Society

How Much Are You Willing to Pay For Free Stuff?

by
I think that the word "free" is one of the most misused words. - Milton Friedman
I think that the word “free” is one of the most misused words. – Milton Friedman

A couple weeks ago, I wrote about some polling data on millennials and their (un)willingness to redistribute wealth. A recent poll by Vox and Morning Consult found that while most Sanders supporters (80%) are willing to pay more in taxes,[ref]Compare this to Clinton supporters (70%) or Republicans (40%).[/ref] how much more they are willing to pay paints an interesting picture. “When we polled voters, we found most Sanders supporters aren’t willing to pay more than an additional $1,000 in taxes for his biggest proposals [i.e. nationalized health care and free public college tuition]. That’s well short of how much more the average taxpayer would pay under his tax plan.”

Vox explains,

But Sanders’s plan to pay for universal health care coverage would increase taxes on most voters by more than $1,000. He wants to:

  • Add a 2.2 percentage point surcharge on individual incomes. This means marginal tax rates go up for everyone. (After a standard deduction, about a quarter of households won’t have to pay this surcharge.)
  • Add a new 6.2 percent tax on earnings, which employers pay — but will be passed on to workers over time in the form of lower wages, according to the Tax Policy Center’s Roberton Williams.

The kicker for all of this? Some analysts believe Sanders’s plan will cost twice as much as his campaign estimates.[ref]Other economists have been quite critical of his plan as well.[/ref]

Perhaps even more interesting, “[w]hen you break down the poll results by age, rather than by candidate, it appears older people don’t want to pay as much for universal health care. This is especially interesting because older people have higher premiums, use the health care system more often, and spend a larger portion of their money on health care.” Another finding fits with my previous post: “Older people generally make more money and are more likely to be employed, and our poll shows that people who earn more money would pay less for Sanders’s health care plan — both as a percentage of their income and in dollars.” When it comes to free tuition, 14% of Sanders supporters said they don’t want to pay additional taxes for it with nearly half saying they would only pay up to $1,000 a year.

As the article puts it, “most Sanders supporters don’t want to Feel the Bern in their wallets.” The author concludes,

This isn’t a question of whether Sanders’s ideas are valid. This is a question of how voters are thinking about Sanders’s revolution, which is a radical increase in the scope of what government is responsible for, versus the private sector.

To their credit, some Sanders supporters have done the math and figured out that even with big tax increases, they would end up saving more money from Sanders’s new programs. But many other people were surprised when they used our candidate tax calculator and found out how much additional taxes they would pay under Sanders’s plan.

Yet that’s the revolution — one that promises Medicare for all, public college tuition for all, massive investments in infrastructure, expanded Social Security, etc. Those services require higher taxes, but could also save people money in the long run.

It’s a shift in the way we think about how we pay for social services. But right now, it appears that even Sanders supporters haven’t gotten their heads around what that means for their finances.

The Importance of Religious Literacy

by

In today’s political climate, I often hear some pretty ridiculous things about religion. From liberal atheists to Republican Presidential candidates (here’s looking at you Trump and Cruz), the ignorance abounds. The video below is an excellent reminder as to why religious literacy is important. Check it out.

Guaranteed Basic Income: A 10+ Year Experiment

by

The organization GiveDirectly is about to embark on a potentially paradigm-shifting social experiment:

to try to permanently end extreme poverty across dozens of villages and thousands of people in Kenya by guaranteeing them an ongoing income high enough to meet their basic needs—a universal basic income, or basic income guarantee. We’ve spent much of the past decade delivering cash transfers to the extremely poor through GiveDirectly, but have never structured the transfers exactly this way: universal, long-term, and sufficient to meetbasic needs. And that’s the point—nobody has and we think now is the time to try.

The reasons for this are evidence-based:

Across many contexts and continents, experimental tests show that the poor don’t stop trying when they are given money,[ref]There is evidence that government programs and benefits can discourage work (at least in an already rich country like the U.S.), including unemployment benefits, Social Security Disability Insurance and VA’s Disability Compensation, Obamacare, Medicaid, the Negative Income Tax, and other forms of welfare. Charles Murray argued decades ago that the welfare state creates perverse incentives. However, not all forms of welfare are created equal, which is the point of the debate.[/ref] and they don’t get drunk. Instead, they make productive use of the funds, feeding their families, sending their children to school, and investing in businesses and their own futures. Even a short-term infusion of capital has been shown to significantly improve long-term living standards, improve psychological well-being, and even add one year of life.

