Timothy Noah’s Sinking Ship

Yesterday on Talk of the Nation, the New Republic’s Timothy Noah talked about the growing divide between rich and poor. According to him, economic inequality an especially troublesome problem today, causing more political problems than in the past because it makes the poor feel like they’re not really part of the same community. The bit of the talk I heard irritated me almost to the point of driving my car off the road; instead, I just turned off the radio.

1. Apparently poor people in the past didn’t feel this way because the inequality wasn’t quite bad enough. To Noah, it’s apparently not that you’re struggling and others aren’t that matters, but that you’re struggling and others aren’t struggling even less, or something.

2. Apparently in the ’50s and ’60s, because economic inequality, there was a better sense of community, a better sense of “we’re all in this together,” this white man said to another white man.

3. Noah said, “The amount of money going to the 1% has increased, so there’s less to spread around among the rest of us.”

That’s when I turned it off. I don’t waste my time on people who make that basic error. It’s an upfront demonstration that there’s no reason to listen seriously to them. And even as a white guy I hate this glorification of the ’50s and ’60s by white people; white liberals, who just might have an issue they at least pretend to care about that might give them reason to hesitate, no less. I was particularly struck since right now I happen to be reading The Spook Who Sat By the Door, and the bitter sense of permanent exclusion from the American community just seethes throughout the book. Maybe Timothy Noah should read it.

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About J@m3z Aitch

J@m3z Aitch is a two-bit college professor who'd rather be canoeing.
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12 Responses to Timothy Noah’s Sinking Ship

  1. Matty says:

    Well I think inequality can make the poor feel like they are not part of the community, maybe especially when the social system is meant to be meritocratic but yeah golden age crap like this is factually wrong. Not to mention it is fundamentally conservative, about preserving what has worked rather than making improvements.

  2. Lance says:

    Yeah, re-distributionists see the economy as a static pile of money. In their minds all will be well if you take the money from people who have “too much” of it and give it to those that don’t. They make the infuriating assumption that the people that have more have it illegitimately and that the role of government is to spread it around.

    Government as Robin Hood.

    They give no thought to the fact that most of the people making the money are creating new capital, employment and ideas that expand the pile for everyone, and taking resources away from those people is counterproductive.

  3. Matty says:

    Well people with money are almost by definition creating new capital but whether they are also creating jobs or ideas is less certain.

    In any event it is possible to feel that in a given situation the benefits of taking (part) of someones money outweigh the benefits of letting them choose how to invest it. What those situations are is certainly debatable and of course this doesn’t counter the view that the rest of us simply have no right to their money but it isn’t as simple as saying that leaving money where it is will always have the maximum benefit for everyone.

  4. pierrecorneille says:

    Lance,

    There’s much in what you say that I agree with, but here’s a question that I often have when people point out the fallacy inherent in assuming that there’s a static amount of money (or whatever proxy you want to use for wealth): people who point out the “static” fallacy (is this the same thing as the “fixed pie” fallacy?) seem to assume that wealth is only increasing–things are getting better, and they will get even better (i.e., the total amount of wealth will increase) if government pursues the right policies or doesn’t do anything to actively discourage the growth.

    What about the possibility that wealth might also decrease? Is there some logical argument why this cannot happen?

    I’m not sure what the policy implications are for the type of question I raise: maybe it’s “wealth can very well decrease, so we better refrain from doing things (like wealth redistribution) that might endanger growth.” But I still find difficult to accept what I take to be the implicit (and because “implicit,” perhaps strawmannish on my part) that wealth never comes at the expense of someone else’s wealth. (Again, I acknowledge a possible straw man in the way I’m framing things, especially with my resort to the word “never.”)

  5. James Hanley says:

    Wealth can decrease, but it tends not to if we can avoid a handful of really big disruptors, such as really bad government policy (not just bad, really bad), major natural disasters, and civil war. When things are peaceful and stable, people tend to be productive, which tends to increase wealth. I think people are even pretty adaptable to merely bad (as opposed to really bad) government policies, as long as those policies are pretty stable and predictable (the policies might reduce wealth production and push it from one area to another, even to areas less socially desirable, but if they’re stable, people will find workarounds).

    It is true that my production of wealth can come at your expense, for example if I open a business that outcompetes yours and drives you into bankrupcty. But importantly, my doing so hasn’t reduced total wealth and it hasn’t come to one class at the expense of another class. I think that latter is at the root of the concern many people have (and I suspect is underlying your question). But if we’re talking about situations where all transactions of value are voluntary, and nobody has monopoly power over a vital necessity, I have a hard time seeing how wealth can really come to one group at the expense of another.

    Some might respond that transferring jobs overseas does, by making executives and investors wealthier while the labor loses out. But that requires simultaneously treating the economy as a national phenonmenon and an international phenomenon. It counts the value gained by investors from the efforts of overseas workers but it doesn’t count the value gained by those overseas workers.

  6. James Hanley says:

    Matty, +1 to your first comment, every single clause.

  7. Troublesome Frog says:

    I don’t think that this is such a basic fallacy. Ignoring resource booms, our per capita economic growth comes from increased productivity that results from new technology and infrastructure. That growth is not unbounded–we only get so much of it per year. That growth is divided up among us somehow, and it seems to me that capital gets a much bigger piece of it than it used to. In that sense, it’s right.

