Tuesday, April 12, 2016

Advice to My Teen-Aged Sons

Bill and Joe,

“Dad, please tell me you are not going to lecture us yet again on blah blah blah!”

Everyone hates to be lectured.  You cannot deal with the ideas of a lecture at your own pace – the lecturer forces the pace on you.  So the trick is just to pay enough attention to be able nod at the appropriate times, but otherwise sing a song to yourself until it’s over.  Am I right?  Reading, on the other hand, allows you to digest some ideas at your own pace.  Hence this little memorandum for your consideration.

“Dad, what the heck are you talking about?”

Each of you is on the cusp of big changes as you enter high school, and you are going to have to make a lot of decisions that will have a big impact to you over the next four years and beyond.  Most of your prior decisions in your life didn’t carry with them any real lasting impact.  That is about to change.

“OK, we get it, lots of tough decisions coming our way, can we stop reading now?”

Well, you can, but before you do you have to realize that while some decisions will be obvious, most of the big decisions don’t present themselves as decisions.  If your buddy at school says to you, “hey, you and I are cool guys, let’s go get some beer, drink it all, and then drive home,” this presents to you a very obvious decision point.  Less obvious is the more repeated innocuous (look it up!) version of something similar – “hey, do you want to hang out?”

“So, whether or not to hang out with my friends is a big decision?  Wow Dad, just Wow!”

In and of itself on any given day it is not a big decision at all, but cumulatively over the next four years it could be huge.  You have approximately 35,000 hours to live in the next four years.  If you sleep eight hours a day … well, knowing you guys, let’s make that 9.5 hours a day, then you have 21,170 hours of awake time over the next four years.  Subtract the time you spend in school and we get about 15,822 hours.  That amounts to about 76 hours per week, but of course in the summers you’ll have more than that, and during the school year less.

“Great dad, way to demonstrate your simple math abilities.  Is the point of this that you don’t want us to spend 76 hours per week bumming around with our buddies?”

Well, that’s up to you.  It’s your decision.  Not really, but let’s pretend that it is.  It’s time for me to introduce a little economics into the equation.  Decision making in economics is about trade-offs.  For example, if I buy a new TV, I won’t have money to go to Cancun for Spring Break.  I cannot do both, and so I have to choose where to spend my money based on what I prefer more.  Time is like money – you only have so much of it, and you cannot do two things at once.

“But Dad, look at me, I can walk and chew gum at the same time.”

I can’t look at you – you are reading this, so stop trying to be funny.  Now where was I?  Time is scarce, and doing one thing precludes other options, so you have to start thinking of how you spend your time as a decision that has lasting implications.  Time is like money in another way – in general you have two ways to spend it.  With money, you can either spend it on what economists call consumption goods, or you can invest it.  A consumption good is anything that you want, that brings you pleasure.  It could be a new video game, a trip to the movies, even travel.  An investment is different.  In general, you don’t get pleasure out of making an investment, because the purpose of the investment is to make more money down the line, allowing you to spend more money on the things you want – i.e. consumption.  So, as an example that has nothing to do with Texas, you could decide to take $20, go to the movies, and laugh at stupid Will Ferrell jokes while choking on your popcorn, or you could invest that $20 in a snow shovel.  Having the snow shovel enables you to make money shoveling walks on snow days.  Maybe one good day will net you $100.  The investment results in a recovery of the initial cost, plus $80 additional dollars that allows you to go to the Will Ferrell movie and still have $60 left over.  So when you invest, you give up something you would otherwise want today, in exchange for getting more things you want in the future.  If you don’t invest, you won’t have as much to spend in the future.

“Can’t I just ask you for the money and not worry about shoveling snow?”



No.  You can’t.
But forget about money, let’s get back to time.  Or more precisely, let’s talk about how the two relate.  At your age, you have very little money, but you have lots and lots of time. Time with no money is like having a good looking girlfriend who is sick all the time –it’s nice to have, but there are limits to how much fun it affords.  Just like with money, you have two options with your time – you can spend it doing things that are fun, or you can invest it.  An investment of your time doesn’t give you more time tomorrow, but it does give you either more money or more time doing something you really want to do. 

“Dad, the fact that I am nodding agreement is really just a way of trying to make you feel like you are making sense right now, but you are all “consumption this and investment that.’’

