public policy

What if the charitable deduction were larger?

PNRJ development economics, ethics, public policy , , , , , , , , , , , ,

Nov 3 JDN 2458791

Right now, the charitable tax deduction is really not all that significant. It makes donating to charity cheaper, but you still always end up with less money after donating than you had before. It might cause you to donate more than you otherwise would have, but you’ll still only give to a charity you already care about.

This is because the tax deduction applies to your income, rather than your taxes directly. So if you make $100,000 and donate $10,000, you pay taxes as if your income were $90,000. Say your tax rate is 25%; then you go from paying $25,000 and keeping $75,000 to paying $22,500 and keeping $67,500. The more you donate, the less money you will have to keep.

Many people don’t seem to understand this; they seem to think that rich people can actually get richer by donating to charity. That can’t be done in our current tax system, or at least not legally. (There are fraudulent ways to do so; but there are fraudulent ways to do lots of things.) Part of the confusion may be related to the fact that people don’t seem to understand how tax brackets work; they worry about being “pushed into a higher tax bracket” as though this could somehow reduce their after-tax income, but that doesn’t happen. That isn’t how tax brackets work.

Some welfare programs work that way—for instance, seeing your income rise high enough to lose Medicaid eligibility can be bad enough that you would prefer to have less income—but taxes themselves do not.

The graph below shows the actual average tax rate (red) and marginal tax rate (purple) of the current US federal income tax:

Average_tax_rate
From that graph alone, you might think that going to a higher tax bracket could result in lower after-tax income. But the next graph, of before-tax (blue) and after-tax (green) income shows otherwise:

After_tax_income

All that tax deductions can do is reduce your taxable income. Thus the tax deduction benefits you if you were already donating, but never leaves you richer than you would have been without donating at all.

For example, if you have an income of $700,000, you would pay $223,000 in taxes and keep $477,000 in after-tax income. If you instead donate $100,000, your adjusted gross income will be reduced to $600,000, you will only pay $186,000 in taxes, and you will keep $414,000 in after-tax income. If there were no tax deduction, you would still have to pay $223,000 in taxes, and your after-tax income would be only $377,000. So you do benefit from the tax deduction; but there is no amount of donation which will actually increase your after-tax income to above $477,000.

But we wouldn’t have to do it this way. We could instead apply the deduction as a tax credit, which would make the effect of the deduction far larger.

Several years back, Miles Kimball (an economist who formerly worked at Michigan, now at UC Boulder) proposed a quite clever change to the tax system:

My proposal is to raise marginal tax rates above about $75,000 per person–or $150,000 per couple–by 10% (a dime on every extra dollar), but offer a 100% tax credit for public contributions up to the entire amount of the tax surcharge.

Kimball’s argument for the policy is mainly that this would make a tax increase more palatable, by giving people more control over where their money goes. This is surely true, and a worthwhile endeavor.

But the even larger benefit might come from the increased charitable donations. If we limited the tax credit to particularly high-impact charities, we would increase the donations to those charities. Whereas in the current system you get the same deduction regardless of where you give your money, even though we know that some charities are literally hundreds of times as cost-effective as others.

In fact, we might not even want to limit the tax credit to that 10% surcharge. If people want to donate more than 10% of their income to high-impact charities, perhaps we should let them. This would mean that the federal deficit could actually increase under this policy, but if so, there would have to be so much money donated that we’d most likely end world hunger. That’s a tradeoff I’m quite willing to make.

In principle, we could even introduce a tax credit that is greater than 100%—say for instance you get a 120% donation for the top-rated charities. This is not mathematically inconsistent, though it is surely a very bad idea. In that case, it absolutely would be possible to end up with more money than you started with, and the richer you are, the more you could get. There would effectively be a positive return on charitable donations, with the money paid for from the government budget. Bill Gates for instance could pay $10 billion a year to charity and the government would not only pay for it, but also have to give him an extra $2 billion. So even for the best charities—which probably are actually a good deal more cost-effective than the US government—we should cap the tax credit at 100%.

Obvious choices for high-impact charities include UNICEF, the Red Cross, GiveDirectly, and the Malaria Consortium. We would need some sort of criteria to decide which charities should get the benefits; I’m thinking we could have some sort of panel of experts who rate charities based on their cost-effectiveness.

It wouldn’t have to be all-or-nothing, either; charities with good but not top ratings could get an increased deduction but not a 100% deduction. The expert panel could rate charities on a scale from 0 to 10, and then anything above 5 gets an (X-5)*10% tax credit.

In effect, the current policy says, “If you give to charity, you don’t have to pay taxes on the money you gave; but all of your other taxes still apply.” The new policy would say, “You can give to a top-impact charity instead of paying taxes.”

Americans hate taxes and already give a lot to charity, but most of those donations are to relatively ineffective charities. This policy could incentivize people to give more or at least give to better places, probably without hurting the government budget—and if it does hurt the government budget, the benefits will be well worth the cost.

Unsolved problems

PNRJ core principles, critique of neoclassical economics, macroeconomics, public policy, science and academia , , , , , ,

Oct 20 JDN 2458777

The beauty and clearness of the dynamical theory, which asserts heat and light to be modes of motion, is at present obscured by two clouds. The first came into existence with the undulatory theory of light, and was dealt with by Fresnel and Dr. Thomas Young; it involved the question, how could the earth move through an elastic solid, such as essentially is the luminiferous ether? The second is the Maxwell-Boltzmann doctrine regarding the partition of energy.


~ Lord Kelvin, April 27, 1900

The above quote is part of a speech where Kelvin basically says that physics is a completed field, with just these two little problems to clear up, “two clouds” in a vast clear horizon. Those “two clouds” Kelvin talked about, regarding the ‘luminiferous ether’ and the ‘partition of energy’? They are, respectively, relativity and quantum mechanics. Almost 120 years later we still haven’t managed to really solve them, at least not in a way that works consistently as part of one broader theory.

But I’ll give Kelvin this: He knew where the problems were. He vastly underestimated how complex and difficult those problems would be, but he knew where they were.

I’m not sure I can say the same about economists. We don’t seem to have even reached the point where we agree where the problems are. Consider another quotation:

For a long while after the explosion of macroeconomics in the 1970s, the field looked like a battlefield. Over time however, largely because facts do not go away, a largely shared vision both of fluctuations and of methodology has emerged. Not everything is fine. Like all revolutions, this one has come with the destruction of some knowledge, and suffers from extremism and herding. None of this deadly however. The state of macro is good.


~ Oliver Blanchard, 2008

The timing of Blanchard’s remark is particularly ominous: It is much like the turkey who declares, the day before Thanksgiving, that his life is better than ever.

But the content is also important: Blanchard didn’t say that microeconomics is in good shape (which I think one could make a better case for). He didn’t even say that economics, in general, is in good shape. He specifically said, right before the greatest economic collapse since the Great Depression, that macroeconomics was in good shape. He didn’t merely underestimate the difficulty of the problem; he didn’t even see where the problem was.

