It is, after all, a sound instinct which puts business below the professions, and burdens the business man with a social inferiority that he can never quite shake off, even in America. The business man, in fact, acquiesces in this assumption of his inferiority, even when he protests against it. He is the only man who is forever apologizing for his occupation. He is the only one who always seeks to make it appear, when he attains the object of his labors, i. e., the making of a great deal of money, that it was not the object of his labors.
H.L. Mencken, “Types of Men 7: The Business Man”, Prejudices, Third Series, 1922.
July 11, 2015
July 3, 2015
Frances Woolley on the hidden advantages even a modest amount of money can provide:
Less often observed is that wealth itself generates consumption benefits, even if one never spends a dime of it.
I own a 12 year old Toyota Matrix. The front fender has collided with one too many snow banks, and is now held together with string. The exhaust system has seen better days. It breaks down occasionally. But overall it’s very cheap to run.
If I was poor, it would be tough having an old, unreliable car. The unexpected, yet inevitable, major repairs would be a financial nightmare. $750 to repair the clutch. $200 to fix the axle seal. If the car broke broke down, and I couldn’t get to work, I might lose my job.
But because I’m financially secure, I can afford a cheap car. I can self-insure against financial risks: unexpected repair costs, taxi fares, rental cars, and so on. I can afford to get my car towed. If it was beyond repair, I could get another car tomorrow.
The real value of having $10,000 in the bank isn’t $200 in interest income, or the stuff $200 in interest income might buy. $10,000 in the bank creates a little bit of room to take risks. One could call it the “implicit value of self-insurance generated by own capital.” It’s the comfort of being rich (or having rich relatives). It’s real. It’s valuable. But it wouldn’t be taxed if Canada had a consumption tax.
Admittedly, the insurance value of having wealth isn’t taxed under an income tax either. But at least under an income tax some of the return on wealth is taxed, so there is, at least potentially, some shifting of the tax burden onto those with wealth.
The greatest freedom money offers is the freedom to walk away. Your bank doesn’t offer you unlimited everything with no monthly fees? Walk away. There’s always someone else who wants your money. Your phone plan is too expensive? Walk away (o.k., that may not be the best example).
People with money have alternatives, which makes their demand for goods and services elastic. Food may or may not cost more in poor areas. But a rich person can shop at Value Village if he chooses. A poor person may not be able to afford expensive purchases which save money in the long run, like bread machines or high efficiency appliances or pressure cookers. Consumption taxes aim to tax the amount of stuff people actually consume. But if poor people pay a higher price for their stuff than rich people, is a system that taxes only consumption spending, without taking into account the ability to command consumption wealth conveys, fair?
June 25, 2015
At Reason, Ronald Bailey links to a study that appears to undermine most of Thomas Picketty’s claims:
From the study:
We believe Piketty’s core message is provably flawed on several levels, as a result of fundamental and avoidable errors in his basic assumptions. He begins with the sensible presumption that the return on invested capital, r, exceeds macroeconomic growth, g, as must be true in any healthy economy. But from this near-tautology, he moves on to presume that wealthy families will grow ever richer over future generations, leading to a society dominated by unearned, hereditary wealth. Alas, this logic holds true only if the wealthy never dissipate their wealth through spending, charitable giving, taxation, and splitting bequests among multiple heirs.
As individuals, and as families, the rich generally do not get richer; after a fortune is first built, the rich get relentlessly and inevitably poorer.
The “evidence” Piketty uses in support of his thesis is largely anecdotal, drawn from the novels of Austen and Balzac, and from the current fortunes of Bill Gates and Liliane Bettencourt. If Piketty is right, where are the current hyper-wealthy descendants of past entrepreneurial dynasties — the Astors, Vanderbilts, Carnegies, Rockefellers, Mellons, and Gettys? Almost to a man (or woman) they are absent from the realms of the super-affluent. Our evidence — used to refute Piketty’s argument — is empirical, drawn from the rapid rotation of the hyper-wealthy through the ranks of the Forbes 400, and suggests that, at any given time, roughly half of the collective worth of the hyper-wealthy is first-generation earned wealth, not inherited wealth.
