Mad Skillz

Over at the American Enterprise Institute, James Pethokoukis has an excellent write-up on a new study by Steven Kaplan (University of Chicago Booth School of Business) and Joshua Rauh (Stanford Graduate School of Business) on income inequality and the “1% vs. 99%” war cry. The findings:

  • The increase in pay at the highest income levels has been broad-based, ranging from public and private company executives to pro athletes.
  • Instead of drastically rising, the afer-tax, after-transfer income share of the top 1% is about the same as it was in 1987-1988, 1996, and 2001 (most inequality alarmists cite pre-tax, pre-transfer income).
  • Top earners come less from inherited wealth (which dropped from 60 to 32% between 1982 and 2011) and more from modest households, access to education (the share of those with no college dropped from 17 to 5 percent, with college grads rising from 77 to 87% between ’82 and ’11), and placing their efforts in tech-based industries.

“We believe,” write Kaplan and Rauh,

that the US evidence on income and wealth shares for the top 1 percent is most consistent with a “superstar”-style explanation rooted in the importance of scale and skill-biased technological change. In particular, we interpret the fact that the top 1 percent is spread broadly across a variety of occupations as most consistent with an important role for skill-biased technological change and increased scale. These facts are less consistent with an argument that the gains to the top 1 percent are rooted in greater managerial power or changes in social norms about what managers should earn.

Though globalization “may have contributed to greater scale,” it “cannot drive the increase in inequality at the top levels given the breadth of the phenomenon across the occupations we study.” Funny enough, increasing globalization has actually decreased global inequality over the last few decades.

Xavier Sala-i-Martin, Maxim Pinkovskiy, 2010

So, maybe the superrich aren’t all Gordon Gekkos. Maybe they’ve just got mad skillz in the globalized economy.

Malice Towards None: Orson Scott Card, Gay Marriage, and the “Ender’s Game” Film Controversy, Part Two

Note: This is the second part of this essay. Part one can be found by clicking here.

“It was just him and me. He fought with honor. If it weren’t for his honor, he and the others would have beaten me together. They might have killed me, then. His sense of honor saved my life. I didn’t fight with honor… I fought to win.”
–Ender’s Game

“Somebody with that much compassion could never be the killer we needed. Could never go into battle willing to win at all costs. If you knew, you couldn’t do it. If you were the kind of person who would do it even if you knew, you could never have understood [them] well enough.”
Ender’s Game

Perhaps one of the most troubling things to me about the whole Ender’s Game boycott is the chill and fear it creates not only for those who, on personal, religious or ethical grounds, oppose gay marriage, but also to those who choose to work and associate with them. In these scenarios, all tainted parties are punished, even those who happen to be supportive with the gay rights movement.  It’s a modern McCarthyism, creating a feeling that all people who do not pass that sociopolitical litmus test must be shunned and, if you do not shun them as well, you’re suspect as well. Thus, in the case Ender’s Game, Lionsgate, Harrison Ford, Gavin Hood, Asa Butterfield, and the rest of the cast and crew of the film would be punished by this kind of attitude, even though they have all come out staunchly in the favor of gay rights, and insist the story of Ender’s Game is a story about compassion and empathy, so has nothing to do with Card’s stance on gay marriage.

Fortunately, a lot of the more level headed members of the liberal community see the implications of such actions. Juliet Lapados at the New York Times, even though she hardly agrees with Card’s more extreme views, called out this sort of action:

Generally, boycotts are used to pressure companies or governments to end objectionable activities; consider the boycott of Chick-fil-A to protest the chain’s financial support of antigay organizations. What Geeks Out has in mind is closer to blacklisting. The group wants to “send a clear and serious message to Card and those that do business with his brand of antigay activism — whatever he’s selling, we’re not buying.” This isn’t about stopping the dissemination of antigay sentiments; it’s about isolating Mr. Card and shaming his business partners, thus cutting into their profits.

If Mr. Card belongs in quarantine, who’s next?

