Tag Archives: income inequality

Three visions of our future after the robot revolution

Summary: During the past 2 years the robot revolution has come into view, and all but Right-winger living in fantasy-land have begun to realize it might (like the previous ones) produce large-scale social disruption and suffering. Here we look at three kinds of visions about what lies ahead for us.  {1st of 2 posts today.}

“We did not come to fear the future. We came here to shape it.”
— Barack Obama’s speech to Congress, 9 September  2009.

Dark futures

 

Contents

  1. The center-left sees the problem,
    ……and offers mild solutions.
  2. Realistic analysis and prescriptions.
  3. Visions of dark futures.
  4. For More Information.

 

(1)  The center-left sees the problem and offers mild solutions

Slowly people have come to see the coming robot revolution (aka a new industrial revolution), even economists. The Left has adopted this issue, as they have climate change, as a means to enact long-sought changes in the US economy. Like climate change, their solutions are far too small for the problem described.

(a) A World Without Work” by Kerek Thompson in The Atlantic, July/Aug 2015 — “For centuries, experts have predicted that machines would make workers obsolete. That moment may finally be arriving. Could that be a good thing?” Typical of The Atlantic. Long, meandering, confused mish-mash of issues. Never confronts the core issue of how people will earn money to live. Lots of nonsense about people living by selling crafts to each other.

(b) The Future of Work in the Age of the Machine” by Melissa S. Kearney, Brad Hershbein, and David Boddy at the Hamilton Project, February 2015. See the slides and transcript from the seminar they held for academics and businesspeople. Their prescription is aggressive application of conventional methods…

The Project’s economic strategy reflects a judgment that long-term prosperity is best achieved by fostering economic growth and broad participation in that growth, by enhancing individual economic security, and by embracing a role for effective government in making needed public investments.

(c) The future of work in the second machine age is up to us” by Marshall Steinbaum at the Washington Center for Equitable Growth, 23 February 2015 — They show that the robot revolution has not yet appeared in the macroeconomic statistics. But it’s coming. Their conclusions are the standard center-left recipe, like those of the Hamilton Project…

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We worry about rule-breaking by the underclass, not the upper class

Summary: The daily press gives us lurid tales of the underclass breaking social norms, but seldom does so about the more serious lost professionalism that helps the upper class. Before we tinker with American society to reverse our rising inequality, we should understand the processes that created this problem. I believe we not only don’t understand the causes, we don’t even clearly see the deep changes in American society during the past few decades — during the Boomers’ years. This is another post about our poor vision of America.  {1st of 2 posts today.}

Our Broken Society

Content

  1. Breaking social norms.
  2. Loss of professionalism.
  3. Rise of self-interest in other occupations.
  4. Conclusions.
  5. For More Information.

(1)  Breaking social norms

We talk a lot about underclass break society’s behavioral norms. In his 1986 book Beyond Entitlement Lawrence Mead (Prof Pol Sci, NY U) taught us to fear their increasingly “dysfunctional” behavior: criminality, drug use, promiscuity, out-of-wedlock births, excessive rates of divorce, etc. Sadly we seldom notice the breaking of norms occurring just as strongly in the upper classes — with greater effect on our social cohesion and level of inequality.

(2)  Loss of professionalism. Broken professions.

Like the word “gentleman”, the meaning of “professional” has eroded away to a bland sense of well-behaved. Managing conflicts of interests was a major factor distinguishing professionals from other trained people. For example, doctors, accountants, and attorneys balanced their clients’ interests vs. theirs as business people vs. those of society. Attorneys were expected to act as “officers of the court”. In an epidemic doctors were expected to place the public’s health above that of the patient’s and their own. Accountants were to maintain the integrity of the financial reporting system that guides the money flows of our society.

These standards were often honored in the breach — America was never Heaven — but during my lifetime they have collapsed. What’s happened in medicine and law clearly shows the problem and the result.

In the early 1980’s doctors realized they the controlled America’s health care checkbook, and could leap from affluent to wealth by “optimizing” their practice: bringing in-house diagnostic and out-patient services and then over-utilizing them, taking de facto bribes from drug and medical device companies, and in a hundred other ways. Conferences and articles gave step-by-step instructions, and their incomes rose — varying widely by specialty, skyrocketing for the most aggressive doctors (see this paper, and a later one).

Only slowly did the pushback arrive, the current push to disenfranchise them — turning decision-making over to the HMO’s, enmeshing doctors in paperwork, authorizing less-trained technicians to do aspects of their work, and eventually automating much of their work.

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Be Proud America! as we watch our babies die

Summary: We’ll hear much about American exceptionalism from candidates for President during the next 17 months. Here’s a tangible example — the greater fraction of infants that die in America than in our peers. We know how to fix it; we have the money. We lack only the will. Be proud, America!  {1st of 2 posts today.}

Some insights into the factors affecting infant mortality, showing how badly we’re doing.

