I think you may encounter that story a lot among libertarian people. Libertarians tend to believe very strongly that people earn every penny they make - and, therefore, that the poor deserve their poverty. This belief may often be, as Henderson points out, a way of coping with envy.
I guess that's why I can let myself be so skeptical of the notion that high incomes are "deserved"; I was never envious of rich people. This is a result of my own childhood experiences My father was a lower-middle-class professor, and his brother was a rich entrepreneur. I got to see both lifestyles up close. And you know what? They weren't that different! My dad and my uncle both love their jobs, they both enjoy the same things (sports, movies, cooking, dirty jokes), they each have two kids and a house etc. My uncle's mid-life crisis car is a Porsche, my dad's is a Mustang...so what?
What I was learning about was the diminishing marginal utility of consumption It sucks to be poor, but being rich is not much better than being middle-class. For me, that tacit knowledge freed me from any sense of income envy.
The fact is, a lot of income is not "earned" in the marginal product sense. Some is, but some is a function of luck; some lucky plays in the financial market, a lucky business idea, a lucky personal connection. But who cares? I'm fine with that, because I don't envy the lucky.
I think a lot of people are like me, instead of like David Henderson. I doubt there are a lot of poor people out there who go around feeling resentful because they can't afford sports cars and mansions. But I do think there are a lot of poor people out there who go around feeling like "losers" because their jobs are not prestigious. And I think this is the real problem with inequality.
In American culture, the word "successful" is a synonym (euphemism?) for "rich." There seems to be a widespread notion that the rich are "winners" who have defeated the poor in some sort of ultimate game. I personally could never stand that point of view. There are plenty of people out there who just want a middle-class lifestyle. They want a family, a job they like, friends, a comfortable life, a sense of pride in their work, and a community. Maybe a dog or a cat. If you dumped a pile of money in their laps they'd surely take it, but they don't see their lives as "unsuccessful" because they don't have cabins in Aspen.
And yet I think there are a substantial number of people who do buy into this notion, that your bank account makes you a "winner" or a "loser." And I think that a great deal of the negative behavior that we see among America's poor people - drug use, broken families, violence - is a result of that feeling of loserhood. Contrast this with Japan. Over here, they treat sushi chefs or (perhaps) rent-a-cops as skilled professionals. Even cashiers and clerks get respect, just because they have a job and show up on time and do their best. A man who works his whole life in a restaurant doesn't feel so ashamed of his "loser-hood" that he feels the need to compensate by abandoning his kids and sleeping around. And he doesn't feel that a high-risk career as a drug dealer is his only ticket to "winner-hood." And best of all, he doesn't feel such a need to pretend he's rich that he spends his whole paycheck every month.
I wish we had more of that in America. Rather than shaming people who mention inequality, I think we should simply spread the idea that there is more than one dimension of success. It's a lot more satisfying to count your blessings when your blessings aren't all in your bank account.
(OK, last post for a while. Gotta work!)
This is most evident in the Japanese convention that tipping is impolite. A Japanese friend told me that tipping is like saying "You suck at this job, so here's some extra money to help you find another one."
ReplyDeleteI'm fine with the sort of inequality that results, when the diminishing marginal utility of consumption -- and its friend, opportunity cost -- is operative. Then, your father and your brother can make different choices and have different results.
ReplyDeleteMuch more troubling to me is the "inequality" that exacerbates and derives from predation. Libertarians don't just deny their envy; they often work pretty hard to deny predation, as well.
Marginal productivity ethics never worked for me; I know Keanu Reeves, the actor. Very nice person. The morally "unearned" nature of economic rents trump marginal product every time, for me. That's not the issue for me, however.
The extreme skew of American incomes, is more than a failure to heavily tax economic rents. There is also predation, as wealth and power of the few is used, systematically, to disadvantage the many and the relatively poor. Financial wealth is only useful as insurance, and for financial wealth to earn an income, there's no product, and no marginal product: there's just herding the masses into the casino and fleecing them; there's increasing risk and eroding the social safety net, and harvesting thru attrition, which is the misery of debt peonage, medical bankruptcy, usurious credit cards, etc. Americans are not divided into classes of winners and losers so much as the rich and the victims.
