David Brooks "The Wrong Inequality"

In my last post, I cited statistics from David Brooks's Oct. 31, 2011 op-ed "The Wrong Inequality."  But the article irritated me enough to cause me to write a separate post about it.

Brooks agrees that "the zooming wealth of the top 1 percent is a problem," but he says:

"it’s not nearly as big a problem as the tens of millions of Americans who have dropped out of high school or college. It’s not nearly as big a problem as the 40 percent of children who are born out of wedlock. It’s not nearly as big a problem as the nation’s stagnant human capital, its stagnant social mobility and the disorganized social fabric for the bottom 50 percent."

He concludes: "If your ultimate goal is to reduce inequality, then you should be furious at the doctors, bankers and C.E.O.’s. If your goal is to expand opportunity, then you have a much bigger and different agenda."

He seems to be hugely missing the point.  It's not that we should be upset about "zooming" incomes of the rich in the abstract.  OWS is upset because of the control over the government that that "zooming" wealth enables the top 1% to exert.  

Yes, there are many problems in this country that can't be directly traced to the excesses of the top 1% (although of course, the current recession and much of the country's crippling debt burden can).  But what are we supposed to do to solve those problems, which have been with us since long before the Occupy Wall Street movement?  Is he proposing we start a "stop having kids out of wedlock movement"?

No, OWS has identified a specific problem that CAN be fixed:  The US government is largely controlled by wealth.  Fixing THAT problem might not immediately solve the other problems that Brooks is talking about, but at least it will align government more closely with the aims and needs of the majority of people, and bring the government back into harmony with its founders' democratic ideals.  That's not a call for big government as opposed to small government -- we just need a government that acts in the interests of the majority, rather than the wealthy minority.  And perhaps if that happens, solutions to the social problems will start to appear. 

Who are the 1%?

The answer seems to be nobody really knows.  But here are some figures:

Numbers from Suzy Khimm in the Oct. 6, 2011Washington post:

By household income:  Any household with total income greater than or equal to $516,633 (2010) (in in 2010 (in 2007 it peaked at $646,195) (adjusted for 2011 dollars, according to calculations by the Tax Policy Center).  This is the minimum; the average income is $1,530,773 (note that "average" income, as Nassim Taleb has explained, is not a particularly helpful concept (unlike, e.g. average height).  When Bill Gates walks into a room, the average person in that room becomes a billionaire).  According to CNN, IRS figures say the top 1% floor for adjusted gross income was $343,927.


By net worth:   average of $14 million in 2009 (per a 2011 report from the Economic Policy Institute) (peaked at $19.2 million in 2007) (not clear if 2011 dollars).  As mentioned above, "average" net worth is not a helpful concept; we'd be much more interested in knowing what the minimum net worth is.  Interestingly, Khimm's post as it reads today is already corrected to fix a misconception about floor vs. average.  But it's still not as helpful as it could be.

By profession:  David Brooks's column today gives the following for top 1% of "earners" (all prefaced by "about"):

31% "started or manage nonfinancial businesses"
16% doctors
14% "in finance"
8% lawyers
5% engineers
2% sports, entertainment or the media.

That adds up to 76% -- one might well ask who are the other 24% (of the top 1%).  I wonder if it's "earnings" off of inherited wealth?  That would be pretty shocking.

Brooks's numbers are consistent with numbers reported in the above-referenced CNN article:

"A separate study found that financial professionals made up about 14% of the top rank in 2005.
Executives, managers and supervisors working outside of finance accounted for 31%, the largest share, according to an analysis by Jon Bakija of Williams College, Adam Cole of the Treasury Department and Bradley Heim of Indiana University. Medical professionals came in at 15.7%, while lawyers made up 8.4%."

So the numbers apparently come from different sources, and people have been lumping them together.  

Beware of "Geniuses"

There are no true geniuses, only acts of genius.  What do I mean by that?

The fact of the matter is that most people -- even very smart people -- do not always get it right.  I'll concede that all other things being equal, smart people are more likely to "get it right" than dumb people.  But the problem arises when we decide that what smart people say is "right" simply because they are smart.  When this starts to happen, the smart people start to think that they and their intelligence are infallible.  And if we've put them in positions of power, then that's going to be a problem for the rest of us.

Take Alan Greenspan.  If you met him, you'd probably think he was one of the most intelligent people you ever met.  No doubt he's smart.  But at some point, he started believing that he was some kind of permanent genius.  Maybe it was when Bob Woodward wrote "The Maestro" about him (nice job, Bob!).  With hindsight, it's now easy to show that Greenspan was spectacularly wrong about a whole lot of very important things.  (Read Matt Taibbi's "Griftopia" or any other book about the financial crisis.)  And that had a lot to do with where the economy is today.  And now it's obvious to everyone that Greenspan isn't all that smart.  In fact, the slowness with which he has come to realize how wrong he was comes across as something like stupidity.

And take Einstein.  Yes, the theory of relativity was a work of genius.  But his addition of a cosmological constant to make the universe stationary was, according to him, a blunder. (As it turns out, there may be a cosmological constant after all -- to account for cosmic acceleration -- but that's not what Einstein was thinking.  But at least Einstein was quick to abandon the constant in the face of Hubble's evidence.)

In other words, while there may be really smart people among us, we can't assume that everything they do is "genius."  Better to focus on their individual accomplishments, in isolation.  If someone has done a lot of "genius" things, that's great.  Call those accomplishments acts of genius -- but please don't call him a "genius."  It may go to his head, and will only encourage him to stop checking his work.

Was Napoleon a "genius"?  He might have been smart, but he got a lot of people killed, and lost everything in the end, perhaps because of his own belief that he was a genius.

How about Newton?  In some respects unquestionably.  But in others, not so much.

