Published on 2 Aug 2017
A viewer recently asked us what Words & Numbers thought of Universal Basic Income.
Antony Davies likes the idea of it, provided it’s done well, but doesn’t think it could ever possibly be done well. But what about a theoretical UBI? If we could actually figure out how to implement that well, would that work? And why wouldn’t that work in the real world? This week on Words and Numbers, Antony and James R. Harrigan tackle the issue that’s getting a lot of attention in Silicon Valley.
August 3, 2017
Words & Numbers: Is UBI Better Than Welfare?
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July 27, 2017
Words & Numbers: Is Income Inequality Real?
Published on 26 Jul 2017
Income inequality has been in the news more and more, and it doesn’t look good. It’s aggravating to see people making more money than you, and we’re told all the time that income inequality is on the rise. But is it? And even if it is, is it actually a bad thing? This week on Words and Numbers, Antony Davies and James R. Harrigan talk about how income inequality plays out in the real world.
Learn more: https://fee.org/articles/is-income-inequality-real/
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July 26, 2017
QotD: From local private charity to national government social program
In a small town, the impulse to assist the poor and disorganized was direct, and the people being helped were known to everyone. Big cities with their concentrated slums of poor immigrants led to social service agencies, funded at first by churches and cities, and then by state and federal governments. As the source of the assistance became impersonal, so did the aid — and the direct contact between those assisting and those assisted declined. Instead of the local church matrons with their bourgeois ideas of proper behavior and work, harassed social workers with enormous caseloads processed cases quickly, and the ideology of government assistance changed so that any behavioral expectation of the client population was viewed as an affront to their dignity.
In time, the government assistance ethos spread to every corner of the country and crowded out the local community services. Meanwhile, locally-controlled schools were gradually taken over by higher levels of government and distant union bureaucracies so that the influence of local parents was minimized. This was viewed as “progressive,” since distant elites thought local school boards and parents were too parochial and backward to be entrusted with decisions, and would get in the way of teaching the correct materials.
The incorrect application of emotions of sympathy and support to faceless categories of people like “the poor” and “the undocumented” removes any possibility of understanding the real situations of each of the category’s members. A hazy idealized poor family is envisioned, then a response that would be appropriate if that family lived next door (help them!) leads to voting for politicians that offer new programs to help “people like that.” By misapplying family and community feelings to higher levels of government, voters put into place a bureaucracy that misses most of the social signalling features of local groups and takes tax money to grow itself, crowding out local groups (and the valuable social signals that maintained bourgeois standards.)
Jeb Kinnison, “Real-life ‘Hunger Games'”, According to Hoyt, 2015-09-25.
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July 7, 2017
Despite the headlines, the world is getting much better, much faster
The mainstream media has a built-in bias for bad news, which is understandable: bad news draws eyeballs and clicks because as a species we’re much more attuned to detecting risks than anything else — it’s a good pro-survival trait. Our bias (and reinforcement offered by the media’s bias) leads us all to think things are going much worse than they really are, pretty much all the time. Scott Sumner offers a bit of counterpoint:
The news media is good at storytelling. That’s no surprise, as people like to learn through stories, indeed this preference is probably hardwired into our brains. The news media can’t survive without readers and viewers, and so naturally they focus on storytelling. And the most riveting stories involve war, terrorism, natural disasters, and other serious problems. While the individual stories are usually true, the overall effect is to present a very false image of the world. As a result, at least 90% of Americans literally have no idea as to what is actually going on in the world. Here’s Nicholas Kristof:
Nine out of 10 Americans say in polls that global poverty has been staying the same or worsening. So let’s correct the record.
There has been a stunning decline in extreme poverty, defined as less than about $2 per person per day, adjusted for inflation. For most of history, probably more than 90 percent of the world population lived in extreme poverty, plunging to fewer than 10 percent today.
Every day, another 250,000 people graduate from extreme poverty, according to World Bank figures. About 300,000 get electricity for the first time. Some 285,000 get their first access to clean drinking water. When I was a boy, a majority of adults had always been illiterate, but now more than 85 percent can read.