And, as the plutonomy takes hold, the diminishing marginal utility of consumption ceases to be the force for egalitarianism, which you saw in the case of your father and his brother. The economy bifurcates its products and services into classes, which are much more than just price discrimination. The mass of people, marshalling the smaller part of consumer spending gets fast food burgers, which is practically poisonous; the elite are served Kobe burgers and organic salads. Credit cards, used by the rich, earn bonus points and cash back; debit cards, used by the poor, are subject to arbitrary fees and forfeitures.
If we all focused on counting our blessings, we would just start to compete based on who is the most blessed (although the winner is clearly Rick Perry....).
ReplyDeleteSeriously though, inequality, to me anyway, has far less to do with either envy or self-esteem, but economic security. If you're a few missing paychecks away from deprivation (and a lot of Americans are), and if the reason things are that tight has to do with inequality, then it's not just a psychological issue, but an existential one. Admittedly, that's subjective (i.e., would a dramatic decrease in quality of life count as 'existential', as compared to outright destitution), but people aren't just envious or suffering from poor self-esteem (we Americans typically have tons, often undeserved, of self-esteem anyway), they're worried or even frightened that their lives will become worse (or continue getting worse).
There's inequality and there's inequality.
ReplyDeleteThere's inequality caused by some being smarter/working harder than others, and by some people valuing material goods less than others. This is fine.
Then there's inequality caused by systemic rent extraction by the FIRE industry, where median incomes and working hours stagnate whilst all the gains go to the top for 30 years, whilst poverty outside China in the developing world also increases. This is not fine, is NOT 'deserved' and has NOTHING to do with envy.
Libertarians tend to believe very strongly that people earn every penny they make
ReplyDeleteStrawman: libertarians actually think that huge classes of rich people have unjustly earned income; it's just that they bother making a distinction at all, rather than "reason" that "you're high-income, therefore you mst have cheated, therefore a huge fraction of it should be taken".
The CEOs of Apple and Goldman Sachs earned their money very different ways. It makes no sense to say they both deserve a high tax rate "because they're rich".
One of the great differences between wealthy and not is that wealth makes possible the exercise of power. If you value being able to exercise power, then you cannot abuse people unless you are rich. Consider Trump, for example.
ReplyDeleteIt is possible that Noah's father and uncle are similar in their levels of power or interest in power.
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ReplyDeleteIt's interesting that you bring up Japan in this context. As I am sure you know, the debate about descending into a "winners and losers" society has been on slow boil since the Koizumi reforms; particularly related to the two-tiered (or three or four) labour system that has emerged. One wonders if that admirable respect for work that you note will endure. You don't hear any sloganeers throwing around the "100 million middle class" thing anymore. It's a crying shame.
ReplyDeleteI notice that Silas Barta claims a strawman about libertarians was made, but his only evidence is two strawmen about liberals that he raises.
ReplyDeleteStrawman accusation 1: that [liberals] assume the rich "cheated" and that justifies taxes. You won't find it here, and I doubt it is held by even a small fraction.
Strawman accusation 2: that [liberals] would claim that CEOs deserve a high tax rate because they are rich. First, that confuses income and wealth. Second, and most important, it is not high income that justifies high taxes. It is high utilization of socially provided resources such as highly educated employees, infrastructure, wealthy consumers, and a host of other things. Our society should charge what the market can bear for these. And there is a market of 200+ nations in which to shop.
Anonymous:
ReplyDeleteThat is very true. Sadly, the Japanese "middle-class-ism" that I'm describing is on the wane. But that doesn't mean the future has to be one where only the rich get respect.
My guess is that the "negative behavior that we see among America's poor" is a result of the feeling of nothing-to-loserhood, and the advantage that you perceive in Japan comes from the constraints to excessive freedom that are imposed by society. You and I may share the same idea of what pursuit of happiness should mean, but believe me not everyone does.
ReplyDelete"And I think that a great deal of the negative behavior that we see among America's poor people - drug use, broken families, violence - is a result of that feeling of loserhood. Contrast this with Japan"
ReplyDeleteFrom what I've heard, youth delinquents report above average self-esteem (though this may be different among adults). And Japanese people behave similarly whether they live in America or Japan.
"I think you may encounter that story a lot among libertarian people. Libertarians tend to believe very strongly that people earn every penny they make - and, therefore, that the poor deserve their poverty."
