Failures of democracy or capitalism?

May 24 JDN 2458992

Blaming capitalism for the world’s woes is a common habit of the left wing in general, but it seems to have greatly increased in frequency and volume in the era of Trump. I don’t want to say that this is always entirely wrong; capitalism in its purest form certainly does have genuine flaws that need to be addressed (and that’s why we have taxes, regulations, the welfare state, etc.).

But I’ve noticed that a lot of the things people complain about most really don’t seem to have a lot to do with capitalism.

For instance: Forced labor in Third World countries? First of all, that’s been around for as long as civilization has existed, and quite probably longer. It’s certainly not new to capitalism. Second, the freedom to choose who you transact with—including who employs you—is a fundamental principle of capitalism. In that sense, forced labor is the very opposite of capitalism; it spits upon everything capitalism stands for.

It’s certainly the case that many multinational corporations are implicated in slavery, even today—usually through complex networks of subsidiaries and supply chains. But it’s not clear to me that socialism is any kind of solution to this problem; nationalized industries are perfectly capable of enslaving people. (You may have heard of a place called the Gulag?)

Or what about corporate welfare, the trillions of dollars in subsidies we give to the oil and coal industries? Well, that’s not very capitalist either; capitalism is supposed to be equal competition in a free market, not the government supporting particular businesses or industries at the expense of others. And it’s not like socialist Venezuela has any lack of oil subsidies—indeed it’s not quite clear to me where the government ends and PDVSA begins. We need a word for such policies that are neither capitalist nor socialist; perhaps “corporatist”?

And really, the things that worry me about America today are not flaws in our markets; they are flaws in our government. We are not witnessing a catastrophic failure of capitalism; we are witnessing a catastrophic failure of democracy.

As if the Electoral College weren’t bad enough (both Al Gore and Hillary Clinton should have won the Presidency, by any sensible notion of democratic voting!), we are now seeing extreme levels of voter suppression, including refusing to accept mail-in ballots in the middle of a historic pandemic. This looks disturbingly like how democracy has collapsed in other countries, such as Turkey and Hungary.

The first-past-the-post plurality vote is already basically the worst possible voting system that can still technically be considered democratic. But it is rendered far worse by a defective primary system, which was even more of a shambles this year than usual. The number of errors in the Iowa caucus was ridiculous, and the primaries as a whole suffered from so many flaws that many voters now consider them illegitimate.

And of course there’s Donald Trump himself. He is certainly a capitalist (though he’s not exactly a free-trade neoliberal; he’s honestly more like a mercantilist). But what really makes him dangerous is not his free-market ideology, which is basically consistent with the US right wing going back at least 30 years; it’s his willingness to flaunt basic norms of democracy and surround himself with corrupt, incompetent sycophants. Republicans have been cutting the upper tax brackets and subsidizing oil companies for quite some time now; but it’s only recently that they have so blatantly disregarded the guardrails of democracy.

I’m not saying it’s wrong to criticize capitalism. There certainly are things worth criticizing, particularly about the most extreme free-market ideology. But it’s important to be clear about where exactly problems lie if you want to fix them—and right now we desperately need to fix them. America is in a crisis right now, something much bigger than just this pandemic. We are not in this crisis because of an excessive amount of deregulation or tax-cutting; we are in this crisis because of an excessive amount of corruption, incompetence, and authoritarianism. We wouldn’t fix this by nationalizing industries or establishing worker co-ops. We need to fix it first by voting out those responsible, and second by reforming our system so that they won’t get back in.

We still don’t know the fatality rate of COVID-19

May 10 JDN2458978

You’d think after being in this pandemic for several weeks we would now have a clear idea of the fatality rate of the virus. Unfortunately, this is not the case.

The problem is that what we can track really doesn’t tell us what we need to know.

What we can track is how many people have tested positive versus how many people have died. As of this writing, 247,000 people have died and 3,504,000 have tested positive. If this were the true fatality rate, it would be horrifying: A death rate of 7% is clearly in excess of even the 1918 influenza pandemic.