If you search the Web, you can find a few lists of unsolved problems in economics. Wikipedia has such a list that I find particularly bad; Mike Moffatt offers a better list that still has significant blind spots.

Wikipedia’s list is full of esoteric problems that require deeply faulty assumptions to even exist, like the ‘American option problem’ which assumes that the Black-Scholes model is even remotely an accurate description of how option prices work, or the ‘tatonnement problem’ which ignores the fact that there may be many equilibria and we might never reach one at all, or the problem they list under ‘revealed preferences’ which doesn’t address any of the fundamental reasons why the entire concept of revealed preferences may fail once we apply a realistic account of cognitive science. (I could go pretty far afield with that last one—and perhaps I will in a later post—but for now, suffice it to say that human beings often freely choose to do things that we later go on to regret.) I think the only one that Wikipedia’s list really gets right is ‘Unified models of human biases’. The ‘home bias in trade’ and ‘Feldstein-Horioka Puzzle’ problems are sort of edging toward genuine problems, but they’re bound up in too many false assumptions to really get at the right question, which is actually something like “How do we deal with nationalism?” Referring to the ‘Feldstein-Horioka Puzzle’ misses the forest for the trees. Likewise, the ‘PPP Puzzle’ and the ‘Exchange rate disconnect puzzle’ (and to some extent the ‘equity premium puzzle’ as well) are really side effects of a much deeper problem, which is that financial markets in general are ludicrously volatile and inefficient and we have no idea why.

And Wikipedia’s list doesn’t have some of the largest, most important problems in economics. Moffatt’s list does better, including good choices like “What Caused the Industrial Revolution?”, “What Is the Proper Size and Scope of Government?”, and “What Truly Caused the Great Depression?”, but it also includes some of the more esoteric problems like the ‘equity premium puzzle’ and the ‘endogeneity of money’. The way he states the problem “What Causes the Variation of Income Among Ethnic Groups?” suggests that he doesn’t quite understand what’s going on there either. More importantly, Moffatt still leaves out very obviously important questions like “How do we achieve economic development in poor countries?” (Or as I sometimes put it, “What did South Korea do from 1950 to 2000, and how can we do it again?”), “How do we fix shortages of housing and other necessities?”, “What is causing the global rise of income and wealth inequality?”, “How altruistic are human beings, to whom, and under what conditions?” and “What makes financial markets so unstable?” Ironically, ‘Unified models of human biases’, the one problem that Wikipedia got right, is missing from Moffatt’s list.

And I’m also humble enough to realize that some of the deepest problems in economics may be ones that we don’t even quite know how to formulate yet. We like to pretend that economics is a mature science, almost on the coattails of physics; but it’s really a very young science, more like psychology. We go through these ‘cargo cult science‘ rituals of p-values and econometric hypothesis tests, but there are deep, basic forces we don’t understand. We have precisely prepared all the apparatus for the detection of the phlogiston, and by God, we’ll get that 0.05 however we have to. (Think I’m being too harsh? “Real Business Cycle” theory essentially posits that the Great Depression was caused by everyone deciding that they weren’t going to work for a few years, and as whole countries fell into the abyss from failing financial markets, most economists still clung to the Efficient Market Hypothesis.) Our whole discipline requires major injections of intellectual humility: We not only don’t have all the answers; we’re not even sure we have all the questions.

I think the esoteric nature of questions like ‘the equity premium puzzle’ and the ‘tatonnement problem‘ is precisely the source of their appeal: It’s the sort of thing you can say you’re working on and sound very smart, because the person you’re talking to likely has no idea what you’re talking about. (Or else they are a fellow economist, and thus in on the con.) If you said that you’re trying to explain why poor countries are poor and why rich countries are rich—and if economics isn’t doing that, then what in the world are we doing?—you’d have to admit that we honestly have only the faintest idea, and that millions of people have suffered from bad advice economists gave their governments based on ideas that turned out to be wrong.

It’s really quite problematic how closely economists are tied to policymaking (except when we do really know what we’re talking about?). We’re trying to do engineering without even knowing physics. Maybe there’s no way around it: We have to make some sort of economic policy, and it makes more sense to do it based on half-proven ideas than on completely unfounded ideas. (Engineering without physics worked pretty well for the Romans, after all.) But it seems to me that we could be relying more, at least for the time being, on the experiences and intuitions of the people who have worked on the ground, rather than on sophisticated theoretical models that often turn out to be utterly false. We could eschew ‘shock therapy‘ approaches that try to make large interventions in an economy all at once, in favor of smaller, subtler adjustments whose consequences are more predictable. We could endeavor to focus on the cases where we do have relatively clear knowledge (like rent control) and avoid those where the uncertainty is greatest (like economic development).

At the very least, we could admit what we don’t know, and admit that there is probably a great deal we don’t know that we don’t know.

Trump is finally being impeached

PNRJ current events, ethics, public policy , , , , , , , , , , , , ,

Post 310 Oct 6 JDN 2458763

Given that there have been efforts to impeach Trump since before he took office (which is totally unprecedented, by the way; while several others have committed crimes and been impeached while in office, no other US President has gone into office with widespread suspicion of mass criminal activity), it seems odd that it has taken this long to finally actually start formal impeachment hearings.

Why did it take so long? We needed two things to happen: One, absolutely overwhelming evidence of absolutely flagrant crimes, and two, a Democratic majority in the House of Representatives.

This is how divided America has become. If the Republicans were really a mainstream center-right party as they purport to be, they would have supported impeachment just as much as the Democrats, we would have impeached Trump in 2017, and he would have been removed from office by 2018. But in fact they are nothing of the sort. The Republicans no longer believe in democracy. The Democrats are a mainstream center-right party, and the Republicans are far-right White-nationalist crypto-fascists (and less ‘crypto-‘ all the time). After seeing how they reacted to his tax evasion, foreign bribes, national security leaks, human rights violations, obstruction of justice, and overall ubiquitous corruption and incompetence, by this point it’s clear that there is almost nothing that Trump could do which would make either the voter base or the politicians of the Republican Party turn against him—he may literally be correct that he could commit a murder in broad daylight on Fifth Avenue. Maybe if he raised taxes on billionaires or expressed support for Roe v. Wade they would finally revolt.

Even as it stands, there is good reason to fear that the Republican-majority Senate will not confirm the impeachment and remove Trump from office. The political fallout from such a failed impeachment is highly uncertain. So far, markets are taking it in stride; it may even turn out to be good for the economy. (Then again, a good economy may be good for Trump in 2020!) But at this point the evidence is so damning that if we don’t impeach now, we may never impeach again; if this isn’t enough, nothing is. (The Washington Examiner said that months ago, and may already have been right; but the case is even stronger now.)