ReplyDeleteI've never once heard a libertarian make such a statement (strongly or otherwise). I believe it is more precise to say that libertarians are less interested in judging whether money was *earned* than determine whether it was acquired by playing by the rules. If not, target the people who didn't, but don't target the whole class of people.
One of the fascinating aspects about this topic is that many rich people are in fact quite insecure, and that’s why they go to such lengths to display their wealth, why they seek money and fame. That’s why they talk about their expensive condos or vacation homes, drive fancy cars, live in fancy houses. Any opportunity they get to brag about or demonstrate their wealth or prestige, they will. Why? Because they want people to be envious. It’s like sociopaths who don’t feel complete unless others are miserable. If others are envious of them, then they can’t be losers, right? And this is not at all exclusive to conservatives; it’s just as prevalent among liberals. (I can think of numerous examples of liberal elites despairing of insecurity, but out of kindness, I’ll refrain from naming names.)
ReplyDeleteYou say, “Over here, they treat sushi chefs or rent-a-cops as skilled professionals. Even cashiers and clerks get respect, just because they have a job and show up on time and do their best.” I’ve never been to Japan so I can’t assess the objectivity of this analysis. But I feel that societies that value what everyone does tend to be healthier, happier places to live.
I happened to have been reminiscing with a friend about a summer job I had while in college. It was at the coolest restaurant in the mid-sized town I lived in. It was a beautiful, artistically distressed space, with various bands playing every night, and wide open windows to the park outside to attract warm summer breezes. The laid-back feel belied the high quality food and booze. There was an open bias toward anybody in a band, with oil paints on their jeans, or tattoos and piercings. I got to work with funny, temperamental people who were deliciously recalcitrant and haughty. At the time, it felt like the bohemian center of the world.
We liked to torture the rich guests with our aloof, superior cool, which we completely believed in. We were the artistic class after all; they were just capitalist pigs. We tolerated the pigs however because we wanted their money. But it was at our friends’ tables that we would linger, sitting down to share a drink or anecdotes about random topics. In a way, the capitalist pigs loved to be tortured by us. Since we were the only venue in town where they didn’t get their asses kissed because they were loaded, if they could win even the mildest approval from us, they mustn’t be as completely uncool as their stiff khakis suggested. What we knew then is what I still know now: if you base your self-worth on worthless things, you’ll be a loser no matter how much money or prestige you have.
"David Henderson says that he got rid of his envy of rich people by convincing himself that rich people earned what they have."
ReplyDeleteMost of the income of the rich is simply rent collection, and hence is clearly not earned.
But most libertarians think there's nothing wrong with rent collection.
Silas Barta wrote, Strawman: libertarians actually think that huge classes of rich people have unjustly earned income...
ReplyDeleteWould that it were so. There's a very small minority of libertarians who understand that, for example, land rent is unearned and should be taxed at extremely high rates, but they're, again, a small minority.
My own anecdotal impression is that a few libertarians will agree that rents should be heavily taxed, and that many rich are just rent collectors, and that things like patents are just government-granted licenses to collect rents, but they're definitely not the majority of libertarians and actually appear at best to be a small minority.
Adam wrote, I believe it is more precise to say that libertarians are less interested in judging whether money was *earned* than determine whether it was acquired by playing by the rules.
From a moral point of view, this is silly. The fact is that most rich people got that way by rent collection, and rent collection is legalized theft.
...adding, of course, that it's the rich that make the rules in the first place.
ReplyDelete"I believe it is more precise to say that libertarians are less interested in judging whether money was *earned* than determine whether it was acquired by playing by the rules."
ReplyDeleteSo do libertarians take no interest in whether the rules follow any sense of justice or function to bring about broader prosperity for society? Plenty of despots have caused the death of millions by playing by "the rules." Of course, it helps when you're the one making the rules. And that's the part that I'm greatly concerned by. (I won't claim to speak for any broad group of people, though I suspect others bearing labels such as "liberals" or "progressives" might agree.) If a significant portion of the extraordinarily wealthy acquire most of their wealth by rigging the rules in their favor to the detriment of society as a whole, then the rules need to be changed.
"So do libertarians take no interest in whether the rules follow any sense of justice or function to bring about broader prosperity for society?"
