Saturday, December 3, 2011

Bryan Caplan - High Priest of Wealth

I thought it was put well by someone that goes by the name of "t" over and Pink Scare (thanks Sheldon). Throughout history those with wealth sustain their grip on power not just by controlling means of violence. They do it also by attempting to legitimize their wealth. The kings of old were justly endowed with their riches by divine right. The role of the scribes and priests was to justify the king's position to the masses.

Economist at George Mason University Bryan Caplan gave a lecture that you can watch here. In it he talks about his new book. New at the time. It was 2007. It's "The Myth of the Rational Voter: Why Democracies Choose Bad Policies". In this talk Caplan tells us that economics departments have been beating into the heads of students the glories of neoliberalism for 30 years, but the public stubbornly refuses to accept it. It's baffling. Why won't the public go along with expert opinion? It's hard to say.

Take NAFTA. Like this NY Times article explained, it's going to be really great. Corporate lawyers, PR firms, the financials. They are going to really benefit from this. Of course (read the end of the article) there will be some losers. Women, blacks, Hispanics. You know, like 70% of the population. It will be tough for them. But all in all it's really great. Why is the public opposed?

Or take immigration. The public seems opposed to large scale immigration. They seem to think that it would depress wages. What are they, racist or something? Large scale immigration is really good for the economy, says Caplan.

Which it is. If by the economy you mean it's really good for the short term profit of wealth. Productive outputs require labor and equipment. On capitalism the equipment is owned by the capitalist and he hires labor to operate the equipment. He pays labor with the revenue generated by production and keeps the remainder for himself. If you can get a lot of unskilled labor to come into the country the capitalist of course can pay the labor less and keep more for himself. So this is unquestionably a better scenario for wealth, at least in the short term. If you're more poor and don't generate income from ownership but rather you live by the income gained from labor, this is a tougher situation. Prices could come down, but does this compensate for your depressed wages? That's not clear. Clearly though capital and wealth stand to gain. So this is really great for capital and not clearly so great for the bulk of the population. Caplan can't understand why the bulk of the population doesn't want to go along.

So what can be done? Here's Caplan's solution. And I'm not joking. People are so stupid that we need to undermine democracy. We need to force everyone to accept economic arrangements that they think are harmful to themselves. An independent panel of priests for wealth. That's the trick. Lower tariffs, free trade, financial deregulation. Look how great things are thanks to the independent Fed (remember, this is in 2007). The masses are asses.

Not that there's anything new here. The kings have always paid the priests in order to prevent the common man from having a voice. The cathedrals are now the economics departments at our universities.


Lazer57 said...

It is laughable that Bryan Caplan states that since companies want to make money and they do that by making customers happy it must follow that only good things come of these transactions. He is ignoring the myriad externalities (most of them conscious/deliberate) that occur. He is ignoring the pollution, the slave labor, the destruction of the economies of 3rd world countries in order to maximize profit, the death/violence that occurs both from our need to control other countries and the social breakdown due to poverty, and much, much more. Its easy to believe that he is deliberately being dense in order to help push the propaganda but I think he may truly believe what he says.

Jon said...

It's interesting to me how infrequently these economists address externalities, which is a key issue. Or the idealization of the person that accumulated wealth. It's all Steve Jobs and JK Rowling. People that acquired wealth by actually providing something of value. People that acquire wealth by creating bombs or dangerous financial instruments get really short shrift.

I thought it was interesting the way he says he treats his students in terms of convincing them. "The experts think like me and people outside this room think differently. Who do you want to be like." Oh yes, we want to part of the ruling class like you. We believe, we believe!! Does Caplan believe? I tend to think he does. But some of the priests knew it was a scam I suppose.

Jon said...

He actually says "Do you want to identify with people watching Jerry Springer or people watching C-Span?" It's interesting how strongly he pushes elitism in efforts to appeal.

Sheldon said...

You are welcome Jon.

And companies make money by making customers happy? If that were the case then Direct TV would go out of business! (Long story about why I am not, and still their customer, but I can't wait until the contract ends).

HispanicPundit said...

Do you honestly believe that more immigration - largely from poor countries - is actually a net negative for poor people???


Jon said...

