The point is that the United States is a country where the ordinary guy has a good life.

Not actually in comparison to virtually any other advanced western country. The United States' GINI index is #92 on this list ( http://en.wikipedia.org/wiki/List_of_countries_by_income_equality ).

It seems the "ordinary guy" has a much better life in Japan, Denmark, Sweden, Belgium, Norway, Finland, Germany, the Netherlands, Austria, France, Canada, etc.

Another flag-thumping paean to American Entitlementarianism, as vacuous as it is inaccurate.

greg

Greg,
To paraphrase what you're saying: "Bah, Humbug."

Happy 4th everybody!

Well the GINI index doesn't really tell us much that's useful when comparing. That only highlights inequality. While the US' inequality may be higher than some European countries, that's simply because our richest are incredibly richer; the "common man" can still be better off that other countries.

To illustrate, a GINI index would be "perfect" if everyone in country A earned $10,000 a year. But if half of the people in country B earned $20,000 and the other half earned $80,000, country A would still register "better" inequality. Sure, country B has greater inequality but only a socialist would prefer country A over it.

Moreover, the Gini coefficient measured for a large geographically diverse country will generally result in a much higher coefficient than each of its regions has individually. That puts the US at a disadvantage.

Individual economic satisfaction (i.e. how "happy" you are) is a function of the individual's perception of his or her status in comparison to other individuals. Absolute wealth (or income) levels do not determine satisfaction, relative position does.

Thus a man who makes $100,000 a year in a society full of $10,000,000-a-year earners will perceive himself as inadequate, and have a high degree of unhappiness.

On the other hand, a man who makes $20,000 a year, in a society where most make $15,000, will be quite satisfied.

Again, economic well-being and satisfaction is a function of one's relative position in society, not absolute. This has been covered in the literature and verified empirically over and over.

Ireland, the Netherlands, Iceland, Denmark, Sweden, all of the countries I mentioned earlier not only score better GINI indexes than the United States, but they also report higher levels of life satisfaction (source https://www.sgctech.com/public/download.php?FILE=greg@littlebear.com/63987nGPZeQ
, that from a presentation by Maryland Republican Congressman Roscoe Bartlett, that I attended this spring in Washington, DC).

If by being "better off," we mean "happier" then it does, indeed, seem the "common man" would do better in just about any other western democracy than the United States.

Happy 4th, everyone.

greg

Again, economic well-being and satisfaction is a function of one's relative position in society, not absolute.

I am always surprised to see people actually admit that they really believe that we would all be better off if we were equally poor than with some of us filthy rich and others of us with "only" the ability to afford homes, clothings, food, heating, running water, indoor plumbing, refridgerators, oven/ranges, microwaves, cars, telephones (cell phones!), stereos, televisions, and computers.

Granted, not everyone in America has all that stuff - and that's why there's a debate about welfare and safety nets and such. But an overwhelming percentage of us have all that stuff, and more. (There are two people in my "household." There are also 2 cars, 2 cell phones, and 4 computers.)

But that's a side note. Anyway, my point: if average people (with their cars, cell phones, and computers) are unhappy being able to live in a way that would make Robber Barons of 150 years ago jealous, then I think those people need to reconsider what makes them happy.

I suggest counseling for people who are severely traumatized by the fact that someone else might have more stuff than they do. (Which doesn't dispute Greg's point, because I haven't read any of this stuff. I'm just saying that if what he's saying is true, people are even more ridiculous than I had previously thought.)

It might seem funny, but it's also human nature. Your happiness is not a function of the number of toys you have, it's a function of how many toys you have relative to the people around you.

If Economics is the science of human satisfaction, if the goal of a progressive society is, essentially, utilitarian (greatest good for the greatest number) then the goal of our economists, politicians, and other leaders is to maximize equality, not material accumulation and consumption, because by maximizing equality you maximize happiness.

Which is the real genius of this nation and what, I think, we should celebrate this holiday: a nation predicated on the ideal that all men are born equal and that the goal of society, and government, was to promote a society of equals.

We're not perfect, and we sometimes steer away from that ideal -- as the GINI trend indicates. But we hold it, and we've inspired other nations to do likewise (Liberte', Fraternite', Egalite' (words purposefully re-arranged for emphasis)) and some of those nations are, currently, practicing what we preach even better than we do.