Fortunately, this is almost certainly an overestimate. But it’s actually possible for it to be an underestimate, and here’s why: A lot of those people who currently have the virus could still die.

We really shouldn’t be dividing (total deaths)/(total confirmed infections). We should be dividing (total deaths)/(total deaths + total recoveries). If people haven’t recovered yet, it’s too soon to say whether they will live.

On that basis, this begins to look more like an ancient plague: The number of recoveries is only about four times the number of deaths, which would be a staggering fatality rate of 20%.

But as I said, it’s far more likely that this is an overestimate, because we don’t actually know how many people have been infected. We only know how many people have been infected and gotten tested. A large proportion have never been tested; many of these were simply asymptomatic.
We know this because of the few cases we have of rigorous testing of a whole population, such as the passengers on this cruise liner bound for Antarctica. On that cruise liner, 6 were hospitalized, but 128 tested positive for the virus. This means that the number of asymptomatic infections was twenty times that of the number of symptomatic infections.

There have been several studies attempting to determine what proportion of infections are asymptomatic, because this knowledge is so vital. Unfortunately the results are wildly inconsistent. They seem to range from 5% asymptomatic and 95% symptomatic to 95% asymptomatic and 5% symptomatic. The figure I find most plausible is about 80%: This means that the number of asymptomatic infected is about four times that of the number of symptomatic infected.

This means that the true calculation we should be doing actually looks like this: (total deaths)/(total deaths + total recoveries + total asymptomatic).

The number of deaths seems to be about one fourth the number of recoveries. But when you add the fact that four times as many who get infected are asymptomatic, things don’t look quite so bad. This yields an overall fatality rate of about 4%. This is still very high, and absolutely comparable to the 1918 influenza pandemic.

But the truth is, we just don’t know. South Korea’s fatality rate was only 0.7%, which would be a really bad flu season but nothing catastrophic. (A typical flu has a fatality rate of about 0.1%.) On the (deaths)/(deaths + recoveries) basis, it looks almost as bad as the Black Death.

With so much uncertainty, there’s really only one option: Prepare for the worst-case scenario. Assume that the real death rate is massive, and implement lockdown measures until you can confirm that it isn’t.

Authoritarianism and Masculinity

Apr 19 JDN 2458957

There has always been a significant difference between men and women voters, at least as long as we have been gathering data—and probably as long as women have been voting, which is just about to hit its centennial in the United States.

But the 2016 and 2018 elections saw the largest gender gaps we’ve ever recorded. Dividing by Presidential administrations, Bush would be from 2000 to 2006, when the gender gap never exceeded 18 percentage points, and averaged less than 10 points. Obama would be from 2008 to 2014, when the gender gap never exceeded 20 points and averaged about 15 points. In 2018, the gap stood at 23 percentage points.

Indeed, it is quite clear at this point that Trump’s support base comes mainly from White men.

This is far from the only explanatory factor here: Younger voters are much more liberal than older voters, more educated voters are more liberal than less educated voters, and urban voters are much more liberal than rural voters.

But the gender and race gaps are large enough that even if only White men with a college degree had voted, Trump would have still won, and even if only women without a college degree had voted, Trump would have lost. Trumpism is a white male identity movement.

And indeed it seems significant that Trump’s opponent was the first woman to be a US Presidential nominee from a major party.

Why would men be so much more likely to support Trump than women? Well, there’s the fact that Trump has been accused of sexual harassment dozens of times and sexual assault several times. Women are more likely to be victims of such behavior, and men are more likely to be perpetrators of it.

But I think that’s really a symptom of a broader cause, which is that authoritarianism is masculine.

Think about it: Can you even name a woman who was an authoritarian dictator? There have been a few queen tyrants historically, but not many; tyrants are almost always kings. And for all her faults, Margaret Thatcher was assuredly no Joseph Stalin.

