A more nuanced “Carousel of Progress”

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.

How much should we value statistical lives?

June 9 JDN 2458644

The very concept of putting a dollar value on a human life offends most people. I understand why: It suggests that human lives are fungible, and also seems to imply that killing people is just fine as long as it produces sufficient profit.

In next week’s post I’ll try to assuage some of those fears: Saying that a life is worth say $5 million doesn’t actually mean that it’s justifiable to kill someone as long as it pays you $5 million.

But for now let me say that we really have no choice but to do this. There are a huge number of interventions we could make in the world that all have the same basic form: They could save lives, but they cost money. We need to be able to say when we are justified in spending more money to save more lives, and when we are not.

No, it simply won’t do to say that “money is no object”. Because money isn’t just money—money is human happiness. A willingness to spend unlimited amounts to save even a single life, if it could be coherently implemented at all, would result in, if not complete chaos or deadlock, a joyless, empty world where we all live to be 100 by being contained in protective foam and fed by machines. It may be uncomfortable to ask a question like “How many people should we be willing to let die to let ourselves have Disneyland?”; but if that answer were zero, we should not have Disneyland. The same is true for almost everything in our lives: From automobiles to chocolate, almost any product you buy, any service you consume, has resulted in some person’s death at some point.

And there is an even more urgent reason, in fact: There are many things we are currently not doing that could save many lives for very little money. Targeted foreign aid or donations to top charities could save lives for as little as $1000 each. Foreign aid is so cost-effective that even if the only thing foreign aid had ever accomplished was curing smallpox, it would be twice as cost-effective as the UK National Health Service (which is one of the best healthcare systems in the world). Tighter environmental regulations save an additional life for about $200,000 in compliance cost, which is less than we would have spent in health care costs; the Clean Air Act added about $12 trillion to the US economy over the last 30 years.

Reduced military spending could literally pay us money to save people’s lives—based on the cost of the Afghanistan War, we are currently paying as much as $1 million per person to kill people that we really have very little reason to kill.

Most of the lives we could save are statistical lives: We can’t point to a particular individual who will or will not die because of the decision, but we can do the math and say approximately how many people will or will not die. We know that approximately 11,000 people will die each year if we loosen regulations on mercury pollution; we can’t say who they are, but they’re out there. Human beings have a lot of trouble thinking this way; it’s just not how our brains evolved to work. But when we’re talking about policy on a national or global scale, it’s quite simply the only way to do things. Anything else is talking nonsense.

Standard estimates of the value of a statistical life range from about $4 million to $9 million. These estimates are based on how much people are willing to pay for reductions in risk. So for instance if people would pay $100 to reduce their chances of dying by 0.01%, we divide the former by the latter to say that a life is worth about $1 million.

It’s a weird question: You clearly can’t just multiply like that. How much would you be willing to accept for a 100% chance of death? Presumably there isn’t really such an amount, because you would be dead. So your willingness-to-accept is undefined. And there’s no particular reason for it to be linear below that: Since marginal utility of wealth is decreasing, the amount you would demand for a 50% chance of death is a lot more than 50 times as much as what you would demand for a 1% chance of death.
Say for instance that utility of wealth is logarithmic. Say your currently lifetime wealth is $1 million, and your current utility is about 70 QALY. Then if we measure wealth in thousands of dollars, we have W = 1000 and U = 10 ln W.

How much would you be willing to accept for a 1% chance of death? Your utility when dead is presumably zero, so we are asking for an amount m such that 0.99 U(W+m) = U(W). 0.99 (10 ln (W+m)) = 10 ln (W) means (W+m)^0.99 = W, so m = W^(1/0.99) – W. We started with W = 1000, so m = 72. You would be willing to accept $72,000 for a 1% chance of death. So we would estimate the value of a statistical life at $7.2 million.

How much for a 0.0001% chance of death? W^(1/0.999999)-W = 0.0069. So you would demand $6.90 for such a risk, and we’d estimate your value of a statistical life at $6.9 million. Pretty close, though not the same.

But how much would you be willing to accept for a 50% chance of death? W^(1/0.5) – W = 999,000. That is, $999 million. So if we multiplied that out, we’d say that your value of a statistical life has now risen to a staggering (and ridiculous) $2 billion.