Sheldon, I just dodged the DirecTV bullet myself. They gave me the hard sell. "One night only if you sign up tonight you get this fantastic deal." Turns out it was lies.

HP, I didn't say what you attribute to me. You say "More immigration from poor countries." What do you mean? More than what? And who from those countries? Everyone, including the uneducated? Like, suppose we opened the borders with Haiti and the entire country left Haiti and came here. Would that harm the poor in this country? I say it would. What do you say?

HispanicPundit said...

Sure - it would have SOME negative impact on the poor here.

But my question is more general: assume that you cared about ALL poor people, regardless of nationality. Also assume that you cared more about the poorer people. In other words, the poorer the person helped, the more "points" a system gets.

Would you agree that more immigration is a net boom to the poor then?

Jon said...

This kind of immigration is not in the best interest of a lot of American voters. Not just laborers either. I could make the case that it's not in your best interest or mine. It will result in more inequality and concentrated wealth, which has negative consequences for us.

On net? It's obviously a lot better for the Haitian. But the Haitian is in bad shape because of the past abuses of wealth. Caplan ignores that. He in fact advocates the policies that hurt them. Then he turns around and suggests a policy that helps them at the expense not of the rich in this country. At the expense of the poor. And the poor say no. Want to help them? Stop exploiting them. Don't ask us to sacrifice. You've got all the money and you stole it from them as well as others. You should do the sacrificing.

What to do? For Caplan we need to take away the voting rights of the poor. They don't reach his conclusion. They must be stupid. Why should voters be considered irrational just because they are concerned about their own well being or because they think a particular solution is unjust?

HispanicPundit said...

So let me make sure I understand you. You agree that immigration SIGNIFICANTLY helps THE POOREST people (Haitians). But you still think it's a bad idea cuz it might hurt the "poor" in the USA (who are, let's be honest, FAR RICHER than the poor in Haiti) and might worsen income inequality?

Is this really your position? Please be more specific. I'm really trying to understand you here.

Jon said...

No, I'm not saying more Haitian immigration is a bad thing. What I am saying is that the poor in this country would be harmed by it. So it's rational for voters to oppose it. It's not in their best interest. Why does this make the voter irrational? Why does this justify undermining democracy?

On democracy what you'd get is an end to the exploitative US dictatorships in Haiti. So Haitians would prosper and could prosper without harming the poor in the US. But is that in the interest of short term profit for the wealthy? No. So that's not in the cards for Caplan.

HispanicPundit said...

Okay - that's better.

So on net, you would agree that more immigration is a net positive to the "poor"?

Regarding the voting issue: It's not the bottom of the bottom in the US that vote against it...they primarily DON'T vote. It's the middle class that would be against it. And yes, for them it's stupid. More immigration would be a clear benefit for them - especially from poor countries.

Jon said...

I don't agree that this is clearly a benefit for the middle class. There are macro level effects when revenue shifts away from labor and towards capital as it would under massive Haitian immigration. There's also the fact that people in the US do in fact care about their neighbors. You can argue that they should care just as much about Haitians, but I don't think you can say it's irrational for them to prioritize their neighbors over Haitians.

This is not unlike Boeing's efforts to move a plant from Washington to S Carolina in order to hire non-union labor. I don't support that. If Boeing were a democracy I'd vote against it. Would it help people in S. Carolina? Yeah. But it would certainly harm Washington. It would funnel more money to ownership and less to labor. That creates other effects that I don't like. So I'm against it. Caplan pronounces me irrational and seeks to blunt my influence in democratic spheres. Mostly by taking things that were under democratic control and putting them under tyrannical control. Hence his support for privatization. It's the same story all throughout history. The elite fear the masses and regard them as irrational. The proof that they are irrational is that they don't support policies that retain wealth's grip on power and resources at the expense of the poor. Of course he tries to convince the masses that these policies are really good for us too, but we tend to learn in retrospect that he was wrong, though what he supported certainly made the rich more wealthy.

HispanicPundit said...

It would clearly move wealth from the very wealthy (Middle class and "poor" in the United States) to the very poor (Haitians).

You admit this. Yet you are against it. It's quite telling. Looks like you are more of a "high priest for the wealth" than Caplan is.

Btw, your "economic" rationale is not even worth responding to.