So, the most likely scenario is that the impeachment goes through the House, but fails in the Senate. The good news is that if the Republicans do block the impeachment, they’ll be publicly admitting that even charges this serious and this substantiated mean nothing to them. Anyone watching who is still on the fence about them will see how corrupt they have become.

After that, this is probably what will happen: The impeachment will be big news for a month or two, then be largely ignored. Trump will probably try to make himself a martyr, talking even louder about ‘witch hunts’. He will lose popularity with a few voters, but his base will continue to support him through thick and thin. (Astonishingly, almost nothing really seems to move his overall approval rating.) The economy will be largely unaffected, or maybe slightly improve. And then we’ll find out in the 2020 election whether the Democrats can mobilize enough opposition to Trump, and—just as importantly—enough support for whoever wins the primaries, to actually win this time around.

If by some miracle enough Republicans find a moral conscience and vote to remove Trump from office, this means that until 2020 we will have President Mike Pence. In a sane world, that in itself would sound like a worst-case scenario; he’s basically a less-sleazy Ted Cruz. He is misogynistic, homophobic, and fanatically religious. He is also a partisan ideologue who toes the party line on basically every issue. Some have even argued that Pence is worse than Trump, because he represents the same ideology but with more subtlety and competence.

But subtlety and competence are important. Indeed, I would much rather have an intelligent, rational, competent ideologue managing our government, leading our military, and controlling our nuclear launch codes than an idiotic, narcissistic, impulsive one. Pence at least can be trusted to be consistent in his actions and diplomatic in his words—two things which Trump has absolutely never been.

Indeed, Pence’s ideological consistency has benefits; unlike Trump, he reliably supports free trade and his fiscal conservatism actually seems genuine for once. Consistency in itself has value: Life is much easier, and the economy is much stronger, when the rules of the game remain the same rather than randomly lurching from one extreme to another.

Pence is also not the pathological liar that Trump is. Yes, Pence has lied many times (only 22% of his statements were evaluated by PolitiFact as “Mostly True” or “True”, and 30% were “False” or “Pants on Fire”). But Trump lies constantly. A mere 14% of Trump’s statements were evaluated by Trump as “Mostly True” or “True”, while 48% were “False” or “Pants on Fire”. For Bernie Sanders, 49% were “Mostly True” or better, and only 11% were “False”, with no “Pants on Fire” at all; for Hillary Clinton, 49% were “Mostly True” or better, and only 10% were “False”, with 3% “Pants on Fire”. People have tried to keep running tallies of Trump’s lies, but it’s a tall order: The Washington Post records over 12,000 lies since he took office less than three years ago. Four thousand lies a year. More than ten every single day. Most people commit lies of omission or say ‘white lies’ several times per day (depending on who you ask, I’ve seen everything from an average of 2 times per day to an average of 100 times per day), but that’s not what we’re talking about here. These are consequential, outright statements of fact that aren’t true. And these are not literally everything he has said that wasn’t true; they are only public lies with relevance to policy or his own personal record. Indeed, Trump lies recklessly, stupidly, pointlessly, nonsensically. He seems like a pathological liar, or someone with dementia who is confabulating to try to fill gaps in his memory. (Indeed, a lot of his behavior is consistent with dementia, and similar to how Reagan acted in the early days of his Alzheimer’s.) At least if Pence takes office, we’ll be able to believe some of what he says.

Of course, Pence won’t be much better on some of the most important issues, such as climate change. When asked how important he thinks climate change is and what should be done about it, Pence always gives mealy-mouthed, evasive responses—but at least he doesn’t make up stories about windmills getting special permits to kill endangered birds.

I admit, choosing Pence over Trump feels like choosing to get shot in the leg instead of the face—but that’s really not a difficult choice, is it?

Migration holds together the American Dream

PNRJ development economics, inequality, public policy , , , , ,

Sep 29 JDN 2458757

The United States is an exceptional country in many ways, some good (highest income), some bad (highest incarceration rate), and some mixed (largest military). But as you compare the US to other countries, one thing that will immediately strike you is how we are a nation of migrants.

I don’t just mean immigrants, people who moved to the country after being born here—though we certainly are also a country of immigrants. About 99% of the US population descends from immigrants, mostly European—there aren’t a lot of countries that can even say the majority of their population migrated from another continent. Over 45 million Americans are foreign-born, which is not only the highest in the world; it is almost one-fifth of all the immigrants in the world. We experience a net inflow of immigrants averaging over 1 million people per year, by far the highest in the world. Almost half of the increase in our workforce over the last decade was due to immigrants.

But the US is full of migration in another way, which may in fact be even more important: Internal migration, from country to city, from one city to another, or from one state to another. Every year, about 12.5% of Americans move somewhere; about 10% move to a different state. No other country even comes close to this level of internal migration. According to the US census, about two-thirds of moves are within the same county, and yet each year there are ten times as many Americans who moved to a different county as there are immigrants to the United States. There are more cross-state migrants to California and Texas alone than there are immigrants to the entire country. There are about as many people who move each year within the United States as there are foreign-born individuals total.

This internal migration is central to the high productivity of the American economy. Internal migration is central to the process of urbanization, which drives a great deal of economic development. It is not a coincidence that the United States is one of the world’s most urbanized countries as well as one of the richest, nor that the ranking of US states by urbanization and the ranking of US states by per-capita income look very much alike.

Income_Urbanization

On average, increasing a state’s urbanization by 1 percentage point increases its average per-capita income by $270 per year (in chained 2009 dollars); since most of that increase is going to the people who actually moved, this means that the average income increase as a result of moving from the country to the city is likely over $20,000 per year. To put it another way, if Maine could become as urbanized as California, we would expect its per-capita income to increase from about $39,000 per year to about $54,000 per year—which is just about California’s per-capita income.

Indeed, migration is probably the one thing holding up our otherwise dismal level of income mobility, which still trails behind most other First World countries (and far behind Denmark and Norway, because #ScandinaviaIsBetter). Canada also does extremely well in terms of income mobility, and Canada also has a high rate of internal migration, with almost 1% of Canadians moving to a new province in any given year. Canada is probably what the US would look like with a European-style social safety net; our high internal migration rate might actually get us better income mobility than is currently achieved by say France or Germany.

Indeed, migration may be the main reason there is still some vestige of an American Dream. It’s not what it used to be, but it isn’t yet dead either. Two-thirds of American adults have more real (inflation-adjusted) income than their parents. Intergenerational income mobility in the US grew quickly in the 1940s and 1950s, grew more slowly in the 1960s and 1970s, and has been stagnant ever since. While the odds of moving to a different income bracket have remained stable, income inequality has increased over the last 40 years, which means that the differences between those brackets have become larger.

Why will no one listen to economists on rent control?

PNRJ current events, inequality, market failure, public policy , , , , , , , ,

Sep 22 JDN 2458750

I am on the verge of planting my face into my desk, because California just implemented a statewide program of rent control. I understand the good intentions here; it is absolutely the case that housing in California is too expensive. There are castles in Spain cheaper than condos in California. But this is not the right solution. Indeed, it will almost certainly make the problem worse. Maybe housing prices won’t be too high; instead there simply won’t be enough homes and more people will live on the street. (It’s not a coincidence that the Bay Area has both some of the world’s tightest housing regulations and one of the highest rates of homelessness.)