Family planning leads parents to have fewer babies and invest more in each. The number of global war deaths is far below what it was in the 1950s through the 1990s, let alone the murderous 1930s and ’40s.
Aneri and I are reporting from a country whose name, Liberia, evokes Ebola, civil war and warlords like General Butt Naked. That’s partly because we journalists have a bias toward bad news: We cover planes that crash, not planes that take off.
Unfortunately these true lies are hard to push back against. Statistics tells us that the world is getting better at a mind-boggling rate (Seriously, can your brain even imagine the improvement in human welfare associated with 250,000 people a day rising above extreme poverty? I can’t.) But that’s not the world people tend to see. As a result, they elect politicians who pander to their ignorance of the world.
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June 27, 2017
QotD: The mistakes of the wealthy versus the mistakes of the poor
What have been the effects of progressive, centralized control of education, healthcare, and social services? It is true that the backwards practices of a few local school boards have been reformed, but the loss of a rich layer of church and private charity social services has impoverished local social capital. While today’s mass communication and the Internet removed one of the impulses to community (“I’m bored. Let’s go into town and hang out!”), a lot of the loss is due to the crowding out by a monopoly government, which had deep pockets and would use them to continue failed policies, as Microsoft in the 80s used the profits from its near-monopoly OS business to keep creating mediocre applications software until the innovators in applications were destroyed.
Very wealthy people have always been freer than others from the stifling social controls and judgments of bourgeois community standards. The elite of Paris and London in the 1800s often kept mistresses and dabbled in drug use without having their lives destroyed. The lower classes did not have the wealth to recover from errors, and those who did not hew to bourgeois social norms were isolated and damaged.
As the upper middle classes in the US grew as wealthy as the elite had been in the previous century after WWII, the sexual revolution and War on Poverty bestowed more social freedom on everyone — the middle and upper classes got birth control, sexual freedom, and women in the workplace, while the poor got programs to “uplift” them from poverty (a term which exposes the condescension involved). Social workers in vast numbers were hired to distribute assistance, free of any obligation — except for unmarried mothers, who were told their assistance would be cut if they married a working man.
Over the course of several generations, the well-off used their freedoms and came out relatively unscathed — families were still largely intact, children were still trained in the arts of civilization and followed the path of university and marriage into professional careers. But the artificial assistance to the poor, with its lack of community obligations and support and its immediate withdrawal in the event of marriage and better work, removed the social incentives that keep healthy communities healthy. Intact families grew less common. Crime and social pathologies became the norm in poor inner-city communities. As conditions worsened, the motivated and organized left for more civilized neighborhoods with better schools. The segregation of cities and even whole regions by income increased. Whole generations of children were poorly raised, poorly schooled, and left to drift without purpose or guidance from now-absent fathers, who were in prison or adrift themselves.
Jeb Kinnison, “Real-life ‘Hunger Games'”, According to Hoyt, 2015-09-25.
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June 22, 2017
Words & Numbers: The Population Boom Could Save the World
Published on 21 Jun 2017
In 1798, 95 percent of the world lived in poverty. Today, less than 10 percent do, in spite of the world’s population growing by 700 percent in that same time.
The common thought among young people is that this 700 percent population growth is going to overpopulate the earth. But given the number of people in poverty, it looks like population growth is actually good for poverty – more people means more brains, which means more ideas, inventions, and innovations.
This week on Words and Numbers, Antony Davies and James R. Harrigan talk about how and why the world is improving despite widespread negativity towards the idea of a growing world population, and why that negativity persists regardless of the prosperity we see every day.
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June 17, 2017
Puerto Rico votes for statehood
Andrew Heaton discusses the recent vote by Puerto Ricans to apply for full statehood within the United States and why that might be a good thing for all concerned:
Puerto Rico voted to become a U.S. state this week. Needless to say, we should all be deeply concerned about the island’s engorged debt, destructive fits of socialism, and terrifying chupacabras.
But Puerto Rican statehood also represents a unique opportunity to reform American federalism. Accepting a new state with markedly different problems and programs means acknowledging that states aren’t interchangeable. We should welcome Puerto Rico and, while we’re redefining what constitutes our union, re-examine the power dynamic between Washington and the states.