The originators of great wealth are one-in-a-million geniuses; their innovation, invention, and single-minded entrepreneurial focus create myriad jobs and productivity enhancements for society at large. They create wealth for society, from which they draw wealth for themselves. In contrast, the descendants of the hyper-wealthy rarely have that same one-in-a-million genius. Bettencourt, cited by Piketty, is a clear exception. Typically, we find that descendants halve their inherited wealth — relative to the growth of per capita GDP — every 20 years or less, without any additional assistance from Piketty’s redistribution prescription.
Dynastic wealth accumulation is simply a myth. The reality is that each generation spawns its own entrepreneurs who create vast pools of entirely new wealth, and enjoy their share of it, displacing many of the preceding generations’ entrepreneurial wealth creators. Today, the massive fortunes of the 19th century are largely depleted and almost all of the fortunes generated just a half-century ago are also gone. Do we really want to stifle entrepreneurialism, invention, and innovation in an effort to accelerate the already-rapid process of wealth redistribution?
June 17, 2015
At International Liberty, Dan Mitchell points out an example of leftists who genuinely want higher taxes on “the rich” even when the higher rate will return less money to the government:
Every so often, I’ll assert that some statists are so consumed by envy and spite that they favor high tax rates on the “rich” even if the net effect (because of diminished economic output) is less revenue for government.
In other words, they deliberately and openly want to be on the right side (which is definitely the wrong side) of the Laffer Curve.
Critics sometimes accuse me of misrepresenting the left’s ideology, to which I respond by pointing to a poll of left-wing voters who strongly favored soak-the-rich tax hikes even if there was no extra tax collected.
But now I have an even better example.
Writing for Vox, Matthew Yglesias openly argues that we should be on the downward-sloping portion of the Laffer Curve. Just in case you think I’m exaggerating, “the case for confiscatory taxation” is part of the title for his article.
Here’s some of what he wrote.
Maybe at least some taxes should be really high. Maybe even really really high. So high as to useless for revenue-raising purposes — but powerful for achieving other ends. We already accept this principle for tobacco taxes. If all we wanted to do was raise revenue, we might want to slightly cut cigarette taxes. …But we don’t do that because we care about public health. We tax tobacco not to make money but to discourage smoking.
The tobacco tax analogy is very appropriate.
June 13, 2015
… or, y’know … to get the global movers and shakers together for a quick rubber chicken dinner or six and a few grip’n’grins among the well-connected and the extremely-well-wealthed:
The annual Bilderberg meeting begins today in Telfs-Buchen, Austria. This year the summit’s influential attendees range from David Petraeus to Henry Kissinger, from the CEO of Airbus to the secretary general of NATO. There are some press figures on the guest list too — Bloomberg‘s John Micklethwait, The National Post‘s Andrew Coyne, The Washington Post‘s Anne Applebaum, and a few others. But the journalists won’t be writing about what they see, because the whole thing is off the record.
This combination of power and secrecy inevitably produces conspiracy theories, and the Bilderbergers have been dogged for decades by people convinced they’re the secret parliament of the world. The meeting is more mundane than that, sitting somewhere on the spectrum between a G7 summit and a Davos forum. But if some of the things people claim about Bilderberg are crazy — a couple years ago, Michael Tracy interviewed a protester outside the meeting who was convinced it featured “Devil worship” and “pedophilia” — it’s not at all kooky to recognize that powerful people are gathered there and that the things they’re saying in private may be newsworthy. Bilderberg is not a hidden government, but it’s certainly an elite institution, and it has been since it was founded in 1954.
May 21, 2015
The point of reviewing these hypocrisies is not to suggest that the rich profit-makers of Silicon Valley are any greedier or more cutthroat than the speculators of Wall Street or the frackers of Texas, but merely that they are judged by quite different standards. Cool — defined by casual dress, hip popular culture, and the loud embrace of green energy, gay marriage, relaxation of drug laws, and other hot-button social issue — means that one can live life as selfishly as he pleases in the concrete by sounding as communitarian as he can in the abstract. Buying jet skis is as crass a self-indulgence as buying an even more expensive all-carbon imported road bike is neat.
If Silicon Valley produced gas and oil, built bulldozers, processed logs, mined bauxite, or grew potatoes, then the administration, academia, Hollywood, and the press would damn its white-male exclusivity, patronization of women, huge material appetites, lack of commitment to racial diversity, concern for ever-greater profits, and seeming indifference to the poor. But they do not, because the denizens of the valley have paid for their indulgences and therefore are free to sin as they please, convinced that their future days in Purgatory can be reduced by a few correct words about Solyndra, Barack Obama, and the war on women.