Masculinity is tied to power, authority, strength, dominance: All things that authoritarians promise. It doesn’t even seem to matter that it’s always the dictator asserting power and dominance upon us, taking away the power and authority we previously had; the mere fact that some man is exerting power and dominance on someone seems to satisfy this impulse. And of course those who support authoritarians always seem to imagine that the dictator will oppress someone else—never me. (“I never thought leopards would eat my face!”)

Conversely, the virtues of democracy, such as equality, fairness, cooperation, and compromise, are coded feminine. This is how toxic masculinity sustains itself: Even being willing to talk about disagreements rather than fighting over them constitutes surrender to the feminine. So the mere fact that I am trying to talk them out of their insanely (both self- and other-) destructive norms proves that I serve the enemy.

I don’t often interact with Trump supporters, because doing so is a highly unpleasant experience. But when I have, certain themes kept reoccurring: “Trump is a real man”; “Democrats are pussies”; “they [people of color] are taking over our [White people’s] country”; “you’re a snowflake libtard beta cuck”.

Almost all of the content was about identity, particularly masculine and White identity. Virtually none of their defenses of Trump involved any substantive claims about policy, though some did at least reference the relatively good performance of the economy (up until recently—and that they all seem to blame on the “unforeseeable” pandemic, a “Black Swan”; nevermind that people actually did foresee it and were ignored). Ironically they are always the ones complaining about “identity politics”.

And while they would be the last to admit it, I noticed something else as well: Most of these men were deeply insecure about their own masculinity. They kept constantly trying to project masculine dominance, and getting increasingly aggravated when I simply ignored it rather than either submitting or responding with my own displays of dominance. Indeed, they probably perceived me as displaying a kind of masculine dominance: I was just countersignaling instead of signaling, and that’s what made them so angry. They clearly felt deeply envious of the fact that I could simply be secure in my own identity without feeling a need to constantly defend it.

But of course I wasn’t born that way. Indeed, the security I now feel in my own identity was very hard-won through years of agony and despair—necessitated by being a bisexual man in a world that even today isn’t very accepting of us. Even now I’m far from immune to the pressures of masculinity; I’ve simply learned to channel them better and resist their worst effects.

They call us “snowflakes” because they feel fragile, and fear their own fragility. And in truth, they are fragile. Indeed, fragile masculinity is one of the strongest predictors of support for Trump. But it is in the nature of fragile masculinity that pointing it out only aggravates it and provokes an even angrier response. Toxic masculinity is a very well-adapted meme; its capacity to defend itself is morbidly impressive, like the way that deadly viruses spread themselves is morbidly impressive.

This is why I think it is extremely dangerous to mock the size of Trump’s penis (or his hands, metonymously—though empirically, digit ratio slightly correlates with penis size, but overall hand size does not), or accuse his supporters of likewise having smaller penises. In doing so, you are reinforcing the very same toxic masculinity norms that underlie so much of Trump’s support. And this is even worse if the claim is true: In that case you’re also reinforcing that man’s own crisis of masculine identity.

Indeed, perhaps the easiest way to anger a man who is insecure about his masculinity is to accuse him of being insecure about his masculinity. It’s a bit of a paradox. I have even hesitated to write this post, for fear of triggering the same effect; but I realized that it’s more likely that you, my readers, would trigger it inadvertently, and by warning you I might reduce the overall rate at which it is triggered.

I do not use the word “triggered” lightly; I am talking about a traumatic trigger response. These men have been beaten down their whole lives for not being “manly enough”, however defined, and they lash out by attacking the masculinity of every other man they encounter—thereby perpetuating the cycle of trauma. And stricter norms of masculinity also make coping with trauma more difficult, which is why men who exhibit stricter masculinity also are more likely to suffer PTSD in war. There are years of unprocessed traumatic memories in these men’s brains, and the only way they know to cope with them is to try to inflict them on someone else.