Mathematically, the estimates are more consistent if we use small probabilities—but all this assumes that people actually know their own utility of wealth and calculate it correctly, which is a very unreasonable assumption.

The much bigger problem with this method is that human beings are terrible at dealing with small probabilities. When asked how much they’d be willing to pay to reduce their chances of dying by 0.01%, most people probably have absolutely no idea and may literally just say a random number.

We need to rethink our entire approach for judging such numbers. Honestly we shouldn’t be trying to put a dollar value on a human life; we should be asking about the dollar cost of saving a human life. We should be asking what else we could do with that money. Indeed, for the time being, I think the best thing to do is actually to compare lives to lives: How many lives could we save for this amount of money?

Thus, if we’re considering starting a war that will cost $1 trillion, we need to ask ourselves: How many innocent people would die if we don’t do that? How many will die if we do? And what else could we do with a trillion dollars? If the war is against Nazi Germany, okay, sure; we’re talking about killing millions to save tens of millions. But if it’s against ISIS, or Iran, those numbers don’t come out so great.

If we have a choice between two policies, each of which will cost $10 billion, and one of them will save 1,000 lives while the other will save 100,000, the obvious answer is to pick the second one. Yet this is exactly the world we live in, and we’re not doing that. We are throwing money at military spending and tax cuts (things that many not save any lives at all) and denying it from climate change adaptation, foreign aid, and poverty relief.

Instead of asking whether a given intervention is cost-effective based upon some notion of a dollar value of a human life, we should be asking what the current cost of saving a human life is, and we should devote all available resources into whatever means saves the most lives for the least money. Most likely that means some sort of foreign aid, public health intervention, or poverty relief in Third World countries. It clearly does not mean cutting taxes on billionaires or starting another war in the Middle East.

Just how poor is poor?

June 2 JDN 2458637

In last week’s post I told you about the richest of the rich, the billionaires with ten, eleven, or even twelve-figure net wealth. My concern about them is only indirect: I care that we have concentrated so many of the resources of our society into this handful of people instead of spreading it around where it would do more good. But it is not inherently bad for billionaires to exist; all other things equal, people having more wealth is good.

Today my topic is the poorest of the poor. Their status is inherently bad. No one deserves it, and while for much of history we may have been powerless to prevent it, we are no longer. We could help these people—quite substantially quite cheaply, as you’ll see—and we are simply choosing not to. Perhaps you as an individual are not making this choice; perhaps, like me, you vote for candidates who support international aid and donate to top-rated international charities. But as a society, we are making this choice. Voters in the First World could all agree—or even 51% agree—that this problem really should be fixed, and we could fix it.

If asked, most people would say they care about world hunger, but either they are deeply ignorant about the solutions we now have availble to us, or they can’t really care about world hunger, or they would have voted for politicians who were committed to actually implementing the spending necessary to fix it. Maybe people would prefer to fix world hunger as long as it didn’t cost them a cent; but ask them to pay even a little bit, and suddenly they’re not so sure.

At current prices, the official UN threshold for “extreme poverty” is $1.90 in real consumption per person per day. I want to be absolutely clear about this: This is adjusted for inflation and local purchasing power. They account for all consumption, including hunting, fishing, gathering, and goods made at home or obtained through bartering. This is not an artifact of failing to adjust for prices or not including goods that aren’t bought with money. These people really do live on less than $700 per year.

Shockingly, they are not all in Third World countries. While the majority of what we call “poverty” in the United States is well above the standard of living of UN “extreme poverty”, there are exceptions to this; there are about 5 million people in the US who are genuinely so poor that they are accurately categorized as at or near that $1.90 per day threshold.

This is such a shocking and horrifying truth that many people will try to deny it, as at least one libertarian think-tank did in a propagandistic screed. No, the UN isn’t lying; it’s really that bad. Extreme poverty in the US could be fixed so quickly, so easily that the fact that it remains in place can only be called an atrocity. Change a few numbers in the IRS code, work out a payment distribution system to reach people without bank accounts using cash or mobile payments, and by the end of the year you would have ended extreme poverty in the United States with no more than a few billion dollars diverted—which is to say, an amount that Jeff Bezos himself could afford to pay, or an amount that could be raised by a single percentage point of capital gains tax applied to billionaires only.
Even so, life is probably better for a homeless person on the street in New York City than it is for a child with malaria whose parents died in civil war in Congo. The New Yorker has access to clean water via drinking fountains, basic sanitation via public toilets (particularly in government buildings, since private businesses often specifically try to exclude the homeless), and basic nutrition via food banks and soup kitchens. The Congolese child has none of these things.

