The end of entitlement

Robert Samuelson writes that the public is going through a downshift in expectations that is having deeper political consequences.

Weighed down by these contradictions, entitlement has been slowly crumbling for decades. The Great Recession merely applied the decisive blow. We're not entitled to many things: not to a dynamic economy; not to secure jobs; not to homeownership; not to ever-more protective government; not to fixed tax burdens; not to a college education. Sooner or later, the programs called "entitlements," including Social Security, will be trimmed because they're expensive and some recipients are less deserving than others.

The collision between present realities and past expectations helps explain the public's extraordinary moodiness. The pandering to the middle class by both parties (and much of the media) represents one crude attempt to muffle the disappointment, a false reassurance that the pleasing past can be reclaimed. It can't.

I don't think this is true. We still have the paradox that we have more productive capacity and underlying abundance than ever before. The problem is we have less and less clarity on how to distribute it, or what we value, or what incentives are or ought to be.

What it does mean is we need a deeper rethink of economic institutions to cope with a world in which many of the things we value most are not easily traded. Government cannot deliver what people want if we have no shared vision of what people ought to want, in their own different ways. Instead, our general discourse on rights and universal rules tends to evade the question.

"..some recipients are less deserving than others" says Samuelson. That is the heart of the problem. It is a matter of ethics, not economics. The left wants universal (unearned) rights. The right wants a changing mix of pure market allocation and tradition.

People are just not that motivated by money alone

Here's an interesting blog post on the Harvard Business Review site on how money and motivation are related: they're not.

The results indicate that the association between salary and job satisfaction is very weak. The reported correlation (r = .14) indicates that there is less than 2% overlap between pay and job satisfaction levels. Furthermore, the correlation between pay and pay satisfaction was only marginally higher (r = .22 or 4.8% overlap), indicating that people's satisfaction with their salary is mostly independent of their actual salary.

In addition, a cross-cultural comparison revealed that the relationship of pay with both job and pay satisfaction is pretty much the same everywhere (for example, there are no significant differences between the U.S., India, Australia, Britain, and Taiwan).

It puts a little more solid evidence around the argument that is made in books like Daniel Pink's Drive: The Surprising Truth About What Motivates Us.

 

Wittgenstein against scientism

This is a very good article in the NYT about Wittgenstein. It is not surprising he is not popular in current philosophy departments, the author, a Professor at NYU says, as Wittgenstein is so skeptical of standard philosophy. The article summarizes Witgenstein's position:

Philosophical problems typically arise from the clash between the inevitably idiosyncratic features of special-purpose concepts —true, good, object, person, now, necessary — and the scientistically driven insistence upon uniformity. Moreover, the various kinds of theoretical move designed to resolve such conflicts (forms of skepticism, revisionism, mysterianism and conservative systematization) are not only irrational, but unmotivated.The paradoxes to which they respond should instead be resolved merely by coming to appreciate the mistakes of perverse overgeneralization from which they arose. And the fundamental source of this irrationality is scientism.

The dream of social physics dies hard. Economics, even more than philosophy, has suffered from an overtemptation towards generalized parsimonious models.

As Wittgenstein put it in the “The Blue Book”:

"Our craving for generality has [as one] source … our preoccupation with the method of science. I mean the method of reducing the explanation of natural phenomena to the smallest possible number of primitive natural laws; and, in mathematics, of unifying the treatment of different topics by using a generalization. Philosophers constantly see the method of science before their eyes, and are irresistibly tempted to ask and answer in the way science does. This tendency is the real source of metaphysics, and leads the philosopher into complete darkness. I want to say here that it can never be our job to reduce anything to anything, or to explain anything. Philosophy really is “purely descriptive."

And so therefore the purpose of philosophy is not explanation but therapeutic.

traditional philosophy is necessarily pervaded with oversimplification; analogies are unreasonably inflated; exceptions to simple regularities are wrongly dismissed.

— Therefore — the fourth claim — a decent approach to the subject must avoid theory-construction and instead be merely “therapeutic,” confined to exposing the irrational assumptions on which theory-oriented investigations are based and the irrational conclusions to which they lead.