On the other hand, well-intentioned social programs have often fallen short. A recent World Bank study concludes that “skills training and microfinance have shown little impact on poverty or stability, especially relative to program cost.” Moreover, this paternalistic approach is often for naught: Jesse Cunha, for example, finds no differences in health and nutritional outcomes between providing basic foods and providing an equally sized cash program. Most importantly, though, the poor prefer the freedom, dignity, and flexibility of cash transfers—more than 80 percent of the poor in a study in Bihar, India, were willing to sell their food vouchers for cash, many at a 25 to 75 percent discount.

As the authors note, the “idea of a basic income guarantee is being debated around the globe, with pilots being considered by Finland’s center-right government and Canada’s liberal party, and support from across the political landscape, including libertarians from the Cato Institute[ref]Slight quibble: the essay is for Cato Unbound, but Matt Zwolinski isn’t with the Cato Institute. Nonetheless, Zwolinski has praised GiveDirectly.[/ref] and liberals from the Brookings Institution.”

“But fundamentally,” the authors point out,

the question should be an empirical one: What are the impacts of a universal basic income? And how do they compare with other forms of assistance?

We’re planning to find out. To do so, we’re planning to provide at least 6,000 Kenyans with a basic income for 10 to 15 years. These recipients are some of the most vulnerable people in the world, living on the U.S. equivalent of less than a dollar. And we’re going to work with leading academic researchers, including Abhijit Banerjee of MIT, to rigorously test the impacts.

…To get started, we’re putting in $10 million of our own funds to match the first $10 million donated by others. At worst that money will shift the life trajectories of thousands of low-income households. At best, it will change how the world thinks about ending poverty.

This is really exciting stuff. See more on it here.

Brigham Young: A Lecture by John G. Turner

by

This is part of the DR Book Collection.

In her review of Brigham Young: Pioneer Prophet by GMU historian John G. Turner, Julie Smith writes,

I suspect that John G. Turner’s Brigham Young: Pioneer Prophet will be the definitive biography of Brigham Young for the next few decades.  Overall, this is a good thing.

But it may also be a troubling thing, at least for some people. I wholeheartedly recommended the recent Joseph Smith, David O. McKay, and Spencer W. Kimball biographies to all members of the Church.  Sure, they are a little less sanitized than we are used to, but the picture in each one of those works is of a prophet of God who had some flaws, with far more emphasis on the “prophet” part than on the “flawed” part.

This book?  Not so much.  I have serious reservations about recommending it to the average church member; if you need your prophet to be larger than life, or even just better than the average bear, this book is not for you.  I think there is a substantial risk that people raised on hagiographic, presentist images of prophets would have their testimonies rocked, if not shattered, by this book.

…So, here’s the Readers’ Digest version of my review:  this book is a real treat, but it might completely destroy your testimony if you can’t handle a fallible, bawdy, often mistaken, sometimes mean, and generally weird prophet.

The book truly is incredible, doing for Brigham Young what Richard Bushman did for Joseph Smith. However, I agree with Julie that “the main weakness of this book” is the fact that “you are not left with any reason as to why people would have made the enormous sacrifices that were part of believing that Brigham Young was a prophet.” To fill in these gaps, here are the reported words of Turner from my friend Carl Cranney on Young’s appeal:

Why did people follow Brigham? He admitted to me and the others in the study group a few weeks ago that he felt he could have handled this question better. He pointed out three things, specifically, that Brigham had done before he became the de facto church president, and later actual church president, that garnered him a lot of good will from the members. First, many of the church members were from the British Isles, and Brigham had led the British mission. So many members of the church had fond memories of him as the leader of the missionaries that brought them into the church. Second, he finished the Nauvoo temple and endowed thousands of Mormons before they abandoned the city. The sheer amount of man-hours this took would have staggered anybody but the firmest believer. Brigham Young was a believer, and it showed to the people that he worked tirelessly for in the temple. Third, he was the “American Moses” who dragged a despondent group of church members from their Nauvoo the Beautiful to the middle of nowheresville, Mexico, to create a civilization literally out nothing in a sparsely-populated desert wilderness. He worked hard to preserve the church and to get its members to safety. So, after doing these three things he had garnered a lot of support and a lot of good will from the members.

Despite this oversight, the book is fantastic and the go-to biography of Brigham Young.

Check out John Turner’s lecture on the bio at Benchmark Books below:

The Plight of the Poor in the U.S.

by

In the comments on my last post, Robert C made an important point based on his own experience that “the poor in the U.S. experience a high degree of social, emotional, and psychological stress in comparison to the lack of such stress among the relatively rich in other countries.” My interest in economics and data is largely about providing proper context and analysis, but sometimes it can make me look like a cold-blooded bastard.