Life for the very poorest is a constant struggle for survival, against disease, malnutrition, dehydration, and parasites. Forget having a refrigerator or a microwave (as most of the poor in the US do, and rightly so—these things are really cheap here); they often have little clothing and no reliable shelter. The idea of going to a school or seeing a doctor sounds like a pipe dream. Surprisingly, there is a good chance that they or someone they know has a smartphone; if so it is likely their most prized possession. Though in Congo in particular, smartphones are relatively rare, which is ironic because the most critical raw material for smartphones—tantalum—is quite prevalent in Congo and a major source of conflict there.

Such a hard life is also typically a short one. The average life expectancy in Congo is less than 65 years. This is mainly due to the fact that almost 15% of children will die before the age of five, though fortunately infant and child mortality in Congo is rapidly declining (though that means it used to be worse than this!).

A disease that is merely inconvenient in a rich country is often fatal in a poor one; malaria is the classic example of this. Malaria remains the cause of over one million deaths per year, but essentially no one dies of malaria in First World countries. It can be treated with quinine, which costs no more than $3 per pill. But when your total consumption is $1.50 per day, a $3 pill is still prohibitively expensive. While in rich countries antibiotic-resistant tuberculosis is a real danger, for the world’s poorest people it doesn’t much matter if the bacteria are resistant to antibiotics, because nobody can afford antibiotics.

What could we do to save these people? A great deal, as it turns out.

Ending extreme poverty worldwide wouldn’t be as easy as ending it in the United States; there’s no central taxation authority that would let us simply change a few numbers and then start writing checks.
We could implement changes through either official development aid or by supporting specific vetted non-governmental organizations, but each of these options carries drawbacks. Development aid can be embezzled by corrupt governments. NGOs can go bankrupt or have their assets expropriated.

Yet even with such challenges in mind, the total cost to end extreme poverty—not all poverty, but extreme poverty—worldwide is probably less than $200 billion per year. This is not a small sum, but it is well within our means. This is less than a third of the US military budget (not counting non-DoD military spending!), or about half what the US spends on gasoline.

Frankly I think we could safely divert that $200 billion directly from military spending without losing any national security. 21st century warfare is much less about blowing up targets and much more about winning hearts and minds. Ending world hunger would win an awful lot of hearts and minds, methinks. Obviously we can’t eliminate all military spending; those first two or three aircraft carrier battle groups really are keeping us and our allies safer. Did we really need eleven?

But all right, suppose we did need to raise additional tax revenue to fund this program. How much would taxes have to go up? Let’s say that only First World countries pay, which we can approximate using the GDP of the US and the EU (obviously we could also include Canada and Australia, but we might not want to include some of Eastern Europe, so that roughly balances out). Add up the $19 trillion of European Union GDP and $21 trillion of US GDP together and you get $40 trillion per year; $200 billion is only 0.5% of that. We would only need to raise taxes by half a percentage point to fund this program. Even if we didn’t make the tax progressive (and why wouldn’t we?), a typical family making $60,000 per year would only need to pay an extra $300 per year.

Why aren’t we doing this?

This is a completely serious question. Feel free to read it in an exasperated voice. I honestly would like to know why the world is willing to leave so many people in so much suffering when we could save them for such little cost.

Green New Deal Part 4: Guaranteeing employment and housing is very hard—but we should still try (public policy)

Apr 28 JDN 2458602

In previous posts I have talked about the “easy parts” of the Green New Deal (infrastructure, healthcare and education), as well as one of the “hard parts” (net-zero carbon emissions). But today it’s time for the “very hard parts”: guaranteed employment and housing.

“Guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States.”

“Providing all people of the United States with – […] (ii) affordable, safe, and adequate housing; (iii) economic security; […].