Puerto Rico is a test case in one-size-fits-all solutions and federal intervention ruining an economy. The island has significantly lower income and productivity than the continental United States, but it is still subjected to a national minimum wage crafted for the mainland. That disparity squeezes entry-level jobs out of the market and ratchets up unemployment rates. The slumping job market is worsened by the fact that federal programs like food stamps, Social Security benefits, education grants, and disability payments aren’t pegged to local cost of living. In a region poorer than America’s poorest state, it’s not surprising that people would opt for generous federal handouts over scrambling for jobs the minimum wage hasn’t yet outlawed. Puerto Rico would benefit from an opt-out clause on the mininum wage — an option that should be available to all states.
Because Puerto Rico is an unincorporated territory and not a state, it’s more vulnerable to federal intervention. The Jones-Shafroth Act exempted Puerto Rican bonds from local, state, and federal taxes. The feds might as well have sprinkled cocaine and cronuts over the bonds. Investors bought dumpsters full of Puerto Rico’s sovereign debt, leading the island to further lurch into exorbitant deficit spending.
Federal trade laws also hobble Puerto Rican prosperity. The Jones Act prohibits foreign ships from moving goods between American ports. That means a foreign flagged vessel can’t stop at Puerto Rico on its way to or from the mainland, but must instead offload and reload goods at another American port so a more expensive U.S. ship can transport them. Peter Schiff explains: “Even though median incomes in Puerto Rico are just over half that of the poorest U.S. state, thanks to the Jones Act, the cost of living is actually higher than the average state.” The Jones Act would be a great issue to bring up when Congress deliberates on Puerto Rican accession. Abolishing it would benefit everyone, most of all Puerto Rico.
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June 15, 2017
Words & Numbers: What You Should Know About Poverty in America
Published on 14 Jun 2017
Poverty is a big deal – it affects about 41 million people in the United States every year – yet the federal government spends a huge amount of money to end poverty. So much of the government’s welfare spending gets eaten up by bureaucracy, conflicting programs, and politicians presuming they know how people should spend their own money. Obviously, this isn’t working.
This week on Words and Numbers, Antony Davies and James R. Harrigan delve into how people can really become less poor and what that means for society and the government.
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May 26, 2017
Puzzle of Growth: Rich Countries and Poor Countries
Published on 16 Feb 2016
Throughout this section of the course, we’ve been trying to solve a complicated economic puzzle — why are some countries rich and others poor?
There are various factors at play, interacting in a dynamic, and changing environment. And the final answer to the puzzle differs depending on the perspective you’re looking from. In this video, you’ll examine different pieces of the wealth puzzle, and learn about how they fit.
The first piece of the puzzle, is about productivity.
You’ll learn how physical capital, human capital, technological knowledge, and entrepreneurs all fit together to spur higher productivity in a population. From this perspective, you’ll see economic growth as a function of a country’s factors of production. You’ll also learn what investments can be made to improve and increase these production factors.
Still, even that is too simplistic to explain everything.
So we’ll also introduce you to another piece of the puzzle: incentives.
In previous videos, you learned about the incentives presented by different economic, cultural, and political models. In this video, we’ll stay on that track, showing how different incentives produce different results.
As an example, you’ll learn why something as simple as agriculture isn’t nearly so simple at all. We’ll put you in the shoes of a hypothetical farmer, for a bit. In those shoes, you’ll see how incentives can mean the difference between getting to keep a whole bag of potatoes from your farm, or just a hundredth of a bag from a collective farm.
(Trust us, the potatoes explain a lot.)
Potatoes aside, you’re also going to see how different incentives shaped China’s economic landscape during the “Great Leap Forward” of the 1950s and 60s. With incentives as a lens, you’ll see why China’s supposed leap forward ended in starvation for tens of millions.
Hold on — incentives still aren’t the end of it. After all, incentives have to come from somewhere.
That “somewhere” is institutions.