Yeah, I get it.  Hazzards of having an economist as a dad.  Let’s talk about some concrete examples.  Playing video games, or just hanging out with your friends – these things are like consumption spending.  They are fun while they last, but there is no later payoff to these activities, so as compared to investing your time, they come at a cost.  Namely, by not investing that time, when tomorrow rolls around, you have less money to spend, or you otherwise lose out on something you want.  Forget about money and let’s talk about how investing or consuming your time effects how your future opportunities are effected.
For example, if you want to make the high school basketball team, what you are saying is that when the season rolls around, you want the coach to pick you and then you can participate in all of the practices and games over the three-month season.  Your goal involves a decision to spend a lot of time during the season dedicated to basketball.  If you don’t make the team, you won’t have access to the gym, the coaching, and the teammates to scrimmage with, and you’ll be left with lots of time on your hands that you would rather be using to play basketball.  Now, in the months prior to the season, your time allocation decisions will affect your prospects for making the team – if you goof around and don’t practice, you won’t make the team.  If you invest your time in getting better, you improve your chances of making the team, and getting an opportunity to spend your time in the future the way you want to.  So you see, decisions about how you spend your time today effect what opportunities you have for spending your time in the future.

“So you want us to spend 76 hours a week practicing basketball?”

No.  I want you divide it evenly between baseball and basketball.  Just kidding.  All I want is for you to realize that there is a connection between how you spend those 76 hours and what opportunities will become available to you.  How you spend your 76 hours per week over the next four years is going to determine a lot, but most people don’t relate their goals, which they regard as decisions, to the allocation of their time, which they simply roll with day by day.

So, for example, you may decide on a goal to make the U.S. curling team for the 2018 Winter Olympics.  Saying that out loud to your buddies doesn’t really commit you to anything.  If it’s a decision you truly make, you have to make it every day thereafter leading up to the Olympic trials in how you allocate your ...  I am sure you can complete the sentence.  Oh, you can’t?  Time, you nimrod!  It’s about allocating your time.

If you spend your 76 hours per week playing NBA 2k14, don’t expect to get any better at silly activities like sweeping ice vigorously in front of some smooth stone – that takes hours of practice sweeping ice vigorously in front of some smooth stone.  The grand decision is to set a goal to make the team, but this is followed by thousands of little micro-decisions that are either consistent with that goal, or incompatible with it.

“But what if we spend 76 hours practicing curling with our buddies?”

Yes, that is a great idea.  You will hopefully make friends who share the same interests and have similar goals.  So if playing high school basketball is a shared goal, it is a great idea to make practicing together one of the main ways that you hang out together.  So there is some potential ability to do both.  But if your friends don’t share that interest – it is an “either – or” decision – either I get better at baseball, or I hang out.

Remember, when you invest money rather than buy something for consumption, you are giving up something fun today.  Investing involves a sacrifice with the hope that in exchange for giving up something today, you’ll get something you want even more tomorrow.  It’s about delayed gratification.  And the thing about it is this – most things you will want in your life require sacrificing other things in the short-term in order to make the necessary investment needed to deliver those goals. 

“OK, so you want us to hang out with our friends only if we are all sacrificing something for the future?  76 hours of pure investment?”

Ahh, here’s the beauty.  You can get by on a lot less than 76 hours and realize a lot of your goals.  But you can’t get by on zero hours.  Many kids rely on zero hours, and then they are left to wonder why opportunities don’t come their way later on.  Think about how you spent your free time in just the last week, and then ask yourself what long-term goal is served by how you spent that time.  If you spent it watching TV and playing video games, the answer is it didn’t serve any long-term goal.  So if you are starting at zero – and many kids are – even just 30 minutes a day dedicated to some goal will lead to a big improvement.   

“But dad, you know we have a lot of homework and studying that we have to do for school, so that kills a lot of hours as well.”

Yeah, you are right.  And that, in addition to the hours you spend in school, is a large investment of time in learning things that will provide you better opportunities tomorrow.  In the most obvious case, if you never learned to read and write, you would have a difficult time learning how to do any skilled job, and your income prospects would be very limited.  Let’s pause and think about that investment for a moment, because you don’t even realize how much is being invested.

From your perspective, since you are a free-loading teenager, all you think about is the time aspect.  From first grade through high school, you will spend about 36 hours per week attending school and doing homework.  So that is a pretty big sacrifice, but it is not the entirety of the investment, because schools cost money.  We have to pay for teachers and facilities and for the byzantine bureaucracy (but that’s another story).  That costs us roughly $120,000 to get you from first grade through high school.  And then there is time that your mom and I spend helping you with homework, keeping you on track, driving you to and from school.  Hopefully, you’ll spend another four years in college, requiring the same or more hours per week, and costing you, in combination with good old mom and dad, another $200,000.  By that time, with a high school degree, you are probably also foregoing $100,000 of potential earnings.  In total, that is $420,000 and 30,000 hours of your time to get you from being a kid carrying a Sponge Bob lunchbox to a college degree.