Read moreMalice Towards None: Orson Scott Card, Gay Marriage, and the “Ender’s Game” Film Controversy, Part Two

Science of Smiling

2013-08-15 Smiling

This is an interesting article about the science behind smiling, and most importantly the beneficial effects of smiling:

Smiling stimulates our brain’s reward mechanisms in a way that even chocolate, a well-regarded pleasure-inducer, cannot match.

The article even includes directions on how to practice your smile. That sounds off-putting initially (to me, at least), but it’s interesting that it’s specifically teaching you to practice your genuine smile. Fake smiles, apparently, just don’t give the same benefit.

Honest Company vs. Honest Toddler

2013-08-14 Honest Toddler

Something that sucks about the US legal system: sometimes it doesn’t matter who is right and who is wrong. It matters who is funded and who is not. I hope that’s not how the feud between The Honest Toddler (which is a hilarious and independent mom blog) and The Honest Company (which is backed by celebrity Jessica Alba and the guy behind LegalZoom) ends up. Read about it at the aptly named blog: People I Want to Punch in the Throat, but here’s the gist:

The Honest Company appears to think that any company with the word “Honest” in the title infringes on their trademark. (Except for Honest Tea, of course, because that’s owned by Coca-Cola and The Honest Company only picks on companies smaller than itself.)

So far Honest Toddler has refused to give in, and I hope she never does and that she ends up kicking ass.

“I, Pencil” and the Providential Invisible Hand

In the December 1958 issue of The Freeman, economics writer and FEE founder Leonard Read published his now-famous essay “I, Pencil.” The essay traced the “family tree” of the modern pencil, demonstrating the complexity of its creation and the numerous people involved. Nobel laureate Milton Friedman was so impressed with the essay that he used it in one of the episodes for his TV series Free to Choose. More recently, science writer Matt Ridley borrowed from the idea by declaring that literally nobody on the face of the planet knows how to build a computer mouse. Despite the individualistic rhetoric that often accompanies markets, Read’s essay provides a much needed reminder that markets on the whole are more communal, more cooperative, and more interdependent than the centralized planning that often employs these rhetorical fronts.

The discussion of the “invisible hand” toward the end is almost spiritual in nature. And with good reason. As Peter Harrison, historian and director of the Centre for the History of European Discourse at the University of Queensland, explains,

[D]uring the early modern period, in addition to increasing frequency of occurrence, we witness the emergence of a more distinct pattern of use or, more correctly perhaps, of two related concepts of the operation of ‘‘the invisible hand.’’ Most commonly the invisible hand was used to refer to the manner in which God exercised providential control over the course of history by subtly influencing human actions in order to bring about his ends. These ends are thus accomplished in spite of the intentions of human actors and without their knowledge. The second pattern of usage also refers to God’s providential action, but in the context of his superintendence of the natural world. Thus God’s invisible hand was glimpsed in the contrivances of the creatures and in the wisdom and foresight evidenced by the laws of nature, which again promote his ends. These two conceptions between them represent the most predominant uses of the expression in the seventeenth and eighteenth centuries and hence the most relevant background for Smith’s uses of the expression.

Just as the laws of nature were originally seen as “exemplif[ying] design, so too…did the laws of morality.” For Smith and his contemporaries, “the general laws of the moral, as well as of the material world, are wisely and beneficently ordered for the welfare of our species.”

Seems to be working out alright.

Hide Your Eyes… There Be Breastfeeding!

In an aptly named blog post, We must stop these crazed half naked psychopaths from feeding their children in front of other people!, one father discusses the country’s crazy aversion to breastfeeding.


Do you feel awkward around a breastfeeding mom?  No worries!  Our society has conditioned us to think of the breast as a sex object.  Sex object + innocent baby + dinner time = weirdness!

In that moment of awkwardness, just remind yourself: this is in no way about sex.  This is just a mom caring for her baby.  It’s natural and beautiful. Eventually, your neural pathways will reroute and maybe you won’t feel even a twinge of awkwardness.