There is some evidence that rent control can help keep tenants in their homes—but at the cost of reducing the overall housing supply. Most of the benefits of rent control actually fall upon the upper-middle-class, not the poor.

Price controls are in general a terrible way of intervening in the economy. Price controls are basically what destroyed Venezuela. In this case the ECON 101 argument is right: Put a cap on the price of something, and you will create a shortage of that thing. Always.

California makes this worse by including all sorts of additional regulations on housing construction. Some regulations are necessary—homes need to be safe to live in—but did we really need a “right to sunlight”? How important is “the feel of the city” compared to homelessness? Not every building needs its own parking! (That, at least, the state government seems to be beginning to understand.) And yes, we should be investing heavily in solar power, and rooftops are a decent place to put those solar panels; but you should be subsidizing solar panels, not mandating them and thereby adding the cost of solar panels to the price of every new building.

Of course, we can’t simply do nothing; we need to fix this housing crisis. But there are much better ways of doing so. Again the answer is to subsidize rather than regulate.

Here are some policy options for making housing more affordable:

  1. Give every person below a certain income threshold a one-time cash payment to help them pay for a down payment or first month’s rent. Gradually phase out the payment as their income increases in the same way as the Earned Income Tax Credit.
  2. Provide a subsidy for new housing construction, with larger subsidies for buildings with smaller, more affordable apartments.
  3. Directly pay for the construction of new public housing.
  4. Relax zoning regulations to make construction less expensive.
  5. Redistribute income from the rich to the poor using progressive taxes and transfer payments. Housing crises are always and everywhere a problem of inequality.

Some of these would cost money, yes; we would probably need to raise taxes to pay for them. But rent control has costs too. We are already paying these costs, but instead of paying them in the form of taxes that can be concentrated on the rich, we pay them in the form of a housing crisis that hurts the poor most of all.

The weirdest thing about all this is that any economist would agree.

Economists can be a contentious bunch: It has been said that if you ask five economists a question, you’ll get five answers—six if one is from Harvard. Yet the consensus among economists against rent control is absolutely overwhelming. Analyses of journal articles and polls of eminent economists suggest that over 90% of economists, regardless of their other views or their political leanings, agree that rent control is a bad idea.

This is a staggering result: There are economists who think that almost all taxes and regulations are fundamentally evil and should all be removed, and economists who think that we need radical, immediate government intervention to prevent a global climate catastrophe. But they all agree that rent control is a bad idea.

Economists differ in their views about legacy college admissions, corporate antitrust, wealth taxes, corporate social responsibility, equal pay for women, income taxes, ranked-choice voting, the distributional effects of monetary policy, the relation between health and economic growth, minimum wage, and healthcare spending. They disagree about whether Christmas is a good thing! But they all agree that rent control is a bad idea.

We’re not likely to ever get a consensus much better than this in any social science. The economic case against rent control is absolutely overwhelming. Why aren’t policymakers listening to us?

I really would like to know. It’s not that economists have ignored the problem of housing affordability. We have suggested a variety of other solutions that would obviously be better than rent control—in fact, I just did, earlier in this post. Many of them would require tax money, yes—do you want to fix this problem, or not?

Maybe that’s it: Maybe policymakers don’t really care about making housing affordable. If they did, they’d be willing to bear the cost of raising taxes on millionaires in order to build more apartments and keep people from being homeless. But they want to seem like they care about making housing affordable, because they know their constituents care. So they use a policy that seems to make housing more affordable, even though it doesn’t actually work, because that policy also doesn’t affect the government budget (at least not obviously or directly—of course it still does indirectly). They want the political support of the poor, who think this will help them; and they also want the political support of the rich, who refuse to pay a cent more in taxes.

But it really makes me wonder what we as economists are even really doing: If the evidence is this clear and the consensus is this overwhelming, and policymakers still ignore us—then why even bother?

Billionaires bear the burden of proof

PNRJ core principles, ethics, inequality, public policy , , , , , , , , , ,

Sep 15 JDN 2458743

A king sits atop a golden throne, surrounded by a thousand stacks of gold coins six feet high. A hundred starving peasants beseech him for just one gold coin each, so that they might buy enough food to eat and clothes for the winter. The king responds: “How dare you take my hard-earned money!”

This is essentially the world we live in today. I really cannot emphasize enough how astonishingly, horrifically, mind-bogglingly rich billionares are. I am writing this sentence at 13:00 PDT on September 8, 2019. A thousand seconds ago was 12:43, about when I started this post. A million seconds ago was Wednesday, August 28. A billion seconds ago was 1987. I will be a billion seconds old this October.

Jeff Bezos has $170 billion. 170 billion seconds ago was a thousand years before the construction of the Great Pyramid. To get as much money as he has gaining one dollar per second (that’s $3600 an hour!), Jeff Bezos would have had to work for as long as human civilization has existed.

At a more sensible wage like $30 per hour (still better than most people get), how long would it take to amass $170 billion? Oh, just about 600,000 years—or about twice the length of time that Homo sapiens has existed on Earth.

How does this compare to my fictional king with a thousand stacks of gold? A typical gold coin is worth about $500, depending on its age and condition. Coins are about 2 millimeters thick. So a thousand stacks, each 2 meters high, would be about $500*1000*1000 = $500 million. This king isn’t even a billionaire! Jeff Bezos has three hundred times as much as him.

Coins are about 30 millimeters in diameter, so assuming they are packed in neat rows, these thousand stacks of gold coins would fill a square about 0.9 meters to a side—in our silly Imperial units, that’s 3 feet wide, 3 feet deep, 6 feet tall. If Jeff Bezo’s stock portfolio were liquidated into gold coins (which would require about 2% of the world’s entire gold supply and surely tank the market), the neat rows of coins stacked a thousand high would fill a square over 16 meters to a side—that’s a 50-foot-wide block of gold coins. Smaug’s hoard in The Hobbit was probably about the same amount of money as what Jeff Bezos has.

And yet, somehow there are still people who believe that he deserves this money, that he earned it, that to take even a fraction of it away would be a crime tantamount to theft or even slavery.

Their arguments can be quite seductive: How would you feel about the government taking your hard-earned money? Entrepreneurs are brilliant, dedicated, hard-working people; why shouldn’t they be rewarded? What crime do CEOs commit by selling products at low prices?

The way to cut through these arguments is to never lose sight of the numbers. In defense of a man who had $5 million or even $20 million, such an argument might make sense. I can imagine how someone could contribute enough to humanity to legitimately deserve $20 million. I can understand how a talented person might work hard enough to earn $5 million. But it’s simply not possible for any human being to be so brilliant, so dedicated, so hard-working, or make such a contribution to the world, that they deserve to have more dollars than there have been seconds since the Great Pyramid.