One final point, for emphasis, before I go march in the parade: Contra Nick's point above:

My house was built a century and a half ago by a locally prominent family of, from what I can tell, slightly better than average (for their time) means.

Yet when built the house had no plumbing at all (indoor or outdoor), no electricity, no phone, no internet, no nothing. You wanted to poop? You had to go outside and squat in a privvy. You want a drink of water? Hope you collected some the last time it rained. Don't like hot summers? Cool off on the porch? Don't like cold winters? Put another dog on the bed.

By an absolute standard of material wealth and happiness, we would have to conclude that the people who lived in my house a century and a half ago were characterized by absolute misery. They must have hated every single hour of every single day.

And we should see expressions of that misery in the records they left behind. Diaries full of ruminations on their wretched sort, appeals to God to end their horror, etc.

Except that we don't. In the records we have we see people expressing themselves pretty much as they do today. Writing about the joy of seeing their children, expounding on the particular beauty of a newfound vista, expressing hope for the year to come and, in general, expressing contentment.

Two hundred years from now schoolchildren will study our age. They will be horrified at how we had to struggle daily with disease, how it was common for our organs to fail, how some struggled to get enough to eat or to keep themselves warm, or that they had to prepare their own food and excrete into a filty water-filled bowl.

They'll shudder at the horror of our predicament. Maybe someone will unearth this post in those two hundred years, in which case I'll only comment:

It really wasn't that bad. In fact we had some real good times.

greg

Hmmm.. I had two thoughts there, and they kinda ran together in a way I didn't mean them to.

1) Things are pretty damn good for most people in most western-style countries. Some are better than others and we can all debate about a lot of things, but whether you're in Denmark, Japan, or the US, things are generally okay. (They could always get better. Hence debates about healthcare, SSI, etc.)

That's all I wanted to say about that: the average is way better than it used to be, even if it is still "just" the average. To that end, I totally agree with you. Life is good.

2) I don't know why people would be unhappy in the first place. I don't care if Bill Gates can afford to wipe his butt with hundred dollar bills because I've got my own pot to pee in. And it's not just because I'm doing well for myself now (and I'm not, really, yet - student loans are paying the rent), I felt the same way when I was younger and my family had one mostly-broken car, a two-room "house," etc.

I'm a very glass-is-half-full kind of guy, and I think that the issue is less with the money than with the ridiculous notions people have about what they should get out of life.

New thought: 3) I'm not debating the merits of social/commun-ism per se. It's not about whether Bill Gates should divide up his wealth and send out $150 checks to each American. It's about how average people really ought to work harder to find a balance between being happy with what they have and desiring enough more that they get out of bed & go to work every day. At least, that's what I think.

greg wrote:

Which is the real genius of this nation and what, I think, we should celebrate this holiday: a nation predicated on the ideal that all men are born equal and that the goal of society, and government, was to promote a society of equals.

If, when you speak of equality, you mean people's actual economic situations, I think you're dead wrong. The United States was built upon the principle of *legal* equality--everyone has the same rights under the law.

It is true, of course, that a person's life opportunities are much brighter if they are born to a rich suburban family than if born to a poor urban family. But even if somehow every child had the exact same opportunities, in a completely free economic system they would attain a wide range of economic success. To try to change that is to fight against human nature.

Nick wrote:

I'm a very glass-is-half-full kind of guy, and I think that the issue is less with the money than with the ridiculous notions people have about what they should get out of life.

Amen to that. And I wonder if it's not so much the less-flat wealth distribution in America that results in people reporting less satisfaction in life, but a more deeply-ingrained materialism than other Western democracies have.

But even if somehow every child had the exact same opportunities, in a completely free economic system they would attain a wide range of economic success.

Why? If they're born equal and live in a society that treats all equally (including affording each equal economic opportunity), then why would we expect a "wide range" of economic success?

Or are you saying that while all are born equal, some subsequently BECOME either lazy or industrious?

My own view on the matter is (no surprise) very much influenced and framed by classical liberal economics, particularly the redistributive theories of Smith as refined and given a more distinct moral basis by Mill.