“Wow, I never looked at it in that way before.  You oughta be an economist, dad!”

Yes, I’ve been told I have a knack for that.  So here is the bottom line – think about how much of your extra time is going to add to that investment, and in what way.  Because guess what – all of those numbers and hours just puts you on par with anyone else with a college degree at the end of the day, and the world is chock full of Starbucks barristas that have a bachelor’s degree.  The good news is it’s not chock full of kids who have a degree in a technical field from a prestigious school.  And if you can achieve that, you’ll be on the right end of that Starbucks counter on your way to a promising job.  The bad news is that who falls into that category will depend in part upon who adds the most to that baseline investment. 

“Dad, it seems like you are flipping between school work and sports, so which is it?”

It’s both, because both have their place.  And both have similar attributes that help you to develop certain crucial lifelong skills.  Both involve setting goals.  Both require work to achieve the goals.  Both provide important feedback about your success or lack thereof.  Both will involve setbacks, and learning how to trip without falling is important.  Both will also involve the realization that certain goals are beyond your reach, and you will learn that there is honor in giving it your all even against the odds, and even if it comes to nothing. 

“What if I fail in reaching a goal?”

I don’t know.  That’s never happened to me… Just kidding.  If you are not failing in some goals, you’re not setting the right goals.  Coach Chris had a great comment one night after your basketball training – “what they don’t tell you is that you have to fail and fail and fail again in order to succeed.”  He was talking about basketball, and it certainly applies there. If you are practicing a new move in isolation, you will not be very adept at first.  You’ll dribble it off your foot, or your footwork will need work, etc.  You have to repeatedly fail until it becomes easier.  And then you get into a one on one game, with a defender, and you try the move, and you fail again and repeat until you can do it with some degree of success.  And then finally you do it in a real game situation, where there is helpside defense, etc., and you repeatedly fail until you don’t.  But it applies in other areas as well.  Venture capitalists are people who lend money to entrepreneurs who are trying to start new businesses, especially tech businesses.  There is a rule among venture capitalists – never lend money to an entrepreneur who hasn’t already failed two or three times in trying to launch a business.  Venture capitalists understand that a would-be entrepreneur has to fail before he can succeed. 

“Does it make sense ever to abandon a goal that seems unreachable?”

Wow, that’s a great question, and the answer is yes.  One of the most useful white lies people tell kids is that they can be anything they want to be – it is important for kids to believe that, even if it’s not true.  Looking at sports as the most obvious example, practically every athletic kid growing up wants to be a pro athlete, and probably 1 in 10,000 achieves that goal.  That 1 kid does not make the pros because he is unique in being the only one who believes that he can, and acts accordingly – it is more likely that he made it because he is 6’10”.  No matter how much you may believe you can someday play pro basketball, you cannot believe yourself into growing to be 6’10”, and there are millions of athletic 6’2” guys. 
And here we get back to the limits of your time.  Frankly, if your grades are good, I have no problem with you pursuing a completely unreachable goal that has no chance of success, because you still learn the value of hard work.  But what you may find is that other opportunities become available to you that become comparatively more attractive, and you cannot pursue both at the same time.  I got cut from Freshman basketball and was devastated.  At that point I had to make a decision – do I try to improve and try out again next year?  If I decided that, it would have been wise for me to quit cross country and track, because those two sports obviously took a lot of time.  But I knew if I stuck with cross country I’d probably be part of a state championship team eventually, and all of my friends were on that team.  The two goals were incompatible, so I had to choose one. 

To be perfectly honest with you, in looking back on it I failed to make the basketball team as a freshman because I wasn’t really committed to that goal.  To be more precise, I was afraid of making it a goal, and then failing.  That summer I could have gone to the public courts and played two hours every night.  But I made the “decision” not to.  I didn’t sit down one day and say – “I will not go to the courts this summer to practice” -  but how I used my time was completely consistent with that kind of statement.  Even though I preferred playing basketball to running, because I was afraid that I might try and still fail, I effectively decided to not try and see what happened.  That way, in the back of my mind, I could look back and say I could have done it if I had tried.