Jon said...

HP, I honestly think you need to ask yourself if you just want to be ignorant. Seriously.

You are incapable of reading me and properly understanding my views. You want to critique positions I don't hold. It's been like three times now in just this one thread and it's constant in all the other threads.

Where did I say I'm against mass immigration from Haitians? Answer? I didn't. In fact what I said is this: I'm not saying more Haitian immigration is a bad thing. The fact that you cannot understand what I write, and it's the same theme in thread after thread, tells me that you just are not at a point in your life where you could consider learning on this topic. You cannot even comprehend the words.

That's fine and it's not uncommon, but that's just where you are in life. What you read you read to re-enforce what you think you already know, not to learn. Why? Suppose you were wrong about your right wing theories. Would you want to know? I think the answer is no. Properly understanding a critique is a threat to your view so your mind will not allow it. That's just where you are in life. You should ask yourself why.

HispanicPundit said...

Maybe it's me reaading you wrong. I fully grant that (which is why I tend to always ask for further and further clarification, you can be vague).

But maybe it is the way you write. You did write: I'm not saying more Haitian immigration is a bad thing.. Which seems to suggest you are in favor.

But you also wrote:

This is not unlike Boeing's efforts to move a plant from Washington to S Carolina in order to hire non-union labor. I don't support that. If Boeing were a democracy I'd vote against it. Would it help people in S. Carolina? Yeah. But it would certainly harm Washington. It would funnel more money to ownership and less to labor.

This implies you would be against it. This is why I responded the way I did.

So am I reading you wrong, or is it difficult to decipher your point? I'd like to see what your other readers think here, Paul?

Jon said...

I understand why you could miss where I was going with the Boeing example. I'm saying there are cases where I would oppose a move that would benefit the poor at the expense of the less poor (Washington is more union and SC is right to work). But regardless of that you can't say, as you did "Oh, Jon actually opposes Haitian immigration." You could ask me if I oppose, which I've already answered. But I think you are itching to put me in the ignorant category and so rather than read me you say things like "You seriously think more immigration is a net negative? Seriously? Seriously???" No. Why make up stuff like this?

There is no way to conclude, based on what I said, that I oppose Haitian immigration. If you aren't sure what I think, fine. But that's not where you are. You're confident I oppose. Why? You don't read me carefully. To make progress (that is, if we want to learn from one another) you have to be more careful. I try to be careful with what you say, first of all because you'll call me names if I don't and second because I really learn more that way. I know you think I'm a novice so maybe there's a tendency for you to skim what I write and I understand that. But you've also admitted that though I'm a novice you've still learned some things. So do it just on the off chance you might learn more. Or if you think you won't learn much do it just so you don't waste my time re-explaining what I actually think.

HispanicPundit said...

Maybe you are right more generally, but in this particular case I still don't see how I could read it any other way.

Let's spend a little time on this. Educate me here. Show me where I misread you. Here is what I read from your response, you tell me where I went wrong.

I read:

1. By analogy, you compare mass immigration to the Boeing strike and the possibility of moving its bases to S Carolina.


2. You then say you would be against such a move.


Assuming I read the two points above correctly, and reading the rest of your post (where you go on about precisely WHY #2 above is a bad idea), why is it "misreading" to then conclude you would be against mass immigration?

I'm truly curious and confused. Seriously.

Jon said...

Like I said in my prior post, I can understand why you would misunderstand me there. You thought I was making an analogy between Haitians getting work in the US and people in SC getting work with Boeing. I oppose the Boeing move so by analogy I oppose the movement of Haitians.

What I was actually trying to do though was not draw an analogy. I was trying to say that there are parallels between Haitians and SC and I do oppose the move that helps SC. So I'm saying there are cases where I do oppose a move that harms richer at the expense of the poorer. But I'm not actually saying that's the way I feel about Haitians. The cases are analogous but all cases are different. These must be looked at case by case. So it's not that I oppose moves that help the poor and harm the richer in principle.

It's on the heels of two other misreads. "You seriously think mass immigration is a net negative?" That's posed in a kind of "you're an idiot" way and it's not what I said. Then comes this as well as "your economic rationale is not worth responding to." Again "you're an idiot" and yet you are misreading me.

HispanicPundit said...

