Quotulatiousness

May 16, 2014

Improving “privilege awareness” at Harvard

Filed under: Education, Randomness, USA — Tags: , , — Nicholas @ 08:02

Conor Friedersdorf talks about a new privilege awareness exercise for new grad students at Harvard’s John F. Kennedy School of Government:

Such exercises are not without insight or merit (though I find it hard to believe that first-year graduate students at Harvard haven’t encountered this sort of thing before). It surprises me not at all that Harvard insiders would craft the exercise to highlight where they ostensibly stand relative to their fellow Harvard classmates.

As a Harvard outsider who will one day live under a governing elite populated by today’s KSG first-years, I’d only ask for one addition to the “step forward, step back” exercise. Prior to the day it is conducted, KSG should take out some ads in local media: $50 dollars available for the first 500 non-Harvard students to show up at the campus football field at an appointed time. Let them gather, black, white and brown; men and women; straight and gay. The hoi poloi and the KSG freshmen should all mass together behind one end zone. Then the stadium announcer should say, “If you’re not a Harvard student, stay where you are. And if you are a Harvard student, take 95 steps forward, until you’re at the 5 yard line by the far end zone.”

Once all the KSG freshmen are lined up straight at that 5 yard line, everyone can do the “step-forward, step-back” exercise as before. I submit that my augmented approach will afford a more accurate understanding of privilege as it operates at Harvard.

May 14, 2014

The rich boozehound’s guide to globetrotting

Filed under: Britain, Business, Randomness — Tags: , , , , — Nicholas @ 11:07

Got lots of money burning a hole in your bank account? Want to show off just how filthy stinking rich you are? Like spending your however-earned-or-inherited loot on fancy booze? Then there’s a million-dollar booze vacation you’ll probably like:

UK-based travel company Holidaysplease is offering a luxury world drinking tour in which you can learn and demonstrate the art of conspicuous consumption.

Starting and ending in London — although pickups are possible elsewhere — the ultimate hedonistic, money-no-object vacation takes in the world’s best hotels, swankiest restaurants and most exclusive bars in 10 upmarket destinations.

En route, drinkers take in the universe’s most ludicrously expensive niche beverages.

In Monaco, members of the bottomless budget brigade will mingle with other surreally high net individuals at the high end Hotel Hermitage Monte-Carlo and party at Flavio Briatore’s Billionaire Sunset Lounge in the hotel Fairmont Monte Carlo, quaffing selections from the $565,000 “in-house Armand de Brignac Dynastie” champagne collection.

It all comes complete with fawning waiters and diamond-filled ice buckets.

“We spend the first three nights in London in the five-star Corinthia Hotel and hang out in the Playboy Club, Park Lane, Mayfair,” says Byron Warmington of Holidaysplease.

Hef once said: “Life needs to be lived with a sense of style.”

As a taste of things to come, surrounded by grinning Bunnies, guests will sample the glam high life and swallow what’s reported to be the second most expensive drink in the history of mixology.

The Legacy cocktail includes 1788 Clos de Griffier Vieux Cognac, which comes in at $21,000 for a 40 ml shot.

It also includes ancient Kummel liqueur, vintage orange Curacao and four dashes of circa 1900 Angostura bitters.

May 13, 2014

The global 1% includes almost all North Americans

Filed under: Economics, USA — Tags: , — Nicholas @ 07:14

Peter Jaworski explains that as with so many other issues, where you sit on the issue of economic inequality determines what you see:

When people talk about the “1%”, I think they think that they are talking about a specific group of individuals, who have been and remain in that category over time.

When they say “We are the 99%” I think they think that that’s a static category, designating a group of people who persist as members over their lifetime.

Would people be so upset if it turned out that the individuals who made up the 1% were different people over time? That those who are in the 1% spend most of their lives in the 99%, and will go back to being 99%ers after a few years of being 1%ers?

I’m not sure. I am sure that if those categories represented a permanent group of specific individuals, we would be justified in lamenting the state of the economy.