That is the only kind of regret you should have in life.  You should never regret trying and failing, but you should always regret not trying because you feared you would fail.  The world is full of people who say they could have done this or could have done that followed by some excuse that exonerates (look it up!) them from responsibility for the fact that they didn’t.  Don’t be the kid who could have made the team if he had practiced during the summer.  All you are telling people is that you have a talent that you were too lazy or scared to develop.  If you try and fail, there is no shame.  Your talent is God-given, so it is not to your credit; what you do with that talent, however, does speak to your character. 

Getting cut from freshman basketball is really a small thing in retrospect, and to be honest, as a 5’9” player my upside was limited anyway.  But the same dynamic nearly did me in on a much larger scale when I was working toward my Ph.D.  I had a profound fear of failure that nearly led me to just not try, so that I would be able to rationalize my failure by claiming I could have complete the Ph.D. but I just really wasn’t interested.  But one day it dawned on me that if I was going to fail, and there was a good chance I would, I didn’t want to have an excuse.  I wanted to be able to say that I gave it my all, but just wasn’t up to the task.  I wanted the reason for failure to be a lack of God-given intelligence, not a lack of commitment or effort on my part.  That fortunately worked out for me, and financially it has probably made a big difference.  But even if I had failed in that way, I knew I would never regret the effort, whereas if I had just given up I would always have a nagging regret.

“How do I know what goals to set?”

It’s less important that you set a specific goal than that you set a goal period.  At one point in graduate school, I was going nowhere with my progress toward my Ph.D., and thought constantly of dropping out.  Writing a Ph.D. thesis is not something you can simply sit down one day and do, and I really had no idea where to start.  So I came up with a goal that had nothing to do with my Ph.D. – I was going to run a marathon.  Now I had something to motivate me to get up in the morning, and every time I stuck to my training it was a validation of my ability to stay disciplined.  It spills over into other areas.  It is not surprising that high achievers are high achievers in many areas of their life – professionally, in their family life, in their community, and maybe even as an amateur athlete or coach. 

“So you don’t know what goals we should set?”

Of course I have my own ideas.  Let’s start with school.  With respect to your education in high school, your main goal should be do what you have to do to create good opportunities for yourself when you graduate.  That is, work to be able to get into a good college.  It’s pretty simple – take challenging courses and learn to develop the study habits to do well in them.  Getting good grades is not necessarily about how smart you are.  Your habits will matter a lot.  I was a very efficient studier – I didn’t screw around and I developed the ability to hold my concentration for an hour at a time without taking a break.  In college, I’d see guys heading to the library to study for a final all day long – eight hours with books spread out over a table with a few friends – and I’d get as much done as them in 2 or 3 hours of intense study.  It’s quality, not quantity that matters. 

Right now I see how you guys do work – and this is partially a function of your age – you cannot hold your concentration that long to learn complex things.  This is why, for example, when you see your teacher go through a math problem in class and it seems to make sense, you can still have difficulty when you get home.  It is one thing to understand the logic as she goes from step to step.  It’s another to have the working memory to whip through the steps and do the simple things in your head rather than dragging out a problem for twice as long as it should take.  It’s just like basketball in that respect – your speed is going to be slow at first in working through new problems.  You have to keep your concentration and try to work through problems as fast as you can in order to do well on a test, because a good test is testing not only your comprehension, but your speed.  Writing is similar – I do a lot of writing, and it requires sustained concentration.  If you space out every two minutes and start thinking about what you’re going to have for dinner, it will take a much a longer span of time to get anything achieved.   

Intelligence is partially a function of your working memory – and you can do exercises to improve your working memory just as much as you can improve your muscles.

“How do I keep track and make sure I am working consistently toward a goal?”

You have to have a plan, and the plan has to include mini-goals along the way.  It is also important that you try to measure results.  There is a saying in business management – you can’t manage what you can’t measure.  You should work to try to convert a “big” goal into a series of measurable mini goals.  For example, if your goal is to become a better basketball player, you could have several mini goals that are measurable, such as 1) increase your vertical jump by 3 inches; 2) increase your foul shooting percentage (gauged by a weekly test of 20 foul shots); improve your dribbling (again, measured against some test that you construct). 

And here is the importance of measurement – if things are not improving, this is a sign that you are not progressing, and at that point you have to step back and think about why you are not seeing results.  It could be due to fatigue, it could be due to bad technique, it could be due to lack of directed practice.  But you have to figure it out, especially with respect to errors of technique.  If you are not progressing because your hitting form or shooting form is bad, more practice will just further ingrain bad technique, and it will be harder for you to change your technique.  Coach Chris has said it to you guys – you have to be a bit of a scientist about your practice; if something isn’t working, like your shot is consistently short, you have to address potential reasons why.  You may not be at the right 90 degree angle, you may be bending your back, you may need to focus on the back end of the rim, etc.  But you shouldn’t just continue to take short shots – you need to step back, diagnose, and correct.

