Atlas Shrugged: The Mocking

Monday, November 28, 2011

You Are What You Buy

image fromm here

Anyone who has ever worked in the service industries knows that for many people, making a purchase is a little power trip. A consumer is a thing to be cherished, courted by corporations, lauded by politicians, envied by the other Consumer-Americans for his ability to publicly demonstrate his wealth and therefore power. And people often get a little thrill from imitating those with more money and power by shopping where they shop or buying what they buy. It's like going on a cruise or staying at a hotel; for a few days you live like the rich, pampered with new, clean, expensive surroundings and servants to wait on you. We've all seen people trip out on this power as well, insulting the waitress or demanding immediate service or being needlessly critical. We've also seen people spend far more than they can afford or need to spend as they are driven to seek more power in their social and professional sphere. You have to spend money to make money, they say, and some people spend money freely in a futile attempt to satisfy an inner need for power, acceptance and self-esteem. (Which is another reason why our corporate overlords and their servants hate self-esteem.)

Which brings us back to our case study for emotional dysfunction, our symbol of status-seeking, our icon of ignorance, Megan McArdle. These are difficult times for Consumer-Americans. With thousands of people gathering en mass across the country to protest the stranglehold our elite have on our necks and criticizing our winner-take-all consumer society, Megan McArdle's entire raison d'etre is at risk. All this commotion in the streets might hamper McArdle in her quest to buy entrance to the upper crust, her ultimate and most precious goal. McArdle dimly realizes that she is doomed to fail since, partially through her own efforts, the rich have become so very, very rich that she will never be able to earn enough to join them. She will never be anything but a useful idiot who will be willing to pick up the tab for the lesser elite in the hopes of rubbing shoulders with the truly elite one day. But at least she can have the same toys as the rich, God and Visa willing, and for now that is close enough.

A few months ago, I became the proud, and slightly sheepish, owner of what must be the world's most expensive food processor. The Thermomix costs about $1,500. It not only chops the food but weighs the ingredients and cooks them for you while stirring constantly. Perfect hollandaise and flawless b├ęchamel can be produced in minutes with virtually no effort.

After seeing one last summer in the home of a friend, I promised myself one if I completed a particularly large and time-consuming research project. By the time I did, I was no longer sure that I wanted to spend the price of a good chair or a bad car on a kitchen-counter appliance. But I went ahead and ordered one. However guilty the pleasure, I couldn't resist the joy of the long-planned splurge.

McArdle knows that it is declasse to discuss how much one spends for a purchase but how else can you excite admiration and envy from your audience? McArdle observed the proprieties by pretending to be abashed by her extravagant purchase but quickly gets to the main point: Consumerism is under attack and nobody is more willing to rush to its aid than Megan McArdle. And because no honest person can support the enormous consequences of our third-world level of inequality, McArdle must begin with a little bit of dishonesty.

Nor, it seems, can any of my countrymen. For decades, Americans have wallowed in credit, shunned savings and delighted in debt. In 1982, the personal savings rate was 10.9% of disposable income, by 2005 it had fallen to just 1.5%. It has since rebounded, but remains a measly 5%.

As everyone who read this article noted, people are "wallowing" in debt because wages are not rising and they are losing jobs right and left. Americans also refuse to admit that they no longer can afford a 1960s-style middle class comfort because they are exceptional and exceptional people do not become poorer, they only become richer. For decades they elected leaders who promised them more money, mostly by cutting taxes, but that didn't work out very well as cutting taxes helped the rich a great deal more than the middle class. To undercut Americans' growing unhappiness some corporate-sponsored pundits made a career of chiding the middle class for their greed and spending habits in an attempt to deflect blame from the rich to the rabble. Genuine concerns about the nature of American society and consumerism are mocked as the pundits celebrate the joys of spending money in this, the best of all possible worlds.

All this profligacy supports a rather vibrant cottage industry in polemics against consumerism. Authors as varied as the economist Robert H. Frank (1999's "Luxury Fever") and the political theorist Benjamin R. Barber (2007's "Consumed") have ganged up on what they see as the particularly unequal and excessive American spending habits. Unsurprisingly considering their abhorrence of waste, they are avid recyclers; the same arguments, behavioral economics studies and anecdotes appear time and time again. Access to credit makes consumers overspend. Materialistic people are anxious and unhappy. The conspicuous-consumption arms race is unwinnable. Down with status competition! Down with long work weeks, grueling commutes and McMansions! Up with family time, reading and walkable neighborhoods! The effect is rather like strolling down the main tourist strip in a beach town: Each merchant rushes out of his shop, gesticulating wildly and showing you exactly the same thing that you saw at all the previous stores.

This passage is just embarrassing. McArdle does not attempt to discuss Frank and Barber's arguments because the facts might interfere with her goal of supporting corporate consumerism. Instead she addresses an emotional argument that she hopes to deflate by being even more emotional herself. McArdle flings out exclamation points and knee-jerk conservative cliches about liberal arguments, waving her arms about in the same method she attributes to her ideological "enemies" to deflect criticism from coherent arguments and unwanted conclusions.

The latest person to open up shop on this boardwalk is Baylor marketing professor James A. Roberts. "Shiny Objects: Why We Spend Money We Don't Have in Search of Happiness We Can't Buy" runs mostly true to form, its main innovation being to add financial self-help advice to the usual lectures. The book includes not only exhortations but actual instructions—how to make a budget, get out of debt and save for retirement.

It's a thorough survey of both academic research on consumerism and basic finance advice. Still, I first ran into an argument I hadn't seen before somewhere around page 200—that the perfect surfaces of modern products hasten the replacement cycle because they show wear so badly—and well before then Mr. Roberts had fallen into some of the terrible habits of the genre. Though less openly contemptuous of the spendthrift masses than many of his fellow scolds, he still exudes that particular sanctimonious anti-materialism so often found among modestly remunerated professors and journalists.

It's no surprise that Dr. Roberts is on McArdle's Naughty List. He has said:

There are “his and her” spending patterns…but the desires that motivate consumption are only superficially different. “Women generally value their appearance more than men, which can lead to retail therapy; men value social recognition…both trying to build self esteem from different directions.” Women tend to doubt their financial acumen might shop “in order to take comfort in the trappings of financial success.” Men, more optimistic, just want to strut their stuff. “How big your collection of power tools or music boils down to feelings of self-worth.”


The research is overwhelmingly clear…The more materialistic you are, the less happy you are…we’ve been told by Madison Avenue that happiness can come through the mail.

Telling McArdle that money does not buy happiness is futile since spending money makes her very, very happy and increases her feelings of self-worth. Since McArdle cannot imagine any other way of feeling good about herself she is deeply threatened by any attempts to take away her source of happiness.

Here are some of the things that upset him and that "document our preoccupation with status consumption": Lucky Jeans, bling, Hummers, iPhones, 52-inch plasma televisions, purebred lapdogs, McMansions, expensive rims for your tires, couture, Gulfstream jets and Abercrombie & Fitch. This is a fairly accurate list of the aspirational consumption patterns of a class of folks that my Upper West Side neighbors used to refer to as "these people," usually while discussing their voting habits or taste in talk radio. As with most such books, considerably less space is devoted to the extravagant excesses of European travel, arts-enrichment programs or collecting first editions.