Let me start by giving you a sense of how difficult this is: No country on Earth has ever successfully guaranteed employment and housing. Even Scandinavia’s extensive social safety nets and active labor market programs are not sufficient to eliminate homelessness or unemployment (though they do dramatically reduce them).
The Soviet Union came close to guaranteed employment, but only as part of a labor system that was extremely inefficient and unproductive. Effectively, they guaranteed everyone a job by not even firing people who didn’t actually do the jobs they were given. This is clearly not a sustainable solution.
There are serious proposals on the table for a job guarantee program, but they are extremely ambitious.
The Center on Budget and Policy Priorities has a proposal that would add 9.7 million people to the federal workforce and cost over $500 billion per year to operate. For comparison, the current non-postal federal workforce is only 2.1 million. The postal service has about another 600,000. So we are talking about quintupling the federal workforce, at a cost comparable to the entire (bloated) military budget. That’s a huge number of people and a lot of money.
The basic idea of such a program is that we can (hopefully) find various forms of public service that need to be done, and pay people to do that public service at a certain minimum level of pay and benefits. These jobs would be available to anyone who wanted them, and any time you lost a private-sector job you could always take the guaranteed job. This would effectively create a floor on wages and benefits; any job that offered a worse deal than the government job would be competed out of existence.
I’ve written before about why I’m skeptical of such programs. If there is all this work that needs done, why aren’t we already doing it? If people have the skills they need to do this work, why is no one currently employing them?
Maybe there is a way to solve these problems. Maybe I’m underestimating the public goods that could be produced by people with low levels of skill. But at the very least we need to face up to the fact that it is a problem. We need to actually find work that it makes sense to guarantee—we can’t just wave our hands and say that “obviously” there is plenty of valuable work to be done that will happen to line up exactly with the skills of the people who are currently unemployed.
And then we need to think about the fact that we can’t really guarantee it, not the way the Soviet Union did. We do need to be able to fire people. We need to be able to fire them for not showing up to work, for being drunk at work, for sexually harassing co-workers, or simply for being incompetent. We need to be have some sort of policy in place for what happens to people who get fired: How long before they can get another guaranteed job? And being fired should hurt: It’s supposed to be an incentive to do your job correctly. We don’t need to punish laziness or incompetence with homelessness—but we do need to punish it with something.
Ultimately what I would like to see is not guaranteed jobs but guaranteed income: A basic income that everyone gets, no questions asked. And then I would hope that our norms about work would change, and people would stop defining themselves by their paid employment and start defining themselves by other things, like creating art, supporting their family, or contributing to their community.
What about guaranteed housing? On that front I am more optimistic.
Housing is quite expensive, particularly in major cities. But homelessness is also very expensive from a societal perspective. In the long run, free housing might actually pay for itself.
One of the most successful programs at reducing homelessness is called Housing First. Rather than going through the usual machinations of shelters and transitional housing, the program just takes people off the streets and gives them homes. Like a basic income, it sounds ludicrously simple; it’s the sort of thing a five-year-old would suggest. Surely it can’t be that easy?
Well, the results speak for themselves. Implementation of Housing First programs in several major US cities has resulted in reductions in homeless of over 30% and reductions in the social cost of homelessness of over 50%.

The current population of about 80,000 chronically homeless Americans each cost taxpayers about $40,000 per year in social costs, via emergency room visits, shelter maintenance, crime, court costs, and so on. This is about $3 billion per year. For that same amount of money—or potentially even less—we could have put all those people into homes.

