take on corporate overreach in protection of individual rights.Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com2tag:blogger.com,1999:blog-6052097781213973653.post-70238633457397048462014-03-02T14:12:00.000-08:002014-03-20T17:51:19.374-07:00American's Woke Up and Realized They are Getting Screwed. Envy Isn't the Emotion They're Expressing.<a href="http://www.nytimes.com/2014/03/02/opinion/sunday/the-downside-of-inciting-envy.html?hp&rref=opinion">Arthur Brooks has a column in today's NY Times that I take a bit of exception to</a>. In it, he makes the claim that envy is on the rise in America and that this is a problem.<br />
<br />
My central issue with this is that I believe that over the past 30 years institutional and cultural shifts have resulted in an increasing exploitation of the majority of society by those at the very top of the income scale. There is no other credible explanation for why these trends are so pronounced in the Anglo-Saxon countries, with the US an outlier among this group, and so much weaker in the rest of the developed world. While there is a small shift towards inequality that is occurring across all developed nations, probably largely the result of the vast increase in labor supply caused by the development of the third world, this international component is far smaller than the country specific shifts we have observed in the U.S., Canada, and Great Britain.<br />
<br />
However, Brooks mentions none of this, instead trying to frame it as if there is a cultural shift towards envy being caused by politicians "fomenting bitterness" and reduced mobility resulting from regulations, taxes, and a lack of school choice (never mind that this agenda doesn't well describe the policies of countries with greater mobility than us). He summarizes Alexis de Tocqueville, stating that:<br />
<br />
<blockquote class="tr_bq">
Alexis de Tocqueville phrased it a little differently, but his classic
19th-century text contains the same observation. Visiting from France,
he marveled at Americans’ ability to keep envy at bay, and to see
others’ successes as portents of good times for all.</blockquote>
It's been a long time since I've read de Tocqueville, but from what I remember of it his main explanation for American's attitude is that rich and poor alike share in all aspects of life. They meet and discuss the issues of the day at each other's homes and public entertainments, they recognize the mutual equality of each in politics, they live amongst each other and interact continuously in life's daily commerce, and the benefits and burdens of living in a civilized society are shared according to each individual's means and talents.<br />
<br />
This is not descriptive of modern America. Our rich do not brush up against their inferiors in every day life. Today, they have separate stores, separate clubs, and a diverse array of high brow entertainments unavailable to the working poor. Their children attend separate schools, they live in separate, wealthy suburbs, and network amongst each other, not their less affluent fellow citizens. Furthermore, they pour money into influencing their favored political candidates, violating the original Americans' compact amongst each other to have equal voice in the political sphere even when of unequal means.<br />
<br />
It isn't envy to realize that this is not de Tocqueville's America. If the rich want to maintain their wealth while dispelling envy the onus is on them to return to these roots. Live in Detroit instead of Grosse Pointe, send their kids to public schools instead of private schools, and shop at Walmart. Talk to the grocery store clerk about the most recent episode of Teen Mom and commiserate about the pot holes and bad public transit that each takes along the same commuting route. In short, live life amongst those of lesser means.<br />
<br />
<a name='more'></a>The major issue throughout is that Brooks attempts to make the claim that it is American's perceptions are changing without ever stopping to consider that their view might be accurate. He states that<br />
<br />
<blockquote class="tr_bq">
According to <a href="http://www.people-press.org/2014/01/23/most-see-inequality-growing-but-partisans-differ-over-solutions/">Pew</a>,
the percentage of Americans who feel that “most people who want to get
ahead” can do so through hard work has dropped by 14 points since about
2000. As recently as 2007, <a href="http://www.gallup.com/poll/166904/dissatisfied-income-wealth-distribution.aspx">Gallup</a>
found that 70 percent were satisfied with their opportunities to get
ahead by working hard; only 29 percent were dissatisfied. Today, that
gap has shrunk to 54 percent satisfied, and 45 percent dissatisfied. In
just a few years, we have gone from seeing our economy as a real
meritocracy to viewing it as something closer to a coin flip.<br />
<br />
How can we break the back of envy and rebuild the optimism that made America the marvel of the world? </blockquote>
<br />