McArdle attempts to frame any discussion of inequality or consumerism in the only way that she can understand, a way that fits in with her preconceived notions, prejudices and neuroses. Liberals are elites who are just jealous of more successful elites and liberal elites look down on conservatives out of snobbery and that evil, dreaded "self-esteem" thing they all have. All academics are liberal elites but they are poor elites, who substitute egg-head competition for consumer competition because they are poor.

One of the running themes of the economist Robin Hanson's excellent blog is that arguments like the ones found in these books are actually an elite-status proxy war. They denigrate the one measure of high-visibility achievement—income—that public intellectuals don't do very well on. Reading "Shiny Objects," you get the feeling that he is onto something.

Consider the matter of status competition. Mr. Roberts, like so many before him, argues that conspicuous consumption is an unhappy zero-sum game. But this is of course true of most forms of competition: Most academics I know can rank-order everyone in the room at a professional conference with the speed and precision of a courtier at Versailles. Any competition, from looks to money to academic credentialing, both consumes a lot of resources and makes many of the participants feel bad about themselves. Why, then, does the literature on status competition always tell us that we should redistribute capital gains or inheritances and never tell us that we should redistribute academic chairs or book contracts?

In your face, liberals! This childish and threadbare argument seems utterly devastating to McArdle. If academics think inequality is so bad why don't they give up some of their hard-earned rewards, huh? Huh?? Naturally McArdle is delighted to find a way to fight back against all those evil liberal academics, with their pipes and leather patches and class envy. Sadly, she is disappointed again.

And so I was excited to see that Rutgers history professor James Livingston had written "Against Thrift: Why Consumer Culture Is Good for the Economy, the Environment, and Your Soul." The book sets out a provocative thesis: Since about 1920, net private investment has not correlated very well with GDP growth, as conventional wisdom has it. To hear many commentators talk, you would think that growth increases basically in tandem with savings and investment, but in fact the numbers bounce around a lot.

Note that McArdle very seldom addresses actual numbers; a wise choice considering her innumeracy. She will never win an argument on its merits and she know it.

Consumption, not investment, is the key to prosperity, Mr. Livingstone argues; most of our recent woes, especially the housing bust and subsequent disaster, stem from excessive savings, driven by rising inequality. Rich savers with no particularly productive outlet for their capital create bubbles, he says, when society would be better off if ordinary people, and the government, had been given the money to spend rather than save. (Though "Against Thrift" is an argument against saving, it interestingly ends up in the same place as most arguments for it: with a call for greater government redistribution of incomes.)

But the question of whether saving is always productive is an important one. In the present crisis, the global economy has been damaged by serial stampedes of desperate investors seeking a safe-but-lucrative spot for their excess capital. Money fled housing bonds to money-market funds, money markets to sovereign debt, sovereign debt to gold. It now looks as if the euro may end up getting trampled to death by the herd. So savers do pose dangers.

Yet Mr. Livingston places far more weight on his favorite statistic about net private investment than it will bear, reaching the ludicrous conclusion that "economic growth since the 1920s did not require net private investment or net capital formation." Since 1947, the real value of businesses' tangible assets (everything from machine tools to the buildings they're housed in) has roughly doubled. Would we really be just as well off if it hadn't?

McArdle deliberately ignores the fact that 70% of our economy is based on consumer consumption. (If she does not know that fact she should be running the Recipe Corner of the Podunk News Gazette, where she would still be ignorant but do less harm.) Despite having just said that Americans were wallowing in credit, she also does not acknowledge that credit has been keeping the consumer economy afloat, credit helped drive bubbles, and when credit dried up, so did the economy.

Mr. Livingston doesn't address this. He also attributes the "global savings glut" of the past decade to excessive wealth even though Asian central banks probably played a larger role than rich Americans and claims that the "Bush tax cuts" caused the housing bubble by leaving those over-saving rich with too much money to play with even though three-quarters of the lost tax revenues stayed in the hands of people making less than $250,000 a year—the de facto threshold for "rich" established by the Obama administration.

McArdle blames Asian banks for loaning money to America instead of America for borrowing money from the Chinese and Japan to finance wars and tax cuts for the rich. This enables her to claim that income inequality isn't as bad as it seems to be.

These are not small omissions; they are central rebuttals to his thesis that Mr. Livingston ignores. After sketching out his interesting but badly incomplete thesis, he simply moves his book onto a series of somewhat tedious meditations on consumer culture, heavily larded with confusing references to luminaries like Freud, Marx and Marcuse. These are confusing not because they are hard to parse but because there is no obvious reason for their inclusion.

Again, McArdle does not address Livingston's arguments, she just calls them confusing, incomplete, tedious, and larded-up with irrelevancies. Why work hard on analysis when you can simply tell everyone that you are right and the other side is wrong?

Like their forebears in this robust polemical genre, neither Mr. Livingston nor Mr. Roberts gets us much closer to answering the essential questions: What makes American consumers spend as they do—and is it a bad thing? For some thoughts on these matters, I'd suggest turning to James B. Twitchell's "Living It Up" (2002), a wry account of the author's own complicated relationship with luxury brands that explores the moral and psychological aspects of our free-spending ways without seeming to be a paternalist rant against the folly of BMWs. "The pleasure of spending is the dirty little secret of affluence," says Mr. Twitchell, a professor of English literature and advertising at the University of Florida. "The rich used to do it; now the rest of us are having a go." He is keenly alive to the risks—and occasional risibility—of American-style consumerism. But he never pretends not to understand its undeniable appeal.

What do you have against spending money, Mr. Academic? It's fun for the whole family! And now that she has recommended a pro-shopping book, McArdle's job of examining our consumer culture in a time of economic crises is done. Let's bring it on home, sister!

The money I spent on a Thermomix, after all, would have more prudently gone into an emergency fund, or retirement savings. Yet having spent it, I really do enjoy my little robocooker, and not because it is (embarrassingly) more expensive than all the other food processors on the block. It has significantly improved the number and tastiness of meals I make from scratch and thus my standard of living. Was it worth $1,500? Hard to say, but I wouldn't sell it back.

Of course not. If she gave it back she couldn't tell us that it is more expensive than any other food processor on her block and raised her standard of living above that of the masses, who will never have a $1,500 appliance, the schmucks.

God bless consumerism and God bless Corporate America, who paid McArdle so much money to support corporations that she can afford to blow the price of a used car on a kitchen appliance while poverty soars and children go hungry.

See also TBogg, Charles Pierce, DougJ, and Rugosa.

Saturday, November 26, 2011

Holiday Trivia

Needs molasses

Today I give thanks for our One Percenters, our libertarian self-professed experts, our Village of Idiots who persist in believing that inheriting luck and fortune is the same thing as earning luck and fortune. Watching our jumped-up, wanna-be leaders pretend to be experts is always good for a chuckle.

asymmetricinfo Megan McArdle
If you're one of those people searching for a pumpkin pie recipe, may I recommend this one?
23 Nov Favorite Retweet Reply

She has such confidence in herself, bless her heart. It's too bad she doesn't have the faintest idea how to bake. But we are supposed to believe that McArdle came from a long line of culinarily intimidating bakers since McArdle's mother was a caterer, just as we are supposed to believe that our elite know what they are doing because they graduated from elite schools. Why bother with facts when you already know you're special?

The link leads to this:

Mom's Pumpkin Pie
I can't tell you how different homemade pumpkin pie is from the awful stuff that gets served in restaurants and bakeries. I wouldn't use the latter for anything but emergency spackle, or checking erosion in a gully. My mother's pumpkin pie on the other hand, is sublime. And easy!

