The “Do Something!” Chorus

Charles PierceCharlie Pierce wrote an excellent article on Friday, Drums Along The Potomac: How This Country Never Learns Anything. In it, he reminded me that, “Rudy Giuliani is only the most garish member of the rising chorus.” His claim that Obama doesn’t love America was about the fact that Obama isn’t standing up and shouting about a clash of civilizations. I was reminded of it recently in a conversation with my father. He’s very frustrated about the Islamic State. How can we allow these barbarians to do “this.” What “this” means is the very public executions — most especially the burning alive of Muath al-Kasasbeh.

But it’s curious, because “those people” who we are supposed to have a class of civilization include Muath al-Kasasbeh. And as I’ve noted before, a big war with the Islamic State is not going to do much to help the people who we are supposed to be helping. And ultimately, what is it that the Islamic State is doing? Their biggest crimes are against the people who are living under them. But we in the west could hardly care less about them. It is the totally unjust and horrific snuff videos that the Islamic State puts out that has everyone in a tizzy.

Rudy GiulianiThe purpose of these very public horrific acts is to get us to act like teenage boys right before the big game. It’s all testosterone and no rationality. Is bombing more Islamic State targets going to make the public executions stop? Is a ground invasion? Is more pointed rhetoric about Islamic extremism? What is it that the conservatives want us to do that will actually make the situation better? The answer, of course, is nothing. The conservatives and — let’s face it — most of the liberals just want us to do something. It is the American way: it is better to do something useless or counterproductive than it is to do nothing.

But this one really isn’t that hard. How is it that the Islamic State has managed to take control of so much territory in Iraq? Well, to be honest, the Islamic State doesn’t control that much territory, and the territory they control isn’t all that great. But they have substantial control and the reason that they have it is that we decided to destabilize an imperfect but stable situation in Iraq twelve years ago. We got rid of the largely neutered Saddam Hussein and put in charge a Shiite government that has treated the Sunni population really badly. So what’s the plan this time? How are we going to screw up Iraq this time?

John McCainRight now, Libya is a mess because again, we thought it would be a good idea to go in and get rid of a despot. Yeah, I don’t like despots. I don’t like the Islamic State. I really don’t like these public executions. And I’m not against doing something. But the same people who felt we just had to “do something” in Iraq at the end of 2002 are the people who are telling us we must “do something” today. And my question is, “To what end?” We aren’t going to roll into Iraq, defeat the Islamic State and then everything will be fine.

As it is, our greatest potential ally in the region is Iran. But we can hardly even talk to Iran because of the Iranian Revolution — Which we were ultimately culpable for! — which happened almost forty years ago. This is the state of our foreign policy — the state of our intellectual maturity. People like Rudy Giuliani and John McCain don’t want to solve a problem; they want to have that great feeling when you let loose on someone who really deserves it. But most people know that while telling the boss to shove it might be very satisfying for a minute or two, it is a really bad idea.

So what good would be done by any of these conservatives ideas? I haven’t heard anything that makes me think that they would not lead to yet another crisis that would have the same group calling yet again for us to, “Do something!”

Larry Summers on How to Fight Income Inequality

Larry SummersWhat we need is more demand and that goes to short run cyclical policy, more generally to how we operate macroeconomic policy, and the enormous importance of having tighter labor markets, so that firms have an incentive to reach for worker, rather than workers having to reach for firms…

I think that the broad empowerment of labor in a world where an increasing part of the economy is generating income that has a kind of rent aspect to it, the question of who’s going to share in it becomes very large. One of the puzzles of our economy today is that on the one hand, we have record low real interest rates that are expected to be record low for 30 years if you look at the index bond market. And on the other hand, we have record high profits. And you tend to think record high profits would mean record high returns to capital, would also mean really high interest rates. And what we actually have is really low real interest rates. The way to think about that is there’s a lot of rents in what we’re calling profits that don’t really represent a return to investment, but represent a rent.

The question then is who’s going to get those rents? Which goes to the minimum wage, goes to the power of union, goes through the presence of profit sharing, goes to the length of patents and a variety of other government policies that confer rents and then when those are received, goes to the question of how progressive the tax and transfer system is. That has got to be a very, very large part of the picture…

If we had the income distribution in the United States that we did in 1979, the top 1% would have $1 trillion less today, and the bottom 80% would have $1 trillion more. That works out to about $700,000 a family for the top 1%, and about $11,000 a year for a family in the bottom 80%.