But at any rate, if you’re someone who worries a great deal about the 1 and 99 %ers, would you be as worried if the following were true?:

Suppose just over one-in-ten (or 12%) would be in the 1% for at least a year of their lives.
Suppose further, to expand our view a bit, that just over one-in-three (or 39%) would hit top 5%, just over one-in-two (or 56%) would hit top 10%, and two-in-three (or 73%) would hit top 20%, each for at least a year of their lives.

And now suppose that less than one-in-150 (or a mere 0.6%) remained in the top 1% for 10 consecutive years.

If all of that were true — if the income distribution were that fluid — would you still be so upset?

All of that isn’t a hypothetical: “it’s a description of the income distribution over time in the U.S.” (and Canadians are probably similarly distributed).

For people in India, I bet they think the heated discussion about top 1%ers and 99%ers in Canada and the U.S. is a great big joke. The very same kind of joke that we would laugh about if the Tremblays in the Westmount area of Montreal were to bitterly complain about the Jones’ living in the Bridal Path area of Toronto. Sure, the Tremblays with their average $8 million net worth have half what the Jones’ and their $16 million net worth have, but it would take a comic to suggest we should lament and despair about the Tremblays’ attempts to keep up with the Jones’.

But it’s not a joke. Or, maybe, the people who occupied Bay Street and Wall Street didn’t get it.

Us Canadian 99%ers are not just rich, which we are. By global standards, we’re filthy, stinking rich. It takes roughly an annual net income of $41,600 to be in the global 1%.

If that’s you, then take a deep breath, find a mirror, and repeat these words, “I am the 1%.”

May 7, 2014

Peak inequality in England – about 200 years ago

Filed under: Books, Britain, Economics, History — Tags: , , , — Nicholas @ 10:18

An interesting article that starts and ends talking about Thomas Piketty’s new book, but in the middle goes a long way to explain what happened to English aristocracy over the last few hundred years:

Extravagances like the stately homes of England made economic sense before the 19th century because the relative wages of servants and construction workers mostly fell from 1500 to 1800 as the supply of English workers slowly recovered in size from the Black Death of the 1340s.

But, outside of economic theory, the rich have often tended to get poorer, especially when they spend more than they make. It’s a common theme in English literature (Evelyn Waugh’s A Handful of Dust) and television (Downton Abbey). For instance, by the time of Winston Churchill’s birth in 1874, the English ultra-rich weren’t getting richer.

[…]

The long agricultural depression of 1873-1896 meant the great houses of England began falling apart. Wings had to be shut as servants found higher paying jobs in factories. Repairs could not be paid for.

The usual solutions were to first auction off the art collection, then marry American heiresses, as in Downton Abbey, where Countess Cora, played by Elizabeth McGovern, is from the Chicago Levinsons. Winston’s mother Jenny was from the Jeromes of Wall Street.

[…]

Servants had steadily become more expensive in England. One reason was the increase in jobs elsewhere in a modernizing economy. On Downton Abbey, to illustrate, a maid applies for a job in town as a secretary, which is a much better post.

A forgotten reason, though, was that the massive emigration from the British Isles reduced the supply of workers and thus raised their wages. While Tony Blair’s Labor Government liked to claim that Britain had always been a nation of immigrants, it was in truth a nation of emigrants. Today, there are perhaps two or even three times as many people descended from the British Isles living in the United States, Canada, Australia, New Zealand, South Africa, and Argentina as there are in Britain and Ireland. Without all that outflow, wages in Britain would be lower and land prices astronomical.

H/T to Kathy Shaidle for the link.

April 30, 2014

Inheritance taxes actually perpetuate the 1%

Filed under: Britain, Economics, USA — Tags: , , , — Nicholas @ 08:18

Here’s Tim Worstall’s counter-intuitive post at the Adam Smith Institute blog from last week:

… Note “family foundation” there. Because of that inheritance tax rich people do tend to (and they have to be very rich for it to work) stick all of the money into a foundation. This wealth can then be maintained by professional money managers down the generations. Tax free, of course, as it’s inside a foundation. The stipulation is that said foundation must give away 5% of its assets each year. But such “giving away” obviously includes employing family members to run it. At pretty much any salary desired.