There is an additional population of about 500,000 transient homeless—people who are homeless for a short period after an adverse life event (such as losing a job, having a divorce, or getting their mortgage foreclosed) but will find housing within a few weeks or months. Their situation is not as dire, and the costs they impose on society are not as large. But standard estimates are still generally over $10,000 per person per year—which, if given to them in cash, would probably be enough to get most of these people into homes.
So this is not a question of affordability: We are already paying these costs, but doing so in a way that doesn’t actually solve homelessness.
The real challenge is subtler than that: How do we make this fair and politically feasible?
When we’re talking about chronically homelessness, I think we can make a pretty strong case: These people are in a really bad way and they need our help. Since we’re already spending all this money anyway, we may as well spend it in a way that would actually help them.
But transient homelessness gets a bit more complicated. Many people who are transiently homeless are not all that poor. They may be college students, or recent divorcees, or failed entrepreneurs, or people who could afford a home but not the expensive home they actually tried to buy. Once they get back on their feet, they will probably go on to maintain a middle-class standard of living. So it really does seem unfair to just hand these people free homes that other people would not get.
And making housing in general completely free is simply a pipe dream. No country has ever even gotten close to that. Housing is such a huge part of a country’s expenditures that even a country like Denmark where the government is half the economy still can’t afford to put everyone in public housing.
I think what I would do instead is provide guaranteed subsidized loans—much as we do for student loans. These loans could be used to pay rent, to pay a mortgage, or even to make a down payment. They would be available to any adult US citizen, regardless of credit history, in relatively large amounts (the average down payment in the US is about $14,000, but as high as $50,000 is not unusual), at very low interest rates (I’d say aim for 0% real interest, so target the nominal interest rate to inflation) and very generous repayment terms (like student loans, you would never be required to pay more than a certain percentage of your adjusted gross income on the loan). If someone did try to avoid paying, their wages could be garnished or their taxes could be increased—this would make the default rates very low.
This policy would allow people who are temporarily homeless to get back into a home immediately, rather than having to wait until they can get more income—which can become a paradox as most employers will require a permanent address. But it wouldn’t be a free home; this policy would cost taxpayers next to nothing. The only costs would come from subsidizing interest rates and bearing defaults, which wouldn’t be more than about 5% of the outstanding balance—even if we loaned out as much as $100 billion, that still wouldn’t be more than what we’re currently losing in social costs of homelessness.
Had this policy been in place during the 2008 crash, people who lost their homes to foreclosure would have been able to immediately re-borrow and buy new homes. This would have blunted the financial crisis and maybe even done as much as the far more expensive stimulus package and quantitative easing programs.
These policies would not, unfortunately, eliminate unemployment and homelessness. Maybe that’s not even possible. But they would at least greatly reduce the harm caused by unemployment and homelessness, and that alone makes them worth doing.

I don’t care what happened in that video

Jan 27 JDN 2458511

Right now there is an ongoing controversy over a viral video of a confrontation between young protesters wearing MAGA hats and an elderly Native American man. Various sources are purporting to show “a fuller picture” and “casting new light” and showing “a different side”. Others are saying it’s exactly as bad as it looks.

I think it probably is as bad as it looks, but the truth is: I don’t care. This is a distraction.

If you think litigating the precise events of this video is important, you are suffering from a severe case of scope neglect. You are looking at a single event between a handful of people when you should be looking at the overall trends of a country of over 300 million people.

First of all: The government shutdown only just ended. There are still going to be a lot of pieces to pick up. That’s what we should be talking about. That’s what we should be posting about. That’s what we should be calling Senators about. This is a national emergency. The longer this lasts, the worse it is going to get. People will die because of this shutdown—from tainted food and polluted water and denied food stamps. Our national security is being jeopardized—particularly with regard to cybersecurity.

The shutdown was also a completely unforced error. Government shutdowns shouldn’t even exist, and now that this one is over, we need to change the budget process so that this can never happen again.

And if you want to talk about the racist, sexist, and authoritarian leanings of Trump supporters, that’s quite important too. But it doesn’t hinge upon one person or one confrontation. I’m sure there are Trump supporters who aren’t racist; and I’m sure there are Obama supporters who are. But the overall statistical trend there is extremely strong.

I understand that most people suffer from severe scope neglect, and we have to live in a world filled with such people; so maybe there’s some symbolic value in finding one particularly egregious case that you can put a face on and share with the world. But if you’re going to do that, there’s two things I’d ask of you:

1. Make absolutely sure that this case is genuine. Nothing will destroy your persuasiveness faster than holding up an ambiguous case as if it were definitive.
2. After you’ve gotten their attention with the single example, show the statistics. There are truths, whole truths, and statistics. If you really want to know something, you use statistics.

The statistics are what this is really about. One person, even a hundred people—that really doesn’t matter. We need to keep our eyes on the millions of people, the directions of entire nations. For a lot of people, looking at numbers is boring; but there are people behind those numbers, and numbers are what tell us what’s really going on in the world.