ReplyDeleteWhat is it with strawman caricatures of libertarians, anyway? Seems like a few of you would benefit from sitting down with one, rather than taking your biases to logical extremes.
I could only speak for myself, but I'm *very* interested in changing the rules in what I consider a more just direction. One might argue that doing so is the basis of the libertarian movement in general. Just because a libertarian sense of justice doesn't match your sense of justice doesn't mean that we don't care about just rules.
More to your point, David Henderson addresses your concerns directly when he says: "It's true that a small number of wealthy people did get their money by fraud or dishonesty. More common, especially in societies with lots of government controls, were people who got wealthy by using political pull." Much of the libertarian argument for smaller government hinges on the fact that it's harder to get rich through rigging the rules when government has fewer favors to dole out.
"If a significant portion of the extraordinarily wealthy acquire most of their wealth by rigging the rules in their favor..."
ReplyDeleteThis is grand statement. I'm curious how you arrive at this conclusion. If I look at just the wealthiest members of our society, Warren Buffett and Bill Gates, I see no effort on their part to rig any rules. That's not to say it's not possible to do, it's just that it's neither necessary nor sufficient to becoming rich.
Private property is a government service usually in the form of government titled land, shares of government chartered collectives, government protected intellectual property and government issued money. Rich people have more private property so they use more of this valuable government service. They should pay more for it.
ReplyDeleteOf course not every rich person is directly involved with "rigging the rules" but that does not disprove the fact that the rules have been set up to favor people positioned in particular ways.
ReplyDeleteAdam mentions that libertarians want to diminish government so that there will be less rules to rig. This is the utopian problem of libertarianism. Diminished government leaves a power vacuum and vacuums will get filled. Either in the form of more government growth (with the backing of monied interests) or in the form of corporate power. Either way, concentrations of wealth are a problem. There is an alternative way, checking concentrations of wealth. It's messy but better overall.
I am not naive, I distrust government quite a bit, but watch any commercial on tv, read any add in a magazine, etc. and it is quite apparent that merchants operate on the principle of deception in order to extract as much money from you as possible. It's not as if I can use my consumer power to select the honest ones, they are ALL trying to deceive me. The real naive fail to admit this.
The point of this editorial was that we don't envy the rich but we are tired of being played for chumps. Getting played the chump, whether by the banks, the cable company, restaurants, etc. is a kick to the self-esteem. Government allows us some dignity (if it hasn't been captured by industry) by letting us regulate the innate deceptive nature of business.
Saying that a power void will get filled by either government or corporations is a false choice. People (individuals) have a role to play as well. You may call this utopian, but it happens all the time in reality. There are strong correlations between decreased government and increased charitable giving, for instance.
ReplyDeleteI've always operated under the belief that "no" is the most powerful word in the English language. If you don't like what corporations are selling, you can exert your power simply by saying no. Envy, of course, works its way into this discussion, because it inhibits an individual's ability to say no. Want to empower other people against corporations? Teach them to say no more often.
Governments operate through force -- there is rarely an opt-out provision. Corporations operate (or are supposed to operate) through consent. That is a huge distinction in my mind.
I think that it is pretty clear that there is no way to objectively determine if money is earned by means that are abstractly fair.
ReplyDeleteI've spend a lot of time thinking about this kind of thing. And this is my conclusion.
Yet, even if it's true that some societies "exacerbate envy" respect to others, it is naive that to think that is the problem with inequality. As if poverty and inequality could be solved by just if poor people were less materialistic.
George
Liberal, Libertarian and conservative have become meaningless terms simply because they no longer are bounded definitions of phenomena: they are marketing labels with no intrinsic meaning.
ReplyDeleteAfter all, a conservative in the sense of wanting to minimise social change and upheaval would not make efforts to terminate the social safety net which has been in place and functional since 1938-because that would be a radical, reactionary move.
Liberal and liberalism are even more confused. Neoliberalism is the economic force behind conservatives? Huh. Liberals are communists and socialists who wish to force people to be nice to each other and be tolerant-much like Jesus Christ, who the conservatives own as a kind of mand-god baseball beat with which to beat other people.
Libertarianism describes everyone from Anton LaVey to Ted Kaczynski, and every practitioner seems to have an idiosyncratic idea of what exactly those values are such that there are no true libertarians, just as no true Scotsman would do such and so.
