Wilkinson [excuse me, "W.W."] is no idiot, but look at what his commitments are forcing him into here: he's allying himself with someone whose racial politics _he_ describes as "toxic", and endorsing inherited privilege because reasons, that's why. In other words, he's agreeing with Flynn that meritocracy is sociologically incoherent, and embracing its devolution into aristocracy, if it can be used to upset enough liberals, and ennoble enough proles to damp down unrest.

"An alternative explanation is the one I’ve explored in my writings on the disappearance of human labor from production.... My analysis of the political economy... is that we are experiencing a slow transition from a capitalist order in which accumulation is based on the exploitation of labor, into a “rentist” order based on rents accruing to land or intellectual property. Such a society is not, in my view, functionally compatible with the ideals of broadly-distributed critical thinking or practical work skills.
"In a rentist order, an increasing percentage of the population becomes superfluous as labor—but they are still necessary as consumers. For reasons of ideological legitimacy and political control, the fiction that everyone must “work” is maintained, but work itself must increasingly be pointless make-work. What kind of populace is suited to this habit of passive consumption and workday drudgery? One that accepts nonsensical and arbitrary rules—whether they are the rules of endless work or endless consumption. Students who learn to answer the questions the testing bureaucracy wants answered, irrespective of their relationship to scientific knowledge or logic, will be well trained to live in this world."

Comment: This line of argument seems to me much better suited as a rhetorical attack on these (truly stupid and awful) educational practices than serious social analysis. It's a way of saying "You think you want X? Let me tell you what X is good for, let me tell you what you'll get along with X, and you see if you really want it." Bertrand Russell used to argue like this all the time, but he didn't really believe that (e.g.) opponents of sex ed. truly wanted more syphilis. Similarly, I don't think that fools do things like this to schoolchildren because it makes them more suitable for the rentist society of the future; I think it is even more pointless and accidental than that.

"So here’s a riddle: which form of technology should we prefer, labor saving or labor complementary? Labor saving technology is consistent with high wages and tight labor markets. But it also, of course, leads to less jobs overall in the sectors where it is deployed. Which brings us back to the homeless people with hotspots. Let’s imagine, for the sake of argument, that this is a legitimately profit-making business venture rather than a weird kind of charity. (And note that even as charity, the project depends on its consumers viewing it as a kind of legitimate business, a way for the homeless to engage in “productive” labor.) Putting hotspots on homeless people has to count as a labor complementary technology. From the standpoint of the wireless company, the marginal product of a homeless person’s labor is much higher (i.e., it’s non-zero) once you’ve figured out that you can attach hotspots to them. So if you think that it’s bad when machines replace human labor (which is not what I think), then this is just the kind of technical change you should prefer.
"But labor complementary technology doesn’t necessarily look so great once you’re face-to-face with the kind of labor it complements. In this case, it relies upon the existence of a cheap and exploitable labor force—something that’s obvious when you’re looking at a homeless person in a creepy t-shirt, less so when you order from an online retailer. And here’s where I think a lot of the outrage over homeless-people-as-infrastructure goes wrong.
"I don’t recall seeing a lot of complaints about the problem of homelessness in Austin prior to this story. Which I don’t mean as some kind of “gotcha”—the world is full of horrible things, and it’s neither possible nor particularly helpful to try to talk about all of them all of the time. But to get up in arms about an ad agency exploiting the homeless as wifi routers strikes me as a peculiarly half-assed form of outrage. If they weren’t walking around as billboards for wireless service, Austin’s homeless and poor would still be homeless and perhaps a bit more poor. The fundamental problem here is not exploitation, but the condition of possibility for that exploitation, which is the fact that there are so many poor and homeless Americans in the first place.
"“The misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all”, goes the old adage from Joan Robinson. Then again, says Marx, “to be a productive laborer is not a piece of luck, but a misfortune. In the short run, labor complementary technology may employ more people, which is better than them not being exploited at all. But in the long run, the jobs thus created tend to be terrible, and our real goal ought to be to channel technical change toward labor saving innovation.
"This leaves us with the question of what the homeless of Austin can demand, if not the right to be walking 4G hotspots. Fortunately there is a simple solution to that. There’s nothing (economically) stopping us from just giving people cash; and as the housing activist Max Rameau likes to say, the cause of homelessness is that people don’t have homes, and we have plenty of those. So imagine what would happen if this pool of cheap, easily exploitable labor wasn’t available. A company that wanted to sell 4G wireless services might have to invest in more transmitters to fulfill demand. Or perhaps they would deploy robots to roll around the streets selling wireless access! This would not employ as many people, since it’s more a labor saving than a labor complementary technology. But it also wouldn’t create the grotesque spectacle of fellow human beings serving as pieces of infrastructure."

