Via Metro Hussein Jerry:

Well, it’s President’s Day. But according to the federal government, it isn’t; it is instead Washington’s Birthday. I don’t especially like that. The best thing you can say about our first president is that he wasn’t ambitious. Many people (most notably John Adams) wanted to form a native aristocracy. Luckily, we didn’t get that explicitly in our politics, but we certainly got it implicitly in our society generally. So maybe the country should celebrate Washington, but you will forgive me if I don’t.

Washington is generally considered our richest president (but wait a few years and I’m sure that this will change as income inequality gets ever worse). Like almost all rich people everywhere, he was not rich through work but through owning. And in his case, what he owned were human beings. For 200 years, people have been trying to make out that Washington was against slavery. This is almost entirely by cherry picking statements he made. Any non-psychopath who is doing something evil will occasionally have bouts of moralizing.

What’s more, Washington never seemed to have any problems with slavery as long as his slave population was young and profitable. As they got older, they were less profitable. So as Washington started have economic problems with his slave population, his moral reasoning kicked in. “These slaves are costing me money… And you know, slavery is wrong!” And just look at his slave holding. He started at the age of 11 with ten slaves. And he actively acquired them as he got older, ending with 317.

According to a review of Joseph J Ellis’ His Excellency: George Washington, “He concluded that slavery was economically inefficient and that people who were compelled to work would never work hard.” You can just imagine the scene. Washington is looking out the window of his mansion sipping tea. He sees the slaves working in the tobacco fields and thinks, “If only those slaves worked harder, slavery would be a whole lot more morally defensible!”

When Washington was president, he wanted to bring some slaves to work from him at the President’s House in Philadelphia. The problem was that if a slave was in the state for more than six months, he was automatically freed. So Washington just cycled the slaves so they never spent six month continuously at the President’s House. What a great guy, huh?!

One slave working at the President’s House, Oney Judge, escaped. That didn’t please the Washingtons. They spent years trying to steal her back. In The Pennsylvania Gazette advertisement of reward for her capture, they mentioned that they didn’t know what she was wearing. This was true, “As there was no suspicion of her going off, nor no provocation to do so, it is not easy to conjecture whither she has gone, or fully, what her design is…” Yeah, what could have caused her to escape?!

The Washingtons never got Judge back. She died in New Hampshire at the age of 75—older than either of the Washingtons. George Washington did free his slaves in his will. So that’s something. But it is interesting that Judge was one of the Washingtons’ dower slaves who ultimately belonged to the Custis Estate. So she would never have been freed.

Afterword

If Washington had wanted to free the dower slaves (there were 154 at the time of his death), he could have brought them to Pennsylvania for six months. Of course, that would have required him to lose some of his wealth while he was alive. Anyway, they were all getting such a great deal being one of his slaves. All that “hardly working” and free room and board! When you look at it properly, George Washington was doing a great service to his slaves. And I’m sure he thought that most of the time.

Well, Greg Mankiw is out with a great big pile of income inequality apologetics in The New York Times, Yes, the Wealthy Can Be Deserving. His article in a nutshell: superstar actors make more today than they did 50 years ago because they are worth it. Matt Yglesias‘ reaction to this argument is exactly the same as mine. He concludes, “It’s true—times change in ways that are disproportionately beneficial to some people. But that’s not a strong case for believing that whatever distribution of economic resources happens to emerge at any given time is optimal.”

Mankiw uses Robert Downey Jr as an example, so I’ll go along with it. It is true that more people have seen Downey in Iron Man 3 than saw Cary Grant in His Girl Friday. But the extra audience is due to changes in the economy and technology. These are social goods that have nothing whatsoever to do with Robert Downey Jr’s charm and acting ability. Why is he paid more? It’s quite simple: he’s lucky. The way the economy is set up either over-rewards him or under-rewarded Grant. What this means is that a given economic system under different conditions does not reward the same individuals the same. Thus, it must be unfair under some conditions and Mankiw’s argument doesn’t even acknowledge this, much less address it.