As we showed you before, institutions dictate incentives. Things like property rights, cultural norms, honest governments, dependable laws, and political stability, all create incentives of different kinds. Remember our hypothetical farmer? Through that farmer, you’ll learn how different institutions affect all of us. You’ll see how institutions help dictate how hard a person works, and how likely he or she is to invest in the economy, beyond that work.
Then, once you understand the full effect of institutions, you’ll go beyond that, to the final piece of the wealth puzzle. And it’s the most mysterious piece, too.
Why?
Because the final piece of the puzzle is the amorphous combination of a country’s history, ideas, culture, geography, and even a little luck. These things aren’t as direct as the previous pieces, but they matter all the same.
You’ll see why the US constitution is the way it is, and you’ll learn about people like Adam Smith and John Locke, whose ideas helped inform it.
And if all this talk of pieces makes you think that the wealth puzzle is a complex one, you’d be right.
Because the truth is, the question of “what creates wealth?” really is complex. Even the puzzle pieces you’ll learn about don’t constitute every variable at play. And as we mentioned earlier, not only are the factors complex, but they’re also constantly changing as they bump against each other.
Luckily, while the quest to finish the wealth puzzle isn’t over, at least we have some of the pieces in hand.
So take the time to dive in and listen to this video and let us know if you have questions along the way. After that, we’ll soon head into a new section of the course: we’ll tackle the factors of production so we can further explore what leads to economic growth.
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May 3, 2017
“Poverty, to be scenic, should be rural”
Daniel Hannan on the contrast between rural and urban poverty, and the attitudes of Westerners:
When I was growing up in Lima in the 1970s, Western visitors were astonished by the shantytowns, the barriadas, as they were known, that ringed that grimy city. Why, they asked, did people leave the countryside to live in these squalid slums? Why swap the pure air of the Andes for traffic fumes and sewage?
It was a very First World question. No Peruvian ever asked why people were quitting villages that lacked electricity and clean water. The barriadas may have been ugly, but they were humming with enterprise. They offered work, access to schools and clinics, a power supply. They were, for most of their denizens, transitional, a staging post between mountain squalor and something better.
In time, I came to realize that Western nose-wrinkling at developed countries was more esthetic than sympathetic. As the Victorian novelist Anthony Trollope put it, “Poverty, to be scenic, should be rural.”
Western attitudes haven’t advanced much since then. My kids’ geography homework is full of stories about evil Western corporations exploiting poor women in Vietnam or wherever. Now, you and I would not want to work in a Vietnamese sweatshop. But we have not spent our lives bending our backs in rice paddies.
Employees of foreign-owned companies in Vietnam earn 210 percent of the average wage. The readiness of that country to open itself to trade and investment has brought huge benefits to the Vietnamese, including those on the lowest incomes. Over 19 years, the West struggled to defeat totalitarian socialism in Vietnam, and failed. Three decades of trade have achieved what 60,000 American lives and over a trillion dollars in today’s prices in military spending failed to achieve: the end of Communism.
Developing countries which open their markets eliminate poverty more quickly than those which don’t. Compare Vietnam to Myanmar, or Colombia to Venezuela, or Bangladesh to Pakistan. A study of developing states since 1980 showed that those which had joined the global trading system enjoyed annual growth at an average of 5 percent, as against 1.5 percent for those which hadn’t.
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April 28, 2017
Words & Numbers: Actually, Life is Pretty Awesome
Published on 26 Apr 2017
This week, James and Antony take a brief departure from talking about the growing national debt, and our absurd tax system to discuss the numerous ways in which more economic and personal freedom has made people wealthier, more equal, and better off all over the world. We’re actually living in pretty amazing times.
Read more:
https://fee.org/articles/actually-life-is-pretty-awesome/
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April 25, 2017
Cultural appropriation of “poverty culture” in the Tiny House Movement
Ann Althouse linked to this older article by July Westhale on “Poverty Appropriation”:
How many folks, I wonder, who have engaged in the Tiny House Movement have ever actually lived in a tiny, mobile place? Because what those who can afford homes call “living light,” poor folks call “gratitude for what we’ve got.”