Brook's makes his own suggestions, such as education and a larger EITC, but these aren't particularly compelling. First of all, education doesn't make any sense as a diagnosis. A PhD and post doc in a STEM field doesn't get someone into the 1% but require some of the rarest individual character traits and ability; not to mention making the greatest contributions to our quality of life. There is no evidence that superior skill acquisition has anything to do with widening inequality, and international comparisons are entirely inconsistent with this explanation. His suggestion of a better EITC, while not a bad idea, only really addresses the sliding position of the poorest while inequality is driven specifically by trends within the 1%, not between the lowest and top deciles.<br />
<br />
The second part of his conclusion is what really bugs me,<br />
<br />
<blockquote class="tr_bq">
<div class="story-body-text story-content" data-para-count="350" data-total-count="5226" itemprop="articleBody">
Second,
we must recognize that fomenting bitterness over income differences may
be powerful politics, but it injures our nation. We need aspirational
leaders willing to do the hard work of uniting Americans around an
optimistic vision in which anyone can earn his or her success. This will
never happen when we vilify the rich or give up on the poor.</div>
<div class="story-body-text story-content" data-para-count="129" data-total-count="5355" itemprop="articleBody">
Only
a shared, joyful mission of freedom, opportunity and enterprise for all
will cure us of envy and remind us who we truly are.</div>
</blockquote>
This does nothing but blame the victims. We don't have to blame the rich, inequality can be explained solely in institutional, cultural and other structural terms without blaming individuals. But we must deal with these root causes, it's not about positive visions but about concrete reforms to counterbalance, and, where possible, change, the structural forces leading to inequality.<br />
<br />
While structural issues are the best fit to the evidence for a cause, it doesn't help that the rich have been acting abominably. There are efforts in almost every major metropolitan area to keep the tax bases of small suburban enclaves that the rich live in distinct from the greater metro area thus robbing cities of the tax base they need to support good schools and transportation that would benefit everyone. There is almost no communication between the classes outside of the command and control relationships in the workplace. Politically, money is dominating the issues on the agenda to an ever greater extent.<br />
<br />
To be blunt, I don't see how it is possible to construct a narrative that blames envy and the poor with the rich behaving as they are. It is not envy to realize you're getting screwed and taking exception to it. The real problem is not that American's have lost their optimism but that the reality their optimism was based on has disappeared. Policies implemented back in the 70s and 80s have led to real differences in Americans' ability to get ahead and how the product of our amazingly productive country is allocated. It was only a matter of time before attitudes shifted to match a changed reality. A scam can only continue so long until people wise up to it. If we want to get rid of envy the powerful need to stop screwing over the weak, no leader can simply cajole people into laying down and taking it forever; which is what Brooks seems to want.<br />
<br />
[Edited for clarity] Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com1tag:blogger.com,1999:blog-6052097781213973653.post-86686763376769960252014-02-23T10:01:00.002-08:002014-02-23T10:01:43.608-08:00Heritability of Personal Characteristics Does Not Imply Heritability of Social Characteristics<a href="http://nyti.ms/1fmmDXQ">Gregory Clark has a very interesting article in the NY Times regarding research he has conducted tracking surnames and high status occupations</a>. I recommend reading it.<br />
<br />
However, while the data presented is fascinating I find the conclusions he draws highly questionable.<br />
<br />
For example he writes that:<br />
<blockquote class="tr_bq">
<br />
The notion of genetic transmission of “social competence” — some
mysterious mix of drive and ability — may unsettle us. But studies of
adoption, in some ways the most dramatic of social interventions,
support this view. A number of studies of adopted children in the United
States and Nordic countries show convincingly that their life chances
are more strongly predicted from their biological parents than their
adoptive families. In America, for example, the I.Q. of adopted children
correlates with their adoptive parents’ when they are young, but the
correlation is close to zero by adulthood. There is a low correlation
between the incomes and educational attainment of adopted children and
those of their adoptive parents.</blockquote>
Then goes on to say that:<br />
<br />
<blockquote class="tr_bq">
<div class="story-body-text">