It is from history that we learn that behind every great fortune is a great crime; that liberals are the abused spouses, figuratively, of conservatives and neither can exist without the other as muse and target; that freedom for the individual depends upon giving up that freedom in support of the goals of the group-Franklin's "we must all hang together or we shall surely hang separately."
Taxation? Fairness? Think of who has benefited the most from a system put in place by others at great cost and risk-shouldn't they pay the most? To whom much is given, much from him will be expected.
Adam wrote: Governments operate through force -- there is rarely an opt-out provision. Corporations operate (or are supposed to operate) through consent.
ReplyDeleteOf course, this assumes that people who bear negative externalities generated by private-sector activity are already consumers of that activity. If you're not a consumer of a company's services, you're shut out of having a meaningful say in its revenues.
A democratic republic no more or less inherently operates through force than a multinational corporation. The ways in which individuals can influence them do differ, but both rely on living in a state of compromise alongside powerful, impersonal institutions, which is inherent in any big society. The really important thing is the freedom to choose, on a case-by-case basis, which ones are trustworthy and empower individuals.
Reminds me of this old Mr. Show sketch: http://www.youtube.com/watch?v=ke9iShKzZmM
ReplyDeleteNoah said: "I think you may encounter that story a lot among libertarian people. Libertarians tend to believe very strongly that people earn every penny they make - and, therefore, that the poor deserve their poverty. This belief may often be, as Henderson points out, a way of coping with envy."
ReplyDeleteHenderson thinks the wealthy are morally superior to the rest of us.
Many of the wealthy do, too.
This seems to be the position of libertarians everywhere. That the poor are morally inferior, and deserving of their fate, is pernicious to society, since it justifies the wealthy taking it all. That a wealthy person should consider himself morally superior to me I find odious. It is this that riles me more than envy.
Welcome to the Church of Mammon.
Progressives tend to believe very strongly that every penny that rich people "earn" is ill-gotten, and that poor people are poor because rich people have taken money that is rightfully theirs -- and therefore that the poor should be compensated by the rich for this theft. This belief may often be...a way of coping with envy.
ReplyDeleteSpread the word.
I note that right-wingers never say "hey, you're better off than 99% of the human race, so quityerbitchin'"
ReplyDeleteIt's like the right-wing principle that $250K per year is too little, while $50K/ per year is too much.
It's definitely the case that there are two components of inequality: First, it is self-reinforcing, as the power and connections that come with wealth allow the wealthy to more easily increase their share and that of their heirs. And second is security. For the wealthy, a catastrophe (medical, etc) is likely to make them middle class at worst. For the middle and working classes, they are one catastrophe away from impoverishment.
ReplyDeleteOh Wow, I somehow missed this. You realize this "envy" business is all Austrian nonsense: "[Ludwig Von] Mises's thesis that anti-capitalist sentiment was rooted in 'envy' epitomized 'know-nothing conservatism' at its 'know-nothingest.'" (http://en.wikipedia.org/wiki/Ludwig_von_Mises#Criticism)
ReplyDeleteYou're absolutely correct, by the way, that the underlying assumption of the "envy thesis" is that the rich earned their wealth. If pressed, of course, they would say they support equality of opportunity as a general principle, but would they really be willing to abandon inheritance altogether? Would they really be willing to make the massive changes to society required to actually create equality of opportunity?
But even if they would, that's not the point - even if we could create a perfect meritocracy, we shouldn't. As John Rawls (and before him J.S. Mill) emphasized, it's not just inherited wealth that's not earned - merit has nothing to do with our nationality, our gender, our race, our intelligence, whether we're able bodied or attractive. Even if the wealthy DID earn their wealth (a dubious claim), does that mean someone who is mentally or physically impaired shouldn't be taken care of? Shouldn't we all contribute to make sure the sick, the elderly, the infirm, the unlucky don't suffer? That's not envy, it's not a pathology, it's decency.
To think about those concerned with inequality as "envious" is absolutely backwards - to be unconcerned with inequality is immoral. Distribution of goods in society is a question of justice (known as distributive justice - see e.g. John Rawls, but also every political philosopher ever). I think the pathologies you point to (drug use, etc.) are symptomatic of a society that is fundamentally unjust. And the more the inequality in our society increases, the more such symptoms are likely to arise (see London riots).