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The Son Also Riseslooks at social mobility, of which income and wealth correlation from generation to generation is a component, across a range of societies including the U.S., England, Sweden, India, China, Japan, and Korea. It turns out that there is no correlation between the ethnic homogeneity of a society and the amount of social mobility, contrary to what one would expect if racism were a factor in keeping sub-sections of a society either in a high-status or low-status condition.

I’m going to be writing about this important book in the days to come so I recommend grabbing the Kindle version to everyone who is interested in the questions “Why are some people more successful than others?”, “Whom should I have children with?”, “How many children should I have?”, and “What should I do with those children?”

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If you’re passionate about helicopter instruction you might enjoy this interview with me on the Rotary Wing Show (interviewer: Australian instructor Mick Cullen, who is too modest to mention his own background flying military helicopters such as the Huey and Blackhawk).

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I attended a session run by the Union for Radical Political Economics (URPE), a 50-year group that can be lumped roughly into the larger “heterodox” camp of economics that had a small but continuous presence at the American Economics Association 2015 conference.

Why is there any reason to doubt that the mainstream “neoliberal” economists are correct? If they were, why would they waste their time working as economists? Paul Krugman, for example, writes New York Times articles that are based on the assumption that he knows the optimum way to run an economy. But if he actually did possess this knowledge he could survey the world’s countries with tradeable currencies and then, using the crazy leverage that is available for currency trading, bet on the sure winners and against the sure losers. He could thus accumulate infinite wealth within a few years. Why scribble away for the New York Times when he can join the Forbes 400 at the #1 spot?

A founder of the URPE group, Howard Wachtel, was the first speaker. He is an example of a friend’s rule that the most capable people in any field tend to be the pioneers (see Vermeer, for example, in the early years of modern oil painting). Wachtel said that what motivated his early research was the observation that labor markets were not functioning as predicted by classical economics. People with similar levels of education, and therefore presumably marginal productivity, were being paid different amounts. He looked especially at those with just a high-school degree or a maximum of two years of college. If they found employment in the Detroit automobile industry, for example, they could earn much higher wages than in a different occupation or in a similar occupation elsewhere in the U.S. [Note: I’m not sure that this falsifies classical economics; the auto makers were at the time an oligopoly extracting above-normal profits from American consumers and a powerful labor union was able to intercept some of those profits before they reached the shareholders; the free competitive market with perfect information postulated for much of Econ 101 is very far from the reality of the Detroit automakers circa 1970.]

Wachtel said that the structure of the labor market has a greater effect on wages than human capital and that proof of this is the “vast investments in education and student loans” that have been made for the preceding decades without much effect on wages (see previous posting). Wachtel gave a compelling example of why we need of why we need a massive wealth tax to address complaints about income inequality: “What if I am playing monopoly with my grandchildren and I win the first game then say ‘Let’s play again but each person will start with however much money he or she had at the end of the last game.’ Very quickly they figure out that this isn’t a fair way to play.” (It is a great story but Gregory Clark spoils the ending with his 800 years of data; it turns out that when an English family had 15 children those kids did not turn out dramatically poorer than when a prominent English family had just a handful of children. See The Son Also Rises.)

The next speaker was Julie Matthaei, a professor at Wellesley College. Her talk was titled “Workers, Women, and Revolution: A Marxist-Feminist Perspective on URPE.” She talked about how Marxist-Feminists like herself are committed to ending both patriarchy (male domination) and capitalism (class domination), pointing out that the answer to “Can women be liberated in capitalism?” is “No because they would still be dominated by class.” Her group was forced to adapt in the 1980s when they came under criticism from black and lesbian academics. They also decided to broaden their horizons internationally by adding a program to object to the Jewish occupation of Palestine (Matthaei did not mention looking into criticizing any of the other 195 countries in the world; I’m wondering if this is an illustration of this recent Atlantic magazine story where the journalist says that supporting the Palestinian cause is popular among journalists in Israel because “You can claim to be speaking truth to power, having selected the only ‘power’ in the area that poses no threat to your safety.”) Matthaei criticized Sheryl Sandberg’s book Lean In (my review) as “an example of liberating only white privileged women”: “Sandberg talks about breaking the glass ceiling but for poor women the basement is flooding.” (After the talk I asked her about her abstract that cited the problem of “women’s unpaid reproductive work”. Didn’t the child support guidelines that we have had in place for 20+ years now put a price on reproductive work? If a woman can get paid for having a baby or selling her abortion, what kind of unpaid reproductive work is left? Matthaei cited the work that women do within an intact marriage.)