The ubiquity of “cuck” as an insult in the alt-right is also quite notable in this context. It’s honestly a pretty weird insult to throw around casually; it implies knowing all sorts of things about a person’s sexual relationships that you can’t possibly know. (For someone in an openly polyamorous relationship, it’s probably quite amusing.) But it’s a way of attacking masculine identity: If you were a “real man”, your wife wouldn’t be sleeping around. We accuse her of infidelity in order to accuse you of inferiority. (And if your spouse is male? Well then obviously you’re even worse than a “cuck”—you’re a “fag”.) There also seems to be some sort of association that the alt-right made between cuckoldry and politics, as though the election of Obama constitutes America “cheating” on them. I’m not sure whether it bothers them more that Obama is liberal, or that he is Black. Both definitely bother them a great deal.

How do we deal with these men? If we shouldn’t attack their masculinity for fear of retrenchment, and we can’t directly engage them on questions of policy because it means nothing to them, what then should we do? I’m honestly not sure. What these men actually need is years of psychotherapy to cope with their deep-seated traumas; but they would never seek it out, because that, too, is considered unmasculine. Of course you can’t be expected to provide the effect of years of psychotherapy in a single conversation with a stranger. Even a trained therapist wouldn’t be able to do that, nor would they be likely to give actual therapy sessions to angry strangers for free.

What I think we can do, however, is to at least try to refrain from making their condition worse. We can rigorously resist the temptation to throw the same insults back at them, accusing them of having small penises, or being cuckolds, or whatever. We should think of this the way we think of using “gay” as an insult (something I all too well remember from middle school): You’re not merely insulting the person you’re aiming it at, you’re also insulting an entire community of innocent people.

We should even be very careful about directly addressing their masculine insecurity; it may sometimes be necessary, but it, too, is sure to provoke a defensive response. And as I mentioned earlier, if you are a man and you are not constantly defending your own masculinity, they can read that as countersignaling your own superiority. This is not an easy game to win.

But the stakes are far too high for us to simply give up. The fate of America and perhaps even the world hinges upon finding a solution.

Is this another Great Depression?

Apr 12 JDN 2458952

In the week from March 15 to March 21, over 3.3 million Americans filed for unemployment. In the following week, this staggering record was broken, when over 6.6 million filed for unemployment. This is an utterly unprecedented number of unemployment filings in a single week; while the data is not as reliable further back, we think this didn’t even happen in the Great Depression.

The Dow Jones Industrial Average is down over 26% in the past quarter. The S&P 500 is down over 23% over the same period. The only comparable stock market crashes are Black Monday and the 1929 market crash.

Does this mean we are on track for another Great Depression? Fortunately, it does not.

This is all happening very fast, because of the rapid shutdowns of businesses during the pandemic. So when we look at short time horizons, things look very scary. But currently unemployment is still only 4.4%, and it is forecasted to rise to about 10% or 11%. This will certainly be a recession—indeed comparable to the Great Recession in 2009—but it will still pale in comparison to the Great Depression, when unemployment hit nearly 25%.

Also, we have a good reason for all this unemployment: We’re making people stay home to stop the spread of the virus. And it seems to be working: California and Washington took some of the most drastic measures, and have shown the fastest reductions in the spread of the virus.

This isn’t a normal recession. We are causing this unemployment on purpose. Paul Krugman makes the analogy to a medically-induced coma: We are shutting some functions down intentionally in order to make it easier to heal.

There is a significant chance, however, that this recession will end up being worse than it’s supposed to be, if our policymakers fail to provide adequate and timely relief to those who become unemployed.

As Donald Marron of the Urban Institute explained quite succinctly in a Twitter thread, there are three types of economic losses we need to consider here: Losses necessary to protect health, losses caused by insufficient demand, and losses caused by lost productive capacity. The first kind of loss is what we are doing on purpose; the other two are losses we should be trying to avoid. Insufficient demand is fairly easy to fix: Hand out cash. But sustaining productive capacity can be trickier.

Given the track record of the Trump administration so far, I am not optimistic. First Trump denied the virus was even a threat. Then he blamed China (which, even if partly true, doesn’t solve anything). Then his response was delayed and inadequate. And now the relief money is taking weeks to get to people—while clearly being less than many people need.