Mankiw is up to his usual tricks as well. Rather than looking at total taxes paid by people, he looks at federal taxes, which are the most progressive. This is unconscionable. What is he, an academic economist or a political operative for the Republican Party? Well, we all know the answer to that! He also makes some very questionable assumptions about Downey’s worth based upon the gross receipts of Marvel’s the Avengers. I cannot say whether he is just ignorant of the way actual businesses run (very common among conservatives) or he is, as is often the case, just being disingenuous.

There is a underlying problem with Mankiw’s big thesis that these huge salaries make us all richer: it isn’t true. In 1980, one could reasonably make that argument. But the last four decades have shown that as the top has done better, the middle and bottom have at best stayed even. I hate that people like Mankiw continue to argue this nonsense. If they want to go all Ayn Rand and say that it is tyranny to take a penny away from the rich, that’s fine with me. That’s their opinion. But this argument that income inequality is better for everyone doesn’t hold up. Of course, I know why they keep using it. It may be wrong, but it plays a hell of a lot better than the one about the poor oppressed rich.

This is not the first time that Mankiw has made this argument. Last June I wrote about another article where he highlighted Steve Jobs, J K Rowling, and Steven Spielberg. It’s shameful that he brings up these kinds of examples. All of the important work these people did was as workers, but who he’s defending are primarily owners. He does tip his hat to corruption, but only to say that people like Madoff should be thrown in jail. But as I’m sure Mankiw knows, that’s the exception. When people like James Dimon rob, cheat, and steal, they get bonuses.

I am so sick of reading Mankiw. It seems a couple of times each year, he will come out with another adult fairy tale, explaining to all of us idiots that we just don’t understand economics. And it’s so simple: if you encourage the job creators (You know, people like Robert Downey Jr!) fairy dust will be sprinkled throughout the economy, trickling down on all the rest of us. I think trickle is the wrong word, but what we get from Mankiw is treacle.

Update (15 February 2014)

I can’t believe I forgot to bring this up. As I discussed this morning, even as star salaries are higher than ever, the wages of establish actors have gone down. So even in Mankiw’s own example, we can see as a practical matter, Robert Downey Jr’s $50 million paycheck is not making everyone else richer by bringing more people into the theaters. (Of course, it isn’t Downey who’s bring them in.)

Update (16 February 2014 9:29 am)

Paul Krugman takes Mankiw to task. I particularly liked this:

In other words, Mankiw is being disingenuous.

Update (16 February 2014 9:42 am)

Dean Baker does a much more thorough job with Markiw. He starts by noting that Downey’s huge paycheck is only partly the result of technology; another part is the stricter enforcement of copyright. His larger point is that the current system that we have is a choice. It is not at all the most efficient or fairest. As he concludes, “If the 1 percent are able to extract vast sums from the economy it is because we have structured the economy for this purpose. It could easily be structured differently, but the 1 percent and its defenders aren’t interested in changing things.” You should read the whole thing, but here is a taste:

There is this thing in economics called Marginal Productivity Theory. It claims to show that in a world of perfect competition, everyone makes exactly what they are worth. So if a CEO makes $30 million per year, that must be because he adds $30 million per year to the economy. It doesn’t really matter whether the theory is true, of course. There is no such thing as perfect competition in the world. This is something that constantly amazes me. Physicists deal with idealized systems because it is often the case that real world systems can be approximated that way, or controlled to be that way. But economics, which is a social—and therefore, practical—science has many practitioners who make the most ridiculous assumptions about the state of the world.

I came upon Marginal Productivity Theory because I’m trying to get my head around what I think is a fundamental flaw with a pure capitalist system. What I have seen all the way through my working life is that even on its own terms, people do not get paid what they are worth. The big example of this is the CEO who costs his corporation millions but ends up with a large bonus. But let’s not think that large. In general, the way the economy works is as a lens to magnify the differences between people. I have seen this kind of thing often:

What I’m showing here is just an example, but a 1% advantage in productivity can easily produce a ten-fold increase in compensation. That’s not the point that I’m making, however. Rather, I just want to show the economic system does do this to one extent or another. And the effect gets particularly ridiculous on the upper income margin. But in America, we just assume that the there is some kind of linear correlation between someone’s value and their reward. But this is most clearly not the case.