You should have a journal to record your workouts and your progress.  This helps to keep you motivated as well, because you can see your measurable progress.  Without measurement and tracking, it is easy to lose sight of your progress, which reduces your confidence that you can improve by continued practice.  If you see how far you’ve come, it makes you more confident you can make further gains.
“Jeez dad, this is a lot of very small font pages to read – can we be done now, or is there a quiz?”

No quiz, but you are not done yet.  Your work is actually just beginning.  It is extremely important that you take the effort to write down some goals.  For academics and learning, I want you to set a goal for your entire high school tenure that covers both grades and SAT scores.  Based on that goal, I want you to set mini-goals for your freshman year.  With respect to the SAT, I want to buy you guys a practice test book that you can work through this summer to get a baseline of where you stand.  Based on that, we can set some mini goals for you to work on through the summer.   With respect to sports, I want you to set a major goal (or goals) for your freshman year only, and then set some mini goals.  Based on your mini-goals, we can work together on a practice and workout schedule that is consistent with those mini-goals.  It is very important that you actively drive and motivate this process – if you don’t think it through, you simply will not have the same level of commitment to it.

Monday, March 07, 2016

Government Theft, and the "You Didn't Build That" Idiocy

So when last we talked, it was about the fact that any proposed policy change involving either the distribution of the tax burden or welfare programs was highly likely to be a change that that produced both winners and losers versus the status quo. The status quo holds no special status, with the possible exception that is the devil we know, whereas a change to the status quo may bring about unintended (but often not unforeseen) consequences. 

As such, people generally decide (or like to think that they decide) between the status quo and a redistributive change on the basis of some understanding of what they regard as fair.  And here is where the works get all gummed up, and certain fundamental differences between commie liberals and freedom-loving conservatives emerge.  Fairness, unfortunately, is in part in the eye of the beholder; moreover, even when two people agree in principal about what is fair in the abstract, they may have a very different understanding of the mechanisms by which all of the goodies in the economy have been distributed absent, or prior to, the heavy hand of government. 

To see how people on both sides agree in principal, we can say straight out that (barring a few outliers) most people regard it as wrong and unfair for someone to break into your house and steal your possessions.  Indeed, there is no groundswell on the left for changes in the law arguing that theft should be legal in certain circumstances, such as where the thief is poor and the victim rich.  Theft on this micro-level is widely considered an act of violence.  In fact, the primary argument against anarchy is that some government is necessary, to be endowed as a legitimate “monopoly on violence,” to protect people from just such plunder.  If we all spent our days with no police protection, we’d split our time in four ways –protecting ourselves from theft, working to produce something, robbing others, or watching Netflix.  As it stands, with effective laws and enforcement, the “protection from theft” is provided by specialized labor, and the rest of us can concentrate our time on productive work and leisure.

So while it seems that everyone would feel personally violated if five people broke into their home and stole all of the money they had stuffed in their mattress, a slight tweaking of our example draws a quick divide between left and right.  If five poor people rob my house, everyone understands this is wrong, and doesn’t begrudge them receiving a just punishment.  But suppose those same five guys lobby the government to tax me, with the proceeds going to those five to be divided evenly.   If I resist the tax, now I am the one on the wrong side of the law, and failure to pay it may lead to garnishment of my wages, government seizure of my property, or jail.  My peaceful resistance will be met with government “violence” in the sense that force will ultimately be employed to take my money, just as it would with an armed burglar in my house. 

Clearly this goes on at a macro level in any welfare state; it is not as personal as the example suggests, but the broad application of a redistributive tax and welfare scheme is ultimately doing this same thing – it is taking by force from some for the benefit of others.  There is no distinction between theft via government policy and theft the old fashioned way. 

A government that protects us from theft, in any guise or form, allows us to concentrate on work and the pleasures of family and friends in our leisure time.  Because we can dedicate more time to these things, and not worry about stealing from others or protecting ourselves from others, our lives are inexorably richer.  And here is the rub – once government is seen as a legitimate mechanism for redistribution, we lose that efficiency – now we have to decide to split our time between work, leisure, lobbying the government to plunder others for our sake, or lobbying the government to keep others from plundering us.  The pie gets smaller because the latter two categories are not productive – they are what economists call rent seeking activities.  They do not add to the size of the overall pie we get to split; in fact they subtract from it by diverting our time in part to such activities.