When Trump was first elected, I had several scenarios in my head of what might happen. The best-case scenario was that he’d turn out to be a typical Republican, or be kept on a tight leash by other Republicans. Obviously that didn’t happen. The worst-case scenario was a nuclear war with China; we are all very fortunate that this didn’t happen either. But this is honestly much worse than my median-case scenario, which was that Trump would be like another Reagan or another Nixon. Somehow he turned out to be another Reagan, another Nixon, another Harding, and another Hoover all rolled into one. He somehow combines the worst aspects of every President we’ve ever had, and while facing a historic global crisis his primary concern is his TV ratings.

I can’t tell you how long this is going to last. I can’t tell you just how bad it’s going to get. But I am confident of a few things:

It’ll be worse than it had to be, but not as bad as it could have been. Trump will continue making everything worse, but other, better leaders will make things better. Above all, we’ll make it through this, together.

Fear not to “overreact”

Mar 29 JDN 2458938

It could be given as a story problem in an algebra class, if you didn’t mind terrifying your students:

A virus spreads exponentially, so that the population infected doubles every two days. Currently 10,000 people are infected. How long will it be until 300,000 are infected? Until 10,000,000 are infected? Until 600,000,000 are infected?

The answers:

300,000/10,000 is about 32 = 2^5, so it will take 5 doublings, or 10 days.

10,000,000/10,000 is about 1024=2^10, so it will take 10 doublings, or 20 days.

600,000,000/10,000 is about 64*1024=2^6*2^10, so it will take 16 doublings, or 32 days.

This is the approximate rate at which COVID-19 spreads if uncontrolled.

Fortunately it is not completely uncontrolled; there were about 10,000 confirmed infections on January 30, and there are now about 300,000 as of March 22. This is about 50 days, so the daily growth rate has averaged about 7%. On the other hand, this is probably a substantial underestimate, because testing remains very poor, particularly here in the US.

Yet the truth is, we don’t know how bad COVID-19 is going to get. Some estimates suggest it may be nearly as bad as the 1918 flu pandemic; others say it may not be much worse than H1N1. Perhaps all this social distancing and quarantine is an overreaction? Perhaps the damage from closing all the schools and restaurants will actually be worse than the damage from the virus itself?

Yes, it’s possible we are overreacting. But we really shouldn’t be too worried about this possibility.

This is because the costs here are highly asymmetric. Overreaction has a moderate, fairly predictable cost. Underreaction could be utterly catastrophic. If we overreact, we waste a quarter or two of productivity, and then everything returns to normal. If we underreact, millions of people die.

This is what it means to err on the side of caution: If we are not 90% sure that we are overreacting, then we should be doing more. We should be fed up with the quarantine procedures and nearly certain that they are not all necessary. That means we are doing the right thing.

Indeed, the really terrifying thing is that we may already have underreacted. These graphs of what will happen under various scenarios really don’t look good:

pandemic_graph

But there may still be a chance to react adequately. The advice for most of us seems almost too simple: Stay home. Wash your hands.

How beneficial is healthcare?

Mar 22 JDN 2458931

Healthcare has been a contentious issue in the US for generations, but became especially so during the Obama administration with the passage of the Affordable Care Act. To be honest, I never quite understood the opposition to transitioning to a single-payer healthcare system; we already spend as much public funds on healthcare as most other First World countries spend in their entire healthcare system (plus we spend even more than that on private spending!), so not only can we afford it—it would in fact save us trillions of dollars a year. We might not even have to raise taxes, but even if we did, we’d pay so much less out of pocket that most of us would end up with more money. I understand why the corporations that run HMOs don’t want single-payer; but why does anyone else oppose it?

It’s not as if there are no models to follow; we could literally just copy the Canadian system (or the British system, or the French system…). It’s always amusing to me when conservatives respond to the suggestion by: “But that’s socialism! Do you want to end up like Cuba?” First of all, I said copy Canada, not copy Cuba. But even if we did copy Cuba, healthcare is one of the few things that Cuba actually does extremely well. On a QALY-per-dollar basis, it’s probably the most cost-effective healthcare system in the world (and the US is probably the least). So yeah, you know what? I kinda do want to end up like Cuba.

