I'm a bit late to this, but reading about Sotomayor's dissent 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.
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. 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.*
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.
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 The American Conservative,** 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.
The second method relies on various strains of "academic" racism, such as The Bell Curve.*** 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.
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.
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.
* 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.
** 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.
*** See this post at Noahpinion for some recent discussion of academic racism, particularly follow the link to Gelman. 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.
Sunday, May 11, 2014
Sunday, April 27, 2014
Power Disparities in the Workplace: The Indignity of Background Checks
My 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.
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.
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.
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.
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.
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.
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.
Friday, April 18, 2014
Are 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.
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.
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.
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.**
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.***
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.
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.
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.
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.**
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.***
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.
Tuesday, April 1, 2014
Overhead Allocation vs. Theft
I was reading Dean Baker's excellent post 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.
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?
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.
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.
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.
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.
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).
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.
*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.
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?
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.
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.
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.
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.
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).
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.
*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.
Friday, March 14, 2014
Stockholders are Fungible, Employees are Not
This 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:
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 espirit de corps 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.
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.
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.
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.
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.
[Cross-posted at Angry Bear]
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.)
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 espirit de corps 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.
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.
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.
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.
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.
[Cross-posted at Angry Bear]
Monday, March 10, 2014
Failing to Distinguish the Public and Private Self
Something 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 Rod Dreher and Ramesh Ponnuru's posts on religious freedom in the context of the veto of an Arizona bill touching on these topics by Governor Jan Brewer.
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.
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.
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).
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.
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?).
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.
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.
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).
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.
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?).
Sunday, March 2, 2014
American's Woke Up and Realized They are Getting Screwed. Envy Isn't the Emotion They're Expressing.
Arthur Brooks has a column in today's NY Times that I take a bit of exception to. In it, he makes the claim that envy is on the rise in America and that this is a problem.
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.
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:
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.
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.
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.
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:
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.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.
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.
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.
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