This obviously wouldn’t happen if the money could just be left directly to children without tax being due. And the effect of it going into such a foundation where the professional money managers can maintain it, rather than the heirs blow it, is that we’ve lost one of the major forces that disperses wealth through the society. The feckless heir.

So, we end up with the imposition of the tax leading to the continued concentration of old wealth, as the avoidance of the tax reduces the ability of the inheritors to waste it.

As an example, who thinks that any of the Kennedys would still be rich if they’d been able to get their hands on old Joe’s money directly?

I rest my case.

As one of the comments on that post points out, it’s not just the inheritance tax: it’s the interaction between the tax and the rules governing family foundations that create this unexpected-to-most-of-the-99% situation. I’m sure the 1% who can benefit from this are fully aware of it. This could be fixed either way, but the very people who benefit are the ones who would be pivotal in whether the changes could be made. So, it’s technically possible but not at all likely.

April 21, 2014

Clive Crook reviews Piketty’s Capital in the Twenty-First Century

Filed under: Books, Economics, Media — Tags: , — Nicholas @ 07:40

Clive Crook takes a jaundiced look at what some enthusiastic fans are calling the “most important book ever”:

As I worked through the book, I became preoccupied with another gap: the one between the findings Piketty explains cautiously and statements such as, “The consequences for the long-term dynamics of the wealth distribution are potentially terrifying.”

Piketty’s terror at rising inequality is an important data point for the reader. It has perhaps influenced his judgment and his tendentious reading of his own evidence. It could also explain why the book has been greeted with such erotic intensity: It meets the need for a work of deep research and scholarly respectability which affirms that inequality, as Cassidy remarked, is “a defining issue of our era.”

Maybe. But nobody should think it’s the only issue. For Piketty, it is. Aside from its other flaws, Capital in the 21st Century invites readers to believe not just that inequality is important but that nothing else matters.

This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards, but because it might cause the ratio of capital to output to rise, which would worsen inequality. In the frame of this book, the two world wars struck blows for social justice because they interrupted the aggrandizement of capital. We can’t expect to be so lucky again. The capitalist who squanders his fortune is a better friend to labor than the one who lives modestly and reinvests his surplus. In Piketty’s view of the world, where inequality is all that counts, capital accumulation is almost a sin in its own right.

Over the course of history, capital accumulation has yielded growth in living standards that people in earlier centuries could not have imagined, let alone predicted — and it wasn’t just the owners of capital who benefited. Future capital accumulation may or may not increase the capital share of output; it may or may not widen inequality. If it does, that’s a bad thing, and governments should act. But even if it does, it won’t matter as much as whether and how quickly wages and living standards rise.

Update, 23 April: David Harsanyi says the book is amazing — not for its content, but for the way it is being siezed upon by big government fans, inequality monomaniacs, and confiscatory taxation buffs.

As I write this, Thomas Piketty’s book Capital in the Twenty-First Century is #1 on Amazon. It’s been deemed an “important book” by a bunch of smart people. Why not? It validates many of the preconceived notions progressives have about capitalism: Inequality is growing. Mobility is shrinking. Meritocracy is dead. We all live in a sprawling zero-sum fallacy. And so on.

The book, as you probably know, has also sparked nonstop conversation in political and media circles. Though it’s best to let economists debunk Piketty’s methodology and data, it is worth pointing out that liberal pundits and writers have not only enthusiastically and unconditionally embraced a book on economics, or even a run-of-the-mill leftist polemic, but a hard-left manifesto.

Now, I realize we’re all supposed to accept the fact that conservatives are alone in embracing fringe economic ideas. But how does a book that evokes Marx and talks about tweaking the Soviet experiment find so much love from people who consider themselves rational, evidence-driven moderates?

[…]

The thing is, some of us still believe that capitalism fosters meritocratic values. Or I should say, we believe that free markets are the best game in town. Not that long ago, this was a nearly universal position. A lot of people used to believe that even the disruptions of capitalism — the “caprices of technology” as Piketty dismisses them — that rattle “social order” also happen to generate mobility, dynamism and growth. Today this probably qualifies as Ayn Rand-style extremism.