And no, countries with single-payer healthcare systems do not have longer wait times. Even by standard measures, our wait types are in the middle of the pack. But in fact these standard measures are clearly biased in our favor. The main way that we reduce wait times is by excluding people from care entirely. That’s not a wait time of zero; it’s a wait time of the rest of your life. If we measured properly, we would clearly have the longest wait times in the First World, because of all those people who never get care at all.

But today I’m going to ask a different question:

How much harm is done by our awful healthcare system?

Or conversely:

How much benefit would we get from insuring everyone?

The largest randomized controlled experiment on health insurance in the United States was the RAND Health Insurance Experiment, and its results were quite surprising: The marginal benefit of better health insurance for most people was very small, in many cases statistically negligible. People who were very poor or very sick benefited from having health insurance, but everyone else used more medical care without getting much apparent benefit. Since this was a large randomized controlled experiment, it should probably be considered our most credible evidence.

On the other hand, the RAND study was done before I was born, so maybe it’s time for a new study?

More recent studies have used regression discontinuity analysis, looking to see if going on Medicare seems to change the trendline in your mortality rate. It doesn’t.Of course mortality rates go up as you get older, and people become eligible for Medicare by getting older… but still, if Medicare is helping, you’d think there would be some kind of kink in the trend, and as far as we can tell, there isn’t. Perhaps people are simply transitioning from one form of adequate health insurance (e.g. employer-provided insurance) to another.

There is some evidence that healthcare saves lives, if we restrict attention specifically to what is called mortality amenable to healthcare, deaths caused by diseases that we know can be effectively treated by medical intervention. (It’s really a continuum, with malaria at one end, and airstrikes at the other. Both kill thousands of people every year, but malaria can be treated with a few doses of quinine, while there’s nothing anyone can do for you if you were in the blast center of a Hellfire missile. In between we have diseases like cancer, which medicine can sometimes save you from but not always.) By this measure, the United States clearly lags behind other First World countries, and the reason is clearly that we deny a lot of people healthcare.

However, I think mortality is really the wrong measure to use, for the following reason: We already have a universal healthcare system when it’s literally a question of life or death, and that’s the ER system. The Emergency Medical Treatment and Labor Act, signed by Ronald Reagan (yes, Republicans also used to like saving poor people from diseases, not so long ago!), guarantees that anyone who needs emergency care can get it immediately, regardless of their ability to pay. They can still bill you later, which may be a big reason why medical costs are the leading cause of bankruptcy in the United States (and literally nowhere else in the world). But at least you won’t die.

A lot of it actually comes down to how we measure health. Self-reported measures are notoriously unreliable in various ways, yet ultimately I don’t see how we can tell whether someone is sleeping well, feeling energetic, or being in pain without asking them. Correlating self-reported measures with objective measures like records of doctor visits shows pretty good correspondence, albeit by no means perfect.

As healthcare spending has increased and medical technology has advanced, there has been a worldwide trend of reduced disability and mortality, and the US is no exception. Clearly healthcare is doing something.

Yet it remains a fair question whether most people need more healthcare—maybe we’re actually getting enough. Maybe most people’s health insurance is already adequate, and we don’t need to improve it in any substantial way.

On balance, I think the best evidence we have says that people who have no insurance at all, or really awful insurance, would strongly benefit from improved access to healthcare. There’s also evidence that people with severe chronic conditions benefit from having steady healthcare. But for most people most of the time, the benefits of more health insurance would be quite small.

Does this mean we should get rid of health insurance? Of course not. But it does mean that future reforms should be focused on getting it to people who have none, not improving it for people who already have it. We don’t need to lower co-pays or deductibles; we may not even need to raise or remove coverage caps. But we do need to get some kind of health insurance to people who don’t have any at all.
To this end, Obamacare has done fairly well: You can just look at a graph of the number of uninsured people in the US and see that not only did Obamacare reduce that number, the steady attempts to undermine Obamacare are starting to bring it back up.