"To understand what Murray does in Coming Apart, imagine this analogy: A social scientist visits a Gulf Coast town. He notices that the houses near the water have all been smashed and shattered. The former occupants now live in tents and FEMA trailers. The social scientist writes a report: 'The evidence strongly shows that living in houses is better for children and families than living in tents and trailers. The people on the waterfront are irresponsibly subjecting their children to unacceptable conditions.'
"When he publishes his report, somebody points out: "You know, there was a hurricane here last week." The social scientist shrugs off the criticism with the reply, "I'm writing about housing, not weather." "

---All parts of Frum's review are worth reading.

"The problem with a rights-based liberalism is precisely that it is not and never can be the end of history, that it is never secure or stable, that every liberty claimed through toil and protest, no matter how acclaimed and cherished and generative, is one day away from the firing line when some powerful interest decides that some right or practice is inconvenient.

"It doesn’t even matter if the end of a right, a freedom, a possibility will ultimately hurt that powerful interest. The contemporary businesses who have registered a powerful stake in exceptionally restrictive monopolies over intellectual property have themselves been enormous beneficiaries of a conception of the public domain as a fundamental and irreversible right of a free society. No matter: they would now see it ended. Better to kill the future than live in a present where you can only have two Ferraris in the driveway."

One of those essays which would really be much clearer, and easier to judge, as a mathematical model.

Of COURSE Amazon sells pepper spray.

"In reality, however, the numbers show that wage inflation is — literally — the least of the problems when it comes to university cost inflation. Check out this excellent report, for instance, entitled “Trends in College Spending, 1999-2009″. The first thing to note is on page 26: spending on faculty compensation is never more than 40% of total spending, and “has remained steady or decreased slightly over time”. Then have a look at the numbers.

Overall, if we exclude for-profit schools, which were a tiny part of the landscape in 1999, we have seen tuition fees rise by 32% between 1999 and 2009. Over the same period, instruction costs rose just 5.6% — the lowest rate of inflation of any of the components of education services. (“Student services costs” and “operations and maintenance costs” saw the greatest inflation, at 15.2% and 18.1% respectively, but even that is only half the rate that tuition increased.)

The real reason why tuition has been rising so much has nothing to do with Baumol, and everything to do with the government. Page 31 of the report is quite clear: “except for private research institutions,” it says, “tuitions were increasing almost exclusively to replace losses from state revenues or other private revenue sources.”

In other words, tuition costs are going up just because state subsidies are going down. Every time there’s a state fiscal crisis, subsidies get cut; once cut, they never get reinstated. And so the proportion of the cost of college which is borne by the student has been rising steadily for decades.

There are other culprits, too, behind the rise in tuition costs. Surowiecki touches on one when he talks about “the arms-race problem”, where “colleges compete to lure students by investing in expensive things, like high-profile faculty members, fancy facilities, and a low student-to-teacher ratio”. Another is simply the ever-increasing amounts of money being spent on administration rather than instruction. And a third is the fact that administrators at many high-profile universities have no incentive to decrease costs, and in fact have an incentive to increase costs, since total spending outlay tends to show up as an input in university-ranking algorithms.

But of all the reasons why tuition’s going up, teacher productivity is — literally — at the bottom of the list. Whether or not teachers today are or are not more productive than they were in 1980 (and I suspect that actually they are more productive), that’s not the reason student debt in America is approaching one trillion dollars."

"The point is that these are pure fantasies on the part of the right. The true age of spectacular growth in the United States and other advanced economies was the generation after World War II, with post-Reagan growth nowhere near comparable. So why do these people imagine otherwise?

And the answer, once you think about it, is obvious: growth for whom? There’s only one way in which the post-deregulation boom was exceptional, and that’s in terms of the growth in incomes at the top of the scale.

