Individualism: A Third Way?

In the NY Times today my "favorite economist" from down south has pronounced from on high his view of the dualism of our current political environment.  This dualism he describes as follows:

One side of American politics considers the modern welfare state — a private-enterprise economy, but one in which society’s winners are taxed to pay for a social safety net — morally superior to the capitalism red in tooth and claw we had before the New Deal. It’s only right, this side believes, for the affluent to help the less fortunate. 

The other side believes that people have a right to keep what they earn, and that taxing them to support others, no matter how needy, amounts to theft. That’s what lies behind the modern right’s fondness for violent rhetoric: many activists on the right really do see taxes and regulation as tyrannical impositions on their liberty. 

 He fails to understand the very concept of individualism, the principles that we founded this country on. Individualism respects the primacy of the individual, each individual is equal, with equal rights, and that the individual may own property to which the individual has a true and valid interest and the purpose of the Government is to protect the rights of the individual and their property. Slavery was always a gross and immoral aberration of that view, as was the acceptance of a class society. Individuals were able to enter into associations freely and these associations could be fluid and flexible. Government is Coasean in its actions, arbitrating disputes based in property rights and doing so with minimal transaction costs.

The "favorite economist" see two other world views; first his which is communal Government controlled state as morally superior. The other is a Spencerian-Darwinian survival of the fittest environment. The Individualist would reject both. For the communal state denies the individual and the individuals rights, whereas the Spencerian view denies the very objective of association.

He continues:

There’s no middle ground between these views. One side saw health reform, with its subsidized extension of coverage to the uninsured, as fulfilling a moral imperative: wealthy nations, it believed, have an obligation to provide all their citizens with essential care. The other side saw the same reform as a moral outrage, an assault on the right of Americans to spend their money as they choose.

 As we have demonstrated, universal health care has economic benefit. What was objected to was the central Governmental control. From an individualist perspective, equality of opportunity demands equality of health care, equality of access, at a fair and equitable price to each. The Libertarian would most likely be the Spencerian at the extreme. To my "favorite economist" there is no middle ground. That seems to be his mind set. There is indeed a middle ground, a place for the individual to become the engine which made our society the best. It was and is individualism which drives the entrepreneur. It is the entrepreneur which has made the US what it is. The communal Group mindset is that of the left.

It is not strange wonder therefore that my "favorite economist" is an Asimov fan. For in Asimov's world there are no individuals, all are part of the state, there are no entrepreneurs, there is only a large communal universe, a future of drone like existence, excited from time to time by robots, a metaphor perhaps of what we would become in his world view.

Individualism has been a part of American for centuries, it was observed by de Tocqueville in his writing so eloquently, especially in contrast to the communal, Government controlled, class based societies of Europe. Perhaps that is the world my "favorite economist" wants us to return to, an Asmovian past, not a future.

China and Financial Games

In China Daily they state that China is now demanding ahead of the State visit that the US provide it with assurances that their money is safe in the US. They are questioning the good faith and credit of the United States, perhaps a first.

They state:

Beijing on Wednesday asked Washington to assure the security of its financial assets in the country, as the United States is likely to further press China to revalue its currency during President Hu Jintao's visit there next week.

"Regarding the security of China's assets in the US, if the US side can offer a positive statement on that then of course we'd welcome that. It's an issue we're paying attention to," Vice-Foreign Minister Cui Tiankai said at a news briefing on Hu's visit. 

The US government and politicians have pressed Beijing for years to allow the yuan to rise more rapidly to help US exports to China, a policy they claim would create more jobs.

The White House said President Barack Obama will press US complaints about what it terms China's currency controls that critics say keep the yuan undervalued and swell its multibillion-dollar trade surplus.

On Wednesday, US Treasury Secretary Timothy Geithner pressed China again on the currency issue, saying it is one of the major concerns for the US during Hu's visit.

This is clearly posturing ahead of the meeting but is posturing in an attempt to get what they want and to put the US on the defensive, and possibly with some reason.

This should be an interesting state visit. Most likely nothing will occur of any merit but China is now exercising all of its power; military, economic, and otherwise. As we have been saying for the past few years, especially during this economic crisis, the US has been put in a weak position and the current administration has not really helped the problem with its spending. China wants to see just how far it can push and right now it holds most of the cards.