That’s a trillion dollars. I don’t know what the number is, but my guess is that the total cost of the Earned Income Tax Credit is $50 billion. Nobody’s got on the policy agenda doubling the Earned Income Tax Credit. The big, aggressive agendas are probably to increase it by a third or a half. So, I’m all for it, but we are talking about 2.5% of the redistribution that has taken place. So, you have to be looking for things and there’s no one thing that is going to do it. My reading of the evidence, it’s a fairly general evidence, is that while there may be some elasticity, the elasticity around the current level of the minimum wage is very low.[1]

—Larry Summers
The One Where Larry Summers Demolished the Robots and Skills Arguments

[1] What this means is that raising (or lowering) the minimum wage will have very little effect on the demand for labor. Thus, contrary to what all conservatives “know,” raising the minimum wage is not going to cost jobs, and lowering (or eliminating) it is not going to create jobs.

What the Three Little Pigs Should Fear

Three Little Pigs - 1933I was thinking back on the story, Three Little Pigs. Apparently, in the original story — dating to the 1840s — the wolf eats both the pigs in the substandard houses only to be boiled to death by the brick house building pig. But that isn’t the story that I heard growing up. For people of my generation, the story was probably based upon the 1933 Silly Symphony “Three Little Pigs.” In this telling, the pigs escape and eventually make it to the brick house. And the wolf only gets scalded and runs away.

Here is the whole cartoon:

In 1942, Merrie Melodies did a parody of it, “Pigs in a Polka.” And we got roughly the same thing:

The Merrie Melodies does not go in for the over moralizing of the Silly Symphony version. But clearly, Three Little Pigs is a fable and so is supposed to teach some moral lesson. And that lesson is that one should work hard else she will end up eaten by a wolf. It’s the kind of folk wisdom that Americans have learned a good deal too well. Americans work far too much, and it is a problem.

But I’m struck by the modern incarnation of the tale. Because it shows the power of social bonds. If the three pigs had been John Galt types who didn’t have any connections to other people, two of the pigs would be dead, as they were in the original telling of the story. In fact, even if the two shortsighted little pigs had gotten away, it isn’t clear that the John Galt pig in his brick house would have taken pity on the them.

The original story actually teaches at least one moral that is absolutely false: that we are alone in the world. Despite the ridiculous conservative idea of the rugged individualist, humans would have gone extinct long ago if they did not work in collectives. And this is why in natural economies — as opposed to the ones where power is wielded to create excessive inequality — one doesn’t see straw, stick, and brick houses right next together. But I remember very clearly taking the train from Hong Kong to Guangzhou and seeing people living in houses built of rotting wood and tarp within a mile of people living in skyscraper penthouses of a quality un-excelled in the world. So the modern world has allowed us to create a kind of Three Little Pig scenario.

Perhaps the biggest problem with the fable is the idea that the houses people choose to live in are based upon how hard they are willing to work. In the original Silly Symphony telling, the first pig chooses a straw house so he’ll have more time to play his flute. The second pig chooses a stick house so he’ll have more time to play his fiddle. But given that houses are a one time investment and the third pig has plenty of time to play his piano when his brick house is built, the story doesn’t speak to anyone’s moral character. It is just that the first two pigs are silly for the purpose of the plot.

Similarly, in an earthquake, the straw and stick houses are far superior to the brick one. So the implication is that what matters is not the result of the house but the amount of work that it takes. As I noted earlier, this is the American mentality. There is no time, as there is in the fable, for the pigs to finish their work and play their instruments. In this regard, the third pig is the least believable because he would never finish his house; he would just make it bigger and stronger and never have time to play that piano.

In the Silly Symphony version of the tale, the first two pigs never do learn their lesson. They take no part in getting rid of the wolf and are still hiding under the bed when the third pig knocks on the piano making them think the wolf is back. In the Merrie Melodies version, there is more of an equal outcome for the pigs — but still the first two pigs are silly. But in both cases, the silly pigs are safe because of the the care of the wiser pig. That is ultimately what we ought to learn from the story: we have to take care of each other. All the other lessons are either untrue (that we are alone) or obvious (that hard work has rewards).

Ultimately, we needn’t be afraid of the big bad wolf. We need to be afraid of being alone. And we live in a society that fetishizes the idea that aloneness is the natural state. Working alone, we can’t do much. Working together, we went to the moon.

Robots Are Not the Problem — at Least Right Now

Mike KonczalThe always great Mike Konczal over at Next New Deal told us, The One Where Larry Summers Demolished the Robots and Skills Arguments. If you’ve been following my economic writing for the last couple of years (And really, why would you?) then you know that I have very mixed feelings about this. But first I should point out that there are two issues here, not one. So let me start with the “skills” issue because it is so stupid and evil, there really is no need for nuance.