It’s not necessary to find specific unethical behaviors that brought a billionaire to where he (and yes, it’s nearly always he) is. They are generally there to be found: At best, one becomes a billionaire by sheer luck. Typically, one becomes a billionaire by exerting monopoly power. At worst, one can become a billionaire by ruthless exploitation or even mass murder. But it’s not our responsibility to point out a specific crime for every specific billionaire.

The burden of proof is on billionaires: Explain how you can possibly deserve that much money.

It’s not enough to point to some good things you did, or emphasize what a bold innovator you are: You need to explain what you did that was so good that it deserves to be rewarded with Smaug-level hoards of wealth. Did you save the world from a catastrophic plague? Did you end world hunger? Did you personally prevent a global nuclear war? I could almost see the case for Norman Borlaug or Jonas Salk earning a billion dollars (neither did, by the way). But Jeff Bezos? You didn’t save the world. You made a company that sells things cheaply and ships them quickly. Get over yourself.

Where exactly do we draw that line? That’s a fair question. $20 million? $100 million? $500 million? Maybe there shouldn’t even be a hard cap. There are many other approaches we could take to reducing this staggering inequality. Previously I have proposed a tax system that gets continuously more progressive forever, as well as a CEO compensation cap based on the pay of the lowliest employees. We could impose a wealth tax, as Elizabeth Warren has proposed. Or we could simply raise the top marginal rate on income tax to something more like what it was in the 1960s. Or as Republicans today would call it, radical socialism.

The Amazon is burning.

PNRJ current events, ethics, market failure, public policy , , , ,

Sep 1 JDN 2458729

As you probably already know, the Amazon rainforest is currently on fire. You can get more details about the fires from The Washington Post, or CNN, or New York magazine, or even The Economist; but I think the best coverage I’ve seen has been these two articles from Al-Jazeera.

I have good news and bad news. Let’s start with the bad news: If we lose the Amazon, we lose everything. The ecological importance of the Amazon is basically impossible to overstate. The Amazon produces 20% of the oxygen on Earth. 25% of the carbon absorbed on land is absorbed by the Amazon. We must protect the Amazon, at almost any cost: Given how vital preserving the rainforest will be to resisting climate change, millions of lives are at stake.

The good news is there is still a lot of Amazon left.

This graph shows the total cumulative deforestation of the Amazon, compared against its current area and its original area. The units are square kilometers; the Amazon rainforest has been reduced from 4.1 million square kilometers (1.6 million square miles) to 3.3 million hectares (1.3 million square miles), a decline of about 20% (21 log points). We still have four-fifths of the rainforest remaining—less than we should, but a lot more than we might.

Amazon_cumulative

This graph shows the annual deforestation of the Amazon, with results that are even more encouraging. While the last few years have had faster deforestation than previously, we are still nowhere near the peak deforestation rates of the early 2000s. At peak deforestation, the Amazon was projected to last no more than 150 years; but at current rates of deforestation, the Amazon would not be completely destroyed in more than 400 years.

Amazon_annual

Of course, any loss of the Amazon is bad. We should actually be trying to restore the Amazon—that extra 800,000 square kilometers of high-density forest would sequester a lot of carbon. We probably can’t actually add the 9 million square kilometers (3.4 million square miles) of forest it would take to stop climate change; but any reforestation we do manage will help.

And a number of ecologists have been sounding the alarm that the Amazon is approaching some sort of tipping point where it will stop being a rainforest and become a savannah. If this happens, it may be irreversible. It sounds crazy to me—80% of the forest is still there!—but that’s what ecologists are saying, and I’ll defer to their expertise.

On the other hand, ecologists have been panicking about “irreversible tipping points” on almost everything for the past century. We really can’t be blamed for not taking their word as gospel: They’ve cried wolf about “population bombs” and shortages of food and water for a very long time now. So far their projections on the rates of temperature rise, species extinction, and deforestation have been quite accurate; but their predictions of dire human consequences have always suspiciously failed to materialize. Humans are quite creative and resilient, as it turns out. This is part of why I’m not actually afraid climate change will cause the collapse of human civilization (much less the utterly laughable claim of human extinction); but tens of millions of deaths is still plenty of reason to take drastic action.

Indeed, I think panicking is precisely what we need to avoid. If we exaggerate the problem to the point where it sounds hopeless, that won’t encourage people to take action; it may actually cause them to throw in the towel.

What do we actually need to do here? We need to restore as many forests as possible, and we need to cut carbon emissions as rapidly as possible.

This doesn’t require a revolution to overthrow capitalism. It doesn’t require exotic new technologies (though fusion power and improved electricity storage would certainly help). It simply requires a real commitment to bear real economic costs today in order to prevent much higher costs in the future.

Bernie Sanders has a climate change plan that is estimated to cost $16 trillion over the next ten years. Make no mistake: This is an enormous amount of money. US GDP is about $20 trillion, growing at about 3% per year, so we’re looking at about 6% of GDP over that interval. This is about twice our current military budget, or about our military budget in the 1980s. Notably, it is nowhere near the levels of military spending we reached in the Second World War, which exceeded 40% of GDP. That’s what happens when America really commits to something.

Would this be enough? The UN seems to think so. They estimate that it would cost about 1% of global GDP to keep global warming below 2 C. Even if that’s an underestimate, 6% of the GDP of the US and EU would by itself account for twice that amount—and I have no doubt that if America committed to climate change mitigation, Europe would gladly follow.

And it’s not as if this money would be set on fire. (Military spending, on the other hand, almost literally is that.) We would spending this money mainly on infrastructure and technology; we would be paying wages and creating millions of jobs.

So far as I know Sanders’s plan doesn’t include paying Brazil to restore the Amazon, but it probably should. Part of why Brazil is currently burning the Amazon is the externalities: The ecological benefit of the Amazon affects us all, but the economic benefit of clear-cutting and cattle ranching directly benefits Brazil. We should set up some sort of payment mechanism to ensure that it is more profitable for Brazil to keep the rainforest where it is than to burn it down. How can we afford such a thing, you ask? No: How can we afford not to?

White-collar crime dwarfs all other property crime

PNRJ inequality, public policy , , , ,

Aug 25 JDN 2458722

When you think of “property crime”, you probably envision pickpockets in crowded squares, muggers in dark alleys or burglars breaking into houses. But this is not the kind of property crime that does the most damage—not by a long shot.

Based on FBI estimates, the total economic value of all stolen property (in this conventional sense) is about $14 billion per year. This is less than 0.1% of US GDP.

Wage theft, in which corporations withhold pay that they are contractually obliged to pay, often by misrepresenting hours or not paying overtime rates, is by itself already $50 billion per year.

But this too pales in comparison to the real threat, which is white-collar crime. The direct cost of white-collar crime to the United States has been estimated at between $250 and $600 billion per year. This is about 1-3% of GDP; the average company loses 6% of its revenue to white-collar crime.