Robert is right though. The working class in America does face major problems. The experiences of those growing up in working-class neighborhoods are often traumatic and these experiences have negative effects on economic outcomes (let alone well-being). David Lapp, a research fellow at the Institute for Family Studies, had a powerful reply to a couple recent articles blasting the American white working class. As Lapp tells it,

No true calamity or awful disaster has befallen the white working class?

Try telling that to [the boy] whose own mother abused him and whose parents left him. Try telling that to the girl molested by her mother’s boyfriend, or the little girl whose mom and boyfriend passed out in the McDonald’s parking lot because of a heroin overdose, or the 10-year-old boy who walked into his parents’ bedroom to find his dad having sex with a stranger. (Those are just some of the typical stories we heard in our interviews with members of the working class in Ohio.) As one young man told me, “Besides killing a small child I would say that divorce is the second-worst thing that can ever happen. Because divorce is the symbol of violently breaking apart. Like in my case, my dad and my mom separating, it tore the family apart, literally. It was the symbol of breaking apart and shards went everywhere.”

I understand the point that Williamson and French are trying to make: when we speak of divorce and abuse and heroin and father absence, we are not talking about the factory that left, but acts perpetrated by adults with moral responsibilities. But that is no solace to the young victims—yes, we must speak of victims—of those traumatic events.

Because the divorce culture is a true calamity for generations of young people growing up in the aftermath. Nor should we imagine that just because a cause is cultural or familial, and not economic, that it involves no victims. As Rod Dreher writes in a response to Williamson’s post, “Children are not empty receptacles into which we can insert knowledge. If they live in homes filled with noise, chaos, violence, and contempt, it doesn’t matter what race they are, they are going to be very lucky to make it.”

Families are in trouble, but people aren’t making bad decisions in isolation. The family is in trouble because marriage is a social institution, and many young people have seen their own parents, grandparents, and great-grandparents divorce (sometimes two, three, and four times). Whatever the reasons for divorce that the pioneers of the divorce revolution had, the young people walking into marriage today—or looking bewilderingly at it from the outside—are left feeling broken. That raises serious questions.

…We can always point to some people who grew up in troubled families and nevertheless succeed. We admire their courage and perseverance. Still, isn’t it self-evident that a child who suffers his parents’ divorce, or the absence of his father, or parental abuse, is much less likely to form good and lasting relationships as an adult? More likely to despair and resort to Oxycontin and heroin? And shouldn’t that fact matter for how we think and talk about the problems that confront the poor and working class, many of whom suffer these traumas?

Lapp recognizes that narratives about the poor often fall into two extreme categories and that he could easily adopt one of these extremes in telling of the story of those he’s interviewed. One extreme highlights external factors and lack of resources (typically the political left), but this largely ignores the poor’s “own words about how things could have been different if they had made different choices.” The other extreme focuses “almost exclusively on these young adults’ own moral responsibilities, and downplay the cultural and economic forces and trauma clearly impinging on their lives” (typically the political right). “The true story,” Lapp says, “…is one that shows how cultural and economic forces and trauma intersect with people’s own free decisions.” To “scold the “downscale” people about their sins and “entitlement” and their communities “that deserve to die”” is to assume that “a person suffering from years of trauma and deprived of good models of family life could just snap out of it with a few good rebukes.” When we do this, we fail “to look squarely at not just “the problem,” but the person in front of us.”

The complexities of poverty demonstrate the need for strong communities, families, churches, charities, and yes, even government programs. I still think economic growth does far more to lift the poor out of poverty than anything else. But when traumatic home life retards your emotional, psychological, educational, and economic development, this is not something that should be shamed. It’s something that should be dealt with through integration into a supportive social network.

And this–to borrow language from one of the recent critiques of the working class–requires us to “get off our asses” and help them out.

Good Bosses and Workplace Happiness

by

Over at the Harvard Business Review, there’s a great post on the importance of human connection at work. It starts off by explaining that some research finds that employees prefer happiness at work to larger pay:

So what leads to employee happiness? A workplace characterized by humanity. An organizational culture characterized by forgiveness, kindness, trust, respect, and inspiration. Hundreds of studies conducted by pioneers of positive organizational psychology, including Jane Dutton and Kim Cameron at the University of Pennsylvania and Adam Grant at Wharton, demonstrate that a culture characterized by a positive work culture leads to improved employee loyalty, engagement, performance, creativity, and productivity. Given that about three-quarters of the U.S. workforce is disengaged at work — and the high cost of employee turnover — it’s about time organizations start paying attention to the data.