Here’s a comparison of the postwar boom with the deregulation alleged boom, using real average family income from the Census and real average income for the top 1 percent from Piketty and Saez:

[graph omitted]

If you’re looking at the average, the last generation is a poor shadow of the postwar boom. But if you’re talking about the 1 percent, wonderful things have happened."

"The big gains have gone to the top 0.1 percent. So income inequality in America really is about oligarchs versus everyone else. When the Occupy Wall Street people talk about the 99 percent, they’re actually aiming too low."

I think Lithwick is, for once, too optimistic.

"... the first comprehensive analysis of an economic trend that has been reshaping the United States over the past three decades: rapidly rising income inequality. ... overview of how and why the level and distribution of income and wealth has changed since 1979, sets this situation within its historical context, and investigates the forces that are driving it. Among other factors, Blank looks closely at changes within families, including women’s increasing participation in the work force. The book includes some surprising findings—for example, that per-person income has risen sharply among almost all social groups, even as income has become more unequally distributed. Looking toward the future, Blank suggests that while rising inequality will likely be with us for many decades to come, it is not an inevitable outcome. Her book considers what can be done to address this trend, and also explores the question: why should we be concerned about this phenomenon?"

"While the book demonstrates that democratic civilian control of the military in the U.S. is not at issue, it reveals that there is little public control over Private Security Contractors due to a combination of the current restricted interpretation of what is an "inherently governmental function" and limited legal authority. This is despite the fact that PSCs have taken on roles and missions that were previously the responsibility of the uniformed military. Further, despite numerous efforts to redress the problem, current political and institutional barriers to reform are not likely to be overcome soon. "

In the long run, of course, the end-point of this scenario is Sterling's "The Beautiful and the Sublime". --- Come to think of it, when was Sterling's story written?  Could either have influenced the other?

Observation: the longer Krugman keeps writing about political economy, the more he sounds like an angrier John Kenneth Galbraith.  Here he's calling for counterveiling power.

The post-1970s growth slowdown as a consequence of pervasive and growing market failure, exacerbated by the shift to industries (finance, health care, etc.) marked by persistent and probably ineradicable asymmetric information.  

Query: to what extent has the shift to defined-contribution retirement plans, especially 401(k)s, contributed to financial-sector profits?  (Via (1) a continuing supply of dumb money/noise traders, and (2) guaranteed or at least strongly subsidized demand for financial sector services.)

"Between 1947 and 1973, GDP per family increased at a rate of 2.6% per year and median family income grew at 2.7% per year. From 1973 to 2007, GDP per family increased at 1.7% per year, but median family income grew at just 0.7% per year.
And note the absolute numbers: GDP per family rose by $52,000 during 1947-73 and then by $82,000 during 1973-2007. Median family income increased by $26,000 during 1947-73 but then by just $13,000 in 1973-2007.
Median family income was $64,000 in 2007. Had it kept pace with GDP per family since the mid-1970s, it instead would have been around $90,000.
I’m all for helping to accelerate the rate of innovation. But the big change in recent decades lies in the degree to which economic growth lifts middle-class incomes. If we want to understand slow income growth, that should be our focus."

"traces the longer-term historical evolution that made the rise of finance possible, arguing that this development rested on a broader transformation of the U.S. economy than is suggested by the current preoccupation with financial speculation.
Krippner argues that state policies that created conditions conducive to financialization allowed the state to avoid a series of economic, social, and political dilemmas that confronted policymakers as postwar prosperity stalled beginning in the late 1960s and 1970s. In this regard, the financialization of the economy was not a deliberate outcome sought by policymakers, but rather an inadvertent result of the state’s attempts to solve other problems. The book focuses on deregulation of financial markets during the 1970s and 1980s, encouragement of foreign capital into the U.S. economy in the context of large fiscal imbalances in the early 1980s, and changes in monetary policy following the shift to high interest rates in 1979."

"Its newness as a narrative art form is underscored most convincingly by its power on DVD, where it can be watched all at once, over sixty hours: this particular manner of viewing makes the literary accolades and the comparisons to a novel more justified and true. On the other hand, so engrossing, heart-tugging, and uncertain are the various story arcs that watching in this manner one becomes filled with a kind of mesmerized dread."

This, this, this.