Then again, I haven’t read Ayn Rand since college (or maybe it was high school) but if I still believed she was the most prophetic writer of her generation, I might feel compelled to defend her ideas. But Piketty’s utopian notions and authoritarian inclinations — ones that I’m pretty sure most Americans (and probably most Democrats) would still find off-putting — do not seem to rattle the left-wing press one bit. While Piketty’s economic data might be worth studying and debating, his political ideas are unworthy of discussion.

Despite the extremism of his positions, Piketty has already become a folk hero to inequality alarmists everywhere. So if his popularity tells us anything, it’s that many liberal “thought leaders” have taken a far more radical position on economic policy than we’re giving them credit for.

Update the second, 28 April: Megan McArdle hasn’t read the book yet, but she addresses one of the ideas most positive reviewers have praised in their glowing reviews.

What I want to quarrel with is not the book’s methods or conclusion, but with the general idea that income inequality is the most important thing going on in the world. In terms of how it matters to lived human experience, I doubt it even makes the top 20.

I am not disputing that something unhappy is going on in the global economy. Nor am I disputing that this unhappiness is unequally distributed. But the proportion of this unhappiness due to income inequality is actually relatively small — and moreover, concentrated not among the poor, but among the upper middle class, which competes with the very rich for status goods and elite opportunities.

If we look at the middle three quintiles, very few of their worst problems come from the gap between their income and the incomes of some random Facebook squillionaire. Here, in a nutshell, are their biggest problems:

  1. Finding a job that allows them to work at least 40 hours a week on a relatively consistent schedule and will not abruptly terminate them.
  2. Finding a partner who is also able to work at least 40 hours a week on a relatively consistent schedule and will not be abruptly terminated.
  3. Maintaining a satisfying relationship with that partner over a period of years.
  4. Having children who are able to enjoy more stuff and economic security than they have.
  5. Finding a community of friends, family and activities that will provide enjoyment and support over the decades.

This is where things are breaking down — where things have actually, and fairly indisputably, gotten worse since the 1970s. Crime is better, lifespans are longer, our material conditions have greatly improved — yes, even among the lower middle class. What hasn’t improved is the sense that you can plan for a decent life filled with love and joy and friendship, then send your children on to a life at least as secure and well-provisioned as your own.

How much of that could be fixed by Piketty’s proposal to tax away some huge fraction of national income from rich people? Some, to be sure. But writing checks to the bottom 70 percent would not fix the social breakdown among those without a college diploma — the pattern of marital breakdown showed up early, and strong, among welfare mothers.

April 18, 2014

QotD: Opera

Filed under: Humour, Media, Quotations — Tags: , , , , — Nicholas @ 09:21

Opera, to a person genuinely fond of aural beauty, must inevitably appear tawdry and obnoxious, if only because it presents aural beauty in a frame of purely visual gaudiness, with overtones of the grossest sexual provocation. The most successful opera singers of the female sex, at least in America, are not those whom the majority of auditors admire most as singers but those whom the majority of male spectators desire most as mistresses. Opera is chiefly supported in all countries by the same sort of wealthy sensualists who also support musical comedy. One finds in the directors’ room the traditional stock company of the stage-door alley. Such vermin, of course, pose in the newspapers as devout and almost fanatical partisans of art; they exhibit themselves at every performance; one hears of their grand doings, through their press agents, almost every day. But one has merely to observe the sort of opera they think is good to get the measure of their actual artistic discrimination.

The genuine music-lover may accept the carnal husk of opera to get at the kernel of actual music within, but that is no sign that he approves the carnal husk or enjoys gnawing through it. Most musicians, indeed, prefer to hear operatic music outside the opera house; that is why one so often hears such things as “The Ride of the Valkyrie” in the concert hall. “The Ride of the Valkyrie” has a certain intrinsic value as pure music; played by a competent orchestra it may give civilized pleasure. But as it is commonly performed in an opera house, with a posse of flat beldames throwing themselves about the stage, it can only produce the effect of a dose of ipecacuanha. The sort of person who actually delights in such spectacles is the sort of person who delights in plush furniture. Such half-wits are in a majority in every opera house west of the Rhine. They go to the opera, not to hear music, not even to hear bad music, but merely to see a more or less obscene circus. A few, perhaps, have a further purpose; they desire to assist in that circus, to show themselves in the capacity of fashionables, to enchant the yokelry with their splendor. But the majority must be content with the more lowly aim. What they get for the outrageous prices they pay for seats is a chance to feast their eyes upon glittering members of the superior demi-monde, and to abase their groveling souls before magnificoes on their own side of the footlights. They esteem a performance, not in proportion as true music is on tap, but in proportion as the display of notorious characters on the stage is copious, and the exhibition of wealth in the boxes is lavish.