1 cup sugar
1 tsp cinnamon
1/2 tsp nutmeg
1/2 tsp ginger
1/2 tsp cloves
1/2 tsp salt

Combine all of the above and add 1 1/2 c pumpkin (one "one pie" can)

Mix in 1 beaten egg and a cup of milk

Put in an unbaked pie shell and bake at 400 for 10 minutes, then turn the oven down to 350 until done, about 1 hour, until a knife inserted in the center comes out clean.

Posted by Jane Galt at November 24, 2004 09:41 AM
Not only is her recipe sublime, but bakery pies are good for nothing but spackle! Which is strange because McArdle's recipe is very close to the recipe on the back of a can of pumpkin but with several important and unfortunate changes.

Pumpkin pie is a custard pie, which means it is thickened with eggs. It is similar to a cream pie, which is also made with milk and eggs, but cream pie fillings are often thickened with cornstarch or flour as well. The eggs, milk, sugar and flavoring create the custard and the more eggs and milk you use, the more rich, firm, and silken the custard becomes. The recipe on the pumpkin can uses two eggs and 12 ounces of evaporated milk, I add one more egg and a lacing of molasses for a very rich, custardy pie. One egg and 8 ounces of milk would, at a guess, result in a mealy pie with none of the richness provided by the thickened, sweetened milk and eggs. I would also check the pie well before the hour is up; the pie should be cooked until the filling is just set, quivery but not loose.

It's like McArdle has a grudge against flavor and won't let it in the house. Any day now I expect The Atlantic or the New American Foundation to pay her a fat fee to write a cookbook.

Tuesday, November 22, 2011

Deep Thinkers

It's not easy being a shill for the rich. You have to constantly come up with new ways of telling everyone that high levels of inequality are just fine-n-dandy while the facts are telling everyone otherwis, the little tramps. Fortunately for Megan McArdle, she has people like David Brooks to do her thinking for her. Since he has a New York Times column, obviously the key to literary and punditary success is copying everything Brooks says and does. When he finally kicks the bucket the Times will naturally offer his job to her since the only things that will have to be changed are the by-line and photo.

(Note: we are saying the facts are little tramps, not McArdle. As we all know she couldn't possibly be a whore who would sell out her fellow countrymen for a high-priced cocktail and taxi fare because whores are poor and McArdle is not.)

But we digress. Now that Brooks has led the way, McArdle tells us that the Blue Staters are fooling themselves when they think income inequality is a big problem, for Blue inequality is just fine and proper while Red inequality is the real problem.

The Great Work Divide
Business Nov 22 2011, 11:01 AM ET 54
Reihan Salam has an interesting post on income inequality in which he notes that executives of days past used to consume a lot more of their "income inequality" in the form of corporate perks. Salam attributes this to the fact that there was more within-firm skill inequality; I'd chalk it up more to the tax code, which in 1986 was changed in various ways that made it much more attractive to pay your employees in salary, and much less attractive to pay them in the form of lavish expense accounts and magnificent private office space. The notion of an executive washroom with its own special key now seems mostly ludicrous, but it was an actual thing--and I'm not sure that giving executives special bathrooms is actually noticeably less corrosive to social cohesion and personal happiness than giving them fatter pay packets.
We are supposed to believe that executives no longer have perks, after McArdle defended tax breaks for executive jets. She lies like she breathes--badly.

This particular passage struck a nerve with me:

In a sense, the sorting mechanism at firms like Apple happens before you join the firm: its employees are homogeneously high-skilled, now that manufacturing, etc., has been off-shored. So while a firm like Pepsi might have had a range of employees at different skill levels, that is somewhat less true of the iconic technology firms of our own era.
It suddenly occurred to me that this is a standard feature of the work lives of blue state elites: almost all of their contact is with people just like them. Same education, usually the same few states of origin, and a pretty uniformly shared set of values about what work is for and how it should be done.
McArdle took Brooks' ball and ran with it. It's not that income inequality is high, it's just that education inequality is high. And we all know that education inequality is due to laziness and immorality. Just stay in school, don't have kids, work hard, and you too will become a corporate CEO!

These people tend to vote Democratic. Small-business owners, who work in much more diverse environments, tend to vote Republican. I'm not going to speculate on why this might be so--but I suspect that it matters.
All liberals are elites who live in blue states, work with people educated at elite institutions, and have elite jobs. They don't run businesses and aren't poor or Black or Hispanic or old or female. They are elites, except when they are not. Therefore any liberal who is concerned about income inequality is just being jealous of his more successful elite bretheren.

Where would we be without Megan McArdle to think for us, and David Brooks to think for Megan McArdle?

What Good Is Power If You Don't Use It?

There is nothing more fun than taking your little power-mobile out for a spin by inflicting repressive control over others. After all, what use is power if you don't, well, use it? Sure, you can tell yourself that you are a powerful stud the likes of which the world has never known, you can feel the power caressing your ego, telling it oh baby, baby, you're the bestest, smartest, most wonderful person of power in the whole wide world and everyone else had better do what you say--for their own good, of course.

Now, this works best if you actually have a lot of power, mainly because you have a lot of money. If you don't have any money to speak of and nobody listens to you or does what you say, you have to find another way to feel powerful. You have to find someone so weak that your teeny tiny amount of wealth and power is enough to control them or you have to borrow someone else's power--preferably both. And you still don't have enough power to get them to do what you say. You still don't have beautiful women (or men) hanging on your every word.  Your kids don't show you the proper amount of respect for your position as The Head Of The Family as sanctified by God, and even your church doesn't flatter your ego enough, no matter how many times they tell you God loves you just the way you are. God doesn't put money in your pocket and beautiful women in your non-existent sports car, now does he? And your boss tells you what to do and you know that you are only one bad mistake or bit of bad luck away from losing that job and being utterly powerless yourself.

But the great thing about America is that it has so many poor people, especially poor women and children, and who could be easier to push around than women and children? Nobody cares if they suffer--indeed, they prefer it--so when all else fails, you can always massage your ego and flex your power muscles by telling women what they can and cannot do with their own bodies. Everybody else does it and, as we all know, that means it's okay. Look at all the churches--most of them have an iron grip over the lives of the women they own. If controlling women was given the thumbs-up from God, who are we to argue with His time-tested method of control?

Let's let Matthew Hanley, co-author of Affirming Love, Avoiding AIDS: What Africa Can Teach the West, explain why the Catholic Church insists on interfering with Africa's attempts to control the spread of AIDS. He is interviewed by Kathryn Jean Lopez, who genuinely seems to believe that it is inappropriate for a woman to have any power over her life whatsoever, and  that every time a female enjoys sex she makes Baby Jesus cry.

Condoms may protect some people from some infections some of the time, but that is far from saying they are effective or constructive as public-health policy. HIV transmission rates have remained constant here for the past decade; even Dr. Anthony Fauci of the NIH (National Institutes of Health) took to the pages of The Washington Post recently to characterize, in unusually strong terms, our AIDS- prevention efforts as a failure — although he still dared not emphasize behavioral changes.

Your question got me thinking of, perhaps, another way to put it: One might fairly interpret the “Pope’s best interests” as something akin to the common good — since he is charged with safeguarding matters of faith and morals which are conducive to it — rather than the particular interests of Joseph Ratzinger, the individual man.