Michael Zweig talked about how the labor market must be viewed as employers and workers meeting as classes, rather than as individuals, and that the market is segregated by race and gender (note that this was seemingly contradicted by the fake resume study presented at the conference by a group of Harvard researchers). Zweig said that Gary Becker predicted that the market would eliminate racism, e.g., if black workers of the same quality were available at a lower price than white workers, a company such as Target would hire all black workers and put Walmart out of business. Zweig asserted that the fact that blacks and women still are paid less than white men shows that “capitalism embodies racism and patriarchy. It is not enough that we have a black president. We now know that. Class matters.”

Marlene Kim of U. Mass Boston was the “discussant.” She suggested that everyone needed to incorporate more feminism in their papers and also bring in “cutting edge theories on race” from Psychology. In her view the answer to income inequality was unionization. (I didn’t mention that I had been a member of a union that negotiated a 30:1 hourly wage ratio between senior and junior workers; see “Unions and Airlines”) For an example of why capitalism needs to be torn down she cited USDA inspectors coming out every week to farms to make sure that fruit being packed was up to standards but ignoring obvious child labor law violations. (I’m wondering if the issue is simply that there are separate government offices for performing these inspections, as noted in my posting about FAA oversight of my single-pilot helicopter operation.) But if capitalism is to be torn down, what other enterprise is big enough to take it on other than the U.S. government?

Barbara Bergmann, an influential feminist economist who is too old to travel to a conference like this one, recently published What to Do About Single Parenthood” (Huffington Post). She proposes more government support of children, regardless of the parents’ marital and living status and income, so that children would become essentially cost-free or perhaps even profitable even for married couples. I called her up (she’s a family friend) and asked whether she meant this to be a supplement to the existing litigated system of child support or a replacement for it. For example, could one still collect $4 million after a night of passion with a dermatologist (oxymoron?) and then pocket 100% of the money because the Feds were now paying all direct child expenses? Professor Bergmann said that this system would be a supplement and “I wouldn’t favor weakening any of the existing systems.”

[Note that cost-free (for married couples) or pure-profit (for child support plaintiffs) children might help address the “sustainability of the welfare state” problem identified by some of the demographically-minded economists at the conference. With the exception of the Netherlands and Singapore, most modern rich countries run Social Security-style pensions as a Ponzi scheme in which yet-to-be-born workers will pay for the pensions of current adults. Alicia Adsera and Ana Ferrer brought a paper titled “Do Migrants Adapt to Fertility Patterns in Destination Countries? Evidence from OECD Countries” and noted that college-educated Canadians have a lower-than-average and lower-than-replacement rate of fertility. In other words, they are doing A Farewell to Alms in reverse (in Farewell we learn that economic growth was driven by highly educated people having larger families than the illiterate)). Even without that, apparently almost every developed country is in trouble because so many systems were built under the assumption of an infinitely expanding population. (Assumptions made with the advice of mainstream economists, I might add!)]

An issue with this group is that they don’t seem to have any criteria for disbanding. If total compensation for all working Americans fell within a 3:1 range, would that be sufficient to call the economy “fair”? Would it require a 2:1 range? Would the group disband with a “mission accomplished” if all nations worldwide had only the income disparity of Sweden? URPE doesn’t seem seem to have a concrete numerical goal. Another issue is that data are used selectively. In the 1980s it wasn’t generally possible for an American to earn more from child support than from going to college and working. Then a sociologist published Divorce Revolution asserting that women were becoming 73 percent poorer (out of a maximum impoverishment level of 100 percent) after filing divorce lawsuits. Aside from some simple data coding errors identified 11 years later in an academic paper, the main reason for this counterintuitive result (why were women hiring lawyers and going down to the courthouse asking judges to make them poor? Then, as now, the majority of people suing are women) was that the author didn’t consider earned household income. A women who sued her VHS video cassette rental store clerk to marry a plastic surgeon was counted as impoverished because the author looked only at what the woman was collecting from the clerk and the total number of people in the household. So the marriage to the plastic surgeon made her poorer, not richer (since the surgeon’s income was not counted, only his postulated consumption of food and living space). The modern folks who earn a living by saying that women are getting a raw deal from the U.S. system flip this technique around. They look only at what women earn from wages. If the women is married, the woman’s ability to spend a share of the husband’s paycheck is ignored. If the woman is divorced, the child support, alimony, and tax-free property she may have received is ignored. One of the plaintiffs that we use as an example in our book is Jessica Kosow of Kosow v. Shuman (see previous posting). After a four-year marriage she obtained a spending power 3.2:1 larger than her University of Pennsylvania classmates. But her case would be evidence that the U.S. system is rigged against women because she has no W-2 job (based on an interview with the defendant in the case, two years after the trial before Judge Maureen Monks in Middlesex County).