This is comparable to, and quite likely more than, the $280 billion total expenditure of all law enforcement and criminal justice in the United States—which has the highest total law enforcement expenditure in the world, and nearly the highest per capita as well.

This is only direct cost, mind you. If you include the indirect costs of all forms of crime, including violent crime, the total cost of all crime in the US rises to about $1.5 trillion. But this figure does not account for white-collar crime. Since the direct costs of white-collar crime are so much higher than those of other forms of crime, it’s quite likely that the indirect costs are higher as well. (Indeed, I think it can be reasonably argued that The Great Recession was an indirect cost of white-collar crime—and it cost about $14 trillion in lost economic output.)

And this is not including the approximately $300 billion per year in tax evasion (mostly in the form of unreported income and overstated charitable contributions).

The graph below compares these figures visually:

Value_of_crime

Crime pays quite well, as a matter of fact, as long as it’s the right kind of crime.

Our law enforcement system is designed to punish the crimes of the poor, and does so quite relentlessly. But it seems uninterested in punishing the crimes of the rich.

Some of the policies needed to reduce white-collar crime are quite obvious. The first is tax auditing: As the IRS budget has been cut, the number of tax audits has been plummeting, from 1.7 million in 2012 to only 1.1 million in 2017, a decrease of over a third. High-income returns—which are, obviously, where the worst tax evasion happens—have seen an even more precipitous decline in auditing. In 2011, a return over $1 million had about a 12% chance of being audited; now that probability is only 3%.

The budget cuts to the IRS make less than no sense; since 2002, they reduced spending by $14 billion and tax evasion increased by $34 billion. This is the opposite of fiscal responsibility.

Another obvious policy change is to increase spending on the FTC and SEC, the agencies responsible for investigating business transactions and rooting out securities fraud.

Meanwhile, we are actually cutting the SEC budget. This is beyond madness; the total SEC budget is a measly $1.5 billion, and collected entirely from banks, not taxpayers in general. The SEC budget does not contribute to the federal deficit in any way. And think about what madness was to begin with to allocate a budget of only $1.5 billion to regulate an industry with a market value of $26 trillion in this country alone. This is only 0.006%. Since a tax of 0.5% on stock trades, 0.1% on bond trades, and 0.005% on derivatives trades would raise a whopping $220 billion, this means that simply imposing a 0.01% tax on financial transactions would raise enough to increase the SEC budget by an order of magnitude. And this is low enough that it would be felt by basically no one. Frankly if you even care what happens to a single basis point of your rate of return, you are obviously over-leveraged. The difference between making 6.99% and 7.00% per year over 30 years is the difference between turning $1,000 into $7,590.94 and turning it into $7,612.25. That’s a difference of 2% over thirty years.

Simply increasing IRS and SEC audits would not eliminate white-collar crime, of course. It is far too ubiquitous and sophisticated for that. But the fact that we have been cutting these budgets instead of raising them speaks to a much more disturbing truth: These are not the policies of a government that is seriously trying to improve its budget balance. They are the policies of a government that is being corrupted from within, becoming tilted further and further toward the interests of the wealthy.

A more nuanced “Carousel of Progress”

PNRJ futurism, inequality, public policy , , , , , , , ,

Aug 11 JDN 2458707

I recently got back from a trip to Disney World; while most of the attractions are purely fictional and designed only to entertain, a few are factual and designed to inform and persuade. One of these is the “Carousel of Progress”.

The Carousel of Progress consists of a series of animatronic stages, each representing the lifestyle of a particular historical era. They follow the same family over time, showing what their life is like in each era. When it was originally built, the eras shown were 1900s, 1920s, 1940s, and 1960s; but over time they have updated the “present day” stage, and now they are 1900s, 1920s, 1940s, and 1990s. The aim of the attraction is to show how technology has made our lives better.

The family they show is upper-middle class; this makes sense, as most of the audience probably is as well. But to really understand the progress we have made, we need to also consider the full range of incomes.

In this post I will go through a similar sequence of eras, comparing the lifestyles of not just the middle class, but also the rich and the poor.

In what follows, I’ve tried to create that, using the best approximate figures on standard of living I could find from each era. The numbers are given in my best guess of the inflation-adjusted standard of living; obviously they’re much more precise in the 1980s to today than they are for earlier eras.

I’ve summarized all these income estimates in the graph below (note the log scale):

 

Carousel_of_Progress

This means that, after a bumpy ride through the Middle Ages and the Industrial Revolution, we did actually raise the floor—the poor today are about as well off as the middle class in ancient times. But we raised the ceiling an awful lot faster; the rich today are something like a thousand times as rich as the rich in ancient times.

 

50 AD: Roman Empire

Rich: Patrician

Life is good! My seaside villa is one of the finest in Rome, and my industrious slaves fulfill my every need. At my personal zoo I recently acquired a lion and an elephant. I dine on only the finest foods, including wine from my personal vineyard. An aqueduct feeds directly into my personal baths. The war in Gallia seems to be going well; I look forward to my share of the spoils.

Wealth: $4 million

Income: $200,000

Middle class: Plebeian

Things could be worse. My family has a roof over our heads and bread on our table, so I’m grateful for that. But working all day on the farm is exhausting, and we can’t afford servants to help. My oldest son is a gladiator, though so far he has not attained the highest ranks of the profession. My youngest son was recently drafted into military service in Gallia; I pray for his safety.

Wealth: $10,000

Income: $10,000

Poor: Proletarian

Wealth: $0

Income: $1,000

Living in a hovel I don’t even own with my four children and begging on the streets isn’t an easy life, but at least I’m not a slave. Most of our food is provided by public services. With the war raging in Gallia, one of our small blessings is that we are actually too poor to be drafted into service.

1000 AD: Medieval England

Rich: Duke

While living in a castle is nice, I sometimes wish an end to the frequent raids and border skirmishes that made these high walls necessary. Still, I can’t complain; I own plenty of land, and have plenty of serfs to work it. I am in good favor with the king, and so His Majesty’s army has helped protect my lands against invasion. I have all the feasts, wine, and women a man could ask for.

Wealth: $2 million

Income: $100,000

Middle class: Knight

I can’t complain. It is an honor to be a knight in His Majesty’s army, and I am proud that my family was able to earn enough wealth to buy me a horse, a sword, and the training necessary to reach this rank. I own a little bit of land, but my lord has called upon me for a new campaign, I’m hoping to buy a larger estate with the spoils I earn from it. My family has plenty of food to eat, though if the well runs dry I’m not sure where we’ll get more water.

Wealth: $5,000

Income: $5,000

Poor: Serf

Live grows harder by the day, it seems. My lord keeps demanding more and more work from us, but already the land is producing as much as it can bear. Though we are responsible for planting and harvesting the wheat, often the bread never makes it to my family’s table.