If you weren't trying to draw a strong parallel, analogy, then you shouldn't have wrote: "This is not unlike Boeing's efforts..."

With that included, I don't see how I could have read it any other way.

Regarding my first comment, read your original post. You rattle off NAFTA (which you have told me previously, you are against) and in the same breadth bring up mass immigration.

Of which you write: "Which it is. If by the economy you mean it's really good for the short term profit of wealth....So this is unquestionably a better scenario for wealth, at least in the short term. "

Then you go off on how mass immigration would be bad for the "poor" citizens of the United States.

That's the gist of your post. Nowhere do you even mention what it would result in for the poor coming to the United States. Nada.

And keep in mind despite all of this, I STILL didn't conclude you were against mass immigration. I still ASKED. With SURPRISED exclamation marks even! Like "im surprised here, please tell me I am reading you wrong!!!" remarks.

So again: am I reading you wrong, or are you a person with writings that are hard to decipher?

Btw, regarding immigration being bad for the middle class...i stand behind my claim that it's garbage economics. :-) We can certainly debate (though I still think you are largely wrong) it's role on poor Americans, but as you move up the ladder, the case becomes onesided.

Jon said...

I say it's unquestionably good for wealth, then immediately I say that for the poor it's unclear. So over and over your question is "So you're saying it's bad for the poor." No, I said it's unclear. I explain later how it's a mixed bag. "I see, so you're against Haitian immigration." No.

Are we going to keep arguing about what I think? You're going to have to take my word that I know what my opinions are.

HispanicPundit said...

Jon, you wrote: You are incapable of reading me and properly understanding my views. You want to critique positions I don't hold. It's been like three times now in just this one thread and it's constant in all the other threads.

So now the point of our discussion has turned to - with you leading it there - whether I misread you or whether your writings are difficult to understand.

With regard to your Boeing comment, I think it's fair to say that in that case it was YOU that wrote it wrong - NOT my misreading.

You then brought up my first comment. Now we are addressing that.

Regarding your original post, sure you said it's "unclear" for the "poor" (of which it is very clear you only meant the poor in the United States), but remember, you said this in a post justifying why it's understandable that the "greater population" votes against mass immigration! This gives it negative connotations.

Correct me if I am wrong here but I took your general gist to be that the "general population" is smarter than some economist! They know better what is in their interest and find it logical to vote against mass immigration - understandably, in your view.

This leads me to believe you AGREE with the "general populations" (populists!) views towards immigration. You agree that mass immigration IS against their interest! I would argue that any reasonable reader would come to the same conclusion.

And despite all of this, I did NOT say you were against it. I ASKED. I asked precisely because I found it so shocking. I would have thought you favored mass immigration.

Of which, btw, you still have not answered (my fifth time asking now): So on NET, would you say mass immigration is a positive for the poor????? (<---5 question marks, for every time I have now asked)

You write: Are we going to keep arguing about what I think? You're going to have to take my word that I know what my opinions are.

But that's precisely my point Jon: you DONT tell me what you think. It's shaded in vague contrary statements. That's why I asked in my first comment and I continue to have to ask the same question again and again. PLEASE, PLEASE, tell ME what you think - clearly! Let it be settled! I'll take your word for it, I swear!

Jon said...

Correct me if I am wrong here but I took your general gist to be that the "general population" is smarter than some economist.

Nope. My belief is that differing opinions can both be rational. I'm pro-life. It's a rational belief based on my value judgments. Is pro-choice an irrational position? No. I can disagree with a belief but still regard it as rational. These questions are not like mathematics where the answer is 25 and those that don't see it are just wrong. Values conflict. Life is messy. It seems to me that generally it is right wingers that can't acknowledge this. They are right, so anyone that disagrees with them is wrong.

So I'm not saying that Caplan is wrong and the population is right. It's that things are complicated and there's always not really a right answer. Democracy is as good a method as any to cope with how complicated life is. Caplan doesn't like that because on democracy he loses. That's what I object to.

So in answer to your question, I don't think there is a right answer. It's like asking me if I should give 50% of my salary away to charity. On net it would do a lot of good. I have more money than I need. So is it irrational for me to say no? Do you give away half of your money to charity or do you live relatively luxuriously? You do the latter. That's not irrational. Keeping your money is not wrong. Nor is giving it away. There is no right answer.