NBER: infant mortality, Jan 2015

From the January NBER Bulletin on Aging and Health story about this study:

The U.S. infant mortality rate (IMR) compares unfavorably to that of other developed countries, ranking 51st in the world in 2013. In the U.S., there are nearly 7 infant deaths during the first year of life per 1000 live births, roughly twice the rate in Scandinavian countries. The U.S. IMR is similar to that of Croatia, despite a three-fold difference in GDP per capita.

What explains the U.S.’s relatively high IMR? This is the subject of a new NBER working paper … To quantify the importance of these potential sources of the U.S. IMR disadvantage, the authors combine natality micro-data from the U.S. with similar data from Finland and Austria. These countries provide a useful comparison because Finland has one of the lowest IMRs in the world and Austria has an IMR similar to much of continental Europe.

…  In short, worse conditions at birth and a higher post-neonatal mortality rate are both important contributors to the U.S.’s higher IMR.

Finally, the authors explore how the U.S. IMR disadvantage varies by racial and education group. They find that the U.S.’s higher post-neonatal mortality rate is driven almost entirely by excess mortality among individuals of lower socioeconomic status. As the authors note, “infants born to white, college-educated, married women in the U.S. have mortality rates that are essentially indistinguishable from a similar advantaged demographic in Austria and Finland.”
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Will we be better off ruled by the 1%?

Summary: This post asks if the project to reform America is not just futile but misguided. Yesterday’s post explained how American’s political system has become dysfunctional from the conflict for control between the upper middle class (the professional and managerial classes I call the “outer party”) and the 1% and its allies (especially the wealthy and leadership classes I call the “inner party”). Today we follow this reasoning to its surprising but logical conclusions. Leave your reaction in the comments. {1st of 2 posts today.}

“Most importantly, I no longer believe that freedom and democracy are compatible. … The fate of our world may depend on the effort of a single person who builds or propagates the machinery of freedom that makes the world safe for capitalism.”

— Peter Thiel (Silicon Valley billionaire) in “The Education of a Libertarian“, CATO Unbound, 13 April 2009. You’ll seldom here the voice of the 1% more clearly.

We are the future

(1)  What happens if the 1% wins?

The great challenge of the 1% will be maintaining social cohesion under their rule. We must feel that their rule is legitimate even if runs against our interests. Medieval kings did this with the support of the Church, convincing the people of the divine right of kings.

I suspect they will rely on two pillars of popular support. The social conservatives are the equivalent of the European right-wing parties’ “throne and altar” alliance, who give their support in exchange for mostly symbolic support. Libertarians provide a second pillar, who will cheer as the 1% strip mine America and social mobility declines from its already low level — and give their support to the 1% in exchange for almost nothing.

Life will continue under their rule, with few changes. It will be more difficult and insecure for us; it will be more fun for the 1% (i.e., they’ll have more power). We of the outer party will still read the news, cheering our tribe and booing the others — staying well-informed, although eventually we’ll no longer remember why we bother.

They will eliminate much of the regulations on people’s behavior, for good or ill, because they don’t care what the masses do. Their rule could be stable for a long term.

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Complaints about air travel are the cries of a dying middle class

Summary: The airline industry is a tale of New America. Deregulation, cheap fares allowing more people to travel but with increasingly poor service and rising complaints. It’s an oft-told story of stupid people unaware of the consequences to their behavior. But that’s a shallow view that misses the real significance of these trends.  {1st of 2 posts today.}

Airlines in the past

 

Contents

  1. Unexpected fruits of deregulation.
  2. Interpreting the whining.
  3. It’s the cry of a dying middle class.
  4. Conclusion: expect more of this.
  5. For More Information.

 

(1)  Unexpected but logical fruits of airline deregulation

The rollback of the New Deal began with deregulation of the airlines (except for safety) — done by the President who began the conservative revolution, which his successor accelerated: James Carter. This allowed far more people to fly, people formerly limited to buses, trains and cars.  The unexpected side effect: service has slowly and steadily deteriorated. (There are 25 years of data from the Airline Quality Ratings database run for DoT, with many studies of it by experts such as Dean E Headley — but I can find no analysis of the trend over that period — probably for the obvious reason).

Why has service deteriorated while traffic rose (from 191 billion passenger-miles in 1980 to 580 billion in 2012)? It wasn’t the speed of the increase. In the 20 years before deregulation traffic rose over twice as fast as in the 20 years afterwards — with the airlines still providing excellent service. It’s not that the airlines are rapacious and greedy — their industry has an ugly combination of high volatility (in technology, competition, and revenues) and low profitability. During the dark days after 9/11 it was said that the industry had accumulated no net profits since the Wright brothers.