It's not that people feel powerful or gain power by controlling others, it's just that the churches must control others because they need to be controlled. If you didn't have the church the priests wouldn't be able to control your behavior and the common good would suffer. You are good and you don't want to suffer, especially because of something that someone else did! And by the way, the church needs more money for the bishop's fund and the capital improvements fund and the retired priests' home and the Vatican since without the church there would be nobody to keep the people from sinning and going to hell and you don't want to go to Hell, do you? And don't forget to donate to all the non-profits fighting abortion, which are doing God's work by paying huge salaries to their spiritual leaders. Remember, money equals power, power equals control, and control equals more money. It's the Circle of Profit!

[...T]there are certain truths we can all come to recognize, as they are accessible to reason. As we point out in the book, the great pre-Christian philosophers such as Plato and Aristotle recognized that sexual promiscuity damages the wholeness and well-being of a person. So did many other writers of antiquity and from the Jewish tradition.


Many traditional African cultures themselves prized virginity and held marriage, faithfulness, family life and the like in high regard. Catholic leaders in Africa have noted that its core teachings on sexuality are neither impossible not incompatible with its own traditions. So believers and nonbelievers alike can recognize that chastity, far from being an arbitrary external constraint, helps a person lead a well-integrated life and is essential for human fulfillment. Without it, discord and turmoil proliferate.

Without control you would have no control! There would be discord because people would disagree with you and you wouldn't be able to force them to do what you want. There would be turmoil as you think about your powerlessness in the face of all that activity you can't control. People live and die, have sex and babies, eat and sleep and bury their dead and they don't think about you at all. You mean nothing to them! YOU, the most important person in the history of the earth, the pinnacle of perfection and the epitome of excellence. And nobody cares! They just do whatever they want and ignore you!

Well, you will have something to say about that. You'll just take away their condoms, their birth control, their abortion clinics, their Aid to Dependent Children. See how they like that! We'll see who's powerful after you reduce them to lives of frustration and poverty. They'll be sorry they didn't listen to you tell them how to live their own lives.

We'll see who has the power around here.

Monday, November 21, 2011


Occupy Missoula is in need of money and aid. Taryn Hart at The Plutocracy Files has more, including information on the police harassment they are experiencing. FireDogLake's OccupySupply is donating winter gear to the Occupy movement and is another good way to help. They "ship 100% union made, American manufactured cold weather gear to occupations."

One of the best ways to fight corporations is with the one weapon we have that they fear: spending power. Turning our backs on corporations by using credit unions and buying from non-corporate sources is an important step in undermining their power.

Saturday, November 19, 2011

People Of Merit

Megan McArdle would like to remind us that America is a meritocracy and if the elite exclude everyone else it's just because they are far too busy running the world to spend time sifting through the rabble.
The hardest thing about the meritocracy's tyranny is that they're not necessarily doing it on purpose. It's just a convenient shorthand for a group of people who are really busy.
          (yap yap)
The Ivy League is full of smart, interesting people. But it is not full of all of the smart, interesting people in the country, or even a majority of them. And given the resumes required to get there, it produces a group of people who are narrow in certain predictible [sic] ways. (I include myself in this: just because I can see it operating doesn't mean I can escape it.)
The problem is that actually seeking out a wide variety of graduates would be much more expensive and time consuming. Why spend the effort searching for "best" when you can easily access "very, very good"?
After years of telling us that CEOs are irreplaceable, the Best and Brightest, it seems they are now the Good Enough. McArdle says that the elite merely are saving time by hiring only from the Ivy League, which their money has stuffed with their own progeny and the children of the fellow elite. Naturally when their children graduate the elite will give them a good job, which is no less than they merit in our meritocratic times.

 It would be nice if Megan McArdle read her own magazine; namely, 68% of the Sons of the 1% Work at Their Dad's Company by Dino Grandoni. The more elite a graduate is, the greater the chance that he will get his job from his father.
Nepotism and wealth go together according to a study published in the Journal of Labor Economics. The researchers found that 68 percent of the sons of top-percentile income earners have at some point by the time they're age 33 taken a job at a firm their father also worked. That's significantly higher than the 55 percent rate for the sons of the second-highest percentile of earners and the 40 percent average for all income levels. Though the data was limited to Canadian males, the researchers were able to point to several factors that could be at play, some nepotistic and some not. While high earners tend to be self-employed or at least tend to hold sway over hiring decisions at their companies, the pattern could also involve "the formation of values and preferences" -- basically, that fathers tend to raise kids who would fit into their companies well. Whichever hypotheses turn out to be the most important, one of the study's authors, Miles Corak of the University of Ottawa, thinks it proves that something other than meritocracy is at work. He writes on his blog:

If the members of the top 1 percent are there because of connections or political power—rather than by the force of their talent, energy, and motivation—then we should be rightly critical about claims that they merit their fortunes, and question the contribution they make to economic productivity.

While she will be one of the first to support such income inequality, McArdle does manage to have just the tiniest bit of sympathy for the little people if she knows one personally.
Forget about the effects on society, though; this is terrible for organizations. You see this in Washington all the time--a friend who went to a lesser-known state school said he could always tell the people he wasn't going to like when he met them at cocktail parties, because the minute he told them where he'd gone to school, they became extremely interested in going to get another drink or find the cheese dip. This is one of the smartest, most consistently interesting and original, most talented writers I know. Having actually attended one of those elite schools that apparently make you fascinating, I can attest firsthand that statistically, the elitists were vanishingly unlikely to be as interesting as the person they abandoned because he'd gone to a state college.

McArdle has related this anecdote before. One wonders who is this extraordinarily talented young person, whom McArdle is so passionate in defending while supporting his detractors. Sorry, anonymous person. You just didn't make the cut because your parents couldn't get you into the Ivy League, and someone who knows you and cares about you shrugs her shoulders at the injustice and snobbery. Not all of us have enough merit to rise to the top.

Maybe this extremely talented young man will find a job with a billionaire who needs great writers to support his deregulation plans. Re-reading your favorite passages of Atlas Shrugged will only cheer you up so many times before you need to find someone who will give you what you deserve.

Friday, November 18, 2011

It's The Government's Fault

Shorter Megan McArdle: My doctor wouldn't listen to me, therefore death panels.

Wednesday, November 16, 2011

Our Moral Elite

There are no witches, zombies, giants or gods, despite what we read in the Bible. There were no pagan gods. Athena, Zeus, Ishtar, Mithras and all the rest are fictional. There are no demons or angels, no gods or goddesses. Satan does not exist and does not tempt good people do bad things. A miasma of evil does not stalk the land, entering the hearts of the unaware and ungodly. There is only us and our physical world, which holds more than enough mystery and wonder, beauty and terror, to satisfy even the most spiritual and metaphysical of people.

The Devil does not persuade us to make the wrong choice. We are responsible for our own actions (within limits) and we make our own choices (consciously or unconsciously). When we deliberately choose to harm another person or let them be harmed by our inaction, we are not under supernatural attack. We make a bad choice, usually for selfish reasons. That choice might be small or large, casual or deliberate, reluctant or eager--but it is a choice and we make millions of them in our lifetimes. Very often we don't know the consequence of our choices but the consequences occur nonetheless, so we can only try to make the right choice, trusting that doing the right thing for the right reason will do no harm. We are small creatures who live only for an instant, and sometimes we must just trust ourselves and leave the rest to fate.