What is College Worth?

The National Inflation Association, NIA, has a recent entry regarding college education. They address the college bubble, an area we have been speaking to for a couple of years now. College tuition has risen twice the rate of inflation and it is the only priced item which has not dropped. Loans from students are in the trillions and most likely will be paid at the cost of future US productivity.

As I had noted before, when I went to college the tuition in 1961 at MIT I believe was $700 per semester. Now it exceeds $25,000. Nothing has increased that amount in the same period. A 1961 four bedroom home was $12,000 and now may be $240,000. That is 20 time as compared to 40 times for college tuition. In my experience no college president has a clue as to the meaning of this problem, the keep draining funds from the alumni.

NIA states:

College is the only thing in America that never declined in price during the panic of 2008. It actually rose in price substantially. The annual tuition for a private four-year college was $21,235 in the 2005-2006 school year. Despite Real Estate beginning to collapse in late-2006, college tuition rose by 4.6% in the 2006-2007 school year to $22,218. Despite the stock market beginning to collapse in late-2007, college tuition rose by 6.7% in the 2007-2008 school year to $23,712. Despite oil and other commodities collapsing in late-2008, college tuition rose by 6.2% in the 2008-2009 school year to $25,177. Even after the Dow Jones crashed to a low in early-2009 of 6,469, college tuition still rose by 4.4% in the 2009-2010 school year to $26,273.

Now MIT grads generally add substantial value to society, as scientists and engineers, and than God we do not have a law school, too many out there already. But there are millions of other people in liberal arts programs which are for the most part baby pounds for pampered kids who have no direction in life. We always need a few philosophers and historians, but not the number we purport to educate. Again as I have often said I have hired High School grads over college educated people, they are bright, they learn, and the do not have an entitlement attitude.

As for the cost rise NIA alleges with some merit:

The college tuition bubble has been fueled by the U.S. government's willingness to give out easy student loans to anybody who applies for them. If it wasn't for government student loans, the free market would force colleges to provide the best quality education at the lowest possible price. By the government trying to make colleges more affordable, they have actually driven prices through the roof. Colleges have been encouraged to spend recklessly on wasteful construction projects, building new libraries, gyms, sports arenas, housing units, etc. Colleges spent $10.7 billion on construction projects in 2009. Although this is down from an average of $14.7 billion per year colleges spent on construction projects from 2005 to 2007, colleges are still struggling to pay off their old construction related debt. When interest rates start to rise, it will add further upside pressure to college tuition prices.

 I would agree with the construction issue. Consider the Gehry disaster at MIT which replaced the wooden WW II Rad Lab buildings. Why spend so much and also add to operating costs, when a more plebeian building is better and less costly. One always wonders how much collective hubris drives these decisions. The NIA fails to also account for the explosion of overhead due to Government mandate programs and the like.

Bottom line, the world needs electricians and plumbers, you really can't outsource them, nor can you get one when you need them. Thank God my father made me work as an apprentice electrician, helped at MIT and helps at home.

Economic Mobility and Income Redistribution

There is a recent Report on income mobility in different countries and it contends that the US has the least. They have some chart which alleges to plot the correlation between father and son incomes and that in the US and the UK the correlation is high, implying that if you are rich your kids will be rich and if you are poor your kids will be poor.

Nonsense, one must look at it genetically, there are a lot of dumb rich kids and by the third generation they are broke. One could argue, based solely on my observations in New York, that most of the big winners are street smart kids, the Princeton Degree may at best get you lunch. Just look at traders, they have a gut to trade, yes there is some math behind the scenes but they become the risk takers.

The report contends that Denmark and Norway have the least correlation of generational economic stickiness. Now I have spent a great deal of time in both, they are fundamentally stable middle class socialist countries, with Norway subsidized by oil money. The US is not a class society, if you think otherwise go t the UK or India. Mao had to destroy the class structure in China by brutal means. So in a class structure society, namely who were your ancestors, where you went to school, and especially your accent, that determines your future and that is fairly unchangeable. Not so in the US.