I know, I know – the above analogy is so crystal clear that no one can possibly argue that government redistribution is fair in a way that direct theft is not; and, like widespread direct theft, government redistribution has the deleterious effect of making us poorer overall.  So why is the left so accepting of government plunder and redistribution?  The short answer is that in part they view it in the opposite fashion – to them it is the returning of stolen property to rightful owners.  And this is where the Bernie Sanders socialism that underlies all of the American left comes into play – unfettered market capitalism, in their view, is in large part theft from the poor by the rich through “exploitation” or, in the case of some groups, through “discrimination.”  And that exploitation is, in the view of the left, insufficiently redressed under current tax and welfare policies – more is needed to counteract the theft.

The free market, in other words, gets it wrong when we look at how all of the goodies of society get distributed.  (They think it gets it wrong in other respects as well, but the primary focus is upon its distributional consequences.) One particularly popular variant of the free market injustice  argument is the “you didn’t build that” meme from Elizabeth Warren, echoed by Obama.  The quote in its entirety:

“There is nobody in this country who got rich on their own. Nobody. You built a factory out there - good for you. But I want to be clear. You moved your goods to market on roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory... Now look. You built a factory and it turned into something terrific or a great idea - God bless! Keep a hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Scientific measurements of the ratio of asininity to words in this quote from Elizabeth Warren shatter what scientists had thought was humanly possible.  Let’s unravel the four basic claims – you, the rich guy who started a successful business, owe us, the poor schleps, because 1) you didn’t get rich on your own; 2) we built the roads you move goods to market on; 3) we educated your workforce; and 4) we are keeping marauding bands from taking everything you have.

First, it is indisputable that no one ever got rich on his own.  (I am going to use masculine pronouns throughout, because I am pretty sure Ms. Warren has some convoluted feminist argument that rich women would be somehow exempt from the above arguments).  Everyone has parents, relatives, mentors, teachers, and friends who they would credit for helping them get where they are.  It is the implication that Warren draws from this truism that is shockingly stupid.  The instrumental people generally aren’t asking for the rich guy to pay them back.  And there is something truly twisted in suggesting that what you owe to these people, who ask for nothing in return, should be collected by the government and distributed to a bunch of random people who had nothing to do with your success.  This is like being invited to someone’s house for a dinner party, and in lieu of sending a thank you card, you send a check into the government.  Gratitude is owed to those whom it is owed to; not to amorphous “society.”

It gets worse from there.  The entire quote is premised on a straw man assumption that either factory owners do not currently pay any taxes, or alternatively that someone is arguing that they shouldn’t have to.  The status quo tax system is the complete opposite of the Warren straw man.  U.S. corporate taxes are among the highest in the world, so any argument in favor of reducing them is not the same as an argument in favor of eliminating them, and few are arguing for that (although complete elimination of corporate taxes would be good economic policy). And if her quote is directed toward the owner of a business in his personal capacity, who has gotten rich, the fact of the matter is that rich owner is paying a highly disproportionate share of income taxes, even excluding what he may pay at the corporate level.  (If he owns a C-corp, any profit he makes in the business is taxed at 35 percent, and if he dividends those profits to himself as owner, he pays additional tax).  The top 1% of income earners in the U.S. account for 45.7% of federal income taxes; the top 20% pay 84% of federal income taxes.  So the “rest of us” didn’t entirely pay for the roads that bring the factory goods to market, or for the education of the workforce the business owner relies on; in fact many didn’t pay squat for it.

Second, the factory owner is not profiting from the fact that public roads that can be traversed for free make it less costly to get his goods to market.  If he had to pay a toll for a private road, he’d pass the cost of that straight onto the customer, and because he doesn’t pay a toll, the customer gets the savings.  There is no business owner who is inflating his prices and his profits because people suffer from the illusion that he is paying exorbitant transportation charges.  So with respect to the contribution of public infrastructure to commerce, the benefits fall almost exclusively to consumers, not producers.  Any infrastructure that greases the skids of commerce no doubt contributes to his ability to sell goods in more far flung places, but because all of these transactions are voluntary, there is mutual benefit to him, his workforce, his suppliers (who is also see increased demand), and his customers.  Each of these people in turn is further enriched.