The answer is obvious: customers give their business on the basis of flight convenience and cost. Carriers give people what they want: cheap travel. Since they have no wizards, that means bare bones service — with cycles of cost-cutting, each one clipping off cost and satisfaction. The next cycle features a new class more crowded than economy.

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How to fix America’s tangles of pathology

Summary:  Social reformers design better societies but seldom consider the inevitable constraints on what’s possible. Economists often conceptualize these as trilemmas: 3 good things where you get to have only two. In today’s post SR Waldman explains a fundamental dilemma in politics. It’s long but worth reading.  {1st of 2 posts today.}

Tangles of pathology

By Steve Randy Waldman at Interfluidity, 8 April 2015.
Posted with his generous permission.

"Affe mit Schädel" ("ape with skull") by Hugo Rheinhold (c.1893).

“Ape with Skull” by Hugo Rheinhold (c.1893).

Contents

  1. A trilemma for social reformers.
  2. The necessity of social pathology in America.
  3. Why America’s solution works so well.
  4. Building in pathology.
  5. A history of pathology.
  6. Conclusions.
  7. About the author.
  8. For More Information.

 

(1)  A trilemma for social reformers

Trilemmas are always fun. Let’s do one. You may pick two, but no more than two, of the following:

  • Liberalism
  • Inequality
  • Non-pathology

By “liberalism”, I mean a social order in which people are free to do as they please and live as they wish, in which everyone is formally enfranchised by a political process justified in terms of consent of the governed and equality of opportunity.

By “inequality”, I mean high dispersion of economic outcomes between individuals over full lifetimes.  We’ll be more directly concerned with “bottom inequality”, or “relative poverty” in OECD terms, rather than “top inequality” (the very outsized incomes of the top 0.1% or 0.001%).

By “non-pathology”, I mean the absence of a sizable underclass within which institutions of social cohesion — families (nuclear and extended), civic and religious organizations — function poorly or at best patchily, in which conflict and violence are frequent and economic outcomes are poor. From the inside, a pathologized underclass perceives itself as simultaneously dysfunctional and victimized. From the outside, it is viewed culturally and/or morally deficient, and perhaps inferior genetically. Whatever its causes and whomever is to blame, pathology itself is a real phenomenon, not just a matter of false perception by dominant groups.

This trilemma is not a logical necessity. It is possible to imagine a liberal society that is very unequal, in which rich and poor alike make the best of their circumstances without clumping into culturally distinct groupings, in which shared procedural norms render the society politically stable despite profound quality of life differences between winners and losers. But I think empirically, no such thing has existed in the world, and that no such thing ever will given how humans actually behave.

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Scary lessons for America from pre-revolutionary France.

Summary: Today we look at 18thC France, and speculate about our future. They too had their 1%, hungry for wealth and power. In a time of troubles, they refused to compromise and so plunged France into a long bloody transition to a new regime. Our situation is very different, but there are a few ominous similarities.  {1st of 2 posts today.}

“It’s all about power and the unassailable might of money.”
— E. P. Arnold Royalton, the great 21st century industrialist in “Speed Racer” (2008).

"Liberty Leading the People", Eugène Delacroix (1830).

“Liberty Leading the People”, Eugène Delacroix (1830).

Contents

  1. Pre-revolutionary France.
  2. America today.
  3. Differences and similarities.
  4. Books by GOP candidates.
  5. For More Information.

(1)  Pre-revolutionary France

There was desperate need for financial reform of the French government in the late 18thC, but deep institutional failure prevented reform. King Louis XVI wanted reform, especially the nobility and clergy to pay taxes, but the nobility and clergy blocked change through the parlements (high courts) and Assembly of Notables (1787) — an opposite outcome to that of the previous great crisis in 1626.

Out of easy options, the King called the Estates General in 1789. The 3 Estates each had one vote: the nobility, the clergy, the commons. This might have been the last opportunity to save France from revolution. Each Estate prepared a list of grievances (Cahiers de doléances).

The nobility desired a weaker King: limitations on royal absolutism, guarantee of individual liberties, and taxes only with approval of the Esates General. For this they were prepared to give almost nothing, and had little interest in lightening the burden on the commons. They wanted compensation for abolishing the corvée (forced unpaid labor) and capitaineries (game preserves of the King and nobility). Their opening offer to the commons: nothing.

With no room for negotiation, the Estates General immediately deadlocked. On June 17 the Third Estate, plus defectors from the other two, declared themselves the National Assembly. On June 20 the King locked them from the Salle des États. They relocated to the Royal Tennis Courts, and swore the Tennis Court Oath. The revolution had begun.

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