Practicing cutthroat capitalism while professing cool communitarianism should be a paradox. But in Silicon Valley it is simply smart business. The more money you make, any way you can make it, the more you can find ways of contextualizing it. At first these Silicon Valley contradictions were amusing, then they were grating, and now they are mostly just pathetic.
Victor Davis Hanson, “The Valley of the Shadow: How mansion-dwelling, carbon-spewing cutthroat capitalists can still be politically correct”, National Review, 2014-07-22.
May 17, 2015
This report says that one of the richest men in the world is opening new frontiers in philanthropy:
Perennial contender for World’s Richest Man Carlos Slim announced Friday that he had reconsidered selling his Upper East Side home for $80 million, and instead was opening the Beaux Arts mansion to undocumented roomers. “Ever since I became the second largest shareholder in New York Times Inc., I’ve started reading the editorials,” explained the telecom monopolist. “And they’ve convinced me! What’s all this obsession with documents anyway?”
The Mexican oligarch continued, “If you can fool my doorman into letting you in once, or if you have the moxie to throw a brick through my window and crawl in over the broken glass, well, it would be inhumane to evict you. And if you have kids or parents, then they can come too because I wouldn’t want to stand in the way of family reunification. If I find you inside my house, then mi casa es su casa!”
This is clearly too good to check (but I did verify that the story isn’t dated April 1st, so it must be true, right?
May 7, 2015
Reducing the realities of life in a given city to a quick numerical value or data point on a chart requires you to ignore subtleties and local influences. Last month, Mark Collins linked to this article by Terry Glavin on what the “quality of life” numbers for Vancouver actually conceal:
If the Economist Intelligence Unit’s annual top 10 world cities rankings are what you’ve been relying on, you probably weren’t surprised last month when the global human resources outfit Mercer tagged Vancouver on its Quality of Living index as the best city in North America. But you might have been surprised this week when Statistics Canada released a study showing that, by a variety of indices, Vancouverites are the unhappiest people in Canada, falling dead last among the residents of 33 cities across the country.
We like to think of Lotusland’s grand metropolis as a place where people ski, sail, ride their bikes, swim, and hike though lush rainforests, all in the same day. But StatsCan’s annual survey of median household income in Canadian cities routinely puts Vancouver close to the bottom of the heap on that same list of 33 cities, and in January the Demographia International research institute ranked Vancouver second to last in a global survey of 378 cities on its Housing Affordability Survey.
Vancouver’s median household income in 2014 was $66,400, while the city’s median home price was 10.6 times higher: $704,800. Only Hong Kong fared worse, and just barely. Hong Kong also tops Vancouver, again only barely, as the property investment bolt-hole most favoured by Mainland China’s loot-laden millionaires. For years, we’ve been instructed to pretend that this is somehow mere coincidence. You can’t get away with talking to Hong Kongers like that, but Vancouverites take it sitting down.
In happier places like Saguenay, Sudbury and Thunder Bay, there’s manufacturing, dairy farming, forestry and mining, and there’s a high degree of neighborliness and civility. But Vancouverites make most of their money from increases in the real estate value of whatever property they might be lucky to own. This tends to skew any real sense of hometown belonging, and nothing quite so rattles the cages as loose talk about the elaborate, federally-sanctioned swindle that has been keeping the bubble inflated all these years.
April 3, 2015
March 30, 2015
Megan McArdle on the reactions to a recent book dealing with traditional and non-traditional families:
Robert Putnam’s Our Kids: The American Dream in Crisis has touched off a wave of print and digital commentary. The book chronicles a growing divide between the way affluent kids are raised, in two-parent homes whose parents invest heavily in educating their kids, and the very different, very unstable homes in which poorer kids generally grow up.
Naturally, social conservatives are delighted with this lengthy examination of the problems created by unstable families, even if they are not equally delighted with Putnam’s recommendations (more government programs). Equally naturally, there is pushback from those who see the problem as primarily one of economics and insufficient government spending, as well as from those who argue that there are lots of good ways to raise kids outside the straitjacket of mid-century, middle-class mores.
I have been trying to find a more delicate way to phrase this, but I can’t: This is nonsense. The advantages that two people raising their own biological or jointly adopted children have over “nontraditional” family arrangements are too obvious to need enumeration, but apparently mere obviousness is not enough to forestall contrary arguments, so let me enumerate them anyway.