Wealth: $0

Income: $500

1600 AD: Renaissance Venice

Rich: Noble

With the advent of global trade and colonization, wealth has flooded into Venice, and I have had the chance to claim some portion of that flood. I dress in the finest silks, and eat exotic foods from lands as distant as India and China. Servants fulfill my every need. How could life be better?

Wealth: $10 million

Income: $1 million

Middle class: Merchant

I am a proud member of the trader’s guild. Though it our trade ships that carry wealth from across the seas, we often find that wealth passing on up to the nobles, leaving little for ourselves. Still, I have my own land, my own house, and plenty of food for my family.

Wealth: $10,000

Income: $10,000

Poor: The Pebbles

I had a good job working in construction until recently, but I was laid off. I could no longer afford my rent, so now I live on the streets. I feel as though I work constantly but never can find a way to get ahead.

Wealth: $0

Income: $2,000

1750 AD: Pre-Revolutionary France

Rich: Noble

Viva la France! Life is better than ever. Servants do all my work, while the wealth produced by my fields and factories all goes to me. I barely even pay any taxes on my grand estates.

Wealth: $20 million

Income: $2 million

Middle class: Bourgeoisie

I live reasonably well, all things considered. My family has a home and enough food to eat. Still, taxes are becoming increasingly onerous even as the nobles become increasingly detached from the needs of common people like us. Still, we may as well accept it; I doubt things will change any time soon.

Wealth: $15,000

Income: $15,000

Poor: Peasant

Life is hard. I work all day on the farm to make wheat, and then the nobles tax it all away. We have to make our own clothes even as the nobles luxuriate in silks from around the world.

Wealth: $0

Income: $500

1900 AD: United States

Rich

My coal mine has been a roaring success! I am now one of the richest men who has ever lived. I even have my own horseless carriage. Servants are getting more expensive these days, though; even though I’m richer than my grandfather I can’t afford as many servants.

Wealth: $1 billion

Income: $100 million

Middle class

“Well, the robins are back. That’s a sure sign of spring. What year is it? Oh, just before the turn of the century. And believe me, things couldn’t be any better than they are today. Yes sir, we got all the latest things: gas lamps, a telephone, and the latest design in cast iron stoves. That reservoir keeps five gallons of water hot all day on just three buckets of coal. Sure beats chopping wood! And isn’t our new ice box a beauty. Holds 50 pounds of ice. Milk doesn’t sour as quick as is used to. Our dog Rover here keeps the water in the drip pan from overflowing. You know, it wasn’t too long ago we had to carry water from a well. But thanks to progress, we’ve got a pump right here in the kitchen. ‘Course we keep a bucket of water handy to prime it with. Yes sir, we’ve got everything to make life easier. Mother! I was reading about a fellow named Tom Edison, who’s working on an idea for snap on electric lights.”

Wealth: $18,000

Income: $18,000

Poor

I live on the streets most of the time. I eat food out of the garbage. What little money I have is earned by begging. I’m not proud, but it’s all I can do to survive.

Wealth: $0

Income: $2,000

1920 AD: United States

Rich

Life is sweet. My electric company is raking in the dough these days; seems they can hardly find enough copper to lay all the new cables we need to supply all the folks buying into our grid. I have four automobiles now—all top of the line of course. The times, they are a-changin’: Can you believe they gave women the vote? Eh, well, I suppose they can hardly vote worse than us men do already.

Wealth: $5 billion

Income: $500 million

Middle class

“Whew! Hottest summer we’ve had in years. Well, we’ve progressed a long way since the turn of the century 20 years ago. But no one realized then that this would be the age of electricity. Everyone’s using it: farmers, factories, whole towns. With electric streetlights we don’t worry so much about the youngsters being out after dark. And what a difference in our home. We can run as many wires as we need in any direction for Mother’s new electrical servants: electric sewing machine, coffee percolator, toaster, waffle iron, refrigerator, and they all go to work at the click of a switch. Take it easy! You’ll blow a fuse! Queenie! Leave ’em alone. Well, the days of lugging heavy irons from the old cookstove to an ironing board are gone forever. With an electric iron and electric lights, Mother now has time to enjoy her embroidery in the cool of the evening. Right, Mother?”

Wealth: $20,000

Income: $20,000

Poor

Life on the streets is still hard, but at least they’ve got these new soup kitchens to feed me and my family, and with running water in the city we can sometimes get clean water to drink. That newfangled electricity stuff is supposed to be the bee’s knees, but we sure can’t afford it.

Wealth: $0

Income: $4,000

1940 AD: United States

Rich

My steel company is doing extremely well, particularly with the war in Europe raising the price of steel. We just bought our very own airplane; isn’t that marvelous? With Britain under siege and France already fallen to the Krauts, I think we’re gonna end up in the war soon—FDR certainly has been making noises to that effect. If I were poor, I’d be worried about my sons getting drafted; but I’m sure we won’t have to worry about that. No, I’m just looking forward to my stock returns when they start churning out tanks instead of cars in Detroit!

Wealth: $2 billion

Income: $200 million

Middle class

“Well it’s autumn again and the kids are back in school. Thank goodness! Here we are in the frantic forties and the music is better than ever. And it’s amazing how our new kitchen wonders are helping to take over the hard work. Everything is improving. Electric range is better. Refrigerators are bigger and make lots more ice cubes. But my favorite is the electric dishwasher. Now Mother spends less time in the kitchen and I don’t have to dry the dishes anymore. Oh, I spend a lot of time here. Have to. Now that television has arrived, Grandma and Grandpa have taken over my den. Television has changed our lives. It’s brought a whole new world of culture into our home.”

Wealth: $24,000

Income: $24,000

Poor

The Depression was hard on everybody, but I think it was hardest on us poors. This New Deal business seems to be helping out a lot, though; on one of the new construction projects I was able to find work for the first time in months. I’m worried we’re going to be brought into the war soon, but if I get drafted at least that means three squares a day.

Wealth: $0

Income: $4,000

1960 AD: United States

Rich

Running an oil company is not for the faint of heart; they keep adding more onerous regulations every year. Still, profits are bigger than ever. I just wish Uncle Sam would stop taking such a big cut; Commies, all of them. I can barely afford upkeep on my yacht these days with all the taxes.

Wealth: $2 billion

Income: $200 million

Middle class

We just got a color TV at home, and we’ve been watching around the clock. We get all four channels! And my new T-bird is a real beauty; paid a fortune for her, but worth every penny. Society is improving, too; with Rosa Parks and whatnot, I’m guessing things are about to get a lot better for colored folks especially. After that, I’m thinking it’ll be the gays’ turn next; I wonder how long that will take.

Wealth: $30,000

Income: $30,000

Poor

Life is still hard, but I think it’s better now than it’s ever been, even for poor folks like me. Thanks to Welfare, I’m not even as poor as I could be. It’s tough to make ends meet, but at least I can afford a place to live and food to eat. And I’m pretty healthy too: Antibiotics and vaccines mean that we are finally safe from some terrible diseases, like polio. It seems crazy: Just a generation ago the President had a disease that now even folks like me are protected from.