    Regarding offshoring, we also have to be careful how we look at that. First, moving a job offshore makes the concept of “per capita” growth a little different. If I fire an expensive American worker and hire a cheap Chinese worker but end up making the same set of goods, that wasn’t really economic growth. That’s just me taking the difference between their two salaries while output remains the same. Given that the American worker is now free to get another job producing things, we have increased output, but the cost/benefit calculation becomes more complex.

    Let’s say the Chinese guy was a farmer and his labor is worth $1 to his customers and the American worker is a factory paid $10 with $11 in value going to the factory owner. Let’s say that when the factory job goes the Chinese farmer, he gets bumped to $2 and is $1 better off. The factory owner is $8.00 better off. The American worker goes to a different job which pays $9 and produces $9.09 in value to his employer. Our little economy now produces $20.09 worth of products instead of $12 because we took a valuable human from a low productivity activity and moved him to a more productive one. But we can also see that “labor” as a whole is didn’t gain much and capital is enjoying most of the new income.

    There are a lot of assumptions and conveniently chosen numbers here, but I think it illustrates the basic idea. I’m not saying that this is “good” or “bad” but simply noting that this dynamic makes a difference in how we divide up new gains from productivity.

  8. cardiffkook says:

    James and Pierrre,

    This sub thread on creative destruction is a fascinating topic.

    Free Markets involve what I would call constructive competition. It is competing with a third party for the opportunity to cooperate with a second party in a positive sum, value creating way. The competing parties don’t actually interact with each other. They are not allowed to burn down factories, lie about their service, or forcefully prohibit entrance into a market.

    Competitors compete for voluntary interactions with consumers. The consumers choose the interaction which provides the best value. This by definition creates value. Both parties involved in the actual transaction reasonably expected to gain, and if mistaken can in he future learn from their actions. The competitor that is not chosen is not directly harmed at all at least in some senses of the word. What he lost was the opportunity for a gain. The losing competitor has lost an opportunity for a value adding transaction.

    Of course nobody has the right to oblige others to cooperate/interact/trade with them in perpetuity. Of they did, their would be no incentive to improve the value they added. Coke has no right to demand past customers never shift to Pepsi. Furthermore if one person had this right, why wouldn’t we all? It would be like assuming every individual on earth has imposed a duty on me to buy everything I want from every one of them.

    Long prelude to a different way to approach Pierre’s question. I would answer that voluntary interactions in well functioning markets are almost by definition value creating. A person that got wealthy in a reasonably free market most likely did so by creating value for someone else, and the burden of proving malfeasance is on the accuser (people do lie, cheat, steal and seek rents). Indeed, those earning the most (the1%) in the market are those that are most likely adding the most value to society according to the democratic concensus of the consumers.

    The creative destruction applies to those that lost the opportunity for a positive sum gain. The incentives of the system compel them to find ways to add more value themselves, or continue to lose opportunities. Markets are forms of constructive competition that generate value. That is what they do. They are value finding search and development algorithms.

    Cardiffkook aka Roger

  9. Lance says:

    Matty,

    What those situations are is certainly debatable and of course this doesn’t counter the view that the rest of us simply have no right to their money but it isn’t as simple as saying that leaving money where it is will always have the maximum benefit for everyone.

    Yep, that’s why I said “…most of the people that are making the money are creating new capital, employment and ideas…”

    But how do you decide which are they people creating new wealth and which are the “greedy” people just consuming or investing in things that are not “helping” society?

    And are those even legitimate questions?

  10. Matty says:

    But how do you decide which are they people creating new wealth and which are the “greedy” people just consuming or investing in things that are not “helping” society?

    Not quite what I was getting at though I can see why it looks like that. I meant rather that it is legitimate to decide that you would rather have x amount of money going directly to some government purpose (for the purpose of this discussion assume its something you do regard as a legitimate function of government) than see that same amount increasing the size of the overall economy.

  11. pierrecorneille says:

    I appreciate the responses to my question, and the response to James’s answer, and I don’t have much to add (perhaps because I’m too ignorant of economics). I remain skeptical on some points, but it’s hard for me to pin down which points or why I’m skeptical about them. All this is to say that even though I’m not commenting much, I’m reading the other comments.

  12. Lance says:

    Pierre Corneille,

    What about the possibility that wealth might also decrease? Is there some logical argument why this cannot happen?

    According to some sources the US lost 14.6 trillion (with a “t”) dollars of household wealth during the last recession. Although I am no economist, a point in which I take some pride, this sounds like an imaginary loss of real estate bubble pseudo-wealth to me.

    Here in Indiana the real estate market has rebounded to near pre-recession levels. Of course that is because it never experienced the “bubble” that real estate in trendier locals experienced.

    But that doesn’t mean that this didn’t cause huge disruptions in the “real” economy. Some would argue that government regulation could have “saved” us from this market collapse. I tend to see it as a market correction that, as usual, left a distribution of winners and losers.

    Capitalism (and life in general) is risky.

    Swim at your own risk.

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