A person who trusts himself and tries to be true to himself has been taught that the pain of others is just as real and important as his own pain and therefore he has developed empathy. He has been given unconditional love and therefore he believes he has worth and is a good person. He wants to keep those extremely gratifying feelings of self-worth so he makes choices that will ensure he does not lose them. He does good because it makes him feel good.

It's difficult to control someone with a strong sense of self-worth and self-esteem. It is difficult to play on his fears and weaknesses because does not try to hide from them, he accepts responsibility for making the right decision despite his fears and failings. He does not looking to anyone else for approval or instruction and he does not dismiss his own judgement when it is questioned. If he makes the wrong decision he faces the consequences of his actions and does not blame anyone else for his own choices.

It's not easy being anti-authoritarian but since obedience to authority leads to a lifetime of guilt, fear and confusion, it sure beats the alternative.

Case in point: Mr. Ross Douthat, spiritual and political advisor to the erudite masses.

Bad and mediocre people are tempted to sin by their own habitual weaknesses. The earlier lies or thefts or adulteries make the next one that much easier to contemplate. Having already cut so many corners, the thinking goes, what’s one more here or there? Why even aspire to virtues that you probably won’t achieve, when it’s easier to remain the sinner that you already know yourself to be?

But good people, heroic people, are led into temptation by their very goodness — by the illusion, common to those who have done important deeds, that they have higher responsibilities than the ordinary run of humankind. It’s precisely in the service to these supposed higher responsibilities that they often let more basic ones slip away.

I believe that Joe Paterno is a good man. I believe Joe Posnanski of Sports Illustrated, the brilliant sportswriter who is working on a Paterno biography, when he writes that Paterno has “lived a profoundly decent life” and “improved the lives of countless people” with his efforts and example.

I also believe that most of the clerics who covered up abuse in my own Catholic Church were in many ways good men. Of course there were wicked ones as well — bishops in love with their own prerogatives, priests for whom the ministry was about self-aggrandizement rather than service. But there were more who had given their lives to their fellow believers, sacrificing the possibility of family and fortune in order to say Mass and hear confessions, to steward hospitals and charities, to visit the sick and comfort the dying.

They believed in their church. They believed in their mission. And out of the temptation that comes only to the virtuous, they somehow persuaded themselves that protecting their institution’s various good works mattered more than justice for the children they were supposed to shepherd and protect.

We are only as good as the decisions we make but Douthat has a very different point of view. He believes we are either good people or bad people and that bad people do bad things because they are weak and know that they are bad. But good people are virtuous and heroic, and if they do a bad thing it is only because they were trying to hard to do good things. "Somehow" they ignored their inner goodness to make the wrong choices.

Douthat does not explain how this strange thing happened because it is impossible to reconcile a person of empathy and goodness with someone who will pass around a pedophile priest like an appetizer at a cocktail party. Someone hard and cold enough to ignore child rape makes decisions based on self-interest. To make others act in your self-interest and not their own you need power, and to maintain power you need an authoritarian hierarchies. And you need flunkies who will tell the masses that they have no power, they are bad and helpless and must be controlled.

The loathsome David Brooks is less overtly religious than Douthat but bases his decisions on the same type of belief system.

People are really good at self-deception. We attend to the facts we like and suppress the ones we don’t. We inflate our own virtues and predict we will behave more nobly than we actually do.

David Brooks is very fond of telling people that they are bad. He tells us that self-esteem leads to vanity which leads to immorality which leads to sin. It is vain to think that you are a good person; you are bad and must be told what to think and do, according to the value system you are given by your elite.

As Max H. Bazerman and Ann E. Tenbrunsel write in their book, “Blind Spots,” “When it comes time to make a decision, our thoughts are dominated by thoughts of how we want to behave; thoughts of how we should behave disappear.”

In centuries past, people built moral systems that acknowledged this weakness. These systems emphasized our sinfulness. They reminded people of the evil within themselves. Life was seen as an inner struggle against the selfish forces inside. These vocabularies made people aware of how their weaknesses manifested themselves and how to exercise discipline over them. These systems gave people categories with which to process savagery and scripts to follow when they confronted it. They helped people make moral judgments and hold people responsible amidst our frailties.
And yet despite the fact that the elite gave us moral systems to tell right and what is wrong and punished us when we disobeyed, people still did bad things--often while enforcing those very moral systems. Since one of the ways the elite maintain their power over people is through the enforcement of moral systems, they certainly are not going to tell everyone that the elite are at fault. No, it's the fault of the little people, who are vain and think they are so wonderful when David Brooks knows for a fact they are not.

But we’re not Puritans anymore. We live in a society oriented around our inner wonderfulness. So when something atrocious happens, people look for some artificial, outside force that must have caused it — like the culture of college football, or some other favorite bogey. People look for laws that can be changed so it never happens again.

Commentators ruthlessly vilify all involved from the island of their own innocence. Everyone gets to proudly ask: “How could they have let this happen?”

The proper question is: How can we ourselves overcome our natural tendency to evade and self-deceive. That was the proper question after Abu Ghraib, Madoff, the Wall Street follies and a thousand other scandals. But it’s a question this society has a hard time asking because the most seductive evasion is the one that leads us to deny the underside of our own nature.

Brooks depends on our ability to evade responsibility for our actions, which authoritarian followers hand over to the elite, and deceive ourselves when the elite tell us to commit immoral acts. He would be powerless without it, and he would be a much, much poorer man. So would Ross Douthat and Megan McArdle and all the rest of their wretched lot, and that is why our elite is currently telling us that we would never, ever make the obvious, moral decision when its consequences would threaten an established power structure.

Tuesday, November 15, 2011

The Moral Vacuum Of Authoritarians

Megan McArdle read about the Penn State cover-up and wondered how such a terrible thing could have happened. In a later post, she inadvertently demonstrated how.

I have been thinking some more about the Penn State case, and why McQueary and Paterno did what they did. And I have come to the conclusion that most commentators are overlooking a rather obvious contributing factor: they liked Sandusky.

The authoritarian "leader" identifies with the powerful, not the victim, so her first impulse is to protect them from loss of power. Authoritarian relationships are based on power, not on emotional ties, but such naked wielding of power is socially unacceptable, so the authoritarian leader cloaks his use of force with emotional words. It makes no sense at all to talk of liking Sandusky. Anyone who liked him before they caught him raping a child would certainly not like him after. Certain personal qualities, such as the need to rape children, are definitely a relationship-killer. Empathy for the victim and fear of violation would destroy any empathy for the rapist. But that would assume that one is capable of empathy, of feeling what others feel.

McQueary grew up in State College; his family was friends with Sandusky, and of course, Sandusky had coached him. Paterno had worked with Sandusky closely for years. And if you think about what you would have done in a situation where you caught someone you love and respect in that position, is it really so obvious, as the chest thumping punditariat proclaims, that you would have leaped into the shower, beaten the snot out of him, and frog marched him to the police station after you rescued the kid? Really? You'd have done that to your father, your favorite uncle, your best friend, a beloved mentor?
On a trivial level, McArdle's writing is offensively hackneyed. On a more important level it is just offensive. Yes, we would turn over a rapist we knew to the police. Rapists are dangerous. They rape people. Rape is a very bad thing that hurts people terribly. But this must be spelled out to authoritarians, since rape is partially a crime of power, and they get all confused about whether or not a crime of power is wrong.