Consider a winner-take-all market like screen acting. If George Clooney had never been born, then there would be someone else in his position. His value to the economy might be slightly less, but it would be close. Instead, it is quite possible that the Slightly Less Wonderful George Clooney Replacement doesn’t even make a living as an actor. But one thing is for sure, because of the lensing effect of the economy, this guy isn’t making anything close to what Clooney makes. But any fair economic system should only reward Clooney for the marginal improvement that he provides over the Slightly Less Wonderful George Clooney Replacement. (Note: I’m a big fan of George Clooney; he’s the Cary Grant of my generation.)

All of this is to counter the conservative mythology that people are worth exactly what they are paid. I mean this in strictly economic terms. I’m not even considering all the hobbies and so forth that people have that add value to the society but are never compensated. Unfortunately, the neoclassical economists are convinced that their simplistic and unrealistic assumptions are valid. So they claim that of course the economy is perfectly efficient. Never has a tautology been so widely believed! Meanwhile, in the real economy, we have all kinds of inefficiencies and distortions. But given that this theory tells the rich that they absolutely deserve everything they have and more, it is accepted as fact.

If we are ever to make the economy relatively fair, we must get past this idea that the markets are perfect and someone’s pay is representative of their economic value. This is one of the most damaging ideas in our society.

As a ranting leftist, I have a little economic news to impart to you. It seems that what people like me have been saying for a long time is backed up by economic data: both the private views of the rich and the public views of the mainstream are driven by the self-interest of the power elite. Who that is allowed on network television would ever have imagined?

Last week I saw a segment on The Young Turks, What Changes When You Win The Lottery. It was about an article by Andrew Oswald and Nattavudh Powdthavee, Money Makes People Right-Wing and Inegalitarian. As I’ve written about here, in general, the rich are conservative and the poor are liberal. So these researchers looked at why that is, “Rich people typically lean right politically. Are they motivated by deeply moral views or self-interest? This column argues that money makes you right-wing. It shows that lottery winners in the UK are more likely to switch their allegiance from left to right.”

Their conclusions are disappointing but hardly surprising. One can imagine someone like Daymond John (founder of FUBU) thinking that he made it on his own so anyone could and thus his being a conservative. That would be how humans acted if they were morally rational. But it seems what really drives us is our sense of self-justification. And I get that. We all want to think that the bad things that have happened in our lives are the result of bad luck, and the good things that have happened are the result of our own brilliance. But it is sad that we generalize about this to others, and use it to justify high levels of income inequality just because it makes us feel better. As the authors conclude, “Voting choices are made out of self-interest and then come to be embroidered in the mind with a form of moral rhetoric.”

Paul Krugman discussed this study today along with another paper that discusses a different aspect of inequality. The paper by two IMF scholars, Davide Furceri and Prakash Loungani, is, Who Let the Gini Out? Searching for Sources of Inequality. They find that the standard neoliberal economic policies actually make income inequality worse. The two issues they look at are austerity (which lowers employment rates) and increased capital flows (which allows companies to move operations away to cheaper countries).

These two studies do not bode well for the world. It means that mostly the rich are trapped in thinking that high levels of income inequality are good simply because it is good for them. Related to this is that the neoliberal policies that almost everyone who is given a voice in the economic debate accept as God given. In fact, it is quite common for economic reporters to scoff at anyone who argues that “free” trade agreements might not be so great.

Krugman puts it exactly the way I would, so I will leave the conclusion to him:

Ed Kilgore calls out the Republicans for hypocrisy about the Debt Ceiling. He notes that only 28 of the 272 Republicans in Congress voted for it—just over 10%. He also notes that of the twelve Republicans in the Senate who voted for cloture, none voted for the actual bill. I think he is totally wrong to call this hypocrisy.

The Debt Ceiling vote has long been little more than an opportunity for grandstanding. And that’s just fine. When Barack Obama was a Senator, he voted against it and we rightly justify that because he did it knowing that the Debt Ceiling would pass. That’s all that the Republicans are doing here. The only difference is that the Republican base has become so crazy that the vote is also a matter of political survival. So I think we should applaud them: we got enough Republicans to cooperate and got the Debt Ceiling raised. Yay!