Labor and Social Links

I've been working intensively on another project in the last few weeks, so blogging has been lighter here. There's a build-up of things I want to blog about and say.

I just wanted to note this column by Ross Douhat in the NYT about the decline of work, however. The transformation of work is a major theme on this blog.

If the utopia of a world without work is being achieved, Douhat says, it isn't because the upper classes can afford it and it will gradually spread down to laborers and high school dropouts. It's happening from the bottom up.

Yet the decline of work isn’t actually some wild Marxist scenario. It’s a basic reality of 21st-century American life, one that predates the financial crash and promises to continue apace even as normal economic growth returns. This decline isn’t unemployment in the usual sense, where people look for work and can’t find it. It’s a kind of post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job. So instead of spreading from the top down, leisure time — wanted or unwanted — is expanding from the bottom up. Long hours are increasingly the province of the rich.

The problem with this, he says, isn't so much income or survival. People are not starving. It's lack of social integration. It's part of the wider trend of the decline of community and social links.

One could make the case that the right to not have a boss is actually the hardest won of modern freedoms: should it really trouble us if more people in a rich society end up exercising it?

The answer is yes — but mostly because the decline of work carries social costs as well as an economic price tag. Even a grinding job tends to be an important source of social capital, providing everyday structure for people who live alone, a place to meet friends and kindle romances for people who lack other forms of community, a path away from crime and prison for young men, an example to children and a source of self-respect for parents.

It's a problem of flourishing.

In a sense, the old utopians were prescient: we’ve gained a world where steady work is less necessary to human survival than ever before.

But human flourishing is another matter. And it’s our fulfillment, rather than the satisfaction of our appetites, that’s threatened by the slow decline of work.

This is an interesting take. And of course I agree that the prime question is how our institutions contribute to human flourishing, so he is going in the right direction.

But he doesn't go far enough, perhaps. There is a difference between the labor market, which is going to keep getting more productive, and a sense of vocation.

What is clearly at issue is motivation and purpose, and how you retain and encourage and cultivate them when the economy is changing. Our civil discourse has become very bad at providing that, as I've often argued , such as here.

 

An Apple Watch?

This is quite a visionary and original speculation what might be the next device for Apple: a watch. I've seen excerpts over the past week, but it's worth reading the entire thing, not just for gadget gee-whiz but a sustained piece of practical imagination. The author worked for fourteen years at Apple and developed some of their original design guidelines.

 

The pessimism of blue elites

Here's a magnificent essay by Walter Russel Mead on us continuing theme of the decline of the "blue" economic mode and changes in the economy.

There is deep pessimism among "blue elites".

The blue vision of the future, as I wrote in my last essay, is a bleak one in many respects. If the establishment liberals of our time are right in their future vision, most of the population will be economically surplus; globalization and automation will empower a creative class on Wall Street and in Hollywood and Silicon Valley. Most of the rest of the country will be stuck in low productivity, low wage jobs as manufacturing fades and is replaced by … nothing, unless you count government benefits and food stamps. The blues think that a redistributive and regulatory state (naturally enough administered by wise and well intentioned people such as themselves) can pump enough money from the growing parts of the economy onto the plebs and the proles in the post-industrial doldrums, providing at least a degree of middle class life to the sidelined majority.

But the transition can still lead to something better, as happened when employment in agriculture collapsed. Education levels had to rise.

The task facing America today looks something like the task we faced after the Civil War. How do we manage the transition from a well-established political and social system to something more productive? Both then and now, many of the negative features of the transformation appeared first, while the benefits came slowly. The population boom and the agricultural transition drove millions into cities looking for work when there wasn’t yet enough factory employment.

It is the great question of the age. But as I keep arguing, it is as much an ethical question - what do we value? What do we reward! What is the good life? - as economic.

 

Underperforming hedge funds (again)

More bad news for hedge fund returns, according to this NYT piece. A standard 60% equity/40% bond portfolio returned 90% over the last decade, compared with 17% after fees for a common hedge fund index.

The author finds some people just seem to want to pay higher fees for lack of transparency and hints about secret rocket science under the hood. People - and also pension funds. Two-thirds of the industry is now institutional money. But how long can that go on, if performance is so bad on average?