For example: Trump really does seem to have brought bigotry out in the open. Hate crimes in the US increased for the third year in a row last year.

Then there are his direct policy actions which are human rights violations: The number of children detained at the border has skyrocketed to almost 13,000.

On the other hand, the economy is doing quite well: Unemployment stands at about 4%, and median income is increasing and poverty is decreasing.
Global extreme poverty continues its preciptious decline, but global climate change is getting worse, and already past the point where some serious consequences are going to be unavoidable.

Some indicators are more ambiguous: Corporate profits are near their all-time high, even in inflation-adjusted terms. That could be a sign of an overall good economy—but it also clearly has something to do with redistribution of income toward the wealthy.

Of course, all of those things were true yesterday, and will be true tomorrow. They were true last week, and will be true next week. They don’t lend themselves to a rapid-fire news cycle.

But maybe that means we don’t need a rapid-fire news cycle? Maybe that’s not the best way to understand what’s going on in the world?

The best thing we can do to help them is let them in


 

Dec 23 JDN 2458476

This is a Christmas post, but not like most of my other Christmas posts. It’s not going to be an upbeat post about the effects of holidays on the economy, or the psychology of gift-giving, or the game theory that underlies the whole concept of a “holiday”.

No, today is about an urgent moral crisis. This post isn’t about Christmas as a weird but delightful syncretic solstice celebration. This post is about the so-called “spirit of Christmas”, a spirit of compassion and generosity that our country is clearly not living up to.

At the time of writing, the story had just come out: Jakelin Maquin, a 7-year-old girl from Guatemala died in the custody of US border agents.

Even if it’s true that the Border Patrol did everything they could to help her once they found out she was dying (and the reports coming out suggest that this is in fact the case), this death was still entirely preventable.

The first question we should ask is very basic: Why are there little girls in custody of border agents?
The next question is even more fundamental than that: Why are there border agents?

There are now 15,000 children being held by US Border Patrol. There should not be even one. The very concept of imprisoning children for crossing the border, under any circumstances, is a human rights violation. And yes, this is new, and it is specific to Donald Trump: Bush and Obama never separated children from their families this way. And while two-thirds of Americans oppose this policy, a majority of Republicans support it—this child’s blood is on their hands too.

Yet despite the gulf between the two major parties, the majority of Americans do support the idea of restricting immigration in general. And what I want to know is: Why? What gives us that right?

Let’s be absolutely clear about what “restricting immigration” means. It means that when someone decides they want to come to our country, either to escape oppression, work toward a better life, or simply to live with their family who came here before, men with guns come and lock them up.

We don’t politely ask them to leave. We don’t even fine them or tax them for entering. We lock them in detention camps, or force them to return to the country they came from which may be ruled by a dictator or a drug cartel.

Honestly, even the level of border security US citizens are subjected to is appalling: We’ve somehow come to think of it as normal that whenever you get on an airplane, you are first run through a body scanner, while all your belongings are inspected and scanned, and if you are found carrying any contraband—or if you even say the wrong thing—you can be summarily detained. This is literally Orwellian. “Papers, please” is the refrain of a tyrannical regime, not a liberal democracy.

If we truly believe in the spirit of compassion and generosity, we must let these people in. We don’t even have to do anything; we just need to stop violently resisting them. Stop pointing guns at them, stop locking them away. How is “Stop pointing guns at children” controversial?

I could write an entire post about the benefits for Americans of more open immigration. But honestly, we shouldn’t even care. It doesn’t matter whether immigration creates jobs, or destroys jobs, or decreases crime, or increases crime. We should not be locking up children in camps.

If we really believe in the spirit of compassion and generosity, the only thing we should care about is whether immigration is good for the immigrants. And it obviously is, or they wouldn’t be willing to go to such lengths to accomplish it. But I don’t think most people realize just how large the benefits of immigration are.

I’m going to focus on Guatemala, because that’s where Jakelin Maqin was from.

Guatemala’s life expectancy at birth is 73 years. The life expectancy for recent Hispanic immigrants to the US is 82 years. Crossing that border can give you nine years of life.