I am not saying that opening the borders with Haiti is right and I'm not saying it is wrong. I'm saying it would be rational for someone to say that it is right because it would alleviate massive Haitian suffering. But it would impose more suffering on the poor here. It could also conceivably cause other macro level problems here. So objecting to it is rational. I don't have an opinion one way or the other because I don't actually think I understand the macro level consequences well enough.

This is very different from the position you attribute to me. To quote you. "Yet you are against it." No, I'm not. You think very black and white so you assume that since I expressed how I think being against it is rational I must oppose it. But that's not the same thing because contrary to right wing ideology some questions are hard to answer or maybe don't actually have a right answer.

HispanicPundit said...

Ah, now were are getting to the crux of our disagreement. For the record, I follow Caplan ALOT. If I had to list living economists I admire the most, he would rank near the top of that list. I try to read everything he writes. So I actually am familiar with his book and the points it makes.

One point that you may not have known is that Caplan takes economic consensus as "correct". No shades here. So say you believe that free trade is wrong and 90%+ of economists support free trade...well than your anti-free trade view is...frankly...economic ignorance. It might be rational based on your economically ignorant presuppositions, but it's not an economically rational position.

Same with immigration. The vast majority of economists support it. Right and left. Sure, some support it more than others...but almost all support it more than your typical voter.

So what motivates voters to be against immigration? It's certainly not the economics of it - after all, those trained in economics see it vastly different. So what is it then? Simply put, it's irrational biases. Read the biases here. The one playing a role here is "anti-foreign bias".

So when you posted a post attempting to REBUT Caplan's ACTUAL arguments and even defended the voters views and try to do so based on economics...I'm thinking you actually think their views have ECONOMIC merit. They don't. Economists have looked into it and tend to see immigration as a positive.

So to me, it looked like you actually believed the nonsense anti-immigration voters might give to their opposition to immigration.

Lastly, if you factor in the positive gain to the immigrants themsleves, more immigration is a no brainer.

With that your first post and my comments. Notice that you are trying to say that BOTH sides have merit - the anti-immigration and the pro-immigration (though, aside from me proding you, you never actually gave any pro-immigration arguments)...that can be confusing. It's no wonder I read you the way I did. A little sympathy and understanding could go a long way in situations like this.

I realize you want to paint me as a closed minded person who WANTS to have his views confirmed...but it's usually more complicated than that. After all, remember, it is ME usually on YOUR blog commenting and challenging. :-)

Jon said...

I agree with Raquel Fernandez, Professor of Economics at NYU. She says "yes, it’s true that the average guy on the street doesn’t understand economics, and it’s also true that we don’t understand economics. We just have a more sophisticated lack of understanding than the guy on the street."

A quick side comment. Economists build models and these models assume the consumer is rational. He's looking to maximize his own well being. Assuming that model we find that immigration is good. Yet the voter opposes. So the voter is irrational. If so, what does that say about the economic models the economists use to develop their consensus?

Bottom line is I just don't believe economic consensus equals truth. How could it? It varies all the time, much like religious belief. Really this is not true of science to the same degree. Scientific theories harden and generally hold up with time, at least in terms of how they work and can be applied. Economic theories change rapidly and don't come about via scientific methods. They are articles of faith. And when a person objects, like Ha-Joon Chang, he is called "heterodox". That's the right label. These beliefs are dogma. Departing from orthodoxy is a grave sin.

But the dogma is wrong. Take the Caplan article you linked to. Here's a citation:

"Yet profits are not a handout but a quid pro quo: If you want to get rich, you have to do something people will pay for. Profits give incentives to reduce production costs, move resources from less-valued to more-valued industries, and dream up new products."

That's just not true. Profits can come about because you "do" something people will pay for. But really on free market capitalism you don't necessarily have to "do" anything in the normal sense of the word. Unless owning stuff is "doing" something.