Particularly in the necessary distinction between the creation of wealth and its distribution. It's often assumed in more libertarian economic thinking that wealth is naturally distributed in proportion to those that create it -- or if it isn't that "the market" will take care of that if we only turn up the laissez-faire control a bit more.

But, like Mill (and Smith before him) I consider the distribution of wealth, unlike its creation, to be a function of custom and shaped by the institutions of society. Thus there can arise great unnatural disparities between who makes wealth, and who receives it -- particularly because the control of capital is also subject to the same social customs and institutions and distribution of wealth tends to disproportionatly favor those who control capital.

Now its true that the classical economists (again, Smith, Mill, Ricardo, etc.) come off as positively socialistic (if not even communistic) today. But I do think there's something to what they had when viewed against a backdrop of the economic performance of the western socialist democracies (Belgium, Sweden, France, Germany, etc.) vs. that of our increasingly laissez-faire society.

(Note that that is not to tar all laissez-faire principles with a broad brush. In general the classical economists (as well as I) favor a policy of free markets and as little government oversight as is necessary -- but that's not at all the same thing as as little government oversight as possible)

What improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. Adam Smith, Wealth of Nations.

To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable. Edgar Bronfman Sr

greg

If they're born equal and live in a society that treats all equally (including affording each equal economic opportunity), then why would we expect a "wide range" of economic success?

First, because although people are born equal with regard to their humanity, they are not born equal with regard to their talents.

Second--and perhaps more importantly--yes, some people do choose to be more industrious than others. I consider myself far from lazy, but I would not choose to work 50% longer hours, even if I could double my income by doing so. And apart from actual work, some people are more industrious than others in training to acquire new skills.

By the degree to which you mandate that wealth must be distributed evenly, you remove the incentive for industrious individuals to create useful goods and services for society. Socialist democracies are markedly less productive than capitalistic ones.

Of course, you've already made it clear that you favor making everyone "equal"--even if it doesn't help the poor at all in absolute terms--over increasing the standard of living for everyone if that means some people get a whole lot richer than everyone else. When our paradigms of the ideal society are so fundamentally different, it's no wonder we'll agree on virtually none of the details of running an economy. But it has certainly been an enlightening discussion.

To turn $100 into $110 is work. To turn $100 million into $110 million is inevitable.

Incidentally, I don't think the latter part of this quote is true. Fortunes are often squandered or at least diminished. To the extent that it seems "inevitable" for large amounts of wealth to grow, perhaps it is because you don't acquire $100 million in the first place without knowing how to make wise investments?

First, because although people are born equal with regard to their humanity, they are not born equal with regard to their talents.

Fair enough.

By the degree to which you mandate that wealth must be distributed evenly,

Well, first I don't think I've made any mandate that "wealth must be distributed evenly." What I've tried to say, and I think this is in keeping with classical economics, is that wealth should not be distributed unevenly because an uneven, and unfair, distribution of wealth is not only corrosive to society and civilization but ultimately destructive to and of the oligarchs on the good end of the uneven distribution stick.

you remove the incentive for industrious individuals to create useful goods and services for society

Absolutely, and this is why an uneven distribution of the fruits of labor (wealth) alienated from the labor that creates that wealth is so injurious. Firms, enterprises, and institutions are bodies of men and women who collectively create the wealth produced by those firms, enterprises, and institutions. That wealth should not be unevenly distributed. It should flow back, as much as possible, to those responsible for creating it in the first place.

Socialist democracies are markedly less productive than capitalistic ones.

That's news to me. Can you cite comparative productivity figures (either in some marginally useful comparative measure like output per worker per hour or, even worse, GDP per capita per hour) that shows productivity in Belgium, Norway, Finland, Sweden, etc. is "markedly" less than that of the USA?

I'm aware of variances, depending on the methodology, but they've usually been so small that it was possible to make one's case either way simply by choosing what to emphasize.

Of course, you've already made it clear that you favor making everyone "equal"

Again, I don't think I've put forth that view. I've only advocated for removing, as much as is possible, inequality where that inequality isn't due to innate individual characteristics but rather to social and cultural factors -- inheritance rules, taxation policies, institutional preferences, etc.

over increasing the standard of living for everyone if that means some people get a whole lot richer than everyone else.