Wealth: $0

Income: $6,000

1980 AD: United States

Rich

They told me I was crazy to invest in these “personal computing machines”, but I saw the writing on the wall. Computers are the future, man. They’re gonna be everywhere, and do everything. We’re gonna have robots and flying cars, and if I have anything to say about it, I’m gonna own the factories that make them.

Wealth: $5 billion

Income: $500 million

Middle class

We have our own PC now. I use it for work, but my kids use it mostly for computer games. I still can’t beat my daughter at Pong, but I can at least hold my own at Pac-Man these days. I hear that programming skills are going to be in high demand soon, so I’ve been trying to teach the kids BASIC.

Wealth: $50,000

Income: $50,000

Poor

Nixon’s Welfare “reform” really hit my family hard. If I don’t find work soon, they’re going to cut my benefits; but if I could find work, what would I need benefits for? Jimmy Carter made some things better, but it doesn’t look like he’ll be re-elected. Can you believe that old actor Ronald Reagan is running?

Wealth: $0

Income: $8,000

2000 AD: United States

Rich

I sure played my cards right in the stock market, buying those tech firms just before the Internet boom really hit. Now I have my own jet and I’m thinking of buying a yacht. Maybe I’ll diversify into real estate; it looks like housing prices are heading north.

Wealth: $10 billion

Income: $1 billion

Middle class

Our home has almost doubled in value since we bought it; we took some of that out as a home equity loan, which helped us buy laptops for our kids. It’s amazing what they can do now; we used to have a big clunky desktop, and these little laptops would run circles around it. We also installed a 56k modem; I’m a little worried about what effect the Internet will have on the kids, but it seems like that’s where everything is going.

Wealth: $60,000

Income: $60,000

Poor

I hate working in fast food, but it beats not working at all. I really wish they’d raise minimum wage though; once you figure in inflation, we’re actually making less than people did ten years ago. I think I qualify for Welfare or something, but the paperwork has gotten so crazy I couldn’t even deal with it. I’m just trying to get by on what I make at the burger joint.

Wealth: $0

Income: $10,000

2020 AD: United States, Present Day

Rich

I knew my app startup would be a success, but even I couldn’t have predicted we’d make it this far. Bought out by Apple for $40 billion? I could hardly have dreamed it myself. I am living the high life; I’ve got my own helicopter now, and a yacht 50 feet long (#lifestyle #swag!). I just upgraded my Google Glass to the new model; it is awesome AF. I think I might move out of the Bay Area and get myself a mansion in Beverly Hills.

Wealth: $20 billion

Income: $2 billion

Middle class

Why is rent so expensive? And how am I ever going to pay off these student loans? After college I managed to land an office job because I’m pretty good with Excel, but it’s still tough to make ends meet. Smartphones are cool and all, but it would be nice to actually own my own home. I think my parents had planned for me to inherit theirs, but we lost it in the subprime crash. Eh, things could be worse. #FirstWorldProblems.

Wealth: $62,000

Income: $62,000

Poor

Things were really bad a few years ago, but they seem to be picking up a little now; I’ve been able to find a job, at least. But it doesn’t pay well; I can’t barely afford rent. I don’t have what they call “marketable skills”, I guess. I should have gone back to school, probably, but I didn’t want to have to deal with student loans. Maybe things will be better once Trump finally gets out of office.

Wealth: $0

Income: $12,000

2040 AD: United States, Cyberpunk Future

Rich

I guess I picked out the right crypto to buy, because it gave me enough to buy my own AI company and now I’m rolling in it. My new helicopter is one of those twin-turbofan models that runs on fuel cells—I was sick of paying carbon tax to fuel up the old kerosene model. I just got cybernetic implants: No phone to carry around, nothing to get lost! I hear they’re working on going to neural interface soon, so we won’t even need to wave our hands around to use them.

Wealth: $40 billion

Income: $4 billion

Middle-class

I used to have a nice job in data analysis, but they automated most of it and outsourced the rest. Now I work for a different corp doing customer service, because that’s the only thing humans seem to still be good for. I have to admit the corps have done some good things for us, though; my daughter was born blind but now she’s got artificial eyes. (Of course, how will we ever pay off those medical debts?) And I really wish someone had done something about climate change sooner; summers these days are absolutely unbearable.

Wealth: $65,000

Income: $65,000

Poor

Wealth: $0

Income: $15,000

I lost my trucking job to a robot, can you believe that? But how am I supposed to compete with 22 hours of daily uptime? Basic income is just about all the money I have. I haven’t been able to find steady work in years. I should have gone to college and studied CS, probably; it seems like salaries in AI get higher every year.

Privatized prisons were always an atrocity

PNRJ core principles, current events, ethics, public policy, Uncategorized , , , , , , , ,

Aug 4 JDN 2458700

Let’s be clear: The camps that Trump built on the border absolutely are concentration camps. They aren’t extermination camps—yet?—but they are in fact “a place where large numbers of people (such as prisoners of war, political prisoners, refugees, or the members of an ethnic or religious minority) are detained or confined under armed guard.” Above all, it is indeed the case that “Persons are placed in such camps often on the basis of identification with a particular ethnic or political group rather than as individuals and without benefit either of indictment or fair trial.”

And I hope it goes without saying that this is an unconscionable atrocity that will remain a stain upon America for generations to come. Trump was clear from the beginning that this was his intention, and thus this blood is on the hands of anyone who voted for him. (The good news is that even they are now having second thoughts: Even a majority of Fox News viewers agrees that Trump has gone too far.)

Yet these camps are only a symptom of a much older disease: We should have seen this sort of cruelty and inhumanity coming when first we privatized prisons.

Krugman makes the point using economics: Without market competition or public view, how can the private sector be kept from abuse, corruption, and exploitation? And this is absolutely true—but it is not the strongest reason.

No, the reason privatized prisons are unjust is much more fundamental than that: Prisons are a direct incursion against liberty. The only institution that should ever have that authority is a democratically-elected government restrained by a constitution.

I don’t care if private prisons were cleaner and nicer and safer and more effective at rehabilitation (as you’ll see from those links, exactly the opposite is true across the board). No private institution has the right to imprison people. No one should be making profits from locking people up.

This is the argument we should have been making for the last 40 years. You can’t privatize prisons, because no one has a right to profit from locking people up. You can’t privatize the military, because no one has a right to profit from killing people. These are basic government functions precisely because they are direct incursions against fundamental rights; though such incursions are sometimes necessary, we allow only governments to make them, because democracy is the only means we have found to keep them from being used indiscriminately. (And even then, there are always abuses and we must remain eternally vigilant.)

Yes, obviously we must shut down these concentration camps as soon as possible. But we can’t stop there. This is a symptom of a much deeper disease: Our liberty is being sold for profit.