H.L. Mencken, “The Allied Arts: Opera”, Prejudices: Second Series, 1920.

April 9, 2014

Amity Shlaes on “progressive” tax rates

Filed under: Government, USA — Tags: , , — Nicholas @ 09:36

The US tax system, like those in many Western countries, incorporates the concept of “progressivity” — the higher the income you earn, the higher the tax you pay on the last dollar. Your income is divided into blocks where each block of dollars is taxed at a different (rising) rate. In other words, the lower your personal income the less tax you pay per dollar of income. Amity Shlaes explains why this mechanism makes reforming or cutting taxes such a challenge:

Over the hundred years intervening, studies have shown that generally people do think that the greater the wealth, the more dollars wealthy people should pay in tax, proportionally. But that is not a progressive rate structure. That is a flat tax. A progressive tax increases rates as you earn more, disproportionally.

Nor are many people aware that under a progressive structure the last dollar is taxed at a different rate from the first dollar. The top marginal rate is not necessarily the average rate. In the early 1980s, scholar Karlyn Keene found that many Americans, when interviewed, thought flat taxes fair. Before Keene, Walter Blum and Harry Kalven at the University of Chicago studied attitudes toward progressivity and its functions and came away, despite their liberal predilections, concluding that the case for progressivity is “uneasy.”

[…]

Vanity of two sorts provides answers. Most Americans are unwilling to concede that they may not understand or be comfortable with long formulas and complex economic ideas. So, like the Enron audit committee, they simply nod and go along.

The second vanity involves not intelligence but a kind of Puritan pretension. No American wants to be caught appearing unfair, even if in the most fleeting snapshot. “Progressivity” sounds like “progress.” Nobody wants to be seen opposing progress, even if that progress is regress and unfair to boot.

In any case: That willed American ignorance is the single greatest reason our progressive income-tax rates have moved, at times, into the 90 percent range, up from that original 7 percent.

Worse, the attitude makes progressivity hard to undo. When you cut taxes for all in a progressive rate structure, the rich necessarily get a larger tax break because they pay a greater share of the taxes. But “larger tax breaks for the rich” are impossible to sell. A redistributive corollary: benefits for the poor. This week Paul Ryan is getting scourged because his budget cuts affect the poor more than the rich. That is because the poor get more of the benefits in the first place.

Update, 10 April: Here’s a great example of how much tax rates can increase at higher levels (although this particular example is not an income tax). In New York state, a recent change to estate tax rates can result in a marginal tax of 164%:

On its face, the new law seems like tax relief. Under the previous law, New Yorkers paid estate taxes of 3.06 percent to 16 percent on the value of estates over $1 million. The new law raises that exclusion to $2.062 million this year and gradually increases it to more than $5 million by 2017.

But because the law also phases out certain credits related to federal taxes, people who have estates valued just above the $2 million threshold could get massive estate tax bills. An analysis by U.S. Trust found that a New York resident who dies today with a taxable estate of $2,165,625 could have to pay an estate tax of over $112,050. That represents a tax of over 100 percent on the value of the estate over $2,062,000.

It gets worse in a few years. Matz said that assuming that the exclusion rises to $5,250,000, a New Yorker with a taxable estate of $5,512,500 would have to pay an estate tax of $430,050. That’s a marginal tax rate of 164 percent on the value of the estate above the exclusion.

