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Archive for October, 2010

Liberty, Freedom, and Wealth: Americans Say Power to the People!

October 8th, 2010 3 comments

It drives me batty to hear so-called conservatives and libertarians prattling on about liberty and freedom without seeming to realize or even consider what seems fairly obvious to me: for the vast majority of people, liberty — the freedom to do what you want to do from day to day, year-in and year-out, and in the course of your lifetime — is largely a function of one thing: your bank balance.

Not some ebil gubmint man.

If you’ve got a million dollars in the bank, you’ve got a lot more freedom and liberty than if you have squat.

If that proposition has merit, you can actually go out and measure who has freedom and liberty in this country. The following has been making the rounds of the econoblogosphere, and speaks to that question directly.

Figure 2. The actual United States wealth distribution plotted against the estimated and ideal distributions across all respondents. Ariely and Norton, 2010 (PDF).

Lessons:

1. As I and many others have pointed out, wealth inequality utterly dwarfs income and consumption inequality. If you’re not in the top 40% — really the top 20% — you don’t own shit.

2. People aren’t even aware of #1. We all know how bad humans are at drawing accurate conclusions from casual day-to-day observations; this is just more proof. (As I’ve pointed out, 45% of Americans think they’re at least somewhat likely to be wealthy some day, when in fact only a few percent are.)

3. Americans want to live in Sweden. Their “ideal” distribution looks downright Marxist.

My unsolicited (and largely unsupported) opinion: I think that ideal distribution looks insanely utopian — both impossible and undesirable. There’s just not enough carrot there to to incentivize the strivers who make all boats rise. (Yeah I know: I hate the word “incentivize.”) If the wealth distribution looked like this ideal, I think we’d all be much poorer.

Libertarians and conservatives will have already drawn the obvious conclusion: these skewed estimates and wacky ideals result from a bunch of granola-crunching left-wing utopians. (Admit it: you’d already thought of that, hadn’t you?)

Not so much. Here’s Figure 3:

The estimates and ideals are remarkably consistent (with some small and fairly predictable skews by segment). And the estimates are consistently — and wildly — wrong. Everybody thinks the top 20% holds 55-60% of the wealth (it’s actually about 85%), and everybody thinks the bottom 20% should have about 10% of the wealth (it’s actually, effectively, zero).

Now one thing is certainly true: Big corporations’ freedom is seriously constrained by government — as it must be for the sake of everyone’s freedom and prosperity, including the corporations’.

Corporate capitalism is arguably the most powerful and efficient wealth generator (for all) in the history of the world. But a corporate-capitalist system left to its own devices inevitably pumps the wealth to the top. It’s an “emergent property” of the system. And as we’ve seen, greater wealth inequality (at least in prosperous countries, postwar) results in much slower growth over the long term (which is what matters), hence less prosperity for all.

So it’s not hard to understand why corporations want you to believe that big gubmint’s da problem: government is the only entity powerful enough to go up against the corporations, and give people anything like the widespread prosperity — and freedom — that they believe exists, and want to exist.

Who Does the Senate Listen To? The Poor, the Middle Class, or the Rich?

October 7th, 2010 1 comment

Here’s an analysis that’s somewhat dated, but that I came across and found interesting. Data from Larry Bartels (PDF).

At least during that time period, Senators of all stripes (in aggregate at least) simply ignored the opinions of low-income people. The correlations aren’t just small; they’re negative across the board.

Democrats at least pay attention to middle-class opinions — even more than high-income opinions.

Republicans — judging by their voting record in this period — only care about the opinions of high-income people. And they really, really, really care about those opinions.

What’s Wrong with Free Markets: “The ‘Wisdom’ of the Crowds”

October 6th, 2010 2 comments

This may seem obvious to many, but it’s been very clarifying for me.

People often argue against the free-market system — which is based on the idea of rational actors — by saying “people are obviously not rational actors!”

But that’s a stupid argument. It misses the point. Nobody thinks that everyone, always, makes rational decisions. That would be dumb. Rather, the Wisdom of the Crowds idea is that the market operates as if everybody makes rational decisions.

Here are the assumptions underlying that thinking:

The free market results in the best allocation of resources.

Because: People make decisions about what they want to buy, so resources flow to producers of those things.

Even though: Individual purchase decisions are often irrational — not delivering maximum utility to the purchaser (much less to society as a whole).

But: All those irrational decisions cancel each other out, so the rational decisions dominate, effectively allocating resources.

Because: The irrational decisions are random — non-systematic.

The final assumption — which most free-market advocates don’t know they’re making — is the fatal flaw underlying the belief system. (Or at least one of the fatal flaws.)