Profits are the consequence of people doing things that produce goods that people want to buy. But the people that get rich aren't necessarily doing the things needed. Take slave society or the post Civil War south. The only thing the rich actually do to enhance their wealth is own things. They sit on a plantation and perhaps tell the lead slave/sharecropper to manage the farm. The blacks do all the work. Tend and harvest the crops. Deliver them to market for sale. Deliver the money to the owner for spending while retaining a portion to continue the cycle. The owner didn't do anything. He owned, and that's how he became rich. What if you take the owner out of the equation? What if he dies? Does this prevent the profits? No. Work goes on as normal. You don't need the owner. He's not doing anything. But if he lives on even though he doesn't contribute to creation he actually reaps the bulk of the gains of the creations.

Caplan says free trade is great. Ha-Joon Chang points to S Korea, Japan, the US, China, India and says they got rich by violating that. Well that's wrong for Caplan. Why? Because it's unorthodox.

It's really like saying that if you don't believe in the Flying Spaghetti Monster then you are irrational and you should have no say in how society is run. And the reason is because the intellectual elites happen to be FSM priests. Only the FSM priests should be allowed to say what we should do. And it happens they think it's for the best that policies are introduced that unquestionably are in the best interest of the to .01% of the population that holds disproportionate wealth. The ones that own the plantation.

It would be different if economics was science. But you know my view on that.

HispanicPundit said...

I agree with Herb Stein's theory(paraphrasing): 'Economists do not know very much, but non-economists know so much less!'

Look, I am not going to get into a discussion on whether economists models are worthwhile. I won't do this on economics and I won't do this on global warming.

Can global warming turn out to be a benign phenomena? Sure. I can't say with 100% certainty that what climate scientists predict is true. But who am I going to put my money on? The experts. That's a fundamental difference between us.

You are a global warming denier in economics. I am not.

Jon said...

Global warming is science and economics isn't. The difference between us is I recognize that and you don't.

HispanicPundit said...

Neither of them are hard sciences. Neither of them can perform repeatable experiments inside of a lab.

Now what they both are is "soft" sciences. And when judged in that realm, they are both equivalent. Sure, they each suffer from different shortcomings but the risk is the same.

Let's also remember our biases here. Mainstream economics contradicts many of the worldviews you hold dear. So you clearly have an incentive to disavow its findings. Now granted, global warming contradicts some of the worldviews I hold dear. But instead of disavowing it's findings, I accept them.

I believe I have to. They are the
experts and I am not. That's our difference.

Jon said...

Absolutely false. Global warming claims involve testable predictions that can be evaluated. I've talked about the warming troposphere and cooling stratosphere. There's claims about more dramatic effects at the poles, more continental than at the oceans, more at night than during the day. Predictions about the consequent humidity levels in frozen regions. Obviously the models predict rising temperatures and those models have been shown to be accurate. That's totally unlike economics. I mean, you can look at Saipan, which Delay called "the perfect petri dish of capitalism." But when it all crashes and burns contradicting all the free market models there's always a way out because conditions couldn't be completely controlled.

Actually, think about that. What do you think could falsify your right wing views. Or say the view of Caplan that protectionism harms economies? What test would you suggest? Can you think of one?

HispanicPundit said...

Economists have multiple different countries, under various different circumstances to test the macro level. Much more data and circumstances than global warming "scientists". The micro level can be tested over and over again at the individual level. Plenty of data.

That is not to say that either of them are true sciences, but they each have their advantages and shortcomings.

Jon, I thought you found arguments of "what would prove you wrong" worthless? You said so to me before on this very blog (claimed that Christians asked you the same thing). Now you are resorting to those same arguments? That is quit telling.

I could answer it. But I think this discussion has already drifted off the main point far enough. Suffice it to say that when someone has it in their ideological interest to dismiss a field, and they argue passionately in favor of dismissing that field, I tend to put as much effort in addressing their arguments as you do in disputing the oil industries studies that global warming isn't real. :-)

Jon said...

You didn't actually provide a single test. You said "Tests can be done at various places." Ok, like what? Give us a test. Is Saipan a test? A cooling stratosphere and warming troposphere is a test. What is the economics test?

And I think "what would prove you wrong" questions are very good. It's known as falisfiability. Your view must be falsifiable or else your view is worthless. The question is hard to answer in economics because it is not scientific, but it's quite easy to answer for scientific questions. I don't know what you are referring to when you say I rejected that test. I don't think I did. I think it's very important.

TTS said...