Were any of the 100 authors identified by Harold Bloom in his "Genius" true geniuses in the sense that they were always right about everything?  I doubt it.  They were just talented writers and thinkers who now and then managed to produce a work of genius.

And then there's Larry Summers.  When he first started out (in the 1980's), he questioned the ability of financial markets to regulate themselves (referring to it all as a shell game), and proposed a tax on purchases of corporate securities.  (I have this from John Cassidy's book about market failure).  But then he changed his mind, had some prominent government positions, made tons of money, and kept right on supporting Greenspan's policies up until the moment everything blew up.  So that's a really smart person who thought carefully about both sides of the issue, and picked the wrong side.  Could he have made that kind of money if he had stuck with his original view?  Probably not.  But I'm sure he thought that it was logic, not money, driving his thinking.

And how about the managers of LTCM (Long Term Capital Management)?  Their "genius" was validated by Nobel prizes and academic accolades.  And yet, they put the world economy at risk for the sake of a few nickels.  Here's a quote from wikipedia:

"LTCM's strategies were compared (a contrast with the market efficiency aphorism that there are no $100 bills lying on the street, as someone else has already picked them up) to 'picking up nickels in front of a bulldozer'[29] – a likely small gain balanced against a small chance of a large loss, like the payouts from selling an out-of-the-money option."

Of course, since they're so smart, they may well have realized that even if everything blew up (which it did), they personally wouldn't suffer all that much (which they didn't).  See Roger Lowenstein's "When Genius Fails."  But the lesson for the rest of us should have been STOP TRUSTING THE SMARTIES!

Occupy Wall Street and the Tea Party

Very strange to hear Republican/Fox News commentators giving their "take" on the Occupy Wall Street movement.  They seem to feel a need to characterize it, and to characterize it as "loony"  (I think I heard Bill O'Reilly say they were a bunch of loons).  Or they need to compare the movement with hippies, communists, etc.  I heard one of them -- maybe it was Hannity -- talking about how dignified the Tea Party was, as opposed to this crowd.  And of course they quote whatever extreme "planks" of the OWS platform they can get hold of, e.g. "immediately cause all debt to be forgiven."

But it seems to me that Occupy Wall Street is more like than unlike the Tea Party.  Both movements appeal to people who think that the government isn't working.  And on that, both are right.  The Tea Party seems to think that the solution is to reduce the size of government, and that that will solve all our problems.  The Occupy Wall Street movement seems agnostic on the size of government; they just want to remove corporate influence. 

So how do I pick?  Well, I just don't know what the result will be if the Tea Party realizes its goal.  Obviously, a smaller government should result in less government waste, which is a good thing.  But it doesn't solve the problem of corporate influence on government.  And if you're talking about reducing the resources of the parts of government that regulate the "bad" things corporations want to do -- like pollution and financial shenanigans -- then reducing the size of govenment may well do more harm than good.  In fact, the smaller it is, the easier it will be for the corporations to control.  Some of what the Tea Party wants -- e.g. abolition of the EPA -- is straight out of the corporate influence playbook.  And that's almost certainly not going to be good for the common people.  Remember, corporations would love to pollute our water and air again; it has only been regulation that has kept that in check.

So it seems to me that the OWS movement has the better focus.  Let's focus on where corporations are screwing things up.  I'll hasten to add that there are a lot of places where corporations are just what America needs -- we need the jobs, we need the research, we need the technology, etc.  So it's fine to have a corporation-friendly, capitalistic society.  But that's very different from having a society that is governed by the corporations themselves, which is where some people think we are heading -- or where we may already be. 

Celeste Pizza for One Size

My pizza looked smaller than usual today.  The package was Celeste cheese, 5.08 oz. 

It appears that some stores (including WalMart and Amazon) sell Celeste "original" cheese, which is 5.58 ounces.  Obviously if you are getting cheese in the first place, you are not necessarily getting the most bang for your buck (since pepperoni and supreme weigh more but cost the same), but it's a bit annoying to find that there are two different "cheeses" at the same price.

But here's something else -- I just googled Celeste four cheese, and find that they are selling versions that are 5.22 oz and versions that are 5.74 oz.  And some of each are labeled "original."  Looks like you can get the "zesty" version in both 5.22 and 5.74 oz sizes as well. 

While I'm the first to admit that smaller pizza is probably better for me, this does seem a bit deceptive.  Maybe in some markets "one" (as in pizza for "one") is just a larger and hungrier individual.  Or just maybe Celeste has found a way to save a bit of money on ingredients . . . .

Caveat emptor!

Santitas scam, continued

Ok, Santitas is unacceptable, as is any Frito Lay product, at this point.  Turns out Trader Joes sells a 2 pound bag of tortilla chips for $2.99.  So that's $1.50 a pound, cheaper than Santitas ever was, even when they were being honest.  The Trader Joe chips probably not quite as good as "name brand chips", but then again, under melted shredded cheddar cheese, is rather hard to tell.

Half and half scam

Of course it's always impossible to tell (based on simple consumer experience)  if something is overpriced at some stores or if other stores are using it as a loss leader.  But the bottom line is that half and half costs significantly less at some stores than others.  Here in the DC area, a pint is typically $1.49 (sometimes "on sale" for $1.39) at Shoppers Food Warehouse, Giant, and Safeway, and a quart is typically $2.49. 

But I've recently noticed that Target(!) and Trader Joe's sell the quart for $1.99 regular price (which, up until now, was a price only available at Sam's Club or Costco price. And at Trader Joe's, the regular price for a pint seems to be $1.29.

Of course, the problem with Trader Joe's is that they also sell soy milk creamer (for $1.49 a pint), which this wanna-be vegan was unable to resist.