Why indeed? "[O]ne of the most-pernicious but least-discussed trends of the past thirty years, the drive to replace defined-benefit pensions with subsidized savings/investment schemes like 401(k)s. ... average people have no real ability to invest money in an effective way. ... the flipside of small investors not being able to manage our own investments in a sound way is that having small investors participate in the market can only serve to undermine financial markets’ role in providing corporate governance and allocating capital. Now defined-benefit pensions have declined in the private sector for some pretty good reasons. It’s both personally liberating and economically efficient for there not to be an expectation that you’ll work at the same place for decades. But the substitutes we’ve dreamed up—tax subsidies for middle class stock ownership—are regressive and don’t really make sense."

"So I stand corrected. Credit reporting agencies don't pass along your credit scores to prospective employers. They do pass along your entire credit history and specifically promote it as a way of weeding out problem candidates, but there's no credit score. Just your entire credit history."

The only problem is that this doesn't go far enough. No, I take that back: the only problem is that it _needs saying_.

"Take Household Finance in the early 2000s. Their aggressive lending practices where people would learn after the fact that they were mislead to how much their total monthly payments were ... led to successful settlements in Colorado, Georgia as well as a $484 million in fines joint settlement with a group of attorney generals, the largest consumer fraud settlement in U.S. history. ... That’s a lot of money, until you divide it among the amount of households that were ripped off. Even after legal fees, its hard to image it wasn’t a profitable experience. So Household Finance has to pay the largest consumer fraud fines in history. I bet you think that the investment community and elite financial institutions wouldn’t look twice at it. ... One month later Household was acquired by HSBC, the London financial giant, for $16.4 billion.... Instead of driving out fraud, the market realized, correctly, that there is a ton of money in consumer fraud, and it rewards it handsomely. "

"Funny, isn’t it? The Ford-Carter years look no worse — in fact, somewhat better — than the Bush years, especially if you look from business cycle peak to business cycle peak. And that was in the face of two very severe oil shocks. So a question for all the people who say that the economic troubles under Jimmy Carter discredited postwar economic policies: why don’t the troubles under Bush similarly discredit post-Reagan policies? ... [I]nflation did have to be brought down — and Paul Volcker, not Reagan, did what was necessary. But the rest — slashing taxes on the rich, breaking the unions, letting inflation erode the minimum wage — wasn’t necessary at all... In the modern vision, the old US economy is seen as an absurd, unworkable thing. Where were the incentives to grow super-rich? How did you manage with all those well-paid, organized workers? ... Radical change happened because a powerful political movement wanted it, not out of economic necessity."

"Nixon's spirit will be with us for the rest of our lives -- whether you're me or Bill Clinton or you or Kurt Cobain or Bishop Tutu or Keith Richards or Amy Fisher or Boris Yeltsin's daughter or your fiancee's 16-year-old beer-drunk brother with his braided goatee and his whole life like a thundercloud out in front of him. This is not a generational thing. You don't even have to know who Richard Nixon was to be a victim of his ugly, Nazi spirit.
He has poisoned our water forever. Nixon will be remembered as a classic case of a smart man shitting in his own nest. But he also shit in our nests, and that was the crime that history will burn on his memory like a brand. By disgracing and degrading the Presidency of the United States, by fleeing the White House like a diseased cur, Richard Nixon broke the heart of the American Dream." (See also http://www.youtube.com/watch?v=Bu-pt1H5_EQ)

"Creating a time and place for the entire family to meet each week can give your various dependents and trapped creature-friends the illusion that someone "thoughtful" and "organized" – organized enough to set up a family meeting, at any rate – is in charge. This weekly meeting can also foster a sense of community among smallish people and sulking animals who might otherwise stay hidden in the dark corners of your domicile for days on end, ripping tiny holes in stolen toys with their teeth or yelling at tiny video games or speaking in tiny princess voices about going to the fancy ball, (one of the prerequisites for living happily ever after).

Since you're far too busy to actually "schedule" a time and place for such a gathering, it's best to simply stand in the largest room in the house and yell FAMILY MEETING FAMILY MEETING! whenever it's convenient for you." ... And it gets better from there.

Ladies, gentlemen and distinguished others, your major party vice-presidential candidate of 2008.

David Brooks is an idiot with no grasp of what American society is like or has been like; in other news, water is wet.