March 20, 2014

Today in misunderstood income inequality stats…

Filed under: Britain, Economics, Media — Tags: , , — Nicholas @ 08:20

Tim Worstall pokes fun at a recent Oxfam report that claims that Britain’s five richest families own more than the bottom 20% of the population:

I read this and thought, “well, yes, this is obvious and what the hell’s it got to do with increasing inequality?” Of course Gerald Grosvenor (aka Duke of Westminster) has more wealth than the bottom 10 per cent of the country put together. It’s obvious that the top five families will have more than 20 per cent of all Britons. Do they think we all just got off the turnip truck or something?

They’ve also managed to entirely screw up the statistic they devised themselves by missing the point that if you’ve no debts and a £10 note then you’ve got more wealth than the bottom 10 or 20 per cent of the population has in aggregate. The bottom levels of our society have negative wealth.

[…]

Given what we classify as wealth, the poor have no assets at all. Property, financial assets (stocks, bonds etc), private sector pension plans, these are all pretty obviously wealth.

But then the state pension is also wealth: it’s a promise of a future stream of income. That is indeed wealth just as much as a share certificate or private pension is. But we don’t count that state pension as wealth in these sorts of calculations.

The right to live in a council house at a subsidised rent of the rest of your life is wealth, but that’s not counted either. Hell, the fact that we live in a country with a welfare system is a form of wealth — but we still don’t count that.

Doing this has been called (not by me, originally anyway) committing Worstall’s Fallacy. Failing to take account of the things we already do to correct a problem in arguing that more must be done to correct said problem. We already redistribute wealth by taxing the rich to provide pensions, housing, free education (only until 18 these days) and so on to people who could not otherwise afford them. But when bemoaning the amount of inequality that clearly cries out for more redistribution, we fail to note how much we’re already doing.

So Oxfam are improperly accounting for wealth and they’ve also missed the point that, given the existence of possible negative wealth, then of course one person or another in the UK will have more wealth than the entire lowest swathe.

March 17, 2014

Current US government programs actually increase income inequality

Filed under: Bureaucracy, Government, USA — Tags: , , , , — Nicholas @ 09:32

In the Washington Post, George Will says that we’ve learned nothing about helping the poor since Daniel Patrick Moynihan’s day:

Between 2000, when 17 million received food stamps, and 2006, food stamp spending doubled, even though unemployment averaged just 5.1 percent. A few states have food stamp recruiters. An award was given to a state agency for a plan to cure “mountain pride” that afflicts “those who wished not to rely on others.”

Nearly two-thirds of households receiving food stamps qualify under “categorical eligibility” because they receive transportation assistance or certain other welfare services. We spend $1 trillion annually on federal welfare programs, decades after Daniel Patrick Moynihan said that if one-third of the money for poverty programs was given directly to the poor, there would be no poor. But there also would be no unionized poverty bureaucrats prospering and paying dues that fund the campaigns of Democratic politicians theatrically heartsick about inequality.

The welfare state, primarily devoted to pensions and medical care for the elderly, aggravates inequality. Young people just starting up the earnings ladder and families in the child-rearing, tuition-paying years subsidize the elderly, who have had lifetimes of accumulation. Households headed by people age 75 and older have the highest median net worth of any age group.

In this sixth year of near-zero interest rates, the government’s monetary policy breeds inequality. Low rates are intended to drive liquidity into the stock market in search of higher yields. The resulting boom in equity markets — up 30 percent last year alone — has primarily benefited the 10 percent who own 80 percent of all directly owned stocks.

March 16, 2014

Some things never change

Filed under: Humour, Politics, USA — Tags: , , — Nicholas @ 10:17

Darton Williams posted this on Google+:

WW2-era political cartoon by Theodor Geisel

This is a WWII-era political cartoon by Theodor Geisel (AKA Dr. Seuss). Why is it still so relevant? Has anything actually changed for the better?

March 3, 2014

QotD: The triad of distinctively Canadian sports

Filed under: Cancon, Football, Sports — Tags: , , , , — Nicholas @ 10:54

We have a triad of distinctively Canadian sports: Canadian football, hockey and curling. Football, from its origins to the present, has remained a collegiate game, a game of the ruling class. College kids invented gridiron football; McGill undergrads taught Americans what a “touchdown” was. Today, football is, notoriously, the shortest path to becoming a partner in a law firm, with golf a close second. Peter Lougheed and Rob Ford were football players, rich kids who, in different ways, leveraged the social connectivity of the game.