These studies, along with studies of
correlations across various types of siblings (identical twins,
fraternal twins, half siblings) suggest that genetics is the main
carrier of social status.</div>
<div class="story-body-text">
If we are right that nature predominates over
nurture, and explains the low rate of social mobility, is that
inherently a tragedy? It depends on your point of view.</div>
</blockquote>
I have to confess that I'm not as familiar with studies showing correlations between children's incomes and their adoptive parents, what little I have read does seem to indicate the correlation is much stronger than it is with IQ making this assertion questionable.<br />
<br />
The real problem, however, has to do with the vastly different timing of reversion to the mean in IQ and social status. Dr. Clark is writing about reversion to the mean taking 15 or more generations. However, reversion to the mean with IQ only takes a couple of generations. <a href="http://isteve.blogspot.com/2013/01/regression-toward-mean-and-iq.html">I found this blog post by Steve Sailer illustrating this</a>, I'm not really familiar with the blog so can't vouch for the source but it is consistent with what I know from more formal reading:<br />
<br />
<blockquote class="tr_bq">
The speed of the regression to the mean.</blockquote>
<blockquote class="tr_bq">
If one starts with two parents whose IQs are 160 and looks at the
average IQs across generations the speed of the regression to the mean
is quite fast.<br />
<br />
Parents 160, 160<br />
Children average 136 (assume these mate with a 136)<br />
Grandchildren average 122 (assume these mate with a 122)<br />
Greatgrandchildren average 113 (assume these mate with a 113)</blockquote>
How can genetic reversion to the mean explain the very slow social reversion to the mean? There is almost an order of magnitude difference in speed (2 generations vs 10 - 15).<br />
<br />
Furthermore, while IQ studies tend to show high correlations between IQ and job performance the correlation between IQ and social status or income is much lower. The data certainly hint that social outcomes are the result of something other than merit and it stands to reason that something other than genetic heritability of merit is at work. Of course, there could be a strong genetic component that is not linked with ability, it is pretty well established that people tend to like and hire people more like themselves so it may be that non-performance related characteristics are being selected for and leading to unequal social outcomes. But the implications of this are very different than if elite selection is based on performance related personal characteristics.<br />
<br />
<br />
<a name='more'></a>To mention another major issue, personal characteristics associated with success have changed radically over the past 300 - 450 years. In the 18th century membership in the elite meant living a life of leisure. Only little people worked and commercial striving was considered crass. Attitudes like this persisted into the next century. How is it that a society which selected for vastly different personal characteristics would result in a better genetic profile for their heirs in the modern world?<br />
<br />
The question remains valid over shorter time frames. The kinds of work that are most remunerative have changed a great deal over only the past century. We associate very different characteristics with success than our great grandparents. How can selection pressures for a different set of traits result in the traits being selected for today being more prevalent in high status families?<br />
<br />
While Clark's research is fascinating I just don't find the conclusions he tries to draw from it convincing. There are much easier links to be drawn from social power to outcomes than from social power to genetics to outcomes. Over the long time period written about reversion to the mean in status can be adequately explained by the existence of individuals with below average competence.* There is no strong grounds to assert that this heritability of status has anything to do with the heritability of ability; these are concepts that can remain distinct and the evidence I'm aware of, at least, is more consistent with separate heritability than joint heritability.<br />
<br />
<br />
*Explanations involving social power are attempting to explain why individuals of moderate ability manage to gain and maintain power while individuals of high, but not exceptional, ability do not. They do not claim that individuals of low or no ability can gain positions of high power and influence. While this can happen under some regimes, like primogeniture in the middle ages in some countries, the normal state for societies is to have mechanisms to week out individuals with exceptionally little ability while maintaining the position of individuals with average or better endowments. Tzimiskeshttp://www.blogger.com/profile/13002441291627298737noreply@blogger.com0