Even worse than this, however, is complaining that the Senate Republicans voted for cloture but not for the bill. It amazes me that a smart and knowledgeable commentator like Kilgore would say this. The way things are supposed to work is that votes are allowed on bills even when 41 Senators are against it. Kilgore is implying that this “if you don’t like a bill you filibuster it” approach to legislation is right and proper.

Kilgore quotes an article by Carl Hulsey about the Vote No, Hope Yes Caucus. And yes, there is a small difference between that and Obama’s Vote No, Know Yes vote. But that’s just politics and I think we should all be a little understanding of the hole that Republicans have created for themselves regarding the base.

Hulsey spends a good chunk of his article talking about what this means for immigration reform. Kilgore also discusses this. It is the kind of Villager stuff that drives me crazy. We are not going to get reasonable immigration reform while the Republicans control half the Congress. But to these guys, anything that is called immigration reform is good. They apparently would be thrilled if Congress passed “The Immigration Reform and Deport Everyone Act.”

All this discussion comes down to is a plea that we all just get along. But the vote on the Debt Ceiling was an example of us getting along. So we aren’t going to get a bad immigration bill that is a huge giveaway to corporate America. Big deal. In Washington this week, we managed to raise the Debt Ceiling without further harming the economy. I call that a win. Let’s move on.

Over at The New Republic yesterday, Isaac Chotiner writes, George Will, Tea Party Tory. The article walks a thin line that will make both George Will lovers and haters happy. It discusses Will’s “evolution” from Tory to libertarian. And it doesn’t pull any punches as when it notes the erroneousness of Will’s claim that the global temperature has not raisen in the last 15 years. Still, I find the article more or less a whitewash of Will.

George Will is generally my first example of how it is easy to be a conservative pundit. As long as you don’t drool, everything is fine. And it’s funny to me that people like Will and David Brooks complain about liberal elites and their pseudo-intellectualism, but that is a better description of them. Regardless, for the umpteenth time: if Will were a liberal, the best he would be doing is teaching at a small state college. He certainly wouldn’t be working at the Washington Post and on broadcast television.

But you do have to give one thing to Will: he knows where his bread is buttered. That is well on display in this recent turn to libertarianism. Of course, like all conservatives, I’m sure that Will always saw himself as a libertarian. The great thing about being a libertarian is that you don’t have to do anything about social injustices, but you get to feel good about yourself in that you would never partake. For example: you don’t think the government should do anything to facilitate equal rights for minorities, but you would never treat another person differently because of their skin color.

So why is George Will all gung-ho about libertarianism now? That couldn’t be more obvious: he sees the conservative movement going in that direction. He’s already seen conservatism in America go from Toryism to radicalism. If he is to stay relevant, he either has to go libertarian or fascistic. And we know that fascism isn’t really fitting for his personality. So libertarianism it is! Or at least, the kind of wishy-washy libertarianism that some in the Republican Party have embraced.

In the end, it is the same old conservatism. Libertarianism in the Republican Party is just a patina to give their “worship the rich and screw the poor” politics the look of a consistent ideology. For example, he’s tentatively in favor of cannabis legalization but not for the legalization of other drugs.[1] Libertarians argue, “You have a right to do whatever you want to your own body!” Republican “libertarians” argue, “You have a right to do whatever you want to your own body, as long as we’ve decided that it is okay for you!” A communist would argue exactly the same thing.

So George Will V 2.0 is out and he’s all for libertarianism? That means nothing, other than that he is following trends in the conservative movement. And this is what he has always done. It’s all that popular conservative pundits ever do. It’s why they are popular. And when the pretend libertarianism of the Republican Party peters out, George Will V 3.0 will be there to appeal to the new trend in movement conservatism.

[1] This really is the ultimate example for libertarians. If you believe that people have an absolute right to their own bodies, then you believe anyone should be able to grow poppies in their backyards, extract the morphine, produce heroin, and use it. Anything else means that you want to tell other people how to live their lives. But as I’ve noted before: even most “real” libertarians are all about telling other people how to live. A great example of this is how libertarians (almost to a man) want to stop businesses have having union shops. Voluntary contracts are great, but only when libertarians agree with them. Ugh!