g m g D e s i g n . c o m

According to some well-known economists, the higher income disparity in this country is not a bad thing. They talk about how in certain emerging markets—China and India—economic growth and the income disparity that has resulted has not been bad for inhabitants of those countries, even for those toward the bottom of the socio-economic ladder.

In this country, they explain the bulk of the wage gap as follows:

The main action came in the earnings of college graduates and those with postgraduate education. They both increased at a rapid pace, with the earnings of persons with MBA’s, law degrees, and other advanced education growing the most rapidly. All these trends produced a widening of earnings inequality by education level, particularly between those with college education and persons with lesser education. I should also note that while an upward trend in the earnings gap by education is found for both men and women, and for African Americans and whites, the earnings of college educated women and African Americans increased more rapidly than did those of white males. As a result, inequality by sex and race, particularly among college educated persons, narrowed by a lot.

[…]

The widening earnings gap is mainly due to a growth in the demand for educated and other skilled persons.

Bottom line is that artificial means at shrinking the wage gap could have unintended consequences (politicians are renowned for their ability to not foresee the consequences of their legislation). Legislation that coercively shrinks the wage gap (stronger unions, higher min wage, punishing “progressive” taxes) could eventually result in market-distorting, state-sponsored ramifications that a) discourage investment in economically productive areas of the market and b) discourage individuals from pursuing higher education. The long-term ramifications of such legislation by our political luminaries would not be immediately obvious, but over time would decrease our competitiveness and productivity and, therefore, our standard of living.

If we all have lower standard of living, do we really benefit from a narrower wage gap?

The irony is that government could declare a sharply lower standard of living as a “market failure” and become more involved in the economy… oh wait, that’s already happened, has it not?

EDIT:

Their concluding para is worth reading:

So instead of lamenting the increased earnings gap by education, attention should focus on how to raise the fraction of American youth who complete high school, and then go on for a college education. These pose tough challenges since the solutions are not cheap or easy. But it would be a disaster if the focus were on the earnings inequality itself. For that would lead to attempts to raise taxes and other penalties on higher earnings due to greater skills, which could greatly reduce the productivity of the world’s leading economy by discouraging investments in human capital.

Generally speaking, people don’t like generalizations. People are very predictable that way. Of course, people generally make generalizations all the time. Some are benign, others not so much. It’s the subset of generalizations that are generally considered “non-benign” that are so bothersome, of course. And hence, in our world of (often coerced) political correctness, people generally shun generalizations, often calling them “sweeping generalizations,” “stereotypes,” or some other negative term.

They never talk about political corruption on the news!

It’s really nice outside!

Dogs are so obedient.

Those are all generalizations. I’m sure they do talk about political corruption in the news; it’s not nice outside to everyone, everywhere; not all dogs are obedient.

Of course, there is no national uproar over generalizations such as these. People only object when generalizations are offensive to them, due to their own personal biases. Generalizations against their “enemies”—often political, or of particular people or organizations they find distasteful—are entirely acceptable, of course. Again, no national uproar over this sort of hypocrisy.

Some generalizations truly are offensive (to the general population). For example, I find the idea that I “can’t dance” (due to my complexion) or that I am “aesthetically ignorant” (due to my gender) entirely offensive (though both observations happen to be true). But, like it or not, the absence of any kind of generalization at all would make communication extremely cumbersome. Imagine a piece of legalese where every single provision is spelled out ever-so-carefully; communication of that sort in the general sense would be incredibly unmanageable.

So why are people generally so opposed to generalizations? What’s wrong with a rhetorical short-cut or two? And why are people only outraged when the generalization contradicts their own personal or political preferences?

In a move to prove how economically inept they are, the Times has editorialized their favoritism toward the much-discussed “public option.”

The last para espouses that, eventually, the “public option” be available for everybody.

I’ve written before about why I think the public option is a bad idea (and no, not because some conservative loud-mouth on “talk radio” told me what my opinion should be). The underlying reason is that our medical system as a whole isn’t very good, and additional activism by government will make it worse – in fact, cementing the current system in place for many more years to come.

We need reform, but the “reform” currently being proposed will further lead us astray if it includes the public option. I have a vested interest in cost control (that doesn’t decrease quality). Hence, my bias in this debate is in favor of real and substantial reform (again, something I’ve written about in the past).