It is chest-thumping to say we would get the rapist away from the child he is currently raping and call the police. No frogs would need to be marched, no rapists would need to be beaten. (He could easily be shoved and knocked down). A few steps, grab the kid, wipe your hand on your shirt, pull out your phone and call the cops while getting a towel for the kid. The fact that McArdle creates an imaginary situation to make stopping the rape much more difficult and less attractive is utterly astonishing. People will do terrible things while defending power, as the entire Penn State case shows. But because they are protecting the rapists' enablers and the bankers' thefts and the industrialists' polluting, they must go through a complicated process of denial, which McArdle helpfully outlines below.

Think about what that really entails: overcoming all the shock and horror, the defensive mechanisms that make you question what you're really seeing.
This case is so striking to us all because it is, for once, utterly clear what should have been done: stop the rape and the rapist. Nobody needs to search his soul, despite the genuinely shocking nature of the sight. There was no visual ambiguity, no question of what one was seeing, which is not always the case. The rapist was caught in the act. A defense mechanism is to protect one's self; the only question is what McArdle would be protecting herself from.

The total destruction of a long relationship as soon as you name it out loud and accuse him to his face.

The (private) act would not do that? Only the public act of turning the rapist over to the police?

The actual physical logistics of grabbing a naked sixty year old man, detaching him from that child, and then pounding on him for a while as a ten year old you don't know watches.

Strawman. But the words "you don't know" are extraordinarily important and show up again in the comments, where McArdle and a commenter have the following exchange.

eannie 2 hours ago
What if it was your kid in the shower being raped by Sandusky? It has nothing to do with beating up on Sandusky, it only had to do with rescuing the child . He might have stopped a stranger from beating a dog, but he couldn't overcome the bonds of friendship and loyalty to rescue a little boy? Maybe so.
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McMegan 1 hour ago in reply to eannie
Oh, I'm quite sure that he would have stopped Sandusky from molesting a boy he knew well. In-group/out-group distinctions are an unfortunate feature of human existance. Saying "Well, only bad, authoritarian cultures like Catholic priests/football programs" is itself manifesting exactly the thinking that made McQueary's cowardice possible.
Flag 1 person liked this. Like ReplyReply
Statements like these should bar people from public life but of course they will not. McArdle has no idea of how repulsive her sentiments are because she has no idea that it is genuinely possible to care about what happens to people we don't know. Empathy for anyone outside of her small circle of family, friends and acquaintances is impossible for her. She does not care if anyone suffers or is even killed by the policies she is paid to push.

Snug and smug in her in-group, McArdle declares that building a society based on a hierarchy of power and maintaining power by persecuting those outside the power group is just structural, just something that everyone has to put up with because that's the way things are done. Then McArdle gets in a kick at the critics of authoritarianism, since the silly-headed muggins don't recognize the necessity of obedience to power and scapegoating the powerless. Finally, McArdle goes out in a blaze of glory by claiming that those who denounce authoritarian power structures and their abuses are abetting authoritarian power structures and their abuses.

My god, this woman is worth every penny. She has raised power-worship and naked manipulation to a fine art; her prose gushes forth with an endless stream of Randian invective and moral degeneration. She is Aphrodite, born on a wave of propaganda, who gave herself to the god of war and gave birth to moral monsters such as this post.

The fact that the minute you go to the police, you will have utterly ruined this man's life: he will be jobless, friendless, and branded as the worst sort of pervert by everyone in the country--oh, and also, in protective custody so that the other inmates in jail don't, like, kill him.
Have empathy for the rapist, not the little boy.

That's a pretty huge emotional hurdle to leap in the ten seconds or so that McQueary had to do the right thing. Isn't it quite understandable that your instinct might be to get away? To look for some way that didn't have to involve jail? Wouldn't it be a huge relief to tell your superiors and let someone else take care of it?
She still hasn't mentioned the naked raped kid standing there. McArdle quotes Andrew Sullivan, who emphatically states that he would help the child, but she finds his attitude "blithe." McArdle asks, what about the Jews, huh? You think you'd rescue them but most people didn't out of fear and conformity. So there!

Oh, well, that's an extreme example, you may say; McQueary was at no risk of life and limb. Fair enough, but one can name dozens of less dangerous situations where only a small minority actually does the right thing, but everyone believes that they woulda. Consider, for example, child abuse (sexual or otherwise) in families. How often is the offender actually reported to the police, and how often do the families simply keep the kids away from Grandpa because, well, you know. I'm sure at some level they worry about other kids Grandpa might be touching--but they also worry about what would happen to Grandpa in jail, and the rest of his family in the court of public opinion.

For an authoritarian, what you say is much more important that what you do behind closed doors. The group will still accept you as long as you bow to their power and live by their rules, within their parameters of what is and isn't acceptable. McArdle reminds her tribe of this fact--it's okay to act immorally because everyone does it; that is, the group says it's okay.

When you find out that someone you know is a pedophile, that doesn't erase your knowledge that they're also a human being. It does in the public mind, of course, but it's very different when you know them.
No--and I cannot emphasize this enough--it isn't.

We are evolved to live in small groups, with very deep loyalty to the other members. In most situations, this is in fact a completely laudable sentiment. But this is the dark side: it is very hard for us to betray the members of those small groups to which we belong, particularly if we have strong emotional bonds to that person.

All attention is concentrated on obeying the power structure, conserving it and maintaining it. The powerful is the group. The little boy is not and betraying him is irrelevant.

Sigh. Let's get this over with.

There is a scientific name for people who are not bound by these sorts of ties: sociopaths.

Or: McArdles.

And as I understand it, they do not, in fact, make excellent agents of justice, because they don't care about the victims, either.

Indeed they don't. McArdle spends another two paragraphs reminding her readers of their place in the greater order and justifying letting a rapist go because he's a friend but she obviously recognizes the difficulty of the task and so goes for the audience's jugular, using an argument that she know will work because it has worked for her.

Can you really be so sure that you'd have stepped in right then? Can you honestly say that you've never cut slack for people you like and respect, and maybe people who also happen to have some impact on your career? You've never kept silent while they were doing something that you were pretty sure was really wrong? I'm not talking about looting the company coffers or molesting children, necessarily--maybe it's the friend who cheated on his wife, or the one who's occasionally rather nasty to his children, or I don't know, a political administration who you like but who also does some stuff that is really pretty bad. If you have found yourself making excuses to let them--or yourself--slide, then you know basically how McQueary felt.
McArdle does not understand that some people make moral decisions based on their own values, not the values given to them by the elite authority. Here is true moral relativity, since morals are not absolute and are not based on a person's personality and core values. They are based on whatever the authoritarian leaders want their followers to think and feel, whatever will benefit those leaders.

That doesn't excuse what McQueary did. His reaction may be common, but it was still wrong.

Public obeisance to the (fake) standards of the group duly noted.

And we encourage others to do the right thing by forcefully declaring what that right thing is, and shaming those who fail to live up to even a very difficult standard.
You don't have to do it as long as you agree to say it and force everyone else to say it as well.

But categorizing his act as depraved and incomprehensible is unhelpful. It's unfortunately normal, and entirely comprehensible. Saying otherwise allows us to write off what happened at Penn State to evil people, or a "culture" full of nasty, macho football lovers. It allows us to avoid confronting the real problem, which is that people are evolved to form intense bonds that often trump more abstract principles . . . and also, to be very good at coming up with excuses for not doing what they should at great personal cost to themselves.
McArdle's specialty is taking concrete situations, muddying them up, and declaring the entire situation is too abstract to understand or act upon.