Now my favorite economist chimes in. He states:

So when you hear conservatives talk about how our goal should be equality of opportunity, not equality of outcomes, your first response should be that if they really believe in equality of opportunity, they must be in favor of radical changes in American society. For our society does not, in fact, produce anything like equal opportunity (in part because it produces such unequal outcomes). Tell me how you’re going to produce a huge improvement in the quality of public schools, how you’re going to provide universal health care (for parents as well as children, because parents in bad health affect childrens’ prospects), and then come back to me about the equal chances at the starting line thing. 

Now, inequality of opportunity is only one reason for the inequality in outcomes we actually see. But of what remains, how much reflects individual effort, how much reflects talent, and how much sheer luck? No reasonable person would deny that there’s a lot of luck involved. Wall Street titans are, no doubt, smart guys...., but there are surely equally smart guys who for whatever reason never got a chance to grab the 9-figure brass ring.

 Outcomes is NOT a measure of input equality. Any starting geneticist would see right through their specious ad hoc propiter hoc tautology. Balderdash! Improve public schools, simple, close them. My grandson just switched from a private school to a public. He was doing two hours plus a night in the private and now none required for the public. So is there a problem. Yes, the public school.

Inequality of opportunity assumes implicitly, as the good economist from just south of me here in New Jersey states, leads to inequality of outcomes. Nonsense, to anyone who has ever held a real job, who has employed people, who has created wealth, that is wrong, you take your own chances, use your own wit, and work with your team to seek success. Failure is always an option, but the true entrepreneur has a "burn the boats" mentality and there is no way but forward. 

Wall Street has always been a money maker, not the entrepreneurial life. One has a better chance at the gold ring in basketball sometimes. Wall Street, it has been a club, but a club that oftentimes allowed entry from the mail room. Thus the above two references are abjectly wrong, they based their arguments on false assumptions. The relationships between father and son are complex, and one may look at the data and then one must ask why? Genetics has a strong role, not just that dad was poor. There are quite a few millionaires from poor drunks and I suspect that there are a lot of poor drunks from a wealthy dad.

Google and Search

As one who relies upon Google for searching and obtaining professional papers, I am not a general Google searcher, I was interested in Brad DeLong's brief on Google. He has hit upon a very powerful point, namely that any entity, Google included, always evolves, and if you are not careful it may evolve in the wrong direction.

Thus if one is searching for a product, one should go to Amazon, and they have almost anything from rabbits and mile, to well books and snow blowers. Will the utility of Amazon change, will they become too greedy to make the value they provide disappear, probably not too quickly, unless by pure arrogance, which so far they have managed to avoid quite well.

Now to the Google issue, a general search as DeLong observes, and as his reference also note, are trying to maximize income so the results are for the most part income generators. If on the other hand you search as I do by delimiting to edu sites and pdf documents, you can cut through a lot of the ads. It is not that from time to time that I use them, but what has happened is the Google is raising the user cost of access, the cost of the user filtering through all the junk, akin to the Yahoo screen, and thus if any alternative arises it would place Google at risk. A point noticed by DeLong. Customers are fickle things, that only sign I had behind my desk, "If all else fails listen to the customer!" has lasting merit.

Now what you cannot do readily on Google is the classic full text detailed search hat one could once do on Dialog, the database search company I used thirty plus years ago, an off shoot of Lockheed. It can morph somewhat in that direction but not quite. Perhaps Google should do two things, let off a bit on pushing ads and enhance the service with added features, even at a fee!

Lambertville, NJ 2011

Lambertville, NJ is just a bit north of where Washington crossed the Delaware. January there is scenic, an annual trip, cold, clear, and you can see the large blocks of ice coming down the Delaware River and imagine what Washington went through at the beginning of the Revolution.

This statue is in Morristown, and most people are totally unaware of the fact that Washington spent most of the War here. Unlike Massachusetts which prides itself on the Revolution, frankly they all left after Bunker Hill and came to my backyard here, battle field after battlefield, decision after decision.

George and his officers spent the winters here, just a small ride from my homestead, and the place has been fairly well preserved. Worth a journey if one ever gets here. It is not the New Jersey Turnpike.