The bottom line is this. Although government can make promises, such as liability acceptance for millions of people (via the provision of insurance), that does not mean that the government can guarantee outcomes. The government can promise that people will get insurance (and, by extension, medical care), but that doesn’t make it so. Government can’t guarantee that its own market interventions won’t augment the already-high level of market inefficiencies, leading to higher aggregate costs associated with medical care and treatment. Even if government covered everyone in this country, that does not mean that a) medical coverage would truly be affordable – imagine if income tax rates went up to 60% for most Americans, or that b) quality would be higher or as high as what we have now (imagine waiting months for time-sensitive surgery, or years for “optional” surgery).

Government can’t guarantee outcomes even though government can accept liability with the stroke of a pen. The role of government at various levels has rendered the medical insurance (“healthcare”) market less efficient, with aggregate costs much higher (and far less transparent) than they otherwise would be.

Greater inefficiency and higher aggregate costs (with likely lower quality of service) is a future worth avoiding.

Wow, great editorial. Excerpt (emphasis added), plus some comments…

Yet, one thing we do know: Many Americans now believe many things about their government that are false, and they expect much from the government that the rulers cannot provide. The public at large embraces myths about what the government can do, what it actually does, and how it goes about doing it. Only people enamored of such myths can support, for example, a gigantically expensive health-care “reform” at a time when the present value of the government’s promised future Social Security and Medicare benefits alone amounts to several times the current GDP. (I am disregarding here the interested parties who expect to reap short-run pillage from an intrinsically doomed system.) Until more people come to a more realistic, fact-based understanding of the government and the economy, little hope exists of tearing them away from their quasi-religious attachment to a government they view with misplaced reverence and unrealistic hopes. Lacking a true religious faith yet craving one, many Americans have turned to the state as a substitute god, endowed with the divine omnipotence required to shower the public with something for nothing in every department – free health care, free retirement security, free protection from hazardous consumer products and workplace accidents, free protection from the Islamic maniacs the U.S. government stirs up with its misadventures in the Muslim world, and so forth.

Points made by blog entry (my paraphrasal):

1. therapy and diagnosis are different – if you want a support group for your ideology, consult the relevant right- or left-wing news source (depending on your bias); if you want a diagnosis, don’t be upset when one is given
2. the general public disagrees on “the problem”
3. the general public disagrees on “the solution”
4. the (US) public is increasingly replacing belief in formal religion with the (informal) quasi-religious belief in government as the provider (rather than God)
5. there is no immediate, “magic bullet” solution
6. we should be incredulous of “magic bullet” solutions (flat tax, “public option” in healthcare, etc)

This corresponds with an observation of mine that the US is heading toward Fabian socialism (philosophically): in practice, social democracy. Western Europe is ahead of us in this regard (“ahead of us” is bad, in this case). Think of social democracy as a mix between democracy and socialist ideals. It’s the idea that “communism didn’t work out, but the underlying ideas were valid.”

Of course, that’s false. The irony in all this is that when countries are “converted” into socialist-style democratic systems, the people don’t get to compare such systems with what things would have been like absent those systems. Some people might think of the good ol’ days, but others will naturally prefer the system that “takes care of them” (absent God, someone’s gotta do it!), and while the non-socialist alternative might be substantially better in practice, there’s no way of 1) proving it cogently to the public, or even 2) returning to such a system, since governmental systems win constituencies that prevent such systems from improving over time (Social Security can’t be reformed for this reason).

So we’re left with a deeply flawed system that’s trending worse toward a maddeningly avoidable fate. Well, at least we get eloquent speeches out of all this.

No offense to Barak Obama, but he does not deserve the Nobel Peace prize, nor will that make his job any easier. The Nobel committee, at least for Peace, seems to have a proclivity toward making very good choices some years and awful choices other years (i.e., 2007’s choice of co-winner Al Gore or, of course, this year’s choice of Obama). Which year takes the cake for the worst decision by the luminaries on the Peace committee: 1994, for co-awarding Yasser Arafat with the Peace prize. I mean, how stupid are the Peace prize judges? By comparison, I should point out that Obama and Gore are much more peaceful than Arafat, but the lack of judgment is still very obvious, years later.

Obama might deserve the Peace prize at some point in the future, but that time hasn’t arrived, not by a long shot. Further, winning the prestigious award will almost certainly make his job much harder, as every action he takes is critically evaluated for its “Peace-ness.” Perhaps the Peace prize judges are trying to strategically effectuate an outcome that they find appealing; however: 1) that is not the point of the prize, making the prize seem disingenuous, and 2) that approach is likely to backfire.

The willingness to take bold, direct action (against vile dictators, terrorist-supporters, or Somali pirates) will likely drop, as Obama already has his Peaceful legacy to consider. Bush Jr may have been too flippant about going to war, but Obama will be the opposite: too contemplative, weak, and unthreatening.