Raising children the way an increasing percentages of Americans are — in loosely attached cohabitation arrangements that break up all too frequently, followed by the formation of new households with new children by different parents — is an enormous financial and emotional drain. Supporting two households rather than one is expensive, and it diverts money that could otherwise be invested in the kids. The parent in the home has no one to help shoulder the load of caring for kids, meaning less investment of time and more emotional strain on the custodial parent. Children will spend less time with their noncustodial parent, especially if that parent has other offspring. Add in conflict between the parents over money and time, and it can infect relationships with the children. As one researcher told me when I wrote an article on the state of modern marriage, you frequently see fathers investing time and money with the kids whose mother they get along with the best, while the other children struggle along on crumbs.
People often argue that extended families can substitute, but of course, two-parent families also have extended families — two of them — so single-parent families remain at a disadvantage, especially because other members of the extended family are often themselves struggling with the challenges of single parenthood. Extended families just can’t substitute for the benefits of a two-parent family. Government can’t, either; universal preschool is not going to make up for an uninvolved parent, or one stretched too thin to give their kids enough time. Government can sand the rough edges off the economic hardship, of course, but even in a social democratic paradise such as Sweden, kids raised in single-parent households do worse than kids raised with both their parents in the home.
March 11, 2015
March 3, 2015
With US university tuition on its never-ending rise, some students are taking a rather different approach to funding their education … but everyone assures us that it isn’t actually prostitution:
The average student-loan debt is approaching $30,000. That is to say, of the 70 percent of college students who borrow to pay all or some of their college expenses, the average student left college about $28,400 in the hole in 2013, according to USNews.
This alarming number has triggered a spate of news stories about female college students who are so panicked, so morally freewheeling, or both, that they are seeking the services of “sugar daddies”: older, well-fixed men who yearn to sponsor the academic careers of young college-age women in return for the sheer pleasure of spending time in the company of one of those youthful but impecunious “sugar babies.” (No, it’s not prostitution, everyone involved insists!)
Nonetheless, would-be Holly Golightlys ought to be wary of claims that the sugar-baby lifestyle will make pursuing that B.A. in art history entirely cost-free. For one thing, the entity that seems to the biggest promoter of the sugaring-one’s-way-through-college phenomenon is none other than SeekingArrangement itself, apparently the world’s largest sugar broker, with a claimed 3.6 million members. A promotional video uploaded onto YouTube by Seeking Arrangements in January 2015 touts “Sugar Baby University” with images of gorgeous young ladies who seem to be majoring in mascara, one of whom is being handed a sheaf of C-notes as she sits at her laptop. “Take out loans and eat ramen,” says the voice-over, “or get a sugar daddy and live the life you’ve always wanted. Sugar Baby U. is the place “where beautiful, ambitious people graduate debt-free,” the voice continues.
SeekingArrangement’s motives in seeking maximum numbers of enrollees in Sugar Baby U. who are also enrollees at real universities are blindingly clear: College-age women — almost always in their early twenties — are the most desirable age group for men seeking less-than-serious liaisons. (Google “coed porn,” and you’ll see what I mean.)
But the competition for those well-heeled older men willing to foot the bill for a lovely young thing to “live the lifestyle” she’s “always wanted” turns out to be quite stiff. SeekingArrangement’s home page advertises that there are “8 sugar babies per sugar daddy” — not a hopeful-sounding ratio.
February 9, 2015
Convening to ring the alarm about global warming, our putative betters and would-be rulers gathered in Davos, Switzerland, filling the local general-aviation hangars with some 1,700 private jets. Taking an international commercial flight is one of the most carbon-intensive things the typical person does in his life, but if you’re comparing carbon footprints between your average traveler squeezed into coach on American and Davos Man quaffing Pol Roger in his cashmere-carpeted intercontinental air limousine, you’re talking Smurfette vs. Sasquatch. The Bombardier’s Global 6000 may be a technical marvel, but it still runs on antique plankton juice. The emissions from heating all those sprawling hotel suites in the Alps in winter surely makes baby polar bears weep bitter and copious baby-polar-bear tears.
The stories add up: Jeff Greene brings multiple nannies on his private jet to Davos, and the rest of the guys gathered to talk past each other about the plight of the working man scarf down couture hot-dogs that cost forty bucks. Bill Clinton makes the case for wealth-redistribution while sporting a $60,000 platinum Rolex.