It it tough to remain unbiased in this heterodox versus mainstream economics debate because all of us are bombarded on a regular basis with pronouncements from the mainstreamers. However, based on the presentations that I saw at the conference, the heterodox folks are begging the question (in the logical fallacy sense). Instead of having fancy graphs and lots of data like in the mainstream papers, which are designed to persuade and defend against criticism, the heterodox folks simply assume that everyone in the room already agrees with them. Thus the discussion in a heterodox session is how to achieve what are characterized as “reforms” rather than about, for example, whether data support the proposition that Americans employers are more interested in indulging their racism and sexism than in profits (the kind of project that Professor Wachtel was doing circa 1970). Thus it is a group primarily engaged in preaching

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As a Christmas present to Americans, the New York Times ran a story titled “Affordable Care Act’s Tax Effects Now Loom for Filers” about how “millions of [American taxpayers] will have to grapple with new tax forms and calculations [related to Obamacare subsidies and penalties] that may generate unexpected results.” Apparently if your income in 2014 was not the same as it was in 2012 there is going to be some additional paperwork.

Is this the time for the U.S. to move to a system already in place in some other countries? The government gets all kinds of reports on what Americans are paid by employers, banks, and mutual funds. Why can’t the government figure the correct taxes for most people and just send us the bill?

Health insurers are essentially government agencies at this point. Citizens are required by law to buy their products. No health insurer can operate without (state) government approval. A central planning government committee decides what the product is going to be. Other than paying higher-than-civil service salaries, how is that different from any other government agency? Thus if insurers are government agencies and the IRS is a government agency, why isn’t it the insurer’s job to tell the IRS who were the customers in the preceding tax year? Why do we have to get paper certificates and submit proof to one government agency (the IRS) that we bought something from another government agency (the insurer)?

Why can’t we have an IRS web site where we see what we owe, tell them about any new children or other household changes, type in any extra deductions, e.g., for charitable donations or business expenses (and if it is a capital asset, let the IRS figure depreciation too!), and be done with it?

I’m aware that this is an old idea and that various people have lobbied against it (example story). But this is the first year of Obamacare and the tax system taking on this bizarre new angle of subsidy clawbacks So perhaps this is the time when everyone can finally agree that government should take our money but leave us our sanity.

[The headline argument against the concept seems to be that the government might send out an erroneous bill and people would just pay it, so we’re all going to be better off if we laboriously gather up our paperwork and pay bookkeepers, accountants, and Intuit (for TurboTax). And then, in those cases where the government does actually calculate a different number, pay whatever bill they send us and exchange letters back and forth. It would be a good argument if time were free and accountants were free. But if we have to spend days of our time and hundreds or thousands of our dollars each year to guard against the possibility of an IRS arithmetic error, we can’t come out ahead unless the IRS would be making some truly spectacular mistakes.]

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I’m on Day 10 of a nasty cold with an unusual (for me) amount of sinus congestion. Most people in Boston seem to have flu or strep so I guess I should count my blessings. Anyway, I decided to see if antibiotics would help (science says that it doesn’t (example), but science also says that science is wrong (Ioannidis) and I do think that previous similar incidents have been helped by antibiotics).

I did this back in the early 1990s in Egypt. I walked from my sister and brother-in-law’s apartment to a pharmacy, described my symptoms to the pharmacist, and walked out five minutes later with antibiotics at a total cost of less than $5.

My primary care doctor was busy so this morning I went to a walk-in clinic at Mt. Auburn Hospital in Cambridge, which has a pretty good reputation for delivering ambulatory care without crazy wait times. Nonetheless I did have to spend some time in a crowded windowless waiting room surrounded by flu victims wearing masks. I interacted with seven different people (reception/admission, walk-in clinic front desk, triage nurse, intake nurse, physician, physician in training, discharge nurse), which involved a certain amount of repetition of story and measurements (e.g., my temperature was taken twice). Ultimately I was prescribed antibiotics, though I did not specifically ask for them and the exam room contained a big poster saying “antibiotics are not helpful for viral illness”. Then I went to CVS to get my prescription filled. I had to update them with new prescription drug plan numbers so that I wouldn’t be charged $61 for generic amoxicillin (cost = 42 cents according to UNICEF). Thus what had taken five minutes and $5 in Egypt with one interaction, one payor, and one vendor took three hours and cost perhaps $500 here with eight interactions (including at CVS). There were three payors in the U.S.: me, Blue Cross, and Medco (for the pills). There were at least three vendors, I think: the hospital, the doctor, and the pharmacy.