Conservative Mormon America vs. White Conservative America

Salt Lake Tabernacle

The stereotype of American Mormons (according to socio-demographic data) is true:

  • We’re really, really white
  • We’re well-off financially
  • We’re highly educated
  • We’re overwhelmingly Republican

However, economist Miles Kimball of the University of Michigan finds that this white, conservative demographic is quite different from the typical white, conservative American. In his post “How Conservative Mormon America Avoided the Fate of Conservative White America” over at Confessions of a Supply-Side Liberal, he notes that

  • Mormons invest in marriage with an avoidance of premarital sex (and thus out-of-wedlock births) and relatively low divorce rates.
  • The Mormon prohibition of alcohol and tobacco leads to healthier and longer lives
  • Geographic congregations known as wards function as “ersatz small towns” and plug Mormons into an extensive social network

Kimball makes several other observations with extended commentary. Check it out. It goes along quite well with some of Megan McArdle’s comments in a recent Bloomberg article (which was covered here at Difficult Run):

The highest income mobility in the country, it turns out, is found in Salt Lake City — almost three times higher than the rate in Atlanta, the lowest-ranked city…Salt Lake City is in the reddest of red state places — not a lot of taxes and transfers going on there. And yet it’s highly mobile, presumably because of the influence of the Mormon Church, which essentially runs the most comprehensive and effective social welfare system in the country…maybe in the world. There’s money and other help to tide you over in bad times, but arguably more importantly, there’s all the efforts of your ward to get you back on your feet. Churches do this sort of thing everywhere, of course, but in few places is it so comprehensive and organized. And unlike the government system, it’s combined with intense social support, and a community whose norms about things like work, marriage and family (and drinking and drug abuse) encourage what you might call a prosperous lifestyle.

Social capital and cultural factors are big players in economic well-being and should not be ignored.

“Job Creation” Is Easy…And Sort Of Misses the Point

Nathaniel’s recent post on minimum wage touches on a couple of important–if not overlooked–points about the “job creation” debate: (1) innovation vs. job preservation and, implicitly, (2) wealth vs. jobs. If the goal is to create jobs for the sake of creating jobs, then the task is pretty straightforward.

As economist Steven Horwitz says above, “I would argue that creating jobs is easy; it’s the creation of wealth that’s hard.” The creation of wealth is intrinsically linked with innovation and the “creative destruction” it brings about. Even though many have partaken of what Scott Winship of the Brookings Institution calls “technophobia” (remember Jesse Jackson Jr.’s claim that the iPad was “eliminating thousands of American jobs” or the President’s concern that the ATM represented a “structural issue” in the American economy?), the fear is unjustified.

Arguing against technological progress because it “destroy jobs” ignores the mass benefits that will follow, including the rise in absolute standards of living. “In a free-market economy,” explains historian Thomas E. Woods,

businesses invest the vast bulk of their profits in capital goods that make labor more productive…[Different] kinds of machinery can multiply the efficiency of a single worker many times over, sometimes by orders of magnitude…This is how wealth is created: we can produce more with the same (or a lesser) amount of labor…As a result of capital investment, firms can now produce many, many times more goods than before, and at considerably lower cost. Thanks to the pressures of market competition, firms pass on these cost cuts to consumers in the form of lower prices, better quality merchandise, or a combination of both. The ordinary person’s standard of living increases…because business firms can invest in machinery that makes it possible for more and more goods to be produced with fewer and fewer hands, thereby increasing the overall amount of material goods available and rendering them less and less expensive.

A higher minimum wage will not help raise the poor out of poverty. It will simply eliminate jobs for low-wage workers (i.e. high school education and less).

But couldn’t one argue that technological advances eliminate low-wage jobs? Sure. But the difference is that minimum wage laws provide only a slight financial bump for some low-wage workers, while keeping others in the unemployment line. Innovation creates new jobs for low-wage workers, while raising the absolute standards of living for everyone (including the poor). When given these options, I would hope the choice is obvious.