And what about income? GDP per capita PPP in the US is almost $60,000 per year. In Guatemala? Just over $8,000. Of course, that’s not accounting for the fact that Guatemalans are less educated; but even the exact same worker emigrating from there to here can greatly increase their income. The minimum wage in Guatemala is 90 GTQ per day, which is about $11.64. For a typical 8-hour workday, the US minimum wage of $7.25 per hour comes to $58 per day. That same exact worker can quintuple their income just by getting a job on the other side of the border.

Almost 60 percent of Guatemalans live in poverty. Over 20% live below the UN extreme poverty line. A full 11% of Guatemala’s GDP is remittances: Money that immigrants pay to help their families back home. A further 7% is exports to the US. This means that almost a fifth of Guatemala’s economy is dependent on the United States.

For comparison, less than 0.5% of Americans live in extreme poverty. (The UN recently claimed almost 6%; the Trump administration has claimed only 0.1% which is even more dubious. Both methodologies are deeply flawed; in particular, the UN report looks at income, not consumption—and consumption is what matters.) The overall poverty rate in the US is about 12%.

These figures are still appallingly high for a country as rich as the US; our extreme poverty rate should be strictly zero, a policy decision which could be implemented immediately and permanently in the form of a basic income of $700 per person per year, at a total expenditure of only $224 billion per year—about a third of the military budget. The net cost would in fact be far smaller than that, because we’d immediately turn around and spend that money. In fact, had this been done at the trough of the Great Recession, it would almost certainly have saved the government money.

Making our overall poverty rate strictly zero would be more challenging, but not obviously infeasible; since the poverty line is about $12,000 per person per year, it would take a basic income of that much to eliminate poverty, which would cost about $3.8 trillion per year. This is a huge expenditure, comparable as a proportion of GDP to the First World War (though still less than the Second). On the other hand, it would end poverty in America immediately and forever.

But even as things currently stand, the contrast between Guatemala and the US could hardly be starker: Immigrants are moving from a country with 60% poverty and 20% extreme poverty to one with 12% poverty and 0.5% extreme poverty.

Guatemala is a particularly extreme example; things are not as bad in Mexico or Cuba, for example. But the general pattern is a very consistent one: Immigrants come to the United States because things are very bad where they come from and their chances of living a better life here are much higher.

The best way to help these people, at Christmas and all year round, literally couldn’t be easier:

Let them in.

How much should we give?

Nov 4 JDN 2458427

How much should we give of ourselves to others?

I’ve previously struggled with this basic question when it comes to donating money; I have written multiple posts on it now, some philosophical, some empirical, and some purely mathematical.

But the question is broader than this: We don’t simply give money. We also give effort. We also give emotion. Above all, we also give time. How much should we be volunteering? How many protest marches should we join? How many Senators should we call?

It’s easy to convince yourself that you aren’t doing enough. You can always point to some hour when you weren’t doing anything particularly important, and think about all the millions of lives that hang in the balance on issues like poverty and climate change, and then feel a wave of guilt for spending that hour watching Netflix or playing video games instead of doing one more march. This, however, is clearly unhealthy: You won’t actually make yourself into a more effective activist, you’ll just destroy yourself psychologically and become no use to anybody.

I previously argued for a sort of Kantian notion that we should commit to giving our fair share, defined as the amount we would have to give if everyone gave that amount. This is quite appealing, and if I can indeed get anyone to donate 1% of their income as a result, I will be quite glad. (If I can get 100 people to do so, that’s better than I could ever have done myself—a good example of highly cost-effective slacktivism.)

Lately I have come to believe that this is probably inadequate. We know that not everyone will take this advice, which means that by construction it won’t be good enough to actually solve global problems.

This means I must make a slightly greater demand: Define your fair share as the amount you would have to give if everyone among people who are likely to give gave that amount.

Unfortunately, this question is considerably harder. It may not even have a unique answer. The number of people willing to give an amount n is obviously dependent upon the amount x itself, and we are nowhere close to knowing what that function n(x) looks like.

So let me instead put some mathematical constraints on it, by choosing an elasticity. Instead of an elasticity of demand or elasticity of supply, we could call this an elasticity of contribution.