Related:

• my health care reform proposal
• “What other industry can afford to mail out a 4-page hardcopy bill for $0?”
• “America’s Efficient Health Care System: my $15 bill for a checkup”

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My Caveman Chemist model of the world is that all detergents are the same (e.g., see this soap, shampoo, and shaving cream in one bottle or this laundry detergent that can also be used to clean floors). Thus there would be no difference in damage to the environment from using Tide to wash clothing versus some other brand. Ditto for Cascade versus some other brand of dishwasher detergent. Now that phosphates have been more or less banned there isn’t a distinction among detergents based on phosphate content. Yet Whole Foods carries a whole aisle of detergents whose labels imply that somehow the Earth will be better off if I buy those brands, e.g., Seventh Generation, rather than the poisonous products of devil-worshiping Procter & Gamble. The Seventh Generation web site isn’t very informative. Their laundry detergent is “non-toxic” (so it is actually better for drinking than Tide? Straight or with ice and soda?). They have no “dyes or synthetic fragrances,” but Tide has a fragrance-free variant. And is fragrance harmful to the planet? If we are going to roast our planet about 5.4 billion years ahead of schedule (when the red giant Sun would have done it for us), what’s wrong with a pleasant odor?

So… can our household reduce the amount of environmental harm that we cause by using “eco” detergents in the kitchen and laundry? And is the answer different whether we are putting this into a septic versus a municipal sewage system?

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Folks:

Since I failed to keep any of my previous New Year’s resolutions… It is time to set up a standing/treadmill desk in the home office.

The best idea that I’ve seen is the Steelcase Sit-to-Walkstation. Since I am a big Steelcase fan, why not just buy it?

• the treadmill has a maximum speed of 2 mph, making it unsuitable for getting a little more of a workout when desired
• the treadmill cannot be inclined like a regular treadmill, again making it tough to get a workout
• the treadmill is of unknown provenance
• the product gets a bad review (but from a site that is run by a competitor, without very clear disclosure of the fact)
• the desk has a plastic top (good for durability but maybe not the best aesthetic for home)
• the monitor arm costs extra and might not work that well for a serious monitor, such as a 30- or 32-inch 4K display

Some of the advantages of the Steelcase product include treadmill controls that can slide underneath the desk, a great width (78 inches), and presumed sturdiness.

An alternative is to get the treadmill from a company that specializes in treadmills and a separate desk and any monitor supports.

The Human Solution manufactures its own standing desk, the UPLIFT, and puts a LifeSpan treadmill underneath. This is a well-regarded treadmill company. The treadmill costs about $1000 and could be swapped out easily if an improved treadmill becomes available. This treadmill won’t incline but it will run up to 4 mph and the belt is bigger than on the Steelcase (20×56″ versus 18×53″). The desk can be ordered in 80×30″ solid maple or cherry. It doesn’t have the big cross-brace of the Steelcase so it is tough to see how it can be as rigid. I haven’t found any independent reviews of the UPLIFT.

Instead of a monitor that swings back and forth between the treadmill and standing/sitting side I was considering just getting two monitors, two keyboards, and two mice. Hook them all up to one computer and then program in a keystroke command to swap which is the primary monitor (I think Display Changer from 12noon.com will do this on Windows; is it easy to do the Mac as well?).

One idea might be to combine the presumably bomb-proof Steelcase desk with the LifeSpan treadmill. One has to dig a bit but it seems that Steelcase does sell the 78×29″ height-adjustable desk separately (dimensions). And it might even be possible to get the Steelcase base without the plastic laminate work surface (and then get a solid wood desktop of one’s choice?).

What do readers say? Has anyone used the Steelcase or the UPLIFT or some other packaged system that will do treadmill, standing, and sitting?

[Note: IKEA has been playing around with a height-adjustable desk, but it is not wide enough to compete with the Steelcase or UPLIFT products.]

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The latest New Yorker has some great writing. David Sedaris gives us “Leviathan,” an ode to hosting extended family at the beach. The topics covered are small but the writing is big. If you insist on something weightier, “A Century of Silence” has a good history of the Armenian experience in Turkey.

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In the round of Boston-area holiday parties that I attended, a couple had been paid for by divorce lawsuit defendants not in attendance.