Then again, a single-payer system would clearly do even better, maybe even get that number to zero… so explain to me again why we’re not doing this?

Monopsony is all around us

Mar 15 JDN 2458924

Perhaps because of the board game (the popularity of which honestly baffles me; it’s really not a very good game!), the concept of monopoly is familiar to most people: A market with one seller and many buyers can command high prices and high profits for the seller.

But the opposite situation, a market with many sellers and one buyer, is equally problematic, yet far less well-known. This is called monopsony. Whereas in a monopoly prices are too high, in a monopsony prices are too low.

I have long suspected, but the data now confirms, that the most widespread form of monopsony occurs in labor markets. This is a particularly bad place for monopsony, because it means that instead of consumer prices being lower, wages will be lower. Monopsonistic labor markets are bad in two ways: They lower wages and they increase unemployment.


Monopsonistic labor markets are one of the reasons why raising minimum wage seems to have very little effect on employment.
In the presence of monopsony, forcing employers to increase wages won’t cause them to fire workers; it will just eat into their profits. In some cases it can actually cause them to hire more workers.

Take a look at this map, from the Roosevelt Institute:

widespread-labor-monopsony1

This map is color-coded by commuting zone, based on whether the average labor market (different labor markets weighted by their number of employees) is monopsonistic. Commuting zones with only a few major employers are colored red, while those with many employers are colored green. In between are shaded orange and yellow. (Not a very colorblind-friendly coding scheme, I’m afraid.)

Basically you can see that the only places where labor markets are not monopsonistic are in major metro areas. Suburban areas are typically yellow, and rural areas are almost all orange or red.


It seems then that we have two choices for where we want to live: We can
live in rural areas and have monopsonistic labor markets with low wages and competitive real estate markets with low housing prices, or we can live in urban areas and have competitive labor markets with high wages and monopolistic real estate markets with high housing prices. There’s hardly anywhere we can live where both wages and housing prices are fair.

Actually the best seems to be Detroit! Median housing price in the Detroit area is an affordable $179,000, while median household income is a low but not terrible $31,000. This means you can pay off a house spending 30% of your income in about 10 years. That’s the American Dream, right there.

Compare this to the San Francisco area, where median housing price is $1.1 million and median income is an impressive $104,000. This means it would take over 35 years to pay off your house spending 30% of your income. (And that’s not accounting for interest!) You can make six figures in San Francisco and still be considered “low income”, because housing prices there are so absurd.

Of course, student loans are denominated in nominal terms, so you might actually be able to pay off your student loans faster living in San Francisco than you could in Detroit. Say taxes are 20%, so these become after-tax incomes of $25,000 and $83,000. Even if you spend only a third of your income on housing in Detroit and spend two-thirds in San Francisco, that leaves you with $16,600 in Detroit but $27,600 in San Francisco. Of course other prices are different too, but it seems quite likely that being able to pay $5,000 per year on your student loans is easier living in San Francisco than it is in Detroit.

What can be done about monopsony in labor markets? First, we could try to split up employers—the FTC already doesn’t do enough to break up monopolies, but it basically does nothing to break up monopsonies. But that may not always be feasible, particularly in rural areas. And there are genuine economies of scale that can make larger firms more efficient in certain ways; we don’t want to lose those.

Perhaps the best solution is the one we used to use, and most of the First World continues to use: Labor unions. Union membership in the US declined by half in the last 30 years. Europe is heavily unionized, and the most unionized of all are Scandinavian countries—probably not a coincidence that these are the most prosperous places in the world.


At first glance, labor unions seem anti-competitive: They act like a monopoly. But when you currently have a
monopsony, adding a monopoly can actually be a good thing. Instead of one seller and many buyers, resulting in prices that are too low, you can have one seller and one buyer, resulting in prices that are negotiated and can, at least potentially, be much fairer. This market structure is called a bilateral monopoly, and while it’s not as good as perfect competition, it’s considerably more efficient than either monopsony or monopoly alone.