Of course, that's not neat and convenient: we don't get to think that the problem is localized to far off people who are nothing like our wonderful friends and relations. But I think it's perhaps more likely to help us prevent such happenings in our own backyard.
Of course it will abet such happenings, but that's the whole point of McArdle's post, isn't it.

Remember, it's not about McArdle, it's about the attitudes and beliefs that have been ingrained in her and millions of other people. But their words are useless before the truth, which is why they work so hard to hide and deny it.

Friday, November 11, 2011

Guest Post

I have a guest post up at Naked Capitalism called "The Comfort Of Others" in which I discuss income inequality, Jane Austen, and the 1%. Austen's understanding of the consequences of money, rank and power in our everyday lives was impeccable.

Thursday, November 10, 2011


Shorter Megan McArdle: Trying to punish the financial industry for its "mistakes" will create another Depression.

Longer Version:
The things that fix economic crises are not always intuitive. As Brad De Long himself once remarked to me, it is nearly impossible to bail out the financial system without also bailing out people who are long assets--aka financiers and rich people. But oh, how that flies in the face of our intuitions! It should be true that the most prosperous system is the one which severely punishes everyone who didn't monitor the soundness of their investments. We feel, very deeply, that financial and economic efficiency should mirror our intuitive sense of justice. And probably it does, mostly, when you're living in a hunter gatherer tribe.

But in a complex world where mistakes are easy and detecting them is not, I just don't think this holds truet. The "just world" described above is not some bourgeois paradise; it is the western world during the Great Depression. It was not a better world for everybody; it wasn't even a better world for anybody that I can think of. After it had finished punishing people who made stupid decisions, it went on to wreak brutal vengeance on a lot of people who had been quietly minding their own business. Bank runs can afflict the soundest banks, if depositors panic.
Those poor bankers and their mistakes! Where is liberals' sense of fairness when it comes to them?!?
One can name dozens of examples of things that violate our sense of fairness and obligation, and thereby make us all richer, from limited liability to bankruptcy.  But people most won't believe it.  Oh, they may believe the part of it that supports some larger "fairness" agenda they're committed to.  But their support is almost always piecemeal: try getting a liberal who loves easy bankruptcy to give a second chance to bankers who made a few stupid money decisions, or convincing conservatives who are avid for tort reform that debtors who ran up credit cards with unwise investments in expensive but rapidly depreciating motor vehicles and consumer electronics might also need legal protection from the fullest extent of their past mistakes.

Like Cassandra, McArdle has been a lone voice in the wilderness, warning both erring sides from the all-seeing, all-knowing, perfectly balanced middle. Greedy consumers and a "few stupid money decisions" created this crises, not deliberate acts of fraud and malfeasance, and a wise realist and impartial observer like McArdle can only shake her head, press her little hand to her forehead, and sigh at the incivility that surrounds her.

You can try to explain to all of them why their sense of outrage is rather beside the point in the face of a looming financial explosion which is going to make everyone much worse off if it reaches critical mass. You can also go home and try to explain this to your microwave, for all the good it will do. As anyone who has ever spoken to a five year old knows, the sense of fairness is one of the most primal and intractable cognitive instincts we have. In the best of times, it takes years to change public opinion about what is fair. These are not the best of times, and we do not have years.

In the years that I have been doing just that, it has been a losing battle on most fronts. Especially as regards the financial crisis, where the reaction is usually that I am either a worthless dupe, or a paid shill, for the banking industry.

A person can be both. Let's not underestimate our elite.
The people on the right who can explain it all in terms of moral hazard, and the people on the left who can explain it all in terms of insufficient regulation/punishment of bankers, can wrap economic and moral theory up in a neat package that claims to deliver justice and prosperity. All I've got to offer is messy tradeoffs.

I am very much afraid that the euro zone is about to plunge us into phase two of the global financial crisis--and that as with the Great Depression, phase two may be even worse than the dismal years we've just endured.    In search of fairness, we may all get a lot more justice than any of us really wants.

As we are all suffering, let's not worry about things like justice and fairness. That way leads to ruin.

Tuesday, November 8, 2011

Presidential Material

This is definitely one of the sleaziest things I've seen: Herman Cain sent out a hit piece on one of the now-numerous women who accused him of sexual molestation or harassment. At National Review On-line, Katrina Trinko says "The Cain campaign" released personal, legal and economic information about Sharon Bialek, for obvious reasons. Cain is only reinforcing his image of a person who does not follow rules of basic decency and he looks rather stupid as well for releasing this information himself instead of tossing the red meat to the hounds, to tear apart.

When The Idle Poor Become The Idle Rich

The Deserving Rich

She works much harder than you do.

Before we examine Megan McArdle's post on meritocracy, let us take a moment to marvel at the literary irony. McArdle is living proof that we do not live in a meritocracy; her very presence at what used to be an American literary institution gives lie to her entire premise. McArdle cannot think, read, write or count (a quadruple threat!) yet has reached an extraordinarily high position in the public sphere thanks to her father's money and influence. As McArdle conveniently forgets to mention in her post, she has admitted that money bought her prep school education, her prep school's name bought admission to university, her university's name bought admission to graduate school, and all the above bought contacts who helped her make her way into the upper echelons of the high-paying media. Yet she, like most of those who did not earn their position, writes under the assumption that we do indeed live in a meritocracy and--more important--when that meritocracy fails us, it is just one of those things, those crazy little things that nobody can stop and is nobody's fault.

I don't care about income inequality. I care about the absolute condition of the poor--whether they are hungry, cold, and sick.

That is why she tells us that the poor are too fat and the sick should pay far, far more than they can afford for private insurance.

But I do not care about the gap between their incomes, and those of Warren Buffett and Bill Gates. Nor the ratio of Gates and Buffett's incomes to mine. And I'm not sure why anyone should. Other than pure envy, it's hard to see how I could somehow be made worse off if Bill Gates' income suddenly doubled, but everything else remained the same.

Since everyone's income did not remain the same and in fact incomes dropped, her disregard is proof of callousness, not lack of envy.

But while I do not care about gaps and ratios, I do care about opportunity. It is fine that CEOs earn many times what their workers do--but it is not fine if some are born to be workers, and others to be CEOs. And unfortunately, that increasingly seems to be the story in America, as Scott Winship outlines in a fine new piece for National Review:

There is no such thing as a fine piece for National Review. Although McArdle might be reading the tea leaves and planning for her future, after the Atlantic finds a younger, cuter female blogger.

If you're reading this essay, chances are pretty good that your household income puts you in one of the top two fifths, or that you can expect to be there at age 40. (We're talking about roughly $90,000 for an entire household.) How would you feel about your child's having only a 17 percent chance of achieving the equivalent status as an adult? That's how many kids with parents in the bottom fifth around 1970 made it to the top two-fifths by the early 2000s. In fact, if the last generation is any guide, your child growing up in the top two-fifths today will have a 60 percent chance of being in the top two fifths as an adult. That's the impact of picking the right parents -- increasing the chances of ending up middle- to upper-middle class by a factor of three or four.

That paragraph captures the essence of the problem--and also, why we may well despair of solving it. How would upper-middle-class parents feel about children who had only a 17% chance of achieving a household income above $90,000? They would be horrified. And then they would busily start using the full scope of their talents--their financial resources, their educational skills, and their social capital--to "fix it".