The skills argument goes something like this: the reason that people don’t have jobs is that they just don’t have the skills that the modern economy needs. First of all, this just isn’t true. I know all kinds of smart, technologically sophistocated, and well educated people who are struggling in this economy. Just to name one: perhaps the most brilliant engineer I’ve ever worked with — and I’ve worked with a lot of great ones — is struggling as a “independent contractor” at Cisco with relatively low pay and pretty crummy benefits. It just isn’t the case that the people with the right skills are cleaning up as would be the case if the “skills” argument were true.

The skills argument was also made during the Great Depression. Yet when World War II came, suddenly people had the skills that were necessary. Now it is certainly true that modern corporations don’t want to have to do even the slightest amount of training because they’ve gotten used to the government and the workers themselves doing all of that at their own costs. But mostly, the “skills” argument is just an excuse for companies not hiring. It is a way to push the problem into the future: make workers go into debt while they spend years getting the supposedly marketable skills, only to find themselves just as unemployable. It’s not only disingenuous, it is cruel.

What surprised me in Konczal’s article was this sentence, “There’s been a small, but influential, hysteria surrounding the idea is that a huge wave of automation, technology and skills have lead to a massive structural change in the economy since 2010.” I have my concerns about automation, as I discussed in, Robots, Patents, and Inequality. But it is outrageous to suggest that any issues are recent and even more to say that our current economic slump is due to robots and not, you know, the bursting of the housing bubble. What’s more, as Ha-Joon Chang has noted in the past, “The washing machine has changed the world more than the internet has.”

The problem I see regarding any improvements in technology is the way that the rich have been able to game the economic and political system so that they can keep all the productivity increases as a result of this. This is a large part of the story of the total lack of economic gains for workers over the past four decades. But clearly, this is not a question of the technology itself. It is part of political dysfunction. Technology is not changing any faster today than it was fifty years ago. But strong labor unions, social norms, and many other things made sure that workers saw their lives improve at that time.

There is another issue that is related to this, but which isn’t currently a big problem. It is the “CD effect.” It is the way in which technology can allow a small group of people to capture a much larger share of the market. So whereas without CDs, many solo violinists could be employed, it is only necessary for one to be employed. Now this doesn’t happen in exactly this way, and the economics of it is actually fairly complicated. But I think we need to free ourselves of this philosophy that claims that whatever the “natural” market value of someone is is also what they are worth. This is an argument that Greg Mankiw likes to make. It may be true in the land of Ayn Rand utopias, but in the real world, it is a very bad thing. It leads to economic monocultures that are unstable and certainly not nutritious for those in the economy.

So yes, I admit, our economic problems are not robots and other technologies. But our insistence at looking at the economy in a fundamentally conservative way makes the effects of technology bad for the economy, when it ought to be great for it. Technology is not the culprit. But we are allowing the power elite to manipulate society to use technology against us.

My Favorite Philosopher Arthur Schopenhauer

Arthur SchopenhauerOn this day in 1788, the great philosopher Arthur Schopenhauer was born. He is undoubtedly my favorite philosopher. Not surprisingly, he was a proponent of philosophical pessimism, which is “a worldview or ethic that seeks to face up to the distasteful realities of the world and eliminate irrational hopes and expectations.” I think that puts rather too rosy a gloss on what Schopenhauer wrote. I don’t actually accept his idea in The World as Will and Representation, but I nonetheless think he is onto something profound. The will is what keeps us living even though life is nothing so much as a sequence of painful events. As Wikipedia describes the will as it applies to ontology, “Schopenhauer presents a pessimistic picture on which unfulfilled desires are painful, and pleasure is merely the sensation experienced at the instant one such pain is removed. However, most desires are never fulfilled, and those that are fulfilled are instantly replaced by more unfulfilled ones.” On the other hand, if you look at those photos of him as an old man, I think you can tell that he saw humor in the absurdities of life. Ultimately, I think that is our only hope. Because life does not make sense and continuing through all of this pain makes no sense. If it gets better, it will only be temporary.

But it isn’t actually the pessimism that I find most interesting about Schopenhauer. Rather, it is his thoughts on mysticism and Buddhism — which I share. Above all is the idea that we are not at base rational beings. Continuing to live is not a rational choice. It is a fundamental aspect of the universe. On the Origin of Species was published less than a year before Schopenhauer’s death. It explains, as a practical matter, why it is that the will must supersede the intellect. This doesn’t, however, remove the ontological question: why do species evolve in this way? Certainly, one could be evolve in such a way that life would be a rational choice. Or one could if it were not for the eternal will constantly empowering itself through the fact of existence. This is roughly how I think Schopenhauer would have reacted to Darwin’s work.

Here is an introduction to Schopenhauer that was part of The Giants of Philosophy series. Narrated by Charlton Heston, it isn’t a bad overview of his life and work. Or at least, I think it isn’t. I listened to it a long time ago:

Happy birthday Arthur Schopenhauer!