Research suggests that the most powerful way leaders can improve employee well-being is not through programs and initiatives but through day-to-day actions. For example, data from a large study run by Anna Nyberg at the Karolinska Institute shows that having a harsh boss is linked to heart problems in employees. On the other side of the coin, research demonstrates that leaders who are inspiring, empathic, and supportive have more loyal and engaged employees. So checking in with employees about their families once in a while may help more than offering a mindfulness class at lunchtime.

This is a powerful reminder that “organizations are first and foremost places of human interaction, not just transaction. Research shows that our greatest need after food and shelter is social connection — positive social relationships with others. If we create work environments characterized by these kinds of positive and supportive interactions, we create organizations that thrive.”

In other words, stop being a horrible boss.

Who Are “The Rich”?

by

In honor of former World Bank economist Branko Milanovic’s[ref]Nathaniel and I used some of Milanovic’s work in our SquareTwo article.[/ref] new book Global Inequality: A New Approach for the Age of Globalization (out this month),[ref]You can find The Economist‘s review of the book here.[/ref] here is a NYT piece on his previous book The Haves and Have-Nots:

The graph shows inequality within a country, in the context of inequality around the world. It can take a few minutes to get your bearings with this chart, but trust me, it’s worth it.

Here the population of each country is divided into 20 equally-sized income groups, ranked by their household per-capita income. These are called “ventiles,” as you can see on the horizontal axis, and each “ventile” translates to a cluster of five percentiles.

The household income numbers are all converted into international dollars adjusted for equal purchasing power, since the cost of goods varies from country to country. In other words, the chart adjusts for the cost of living in different countries, so we are looking at consistent living standards worldwide.

Now on the vertical axis, you can see where any given ventile from any country falls when compared to the entire population of the world.

Now the clincher:

Now take a look at America.

Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants.

Now check out the line for India. India’s poorest ventile corresponds with the 4th poorest percentile worldwide. And its richest? The 68th percentile. Yes, that’s right: America’s poorest are, as a group, about as rich as India’s richest.

This goes hand-in-hand with yesterday’s post about GDP per capita (PPP). Should provide some much-needed context when we talk about inequality and “the rich.”

GDP Per Capita: United States vs. Everyone Else

by

Economist Mark Perry has put together an eye-opening chart based on data from the Bureau of Economic Analysis and the World Bank that compares GDP per capita (PPP) in the United States (state-by-state) and other countries, including those of Europe. As Perry explains,

Adjusting for PPP allows us to make a more accurate “apples to apples” comparison of GDP per capita among countries around the world by adjusting for the differences in prices in each country. For example, the UK’s unadjusted GDP per capita was $45,729 in 2014, but because prices there are higher on average than in the US (for food, clothing, energy, transportation, etc.), the PPP adjustment lowers per capita GDP in the UK to below $40,000. On the hand, consumer prices in South Korea are generally lower than in the US, so that increases its GDP per capita from below $28,000 on an unadjusted basis to above $34,000 on a PPP basis.

And what does he find?

states

“As the chart demonstrates,” Perry writes,

most European countries (including Germany, Sweden, Denmark and Belgium) if they joined the US, would rank among the poorest one-third of US states on a per-capita GDP basis, and the UK, France, Japan and New Zealand would all rank among America’s very poorest states, below No. 47 West Virginia, and not too far above No. 50 Mississippi. Countries like Italy, S. Korea, Spain, Portugal and Greece would each rank below Mississippi as the poorest states in the country.

The Cato Institute’s Daniel Mitchell adds a few more points, including the OECD’s Individual Consumption Index:

He concludes,

None of this suggests that policy in America is ideal (it isn’t) or that European nations are failures (they still rank among the wealthiest places on the planet).

I’m simply making the modest — yet important — argument that Europeans would be more prosperous if the fiscal burden of government wasn’t so onerous. And I’m debunking the argument that we should copy nations such as Denmark by allowing a larger government in the United States (though I do want to copy Danish policies in other areas, which generally are more pro-economic liberty than what we have in America).

 

Good stuff.

 

College Is Not the Great Equalizer

by

That’s one takeaway from a recent post by Brookings fellow Beth Akers:

Essentially, does higher education succeed in lowering intergenerational “stickiness” of socioeconomic status?

Unfortunately, the evidence doesn’t paint as rosy of a picture as we’d like to see. New evidence shows that a college degree might be worth less if you’re raised poor. We can’t say for sure why this is the case, but it’s easy to imagine a number of reasonable explanations. For instance, it’s likely that students who grown up in poorer families attend lower quality institutions. The disparity in returns is so large that individuals who are born into poor families (the lowest quintile of the income distribution) and manage to graduate from college have the same chance of staying in the bottom income quintile as people who are born into rich families (higher income quintile) and don’t complete high school.