Moving on from infrastructure, Ms. Warren seems to think that the successful business owner owes something to society for all of that great productivity stuffed into the heads of his workforce, all of the benefits of which somehow flow to the business owner.  Here is a little pesky fact about employees that almost 100 percent of employers can attest to – they expect to be paid for their work.  The only exception to this rule is sycophantic power-hungry recent college grads who will gladly work for free for congresspersons who are only too happy to get their services gratis (so this highly annoying attribute of the workforce is probably lost on the good Senator); in general, no one is rushing to the dismal factory as a volunteer.  Because the business lobby has been entirely unsuccessful in its efforts to legalize indentured servitude in this country, we know a little something about each of the factory owner’s employees – each prefers the job he has to any other job in that he is capable of getting.  Otherwise he’d fly the coop.  It is these workers who are the primary beneficiaries of their own education, not their employer.  And of course these workers also pay taxes.

What Ms. Warren lacks in intelligence, she makes up for in prose style, as she saves her most shocking claim for last – that the factory owner should foot the whole bill for government (or at least significantly more than he does) because government is the one keeping the marauding bands from taking everything he has.  There has never been a more revealing quote about the immorality of the welfare state than this.  It is the argument of the mafia – we, on behalf of the people we represent, want you to pay us for protection from the people we represent. We can do this the hard way, or we can do this the easy way – you decide. 

The social contract, then, has nothing to do with a universal rejection of legitimizing theft in society.  Apparently everyone is OK with theft, or at least the governing majority is just fine with it, and the trick of government is how to figure out the optimal way to do this while keeping the peace.  You don’t want to steal so much that the factory owner shuts down the business, or never starts it in the first place, but short of that every dollar you make is fair game for us to take.  And if you should balk at our suggestion about how much of the total bill we stick you with, we’ll let the pitchforked mob find you where you sleep.

This same idea was shamelessly put forth by Obama, who said as much to Wall Street in the aftermath of the financial crisis – I am the one keeping you guys safe from the pitchforked mob, so you better play ball.  Actually, laws on the books which make violent crime illegal is what keep us all safe, including those on Wall Street, and our protection under those laws is not (and should not be) contingent on certain behavior from an otherwise disfavored group.  It is the duty of the executive branch of government to enforce those laws even when it is otherwise unsympathetic to the potential set of victims.  Obama says shit like this all of the time, and no one seems to have an issue with it.

I’ll close with remarking how bitter and ungrateful the entire tenor of her quote is toward entrepreneurs and business owners.  If they never paid a dime in taxes, such gratitude will still be owed in spades; the fact that they do in fact pay the lion-share of taxes and still decide to stay in business, rather than cashing out and sticking their toes in the sand on a warm beach with a Corona in hand for the rest of their lives, makes gratitude even more deserved.  And then there is Ms. Warren, the poor oppressed Indian squaw, who has gotten rich through manipulating affirmative action policies, rather than doing it the old fashioned way, by investing her money in a business where she risked losing that investment entirely.   She has no employees she feels responsible for, no suppliers who are thankful to her for her business, no customers who are enriched by the consideration she puts into her products – she has only the gratitude of bitter losers like herself who ask not what they could do for others, but instead what others can do for them. 

Wednesday, February 17, 2016

Beyonce's Political Philosophy? and The Myth of Bi-Partisanship

What’s the Super Bowl halftime show good for if it doesn’t distract the narrative away from overpaid steroid-riddled athletes to self-indulgent “artistes” paid to mimic strippers while delivering an apparently much needed dose of unasked for uninformed political commentary?  Thanks Beyonce!  I for one can say I wasn’t at all offended by what many are saying was an anti-police message, because I couldn’t hear a word she was screaming.  I do not know if it’s an evolutionary inspired impairment to certain senses, but when a woman starts gyrating on an imaginary stripper pole, my sense of hearing isn’t exactly taking precedence over other senses.  And as for the Black Panther inspired outfits, how did anyone take the Black Panthers seriously if they strutted around in stockings and leotards?  “Oohh, you guys are baaaad asssss!  Where’d you get those sheer stockings?  Aren’t you afraid to get a snag in em when your robbing banks and sheet?”

I’ve said it many times since the famous Janet Jackson halftime performance – our whole culture is now a wardrobe malfunction.  Adele seems to be the only self-respecting female singer these days.  All of the others have bought into the false narrative that making your music and performance primarily about titillating teen age boys (and men who wish they still were) shows you are an edgy risk-taker who demands to be taken seriously; in fact, any claim you have to being taken seriously goes out the window when your “dance” moves are intended primarily to imitate one half of the beast with two backs.  I won’t even get into Beyonce’s politics on this one, or the hilarious “down with the struggle” courage it takes a billionaire with no talent to trumpet the cause.  It’s laughable that Beyonce thinks we want our politics and titillation from the same person.  You generally don’t see guys lining up at strip joints to seek advice on who to vote for in the primary.