And it’s not just the Tiny House Movement that incites my discontent. From dumpster diving to trailer-themed bars to haute cuisine in the form of poor-household staples, it’s become trendy for those with money to appropriate the poverty lifestyle — and it troubles me for one simple reason. Choice.
The Tiny House Movement began in the ’90s, but has only been rising in popularity since the recession. And to be fair, it’s rooted in a very real problem: more and more people being displaced as a result of soaring housing costs, especially in tech-boom areas like the Bay Area.
[…]
It’s likely, from where I sit, that this back-to-nature and boxed-up simplicity is not being marketed to people like me, who come from simplicity and heightened knowledge of poverty, but to people who have not wanted for creature comforts. For them to try on, glamorize, identify with.
Such appropriation isn’t limited to the Tiny House trend, or even to the idea of simplicity. In major cities, people who come from high-income backgrounds flock to bars and restaurants that both appropriate, and mock, low-income communities. Perhaps the most egregious example is San Francisco’s Butter Bar, a trendy outpost that prides itself on being a true-blue, trailer park-themed bar, serving up the best in “trashy” cuisine and cocktails. With tater tots, microwaved food, and deep-fried Twinkies on the menu, the bar also serves cocktails that contain cheap ingredients, such as Welch’s grape soda. The bar has an actual trailer inside, and serves cans in paper bags, so that bar flies can have a paid-for experience of being what the owners of this bar think of when they think of trailer trash.
Butter Bar in San Francisco (Credit: Facebook)
It’s but one example of an entire hipster movement — can it be called a movement when it’s a subculture rooted not in political consciousness, but in capitalism? — that has brought with it an ethos of poor-culture appropriation and the “re-invention” of things that have largely been tools of survival for poor, disabled, working class, and/or communities of color for decades.
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April 24, 2017
April 18, 2017
Ned Kelly – II: Under Suspicion – Extra History
Published on 25 Mar 2017
Ned’s second venture as a bushranger brought him to the attention of the local police. He did time in prison, then tried to clean up his act, but became frustrated by the suspicion that continued to dog him.
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QotD: Rent control
To someone ignorant of economic reasoning, rent control seems like a great policy. It appears instantly to provide “affordable housing” to poor tenants, while the only apparent downside is a reduction in the income flowing to the fat-cat landlords, people who literally own buildings in major cities and who thus aren’t going to miss that money much. Who could object to such a policy?
First, we should define our terms. When a city government imposes rent control, it means the city makes it illegal for landlords to charge tenants rent above a ceiling price. Sometimes that price can vary, but only on specified factors. For the law to have any teeth — and for the politicians who passed it to curry favor with the public — the maximum rent-controlled price will be significantly lower than the free-market price.
The most obvious problem is that rent control immediately leads to a shortage of apartments, meaning that there are potential tenants who would love to move into a new place at the going (rent-controlled) rate, but they can’t find any vacancies. At a lower rental price, more tenants will try to rent apartment units, and at a higher rental price, landlords will try to rent out more apartment units. These two claims are specific instances of the law of demand and law of supply, respectively.
[…]
In the long run, a permanent policy of rent control restricts the construction of new apartment buildings, because potential investors realize that their revenues on such projects will be artificially capped. Building a movie theater or shopping center is more attractive on the margin.
There are further, more insidious problems with rent control. With a long line of potential tenants eager to move in at the official ceiling price, landlords do not have much incentive to maintain the building. They don’t need to put on new coats of paint, change the light bulbs in the hallways, keep the elevator in working order, or get out of bed at 5:00 a.m. when a tenant complains that the water heater is busted. If there is a rash of robberies in and around the building, the owner won’t feel a financial motivation to install lights, cameras, buzz-in gates, a guard, or other (costly) measures to protect his customers. Furthermore, if a tenant falls behind on the rent, there is less incentive for the landlord to cut her some slack, because he knows he can replace her right away after eviction. In other words, all of the behavior we associate with the term “slumlord” is due to the government’s policy of rent control; it is not the “free market in action.”
Robert P. Murphy, “The Case Against Rent Control: Bad housing policy harms lower-income people most”, The Freeman, 2014-11-12
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