Another one is to ignore (or at least temper) the increasingly popular notion that a college education is about knowledge, not a path to higher income:

For a long time we’ve hesitated to talk about education as a financial investment, but that has a done a disservice to the students who can’t really afford the luxury of turning a blind eye to the economic consequences of their decisions. We need to empower students to make good decisions by publishing data on the labor market returns of each program of study covered by the federal student aid program. A large step on this front was taken last year when earnings data for each college was published on a government website. But program level information is also necessary so that students can choose courses of study that are likely to lead them to jobs that will make their college costs worth it.

She adds that we should seek ways to “reduce the risk of investing in higher education including a more robust income driven repayment system in the federal loan program, private market financial products that offer insurance to student borrowers and new business models that offer guarantees to students.”

Check it out.

European Labor Laws and Radical Islam

by

The Boston Globe made this interesting observation last week in the wake of the terrorist attack in Brussels:

Long before Tuesday’s terror attacks in Brussels, it was clear that Belgium had become a breeding ground for Islamist extremists. Hundreds of Belgian Muslims — as many as 500, according to one estimate — have gone to Syria and Iraq to fight for ISIS, making Belgium by far Europe’s leading supplier of foreign jihadists. Last November’s horrific slaughter in Paris was masterminded by a Belgian radical, Abdelhamid Abaaoud, and at least four of the men who carried out those attacks were from the Brussels district of Molenbeek. One of them was Salah Abdeslam, who was captured in Molenbeek, after an intense manhunt, on March 19.

For Islamist imams and terrorist ringleaders, such neighborhoods — heavily Muslim, densely populated, with high unemployment and crime rates — have proved fertile territory for recruiting violent jihadists. “There is almost always a link with Molenbeek. That’s a gigantic problem, of course,” Belgium’s prime minister said after the Paris atrocities.

The article continues by explaining that “Muslim communities are not inherently predisposed to violence. The presence of a sizable Muslim population in a non-Muslim-majority country does not inevitably presage jihadist bloodshed or demands for the imposition of sharia. It is true that some 650,000 Muslims live in Belgium, but five times as many — 3.3 million — live in the United States. Why hasn’t America become a hotbed of Islamic extremism? Why aren’t American Muslims by the thousands flocking to fight for ISIS, Al Qaeda, and other terrorist organizations?” Drawing on Pew Research data, the columnist points out that the “United States has been far more successful at assimilating and integrating Muslim immigrants into American society and culture than has Western Europe.” And this is all despite the wars in Afghanistan and Iraq. In other words, “America’s melting pot still works.”[ref]Which is why Trump and Cruz should really shut their mouths.[/ref]

Much of this is surely cultural. But are there any economic factors involved? Journalist and Reason analyst Shikha Dalmia thinks so. “The standard explanation,” she writes, “is that Europe has admitted more Muslims than it can afford to integrate…Failure to spend money on integration means consigning these refugees to segregated Muslim ghettos or banlieues without jobs and without prospects — other than their monthly welfare check — where they become sitting ducks for radicalization.” But this narrative is flawed:

Immigrants don’t need job programs. They need jobs. And, for a variety of reasons, Europe provides much more of the first and America much more of the second. Europe has an army of social workers in various NGOs whose job is to prepare immigrants for jobs. Not so much in America, which may be partially why America has a far better assimilation track record than Europe. Jobs offer immigrants not just a paycheck, but also an entry into their new society, providing them with both the means and motive to learn its language and customs, all of which eliminates the need for formal programs. What is striking in any conversation with Syrian refugees in America is just how ready and willing they are to take just about any job, no matter how lowly or arduous…Yet many European countries have gone out of their way to deny or severely limit job opportunities for asylum seekers and refugees.

…Even after refugees obtain work permits, their upward mobility is greatly restricted in Europe, thanks to the exceedingly rigid labor market in many countries. The unemployment rates of France and Belgium are nearly twice that of the United States. This dismal job market affects immigrants much more than the native born, thanks to Europe’s tough minimum wage laws and other labor regulations that protect incumbents at the cost of newcomers…Europe’s tough hiring-and-firing provisions, demanded by labor unions, are poison for immigrants. Why? Because immigrants inevitably involve more risk and uncertainty than natives, and if employers can’t fire them, notes George Mason University’s Alex Tabarrok, they won’t hire them either. It is not surprising that Muslims in France, which has some of the most protective labor laws in the industrialized world, are two-and-a-half times less likely to receive job interviews than non-Muslims.

This counterintuitive explanation is worth considering.