Crumudgeon rant over.  Or maybe not - is it ever really?  Now it’s time to educate the people with some funky economics.  Here’s a basic primer in the economics of understanding presidential campaigns and the empty rhetoric of the need for bipartisanship. Economists use the term “Pareto Improvement” in reference to a change from the status quo that could improve the lot of some in the polis without hurting anyone else.  There are generally two potential tacks in campaigning for president, although they are not mutually exclusive: 1) pretend there are all these Pareto improving policies out there that could make everyone better off without harming anyone; or 2) pick a side you want to back in policies that clearly are not Pareto improvements, which favor some people at the expense of others.  Today I am going to focus on the second.

When your politics is more or less dominated by fights over redistribution (whether you want more or less), you are never talking about a Pareto Improvement that you want to make as president – you are talking about changes in policies that make some people worse off, and others better off.  And so your campaign will be focused on defining those who would win under your policies as deserving, and defining the losers from your policy as anti-American leeches.  If your Bernie Sanders calling for more people on the dole, or a more comfortable dole, this is only right given the damage done by Wall Street speculators, who are the true enemy.  If you are a conservative trying to re-instill work for welfare (ended by Obama), it is only right to limit the extent to which welfare queens can live off of the hard work of the middle class.  You get the picture.

Redistribution is broader than just welfare programs; the distribution of taxes also obviously effects what everyone has in their pockets after the government takes its protection money.  If I want to redistribute $10 from Peter to Paul, one simple way to do so is to increase Peter’s taxes by $10 and lower Paul’s by an equal amount.  There is no welfare payment going to Paul per se, but the effect is no different than if Paul’s taxes staid the same, but he received a check from the government for the extra $10 it collected from Peter.  So fights over tax policies are also principally fights over redistribution of income. 

So here’s the thing – there is no change to tax policy or welfare policy in any direction that does not involve both winners and losers versus the status quo.  (This really isn’t true, as I will discuss in my next blog, but let’s just pretend for now it is).  As such, there is no change in these policies that could possibly be expected to engender bi-partisan support.  If one party’s primary constituency is favored by such a change, it is often the case that the other party’s constituency is harmed.  And this is no mere coincidence – each party will obviously try to advocate for the interests of its core constituencies; because the interests of those core constituencies are often adverse to each other, the parties will clash. 

There is generally no such thing as a bi-partisan solution in any issue involving redistribution; there is only a one-sided capitulation, if only partial, to the demands of the other side.  And compromise should not be confused with bi-partisanship.  If the Democrats seek to double welfare benefits, and Republicans seek to maintain the status quo, a policy change that gets the support of Republicans and increases welfare benefits by 50% is not a bi-partisan measure relative to the status quo – it’s a partial capitulation for Republicans, a loss for their constituent group, and a clear gain for the constituency of the Democrats.

I remember in a 2012 election debate Joe Biden trumpeting his bi-partisanship in the Senate; my memory is a little foggy here, but if I recall it consisted of a vote that was joined by both sides to limit the trafficking of pornography via the internet that featured small puppies in rescue shelters who are clearly not of the age of legal consent, or something very similar.  Such is the scope for genuine bi-partisanship – it is limited to issues that are obvious no-brainers, and which probably do not address any real problem.  Both sides can agree to run the risk of losing the votes of the rescue shelter internet puppy pornographers lobby, rather than take their chances of losing every other voter by backing that lobby.

Once you understand that redistribution is about both welfare and tax policy, you can understand the comparative strategies of the two parties – in both cases it could be crudely considered an attempt to favor the respective ends of the income distribution by bribing the middle class to join them.  Republicans are primarily focused upon claiming all taxpayers as their constituency, as opposed to people on the dole.  So the strategy is to say that we can and should cut all of your taxes at the expense of the shiftless people on the dole, and middle class people will reap the benefits.  You work hard; they don’t – end of story.  Democrats want to pit certain taxpayers against others, and keep the conversation as far away from welfare policy as they can; hence the rich are not paying their fair share.  The message – hey middle class guy drinking Miller High Life after a long day in the mill, we can cut your taxes if we get the fat cats who are on their yachts smoking illegal Cuban cigars hand-crafted by five-year old kids enslaved by the commies (oh wait, they’re legal now) to pay their fair share, and never mind about that welfare.  

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