Presumably the elasticity is negative: The more you ask of people, the fewer people you’ll get to contribute.

Suppose that the elasticity is something like -0.5, where contribution is relatively inelastic. This means that if you increase the amount you ask for by 2%, you’ll only decrease the number of contributors by 1%. In that case, you should be like Peter Singer and ask for everything. At that point, you’re basically counting on Bill Gates to save us, because nobody else is giving anything. The total amount contributed n(x) * x is increasing in x.

On the other hand, suppose that elasticity is something like 2, where contribution is relatively elastic. This means that if you increase the amount you ask for by 2%, you will decrease the number of contributors by 4%. In that case, you should ask for very little. You’re asking everyone in the world to give 1% of their income, as I did earlier. The total amount contributed n(x) * x is now decreasing in x.

But there is also a third option: What if the elasticity is exactly -1, unit elastic? Then if you increase the amount you ask for by 2%, you’ll decrease the number of contributors by 2%. Then it doesn’t matter how much you ask for: The total amount contributed n(x) * x is constant.

Of course, there’s no guarantee that the elasticity is constant over all possible choices of x—indeed, it would be quite surprising if it were. A quite likely scenario is that contribution is inelastic for small amounts, then passes through a regime where it is nearly unit elastic, and finally it becomes elastic as you start asking for really large amounts of money.

The simplest way to model that is to just assume that n(x) is linear in x, something like n = N – k x.

There is a parameter N that sets the maximum number of people who will ever donate, and a parameter k that sets how rapidly the number of contributors drops off as the amount asked for increases.

The first-order condition for maximizing n(x) * x is then quite simple: x = N/(2k)

This actually turns out to be the precisely the point at which the elasticity of contribution is -1.

The total amount you can get under that condition is N2/(4k)

Of course, I have no idea what N and k are in real life, so this isn’t terribly helpful. But what I really want to know is whether we should be asking for more money from each person, or asking for less money and trying to get more people on board.

In real life we can sometimes do both: Ask each person to give more than they are presently giving, whatever they are presently giving. (Just be sure to run your slogans by a diverse committee, so you don’t end up with “I’ve upped my standards. Now, up yours!”) But since we’re trying to find a benchmark level to demand of ourselves, let’s ignore that for now.

About 25% of American adults volunteer some of their time, averaging 140 hours of volunteer work per year. This is about 1.6% of all the hours in a year, or 2.4% of all waking hours. Total monetary contributions in the US reached $400 billion for the first time this year; this is about 2.0% of GDP. So the balance between volunteer hours and donations is actually pretty even. It would probably be better to tilt it a bit more toward donations, but it’s really not bad. About 60% of US households made some sort of charitable contribution, though only half of these received the charitable tax deduction.

This suggests to me that the quantity of people who give is probably about as high as it’s going to get—and therefore we need to start talking more about the amount of money. We may be in the inelastic regime, where the way to increase total contributions is to demand more from each individual.

Our goal is to increase the total contribution to poverty eradication by about 1% of GDP in both the US and Europe. So if 60% of people give, and currently total contributions are about 2.0% of GDP, this means that the average contribution is about 3.3% of the contributor’s gross income. Therefore I should tell them to donate 4.3%, right? Not quite; some of them might drop out entirely, and the rest will have to give more to compensate.
Without knowing the exact form of the function n(x), I can’t say precisely what the optimal value is. But it is most likely somewhat larger than 4.3%; 5% would be a nice round number in the right general range. This would raise contributions in the US to 2.6% of GDP, or about $500 billion. That’s a 20% increase over the current level, which is large, but feasible.

Accomplishing a similar increase in Europe would then give us a total of $200 billion per year in additional funds to fight global poverty; this might not quite be enough to end world hunger (depending on which estimate you use), but it would definitely have a large impact.

I asked you before to give 1%. I am afraid I must now ask for more. Set a target of 5%. You don’t have to reach it this year; you can gradually increase your donations each year for several years (I call this “Save More Lives Tomorrow”, after Thaler’s highly successful program “Save More Tomorrow”). This is in some sense more than your fair share; I’m relying on the assumption that half the population won’t actually give anything. But ultimately this isn’t about what’s fair to us. It’s about solving global problems.