Bryan Caplan addressed this issue beautifully in his Myth of the Rational Voter. (Some comments on it here.) He points out (and demonstrates) that people’s voting choices are irrational. But more importantly, he shows that they’re systematically irrational. So rational choices don’t float to the top of crowd; they’re dominated by systematically irrational decisions by that crowd.

Example (mine, not his; he has lots of his own): People A) think foreign aid is a big part of the U.S. budget (it’s well under 1%), B) are naturally driven by jingoism and ethnocentrism, C) underestimate the personal and national benefits deriving from foreign aid (just ask Mullen and Gates), and D) don’t like taxes. So they vote for people who promise to cut the budget (hence taxes) by cutting foreign aid.

But Bryan is a free-market believer. So he doesn’t apply the same thinking to purchase decisions that he does to voting decisions. He doesn’t consider (or acknowledge) that in fact, the crowd’s purchase decisions are also systematically irrational.

Example: People A) vastly overestimate their own driving skills (almost everybody believes they’re above average, or even in the top 10%), B) underestimate the dangers of traffic accidents (#1 cause of death in children) while overestimating other dangers (child abduction or terrorist attack: vanishingly small odds), and C) greatly overestimate the value of maneuverability and visibility (sitting up high and looking down on others) in avoiding accidents (braking distance is what counts). So they systematically underspend on what matters for auto safety (braking distance, air bags, etc.), favoring power (“I need it to get out of dangerous situations”; yeah, right), style, size (which generally increases braking distance), and “handling” instead.

So in this case and myriad others, because of systematic human irrationality, the free market does not deliver the best allocation of resources — either for individuals or for society as a whole.

I won’t get into what we as a society do and should do given these facts. (If you want to, you could start here.) Just to say, it’s important to know the facts.

Religious Knowledge of a Devout (and Morally Committed) Atheist: 100%

October 2nd, 2010 5 comments

My results on the latest Pew survey:

Here’s how you did on these 15 questions (excerpted from the larger U.S. Religious Knowledge Survey) compared with a nationally representative sample of 3,412 adults. Read the Full Report

Your responses on the quiz do NOT affect the U.S. Religious Knowledge Survey’s results.

Take the test here. Or read all the Christianity/Bible questions below.

You’ve probably heard about it already, but short story, atheists and agnostics know more about religion than religious people.

Atheist even know more about Christianity than Christians do (despite the mealy-mouthed headline here):

White evangelicals and Mormons do know a little bit more about Christianity than atheists/agnostics (though given the overall sample size there’s gotta be pretty low statistical significance for these small slices.) But even so, they could only get 7 or 8 out of 12!? Must be a hard test.

Oh wait. Not so much. Of the twelve Christianity/bible questions in the full survey, I got 11 out of 12. Though I didn’t actually know the answer to two; on one I was able to eliminate one choice out of three, and won the toss on the other two. I also had a 50/50 chance of being “right” on the other (two-choice) one I didn’t know. So call it 10 out of 12.

I went into the survey and pulled out those 12 Christianity/bible questions. Here they are:

What is the first book of the Bible?

Will you tell me the names of the first four books of the New Testament of the Bible, that is the Four Gospels?

Where, according to the Bible, was Jesus born?
Bethlehem
Jericho
Jerusalem
Nazareth

The Book of Mormon tells the story of Jesus Christ appearing to people in what area of the world?
The Americas
Middle East
Asia

Which of the following best describes Catholic teaching about the bread and wine used for communion?
The bread and wine actually become the body and blood of Jesus Christ, or
The bread and wine are symbols of the body and blood of Jesus Christ

Which of these religious groups traditionally teaches that salvation comes through faith alone?
Only Protestants
Only Catholics
Both Protestants and Catholics
Neither Protestants nor Catholics

Please tell me which of the following is NOT one of the Ten Commandments:
Do not commit adultery
Do unto others as you would have them do unto you
Do not steal
Keep the Sabbath holy

Which Bible figure is most closely associated with a. Remaining obedient to God despite suffering [no item b] c. Leading the exodus from Egypt d. Willingness to sacrifice his son for God? [questions rotated]
Job
Elijah
Moses
Abraham

Would you tell me if a. Mother Teresa was b. The Dalai Lama is c. Joseph Smith was d. Maimonides was? [questions rotated]
Catholic
Jewish
Buddhist
Mormon
Hindu

What was the name of the person whose writings and actions inspired the Protestant Reformation?
Martin Luther
Thomas Aquinas
John Wesley

Which one of these preachers participated in the period of religious activity known as the First Great Awakening?
Jonathan Edwards
Charles Finney
Billy Graham

Don’t read this until you’ve answered the last question — spoiler:

Billy Graham was obviously not alive at the time of the The Great Delusioning. I didn’t have more than a vauge guess for the one about “faith alone” (Protestants?). Not that I care…