Hockey is the most popular sport in the triad because it is the game of the Canadian middle class, a game that requires a family to have something of a surplus and, ideally, to live near a town of some size. The typical sponsor for a minor hockey team has always been some kind of small business — a plumber, a restaurant, a trucking company. There are still plenty of kids in families too broke to afford hockey. In Canada, it is the first way one might learn that one is poor.

This is where curling fits in: It is a farmer’s game, a peasant tradition. There are still many villages in the West that cannot afford hockey rinks, but that faithfully lay down two curling sheets in a long, narrow shack every fall. In those towns, an agriculture society’s community investment in two sets of stones will serve all for decades. Where hockey requires every child to have skates and pads and sticks, the traditional equipment for curling amounts to two ordinary household brooms for every four players.

Colby Cosh, “Curling will never be ruined”, Maclean’s, 2014-03-02

March 2, 2014

Why the EU hesitates to do anything about Ukraine

Filed under: Europe, Politics, Russia — Tags: , , , , — Nicholas @ 09:50

Theodore Dalrymple:

Extreme wealth, whether honestly or dishonestly acquired, seems these days to bring forth little new except in the form and genre of vulgarity. Mr. Ambani’s skyscraper tower home in Bombay is a case in point: His aesthetic is that of the first-class executive lounge of an airport. Mr. Ambramovich’s ideal is that of a floating Dubai the size of an aircraft carrier. Only once have I been invited to a Russian oligarch’s home, and it struck me as a hybrid of luxurious modernist brothel and up-to-date operating theater. I saw some pictures recently of some huge Chinese state enterprise’s headquarters, and it appalled me how this nation, with one of the most exquisite, and certainly the oldest, aesthetic traditions on Earth, has gone over entirely to Las Vegas rococo (without the hint of irony or playfulness).

But it was the luxury and not the taste of Yanukovych’s homes that outraged the Ukrainians, for if by any chance they had come into money they would have done exactly the same, aesthetically speaking. Yanukovych may have been a dictator of sorts, but when it came to taste he was a man of the people. A horrified Ukrainian citizen, touring one of his homes after his downfall, was heard to exclaim, “All this beauty at our expense!”

As to politics, the Ukrainian crisis has once again revealed the European Union’s complete impotence. Physiognomy is an inexact science, but it is not so inexact that you cannot read the bemused feebleness on the faces of people such as Van Rompuy, Hollande, and Cameron, the latter so moistly smooth and characterless that it looks as though it would disappear leaving a trail of slime if caught in the rain. Mrs. Merkel has a somewhat stronger face, but then she has the advantage of having spent time in the Free German Youth (the East German communist youth movement), which must at least have put a modicum of iron in her soul.

Be that as it may, Russia holds all the trump cards in this situation. It can turn off Western Europe’s central heating at a stroke, and for Europeans such heating is the whole meaning and purpose of life—together with six-week annual holidays in Bali or Benidorm. Therefore Europe will risk nothing for the sake of Ukraine, except perhaps a few billion in loans of no one’s money, a trifle in current economic circumstances. If Bismarck were to return today, he would say that the whole of Ukraine was not worth the cold of one unheated radiator.

February 10, 2014

The difference between money and wealth

Filed under: Economics — Tags: , , , , — Nicholas @ 11:37

At Ace of Spades HQ, Monty gives an introduction to Say’s Law:

Jean-Baptiste Say, an 18th-century economist and follower of Adam Smith, recognized one of the most fundamental laws in all economics: the entirely common-sense observation that consumption requires production. This axiom is called Say’s Law of Markets.

However, this axiom is often mis-stated as “production creates its own demand”. This is incorrect — production is necessary for consumption to take place, but production anticipates demand, it does not cause it. Production is speculative in this sense. The simple act of producing some good or service does not, in and of itself, create demand for that good or service. (This is true even for basic commodities.)

