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Posts Tagged ‘Inequality’

Mmmm. Bacon.

Rochester Economics Professor Micheal Rizzo, who’s blog shares our affinity for Hayekian humility, had an excellent series of posts over the holidays. In the spirit of the Twelve Days of Christmas, he examined what the last century has shown us about the interaction of scarcity and productivity, and the effects on the cost of twelve resources, from salt and tin to cobalt and diamonds.

His point is that these goods are growing ever more scarce, yet generally the cost (computed in both work hours and real price) is much lower. He argues that this is not merely incidental to each commodity, but true as a general rule. Even something as fundamental as sweet delicious mouth-watering hickory smoked bacon.

He notes that the average American manufacturing worker earns a pound of bacon every 11 minutes, a decrease in real price of 73% since 1900. And all that despite nearly a century of farm policy that can best be described thus.

P.S. While googling ‘bacon’ images, these bacon-wrapped-scallops popped up. Set mouth to ‘water’.

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The triumph over scarcity?

Will Wilkinson picks up a nice tidbit from NYU’s Dean of Social Sciences, Dalton Conley, making this point;

Inequality — and its consequences — is the wrong target. It’s time for progressives to spend less time trying to prove the effects of inequality on health, growth, and politics and instead start focusing on opportunity for those shut out entirely.

There’s  a lot  of other great commentary, I suggest reading the whole post.

The point that a rising tide lifts all boats is echoed nicely in this video from Reason.tv

The gales of creative destruction are not about taking a set number of goods and distributing them, but constantly creating new ways of meeting or creating needs and demands, and desires.

Damn that Nick Gillespie can rock a leather jacket, and bust a Schumpeter reference too.

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Over at Cato Unbound, Elizabeth Anderson responds to Will Wilkinson’s really solid argument about economic inequality.  Will argues that inequality is not injustice in and of itself, but that it can indeed be a symptom of actual injustice.  If inequality comes about due to variation in skill, effort, performance, and chance, then there is no injustice.  If inequality comes about because some elite class is illegitimately withholding resources from the poor, then it does no good to focus on the inequality.  The injustice is the injustice itself.

Elizabeth Anderson makes an absurd argument, one that I had long suspected leftists who fixate on inequality might endorse:

Economic inequality can also lead to stigmatization. Adam Smith famously observed that, as the general level of consumption increases, so does the level of consumption needed by each individual to be able to appear in public without shame:

A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty, which, it is presumed, no body can well fall into without extreme bad conduct.

The consumption of the better-off thereby raises the cost of living for the worse off. The demands of respectable appearance can be crushing in regions where spiteful competition inflames a culture of conspicuous consumption. In the 2008 documentary Kids + Money, Lauren Greenfield depicts the competitive consumption among teenagers of all classes in Los Angeles, sometimes to the financial ruin of parents who are less well-off. One single mother, desperate to see her daughter wear socially accepted clothes, couldn’t pay her utility bills because she spent her income on a pricey t-shirt for her daughter.

Anderson is justifying redistribution by the state because people are sometimes stigmatized for not keeping up with fashion?  Am I cold-hearted because I have absolutely no sympathy for a parent who can’t deny an expensive, unnecessary shirt to their own child and teach them how to socialize?  Children are bullied for all sorts of reasons far more intangible and trivial than for the particular clothes that they wear.

This argument is absurd on so many levels.  Will redistribution mean that this kind of stigmatization would simply disappear?  Does Anderson really believe that the key driver of this systematic error she describes is inequality and not ten other social problems with the community, or the parents themselves?  Does Anderson believe this problem is widespread enough to justify redistribution, and all its costs?

Could the state possibly have the knowledge to analyze and act on how people will be stigmatized socially?  Maybe Anderson’s isn’t connecting the dots.  If the state did have the knowledge and the authority to “fix” a problem like this, it would be a totalitarian society.  That’s no exaggeration.

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Once a friend claimed to me that a free market was ultimately unsustainable because in the long run, all wealth would be channeled to one person.  The implication here is that the government provides a necessary check to prevent such injustice.  The claim is one that addresses complex social and economic features of how humans behave, one that seems intuitively correct to people that, so it survives as a factoid that’s passed around without much question.  The richest in society are richer now than they ever have been, because they’re withholding resources from the lower classes, right?  This is not the way economists think about the world.

Economists see trade as a positive-sum game, which means that when two parties make a voluntary exchange, both are better off.  Have you’ve ever thanked someone at a cash register and heard them thank you in response?  In a free market, wealth doesn’t accumulate to the richest by exploitation; it is produced from the bottom up.

Evolution has left us with an unfortunate bias to think in zero-sum terms.  Our ancestors functioned in a zero-sum environment, which means that one party benefited at the expense of another.  If two warring tribes were competing over resources, then inequality between the them was a signal of injustice.  In contrast, today’s economic institution, a free market, functions contrary to our evolved intuitions.  Zero-sum thinking is quite pernicious because it is so psychologically ingrained, and as such, it strongly motivates people to advocate for protectionism and all sorts of policies that decrease human welfare.

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