The hypocrisy of our literally (literally, Mr. Vice President!) high-flying crusaders against fossil fuels — who overlap considerably with our high-living crusaders against economic inequality — is endlessly annoying if frequently entertaining. And there is something unseemly about enduring puritanical little homilies on how we need to learn to live with less from guys wearing shoes that cost more than the typical American family earns in a quarter. When that obnoxious Alec Baldwin character from Glengarry Glen Ross informs that sad-sack real-estate salesman that his watch costs more than that guy’s car, he was trying to provoke him into getting richer, to the tune of a Cadillac Eldorado or, if not that, at least the second-prize set of steak knives. But our modern progressive versions of that guy are even more obnoxious: They demand that we lower our expectations while they live lives of opulence that would have embarrassed the Count of Monte Cristo.
Out-obnoxious-ing a guy with Alec Baldwin’s smirking mug takes a lot of brass.
Kevin Williamson, “Davos’s Destructive Elites: ‘None of us is as dumb as all of us'”, National Review, 2015-01-25.
January 28, 2015
And Monty calls ’em exactly what they are:
Luckily, all is not lost. Our moral and ethical betters have gathered in Davos to light their cigars with hundred-dollar bills while mocking the tubercular bootblack who’s been pressed into service to keep their shoes looking spiffy while they chat and laugh and eat lobster canapes. Oh, wait, I read that wrong, sorry. They’re in Davos to discuss the pressing problem of Global Warming(tm). Because they’re so concerned about Global Warming(tm) that they felt compelled to fly their private jets to an upscale enclave in the Swiss Alps to talk about it. While making fun of the tubercular bootblack who’s spit-shining their wingtips.
Don’t get me wrong – I’m a big believer in ostentatious displays of wealth. If I had the money, I’d build a hundred-foot-high statue of myself made out of pure platinum and then hire homeless people to worship at it for no fewer than eight hours per day. (I’d pay them a fair wage, though. What’s the going rate for abject obeisance to a living God? I’ll have to look it up.) But this Davos thing is just…rank. It’s a collection of rich fart-sniffers who want to congratulate each other on how socially conscious they are, and how much they care about the Little People. (Except the tubercular bootblack, whom they often kick with their rich-guy shoes.)
January 26, 2015
[W]hat exactly is the HDI? The one-line explanation is that it gives “equal weights” to GDP per capita, life expectancy, and education. But it’s more complicated than that, because scores on each of the three measures are bounded between 0 and 1. This effectively means that a country of immortals with infinite per-capita GDP would get a score of .666 (lower than South Africa and Tajikistan) if its population were illiterate and never went to school.
So what are the main problems with the HDI?
1. I can see giving equal weights to GDP per capita and life expectancy. But education? As a professor and a snob, I understand the appeal (though a measure of opera consumption would be even better). But in terms of the actual if not professed values of normal human beings, televisions and cars are a lot more important than books.
2. When you take a closer look at the HDI’s education measure, it’s especially bogus. 2/3rds of the weight comes from the literacy rate. At least that’s not ridiculous. But the other 1/3 comes from the Gross Enrollment Index — the fraction of the population enrolled in primary, secondary, or tertiary education. OK, I feel a reductio ad absurdum coming on. To max out your education score, you have to turn 100% of your population into students!
3. The HDI purportedly gives equal weights to three different outcomes, but bounding the results between 0 and 1 builds in a massive bias against GDP. GDP per capita has grown fantastically during the last two centuries, and will continue to do so. In reality, there’s plenty of room left for further improvement even in rich countries. But the HDI doesn’t allow this. Since rich countries are already close to the upper bound, the HDI effectively defines their future progress on this dimension out of existence.
To a lesser extent, the same goes for life expectancy: While it’s roughly doubled over the last two centuries, dying at 85 is not, contrary to the HDI, approximately equal in value to immortality.
The clear winners from this weighting scheme, of course, are the literacy and enrollment measures, both of which have upper bounds that are imposed by logic rather than fiat.
4. The ultimate problem with the HDI, though, is lack of ambition. It effectively proclaims an “end of history” where Scandinavia is the pinnacle of human achievement. […] Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is.
Bryan Caplan, “Against the Human Development Index”, Econlog, 2009-05-22.