Arguably, this is just what they've done. Rocked by the shattering forces of the Depression and World War II (and flush with the prosperity of the postwar years), the old moneyed elites of the Northeast and Midwest did something really remarkable: they voluntarily abdicated their position. Ivy League colleges threw open their doors to the bourgeois masses, and cut back on the Saint Grottlesex crowd. The old WASP bastions democratized or were swept away by nimbler competitors who didn't scruple to sacrifice profits because it might look bad to the boys in the club. First Jews, Irish, and Italians, and then later blacks, Hispanics, and Asians, burst through doors that had once been reserved for the sort of people who got married and buried at St. Thomas Church.

It's like she never heard of lawsuits that ended racial and religious discrimination.

They were joined by the children of undistinguished WASP families from America's small towns, suburbs, and tenements.

Who could afford to work their way through school, way back when before economic inequality skyrocketed.

The architects of the transition envisioned a shift to a new meritocratic society in which the circumstances of one's birth didn't matter--only hard work and talent. But that hasn't happened. Instead, we have a system that has less mobility than the old, forthrightly aristocratic version.

Research suggests that by the time they were in their 40s, American children born in the 1950s should have experienced the same earnings mobility as their Swedish counterparts if the economic payoff for additional schooling were not so much higher in the United States -- and, more important, if that payoff had not grown so much between generations. And educational mobility in the two countries -- the connection between parent and child schooling -- was actually very similar for this generation. Opportunity for top slots may therefore have been as widespread in the United States as in Sweden.

However, evidence indicates that American children born since the 1950s have had lower educational mobility than children in Sweden and other Western nations. And recent research indicates that the link between parental income and educational advantages on one hand and child academic outcomes on the other is stronger in the United States than in other Western countries.

You can argue about why this is--are the upper middle class transmitting real skills, or pull? But does it matter? As an editor at The Economist once noted to me, it's actually rather more worrying if what they're giving their children is a strong education and an absolutely ferocious work ethic. An aristocracy that simply bequeaths money and social position to its children will eventually fall. And [sic] aristocracy that bequeaths the actual skills required to earn more money than everyone else is self perpetuating.

Here it comes--the "the rich are rich because they work so damn hard" theory. We can actually find pundits who declare that hedge fund managers work more hours than poor people, therefore the poor are lazy and the rich are a meritocracy. Utterly ignored is the fact that often the poor don't have jobs, which really cuts into those hours worked, and that the rich have put many people on part time or contract status to avoid paying them benefits and decent salaries.

And self-legitimating. The old aristocracy was, I think, at least dimly aware that it wasn't quite fair for them to have what they had by mere virtue of being born to the right parents.

But they never tell themselves that, do they? They say that they work harder and studied more and put off having children.

But in the new aristocracy, it is rarely enough to just get born to the right parents; you also have to work very hard.


(Higher earning men are now more likely to work more than 50 hours a week than are men in lower earnings quintiles.) Whatever the systemic injustices, it's also quite clear to everyone . . . even parasitic leeches of investment bankers . . . that their salaries only come as the result of frantic effort.

Remember, according to McArdle there was no fraud in the banking industry,  just systemic failure and bad luck.

The ability of one's parents to confer such enduring advantages is obviously unfair. And while I don't want to say that a society cannot last that way--obviously, many have, for hundreds of years--I don't think it's healthy for society. It is hard to get civic engagement, or respect for the law, when the bottom 40% or so feels that the game is rigged.

It's also worrying because, as Ross Douthat points out in the Times, recently, the meritocracy hasn't done such a great job. Oh, it's easy to cavil--the old moneyed elite didn't do such a great job in the 1920s, now did it? But I think that rather misses the point: shouldn't the educational meritocracy, which really is very different from the combination of WASP elites and up-from-nowhere untutored operators, have done better?
Yes. And they didn't.

Oh, I know--you want to break out your favorite whipping boy. Barney Frank, Milton Friedman, the CEOs of Fannie and Freddie, Ronald Reagan, Alan Greenspan . . . we've rehearsed the list a hundred times over the last few years, and I know you'd be happy to give one more dramatic reading.

Cute--putting Barney Frank and Fannie/Freddie in with the people who cut tax rates and lowered interest rates to the bone.

But as I think Ross is saying, this overlooks a more important question, which is why the system went wrong. Don't tell me it got hostage to the wrong ideology--tell me why all those professors we paid millions of dollars to study economics couldn't provide a convincing rebuttal to that ideology in advance of the crash.

Because telling the rich what they wanted to hear made economists rich?

Don't tell me that regulators were stupid or bankers got greedy until you first explain to me why tens of thousands of very well educated people, most of them graduates of colleges and professional schools that had aggressively winnowed them based on intelligence, barely outperformed a bunch of upstart micks, third-generation coupon-clipping WASP dimwits, and central bankers who still worshipped the barbarous relic of the gold standard?
Because it made them rich?

The new meritocracy doesn't seem to be much better, on any dimension, than the old aristocracy. It's just more persistent, in every sense of the word.
We work harder, so you can't! But it's all good, because this is the best of all possible worlds and we all get what we deserve in life. Which is why Megan McArdle is rich and you aren't.

Sunday, November 6, 2011

Our Bright And Shining Elite

His CDOs flew too close to the sun.

Shorter Ross Douthat: Alas, if our meritocracy had only been taught humility!

I don't know if Master Ross came up with this all on his own like a big boy or if he heard it in a sermon during Mass but this meme has legs. All our elite need is a little Old Time Religion and they can go back to ruling the world just like God and Nature intended.

It's strange, however, that Ross doesn't mention money once when discussing why our elite screwed the chunky pooch. It's all they're-to-smart-for-their-own-good and if-only-they-had-accepted-Jesus-as-their-personal-savior. There is no mention of how the rich became much richer or the immorality of  income inequality.

Sigh. If only we had smart and moral people to lead us, like little Ross Douthat!

Friday, November 4, 2011

Power v

Most of us act out of emotion most of the time; emotions are instinctive and often overwhelm logic and reason. Almost everything that is important to us--love, family, self-esteem, fears and dreams--is heavily guided by emotion. But we insist that we make decisions based on facts and logic when we usually look to facts and logic to support our emotion-based decisions. We make choices and decisions that make us feel good and avoid painful emotions.

A lot of people derive a great deal of pleasure from gaining superiority over others, it feeds their ego and eases fears and insecurities; power both alleviates and creates great fears. The "winners" in our society will never have enough money or power because the pleasure does not come from being rich, it comes from feeling superior to another individual or group. Once you gain a little power you must continually press for more, to fill an unfillable need for the ego-stroking that power provides.

Power is a verb. Power is not a thing to be won or lost. It is a relationship and it only exists when it is wielded. People do not hold power over us, they demand the power and we give it. When we start exerting power, the relationship changes.

Power is also an incredible high but it only stimulates the pleasure centers when it is demonstrated. It was utterly illogical for the Wall Street elite to go out on their skyscraper balcony to drink champagne before the Occupy Wall Street Protesters. They did it anyway, laughing, because it felt great to know that they are far more powerful than the rabble below them, the little mice scurrying about the cobblestones and squeaking about their short, unimportant little lives. The Enron boys laughed about screwing Granny. Our presidents laugh as they send drones and soldiers off to die. The problem with being one of the 99% percent is that there are so many of them and everyone knows value is based on scarcity.

Coming up next: Megan McArdle whips out her magnifying glass and examines the unfortunate phenomenon of disgruntled youth taking to the streets.

(edited after posting)