"We explore the possibility that the US political system [is effectively] oligarchic. Using a material-based definition drawn from Aristotle, we argue that oligarchy is not inconsistent with democracy; that oligarchs need not occupy formal office or conspire together or even engage extensively in politics in order to prevail; that great wealth can provide both the resources and the motivation to exert potent political influence. Data on the US distributions of income and wealth are used to construct several Material Power Indices, which suggest that the wealthiest Americans may exert vastly greater political influence than average citizens and that a very small group of the wealthiest (perhaps the top tenth of 1 percent) may have sufficient power to dominate policy in certain key areas. A brief review of the literature suggests possible mechanisms by which such influence could occur, through lobbying, the electoral process, opinion shaping, and the US Constitution itself."

"Some numbers to make these points: at the end of 1978, consumption was 61.5% of GDP; in the second quarter of 2008, it had risen to 70.3%, or 8.8 points. Well over half that increase, 5.0 points, came from spending on medical care. The share of GDP devoted to spending on goods actually fell by 4.7 points over that 30-year period.

The pattern is preserved if you start the clock in 1997, just as the stock and housing manias were taking off. Medical spending accounted for almost a third of that rise between 1997 and 2008. Energy accounted for another third. Spending on goods accounted for just 3% of the rise, or 0.1 point. In other words, the familiar story that Americans went hogwild buying all kinds of stuff is wrong." --- Interesting if true.

I am happy to see Krugman's synopsis of the crisis agrees with my half-assed speculations.

I especially look forward to reading the bits about Larry Summers.

The Rajan book sounds interesting.

Perhaps the most horrifying thing I have read this year.

This is just evil.

Sure. But: "Examined broadly, the history of manual labor in this country doesn't suggest that physical jobs secured more respect by convincing people of their complexity. They secured more respect by unionizing, and thus becoming good, even coveted, positions."

"Remember that the gilded Wall Street of 2007 was a fairly new phenomenon. From the 1930s until around 1980 banking was a staid, rather boring business that paid no better, on average, than other industries, yet kept the economy’s wheels turning. So why did some bankers suddenly begin making vast fortunes? It was, we were told, a reward for their creativity — for financial innovation. At this point, however, it’s hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes. Consider a recent speech by Ben Bernanke, the Federal Reserve chairman, in which he tried to defend financial innovation. His examples of “good” financial innovations were (1) credit cards — not exactly a new idea; (2) overdraft protection; and (3) subprime mortgages. (I am not making this up.) These were the things for which bankers got paid the big bucks?"

Origins of the present troubles. --- Somewhat surprisingly, I mostly agree with this.

In which Josh Marshall encounters ideological hegemony.

The remarks about chain bookstores are astute. But I am not sure about the incentives to change. E.g., I don't think there's a hardware store other than Home Depot in a five mile radius of my house. If another one opened, the chain has the resources (by cross-subsidization) to temporarily price it out of the market...

This sounds exactly right. But what is _not_ worth praising is the fact that so many people are so lost, and so far up the creek, that they need someone like this.

"While industrial America was built by and for the urban North, rural Southerners comprised much of the labor, management, and consumers in the postwar service sector that raised the Sun Belt to national influence. These newcomers to the economic stage put down the plough to take up the bar-code scanner without ever passing through the assembly line. Industrial culture had been urban, modernist, sometimes radical, often Catholic and Jewish, and self-consciously international. Post-industrial culture, in contrast, spoke of Jesus with a drawl and of unions with a sneer, sang about Momma and the flag, and preached salvation in this world and the next."

Preach it, Brother Yglesias!

"The United States isn’t a poor country dealing with some objective shortfall of national resources. And yet across a whole variety of dimensions—from broadband speed to train quality to the cleanliness of streets to life expectancy to the crime rate—we fall far short of standards that are reached elsewhere. What we do have, on the other hand, is the richest multi-millionaires in the world. And an awful lot of people’s first instinct is to try to explain these things away or explain why it would be impossible to bring some of these quality of life features to the United States. It seems to me people would do better to get more upset."

Inequality has risen in America because of political and institutional shifts. (Can you say "class struggle"? I knew you could.) Attempts to pretend that it is due to exogenous economic forces (patterns of trade, returns on education a.k.a. "skill-biased technological change") are at best underinformed, and in the case of people who should know better, such as economists, more likely disingenuous.