The Rich Know Less Than You Do

Peter SchiffLast night on The Daily Show, Samantha Bee did a segment on the minimum wage. In it, she talked to investment banker Peter Schiff. He perfectly captures the essence of the patient aristocrat explaining the way the world works to the silly commoner. You could almost hear him sigh as he laid out the conservative narrative against the minimum wage, “There’s a law in economics—supply and demand—that’s something that you learn in Econ 101. If you increase the price of something you decrease the demand. And wages, that’s the price of labor. The higher you make the minimum wage, the more jobs are going to be destroyed.” You see, it’s a law! Except, it isn’t. Our economy is far more complex than that. The actual data indicate that it would at most cause minor job losses and at best create jobs.

Schiff goes on to imply that if you doubled the minimum wage, it would double the price of a hamburger. In the past, I would just pass off what he says to his keen desire to believe the fairy tales that support his ideology. But more and more I think the real problem is that rich people just aren’t that smart. Or maybe it is more accurate to say that they don’t think deeply about these issues. They grab onto a very simplistic narrative that happens to tell them that they deserve their $70 million net worth, and that is the end of their thinking.

Matt Yglesias wrote a great article following on the stupid Tom Perkins letter to The Wall Street Journal, Stop Listening to Rich People. He says:

But the larger issue here is simply that the letter is extraordinarily stupid. Its author, successful as he was in business, was still perfectly capable of writing an extremely stupid letter to the editor. The political and historical analysis contained in the letter is stupid. But beyond that, the idea of publishing it was stupid. Anyone with the slightest sense of public opinion would recognize that the analogy is offensive and counterproductive. There is simply no viewpoint on economics or American politics from which writing this letter was anything other than stupid. And yet Tom Perkins, a very successful businessman and co-founder of one of the most important VC firms in the world, went and wrote it anyway…

Every once in a while a Perkins comes along and says something so egregiously dumb as to be mocked by everyone. But it’s not the egregious idiots who do the damage; it’s the excessive deference paid to the unremarkable mediocrities. But the next time the elite get together to discuss the affairs of state, keep Tom Perkins and his ridiculous analogy in mind.

The deference is the killer. There’s an interesting contrast. Hollywood stars also have opinions on policy. And they get a certain level of attention paid to them. But Obama never meets with them to discuss policy. And the funny thing is that since actors know that they are not experts, they are more likely to know what they’re talking about than are business people. Otherwise, there is no more reason to think a businessman would have insights into policy than an actor or, for that matter, grocery clerk.

I’m not saying that successful business people are stupid. But in my experience, they are rarely brilliant. In business, I think an over-abundance of brains can be a distinct liability. It makes a person less decisive and more easily bored. But let’s face it: economics isn’t that hard. It is not beyond any of these people to understand that the labor market is a monopsony and so simple ideas about supply and demand just aren’t valid.

But if I were drowning in cash, I might not care either. I might just latch onto any convenient theory that said that I was great because I was rich and the poor sucked. All of that is to say that I might have a much worse understanding of the macroeconomy than I do now. But if I were rich, people would listen to me and think I made sense, even though my ideas would be worse. We really are a culture in crisis and Peter Schiff (Who is pushing gold!) is a symptom.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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