The alimony-fueled party was particularly lavish and fully staffed with caterers (at parties hosted by rich people who got their money by working or from a property division lawsuit, the cooking and serving was done by the hosts with help from guests). Although adults in Massachusetts are more likely than average Americans to have advanced degrees and earning abilities sufficient for self-support, alimony cash flows in Boston are 330 percent higher than in an average U.S. city (New York Times Dec 12, 2014 analysis; I am pretty sure that this is adjusted for the difference in incomes from city to city). Thus it is common for someone to have a $200,000 per year income (3X the Massachusetts median household income) and yet be officially dependent on a former spouse, from whom an additional $200,000 per year is collected and spent annually. Here’s an excerpt from our book that explains why the money has to be spent shortly after being received:

Attorneys report that both winners and losers tend to become profligate with money. “The defendant might have been a saver before the lawsuit,” said one attorney, “but then he’ll see how the courts penalize parents for being prudent with money. His plaintiff’s lavish spending on herself will become a ‘need’ used by the judge to justify higher child support and alimony awards. After mom wins she spends like a drug dealer because she’s spending someone else’s money and also because she doesn’t want to lose a modification motion on the grounds that her banking money every year demonstrates that her ‘need’ was overestimated. The father spends whatever he can too because he realizes that his plaintiff and the court will take away whatever he tries to save. Children who would have been very comfortably established in life end up with nothing from their parents.”

I already thanked the hostess of the catered party but does etiquette require me to track down and thank the guy who paid for the house, the caterers, and the $2 million in legal fees (in 2014 dollars; the divorce started decades ago) that opened the alimony taps?

Separately, one of the parties I attended was both to celebrate the New Year and also a housewarming. The approach was up a driveway that was the same length, width, and quality as a secondary highway in England or Wales. This terminated in a 50-car parking lot at the top of the hill. Given that the parking lot looked like the result of successfully robbing a BMW/Audi dealership I was confident that I had not arrived too early. Once inside I learned that part of the renovation of this house had involved the installation of a three-ton circular marble bathtub. We were all awed by the resulting Homeric scale of the master bathroom. The host intruded on our reverie, however, by pointing out that three tons of marble has a lot of thermal mass. “After you fill it with hot water, the water immediately becomes too cold. So you have to drain it and fill it up again.” He has been taking showers.

Related:

• “If I borrow your car and donate it to charity, does that make me a charitable person?”
• from a reader, “Make divorce tougher on women, says leading lawyer” (Independent (UK), December 31, 2014) where “the outgoing chair of the Bar Standards Board” notes that young women in England would likely realize their maximum spending power by remembering “Never mind about A-Levels, or a degree or taking the Bar course – come out and find a footballer.” (From our book: A professor of economics in Massachusetts, a typical “winner take all” state, said “The best career advice that I could give to a female freshman would be to drop out and stop paying tuition. Get pregnant with a medical doctor this year. Get pregnant with a business executive two years from now. Get pregnant with a law firm partner two years after that. She’ll have three healthy kids and a much higher after-tax income than nearly all of our graduates in economics.”)

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Paul Graham has written a pro-immigration essay titled “Let the Other 95% of Great Programmers In”.

The anti-immigration people have to invent some explanation to account for all the effort technology companies have expended trying to make immigration easier. So they claim it’s because they want to drive down salaries. But if you talk to startups, you find practically every one over a certain size has gone through legal contortions to get programmers into the US, where they then paid them the same as they’d have paid an American. Why would they go to extra trouble to get programmers for the same price? The only explanation is that they’re telling the truth: there are just not enough great programmers to go around.

I asked the CEO of a startup with about 70 programmers how many more he’d hire if he could get all the great programmers he wanted. He said “We’d hire 30 tomorrow morning.”

I’m pretty sure that this is an illustration of my hedge fund manager friend’s mantra: “When the market gives you an answer you don’t like, declare market failure.” Presumably Graham’s pal could hire 30 great programmers tomorrow if he offered compensation significantly in excess of what Google, Apple, and Microsoft are paying and/or simply called up great programmers to ask “How much would I have to pay you to quit your job?” and then agreed to whatever price was quoted.

This is also an example of our philosophy around imprisoning drug dealers to end drug dealing. People are born with an innate calling to drug dealing, rather than having chosen the field due to the economic incentives presented by the market. Thus if we put all current drug dealers in prison there will be no more drug dealers. The analysis of the situation that Graham describes is similar. Just as there is no way to turn a retail clerk into a drug dealer (since he or she lacks the genetic disposition toward drug dealing) there is no way that if companies nationwide paid programmers more than the BLS’s median pay of $74,280 per year (source), additional Americans would be attracted to this field.

[Note that in my home state of Massachusetts, $74,280 pre-tax is $52,192 per year after tax (ADP Paycheck Calculator), i.e., comparable to what a person could get in annual tax-free child support following a one-night encounter with a $300,000/year earner. A person who wanted to have two children could collect more than $52,192 per year by having sex with two different Massachusetts residents, each earning $135,200 per year or more (see worksheet).]

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