That is the dilemma of the "rising tide" school of economic thought. That said, I don't think there's anything that inherently prevents immense wealth even in western social democracies (of Forbes' list of the 10 richest people, an equal number (3) are residents of the United States as are residents of western socialist democracies -- including the IKEA guy).

But your position begs the question: is the standard of living for most people, not to mention the poorest, increasing? The answer, for the United States, is a resounding "no."

For four out of the five income quintiles the standard of living has been, for the past thirty years or so, either stagnant or in decline. In fact, it's been in decline most precipitously for "the poor" with the lowest two quintiles (i.e. 20% of the population) having seen an enormous erosion in income over the past thirty years. The only people seeing an increase in standard of living are those in the upper quintile (a group that includes myself, BTW).

It's not a case of the rich getting richer and the poor getting richer too, at least not empirically. It's the rich getting richer and the poor (as well as those in the middle) getting poorer. That's a situation somewhat unique to the United States among advanced western democracies (although it's a situation the United States shares with a whole lot of third-world basketcases).

greg

perhaps it is because you don't acquire $100 million in the first place without knowing how to make wise investments?

I think you usually make $100 million in the first place by inheriting it (#17, 18, 19, 20, 21, and 22 on Forbes' list of the world's richest people are all sons and daughters (and the widow) of WalMart's founder).

That said, the quote was attributed to Edgar Bronfman, Sr, the founder of the Seagrams' brand -- he made his money the old fashioned way, which is to say the same way that Joe Kennedy did, by bootlegging (which is hard work, don't get me wrong).

It might have been more apropos had it been uttered by Edgar Bronfman, Jr. who inherited Seagrams and subsequently squandered it (I think the family's total wealth is down to a paltry $2 billion or so).

greg

I'm just curious about why there is so much attention paid to actual happiness when the Constitution only guarantees the right to pursue it. We aren't guaranteed to be happy - just to be able to chase happiness. Rich people aren't necessarily happier than poorer folk, and lack of Hummers in garages and second homes in wherever the local "best" place is do not guarantee happiness.

"Happiness is a warm puppy." -- Charles Schultz.

Please check this out: http://pithmarrowandcoffeespoons.blogspot.com/2006/07/slow-process-of-dying.html

I'm just curious about why there is so much attention paid to actual happiness when the Constitution only guarantees the right to pursue it.

Because a great society, a great state, not only gets out of the way of the individual pursuit of happiness but does whatever it can to promote greater happiness. The Consitution doesn't talk about the "right to pursue happiness" (that's in the Declaration of Independence) but it does establish that one of the enumerated duties of Congress is to provide for the general welfare.

And the Declaration of Independence, in addition to affirming as basic human right the pursuit of happiness, says it seeks to form a "...new Government ... organizing its powers in such a form ... most likely to effect [the people's] Safety and Happiness."

The Declaration laid the foundation for Mill's utilitarian statement of economy, namely that a beneficial economy, a good economy, is an economy that maximizes happiness and that the measure of a people's well-being is the measure of their happiness. A functioning productive, progressive, state works towards that maximization. A failed, or failing, state does not.

greg

Except according to your quote, the state has to balance happiness with safety. To the extent that happiness comes at the expense of safety, the government cannot effect happiness.....

It doesn't strike me that happiness and safety are necessarily antagonistic, so why would it be an either/or proposition? I generally feel happier the safer I am and vice-versa. If I feel safer from disease, from poverty, from hunger, from loneliness, etc. it usually translates into greater happiness as well.

But even if they were antagonistic concepts (i.e. you can either be "safe" or "happy," but not both) I'm not sure why safety would override happiness in society's duties (just because it comes first in the clause?).

And, speaking personally, I'm not sure I'd rather be safe than happy.

greg

Well, chalk it up to too many years of therapy, but no one can guarantee happiness for anyone but himself. The difficulty arises when anyone tries to make someone else responsible for his or her happiness, and I think that reasoning is consistent with the entitlement to pursue happiness without the accompanying guarantee of achieving it. It still comes back to the question of whether we should have the liberty to pursue our own goals and dreams, or whether we should have the right to make the government give them to us.

Me, I'm on the side of pursuing my own.

Where did any talk of a "guarantee" of happiness creep into this thread? Because I missed it, as well as the advocacy for a "right" to happiness or the charge that the government be "made" to give happiness to us.