What Say’s Law really says is that production is the source of wealth. Market-driven production creates value and provides choice to consumers. Inventors and innovators bring new products to market, and as consumers are exposed to these new products, demand rises with the utility or desirability of these new products. New markets are opened by innovators who are able to tap into needs and wants that consumers didn’t even know they had until a new product or service is offered.

And he explains why money is not wealth:

So what is “wealth”, really? (I could write a whole book on the difference between “wealth” and “money”, but I’ll try to boil it down.) Wealth is options. Wealth is choice. Wealth is variety. Wealth is agency — being able to do what you want to do when you want to do it. Wealth is surfeit — having more than the essentials of life. It is comfort, leisure, ease — or at least the agency and option (those words again) to avail oneself of leisure. Simply put, wealth is stored value that can be drawn down in various ways, only some of which involve the exchange of money for goods and services. And how is wealth created? Through production, because production must necessarily precede consumption.

Money correlates with wealth because money is a medium of exchange and a store of value. Rich people have a lot of money because they are wealthy, not the other way around. Wealth allows us to buy a bigger house or better car or nicer furniture. It pays for a nice dinner for two at an upscale restaurant. Note well: wealth buys these things, not money per se. Consumption is the draw-down of wealth, not the simple expenditure of money.

Money is the oil in the machine of an economy, but money is not in and of itself wealth. If I am stranded on a desert island with a thousand gold coins, I am just as poor as if I were a homeless vagrant living in an alleyway somewhere, because I cannot exchange my gold for things I want or need. It does not give me options or variety or comfort. My gold facilitates neither production nor consumption absent a market mechanism that makes use of it.

February 8, 2014

The utopian bubble of elite university students

Filed under: Politics, USA — Tags: , , , , — Nicholas @ 10:34

Jonah Goldberg on the “ideal” lifestyle of students at elite universities:

There’s a certain kind of elite student who takes himself very, very seriously. Raised on a suite of educational TV shows and books that insist he is the most special person in the world — studies confirm that Generation Y is the most egocentric and self-regarding generation in our history — he is away from home for the first time, enjoying his first experience of freedom from his parents. Those same parents are paying for his education, which he considers his birthright. Shelter is provided for him. Janitors and maids clean up after him. Security guards protect him. Cooks shop for him and prepare his food. The health center provides him medical care and condoms aplenty. Administrators slave away at finding new ways for him to have fun in his free time. He drinks with abandon when he wants to, and the consequences of his bacchanalia are usually somewhere between mild and nonexistent. Sex is as abundant as it is varied. If he does not espouse any noticeably conservative or Christian attitudes, his every utterance in the classroom is celebrated as a “valuable perspective.” All that is demanded of him is that he pursue his interests and, perhaps, “find himself” along the way. His ethical training amounts to a prohibition on bruising the overripe self-esteem of another person, particularly a person in good standing with the Coalition of the Oppressed (blacks, Latinos, Muslims, women, gays, lesbians, transsexuals, et al.). Such offenses are dubbed hate crimes and are punished in a style perfected in Lenin’s utopia: through the politicized psychiatry known as “sensitivity training.”

But even as this sensitivity is being cultivated, the student is stuffed to the gills with cant about the corruption of “the system,” i.e., the real world just outside the gates of his educational Shangri-La. He is taught that it is brave to be “subversive” and cowardly to be “conformist.” Administrators encourage kitschy reenactments of 1960s radicalism by celebrating protest as part of a well-rounded education — so long as the students are protesting approved targets, those being the iniquities of “the system.” There is much Orwellian muchness to it all, since these play-acting protests and purportedly rebellious denunciations of the status quo are in fact the height of conformity.

But it is a comfortable conformity, and this student — who in all likelihood will go into a profession at the pinnacle of the commanding heights of our culture — looks at this Potemkin world and thinks it is the way things are supposed to be. He feels freer than he ever has or ever will again, but that freedom is illusory. He is, in fact, a dependent: All his fundamental needs are met and paid for by others. This is what the political theorists call positive liberty — when someone else gives you a whole pile of stuff so you can be “free” to do whatever you want.

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