If a state governor says she wants to make her state a good economic environment for business, where business can best pursue its right to commerce, do you interpret that as a guarantee from the governor that each and every business in that state will be guaranteed to be successful?

Me, I'm on the side of pursuing my own.

So you have no use for the framework and structure of government in allowing you to do so? I'm not sure what this means, other than as a hyper-individualistic manifesto.

greg

greg,

First, to address the points on which you believe I've misunderstood you:

Well, first I don't think I've made any mandate that "wealth must be distributed evenly." What I've tried to say...is that wealth should not be distributed unevenly...

I do not see any difference between these two statements, unless you are simply saying that even wealth distribution should be a preference, not a mandate.

I've only advocated for removing, as much as is possible, inequality where that inequality isn't due to innate individual characteristics but rather to social and cultural factors

"Social and cultural factors" are highly subjective and extremely difficult to prove or quantify. For instance, I'll grant that CEO salaries appear to be disproportionately large. However, shareholders and boards of directors have no vested interest in overpaying CEOs. How can anyone prove CEOs are paid more than their talent would justify, given the competition for top managerial talent?

That's news to me. Can you cite comparative productivity figures (either in some marginally useful comparative measure like output per worker per hour or, even worse, GDP per capita per hour) that shows productivity in Belgium, Norway, Finland, Sweden, etc. is "markedly" less than that of the USA?

First, why adjust per worker and/or per hour? If a socialist economy discourages people from working harder to increase their wealth, that would certainly be reflected in the number of hours worked.

Here is a ranking of 2005 GDP per capita. The United States ranks #8, behind Norway but ahead of Sweden, Finland, Belgium, and France. When adjusted for purchasing power parity, the US GDP is on par with Norway and well ahead of other socialist nations.

For four out of the five income quintiles the standard of living has been, for the past thirty years or so, either stagnant or in decline.

Of course, "standard of living" is even harder to define objectively than productivity. At a minimum, you should state how you are calculating it. Inflation-adjusted income certainly doesn't tell the whole story since, for example, the real cost of food has declined significantly.

The only people seeing an increase in standard of living are those in the upper quintile (a group that includes myself, BTW).

Ah, yes. You are always quite fond of pointing out your own wealth while talking about economic justice.

Oops, as a follow-up to my mention of CEO salaries, I meant to pose this comparison:

A lawyer probably earns around $100,000 in the first year out of law school. A low-level office worker might earn about $25,000 per year. Do you think that is fair, and if not, why not and what would you propose to do about it?

"A lawyer probably earns around $100,000 in the first year out of law school."

In what states, and where can I sign up? :) I've been in practice for almost 10 years, now, and in the midwest, at least in my neck of the woods, lawyers fresh out of law school are lucky if they make $35K-40K during their first year.....

Hmm... I did a quick Google for that, and was coming up with figures ranging from 75-125K for starting salaries, but perhaps that is with prestigious big-city law firms.

"Social and cultural factors" are highly subjective and extremely difficult to prove or quantify.

Not really. And we have the existing examples of virtually every other (if not every other) western democracy, all with lower levels of income inequality. Somehow they're doing it, maybe we should just ask how. I'll make a guess and say its through things like a more fair (progressive) tax structure, a higher level of social services, including much broader and deeper access to healthcare, a more comprehensive social safety net, etc.

How can anyone prove CEOs are paid more than their talent would justify, given the competition for top managerial talent?

There's really very little competition at that level. The pool of vetted applicants is very small. We have daily examples of CEO compensation going up even as shareholder returns decrease. That doesn't happen in a free market.

First, why adjust per worker and/or per hour?

Because that's a standard first-step for normalizing productivity figures so that one isn't comparing apples to oranges? Productivity is defined as labor output per person per time unit.

If a French factory worker produces 75 pounds of cheese in six hours while two American factory workers produce 120 pounds of cheese in eight hours, guess what? The French worker is more productive. If the nation of France (~60 million people) produces 1 million pounds of cheese every year, while taking July and August off whereas the United States (~300 million people) produces 10 million pounds of cheese a year, working all twelve months a year then the nation of France is more productive (as far as cheese goes, at least) than the USA.

That's the definition of productivity and productivity drives aggregate leisure. Another word for leisure is happiness and that's the same thing as quality of life.

If a socialist economy discourages people from working harder to increase their wealth

The United States ranks #8, behind Norway but ahead of Sweden, Finland, Belgium, and France. When adjusted for purchasing power parity, the US GDP is on par with Norway and well ahead of other socialist nations.

Now you're comparing apples-and-oranges. GDP, even adjusted per capita, does not comparatively measure productivity or certainly happiness (hence my caveat several posts back). Why not?

Work inputs between countries are incomparable. If I recall correctly, the average american spends about 2000 hours a year at wage labor whereas the average Frenchman spends around 1700 (other countries are similar). Thus a salaried Frenchman making $40,000 a year equates to an American making $47,000 a year.

Throw in a 35-hour work week, annual vacations starting at twice as long as the american norm and going up from there, lower commuting costs, lower healthcare costs, etc.

Of course, "standard of living" is even harder to define objectively than productivity. At a minimum, you should state how you are calculating it.

I usually use the studies that the UN does (which is probably not valid in this crowd) on quality of life factors. There's also the empirical approach in which you simply ask people to rate their happiness -- I posted one such study in my first (second?) post in this thread.

Inflation-adjusted income certainly doesn't tell the whole story since, for example, the real cost of food has declined significantly.

Huh? The cost of food is a central part of the CPI calculation. And, according to the Department of Agriculture's Economic Research Service, the per-capita expenditure on food in 1960 was $1,532, in 1970 it was $1,668, in 1980 $1,849, in 1990 $1,988, and in 2000 $2,000 (not a typo). Those are all in 1988-normalized dollars.

http://www.ers.usda.gov/Briefing/CPIFoodAndExpenditures/Data/table15.htm

Ah, yes. You are always quite fond of pointing out your own wealth while talking about economic justice.

Only trying to inoculate against any charge of class warfare bias. In the short-term, at least, fixing what I think is wrong isn't going to help me, personally.

greg

""Social and cultural factors" are highly subjective and extremely difficult to prove or quantify.

Not really. And we have the existing examples of virtually every other (if not every other) western democracy"

1) There are social and cultural differences between us and even our closest "western" cousins.

2) I interprepted the statement is a different, more individual, way - not as referring to macro-economic traits of entire countries but to attributing the positition of individuals to "social and cultural factors".

For (extreme) example, there are extremists who believe that African-Americans have a "different sense of time" than Whites and firing an AA employee for being habitually late would be a form of cultural discrimination and, it follows, would label his/her resultant unemployment as resulting from "Social and cultural factors" rather than from individual laziness. Obviously this is an EXTREME example.

Less extreme cases are easy to come by. I have met shy/insecure people who refuse to speak up in the face of more assertive individuals and will silently go along with the group but then later complain about how they were "forced" into things by others - the kind who wont speak their mind unless you ask in the right tone with the right body language. Such a person will often have problems in an environment with multiple assertive individuals who dont wait to be asked before they offer an opinion and assume others will speak up without being asked too. Some people would blame their trouble of "social and cultural factors" because the social environment is clearly a factor, but other would call it "individual" things because, in theory, such a person COULD speak up but "chooses" not to.

In what states, and where can I sign up? :) I've been in practice for almost 10 years, now, and in the midwest, at least in my neck of the woods, lawyers fresh out of law school are lucky if they make $35K-40K during their first year..,/i>

Well a paycut wasnt what I had in mind if I did opt for a JD in the near future.

I'm too lazy to look for the link, but the latest statistics from the Indiana DWD show the average lawyer in Indiana making around $65k/year. (Which seems like a pretty reasonable average between the $100k+ salaries at larger Indy-area firms and the $40-50k salaries of prosecutors and other state-employed JDs, I think.)

$40-50k salaries of prosecutors and other state-employed JDs, I think.

FYI, our county prosecutor makes $95K (same as Judges), but that's about to go up I think.

Chief deputy prosecutor makes $72K.

Other county attys make in the $54-$60K/yr range.

None of those strikes me as overpaid, BTW. In fact, I think they go a long way to illustrating just-what-I'm-talkin'-about. Someone goes through college, law school, the bar, etc. only to come out making as much as a truckdriver did in the 1980s.

greg