Things to Read on the Morning of May 4, 2014

May 4, 2014

Should-Reads:

  1. Tim Harford: Have living standards really stopped rising?: “Income inequality is soaring…. So I claimed…. But was I right?… The everyday technology of today was the stuff of science fiction in the 1970s when this apparent stagnation began. Perhaps inflation measures haven’t kept up…. 40 per cent of the consumer price index (CPI) tracks the cost of housing and related costs such as domestic heating; another 30 per cent tracks the cost of food and drink. If two-thirds of my income goes on basics such as food and shelter, and my income is barely keeping pace with the price of such basics, there is a limit to how ecstatic I am likely to feel about the fact that iPhones exist…. Most of these objections should lead us to conclude that growth is not quite as slow as we fear, and increasing inequality not quite as stark as it first seems. None of them is powerful enough to put my mind at rest…”

  2. David Leonhardt: Inequality Has Been Going On Forever… But That Doesn’t Mean It’s Inevitable: “A true attack on inequality would require that the country move the issue to the center of every political debate: how we tax wealth, how we tax the income of the middle class and poor (often stealthily through the payroll tax), how we finance schools and measure their results, how we tolerate income-sapping waste in health care, how we build roads, transit systems and broadband networks. These are precisely the sort of policies pursued by countries with better recent middle-class income growth than the United States…”

Should Be Aware of:

  1. Felix Salmon: Facebook’s Horrible, Stroke-of-Genius IPO: “The technology world moves fast, and companies need to be able to change or die…. Zuckerberg knew, circa Facebook’s IPO, that his company was not good at mobile… he knew that asking his existing corps of engineers to turn their attention to mobile would probably not work. But… he… [now had] a highly-valued acquisition currency in the form of Facebook stock. The world of mobile is in large part a lottery. The most successful products aren’t the best-made; they’re just the ones which managed to catch on…. Facebook bought Instagram for $1 billion in 2012 not because the product was particularly great, but because the product was insanely popular. The same when he offered $3 billion for Snapchat…. Facebook’s acquisition of WhatsApp sums up Zuckerberg’s strategy perfectly. WhatsApp is an ugly, clunky product with a juvenile name…. But… it’s also insanely popular… hundreds of millions of incredibly loyal users…. Issuing Facebook stock, especially if doing so buys you the future, in terms of a young global user base, costs Zuckerberg effectively nothing…. The WhatsApp acquisition is a statement by Zuckerberg that mobile matters more than money. He’s right about that. Without mobile, it doesn’t matter how much money Facebook has…. He’s playing large-stack poker, and he’s playing it in textbook manner. I, for one, wouldn’t want to be competing against him…”

  2. Digby: Has the GOP message machine on wealth inequality really run so low on ideas?: “If… Judd Gregg column… is the best the right wing can come up… [on] wealth inequality… they’re in some serious trouble: ‘We often hear… from President Obama and his chorus… that there is massive income inequality in America and that he and his minions are committed to correcting this situation….. It is an interesting observation. It means that after almost six years of control of the presidency and the majority of the government, those who anointed themselves to resolving the problem now implicitly–but never explicitly–acknowledge that they have failed to do so…. If this were a business confronting an issue so precisely seen by its leaders, one would presume those leaders would be out of work for not having come up with an effective solution…. But they are not in business; they are the government, where there is no actual accountability…. They seem to genuinely believe that it is not individuals who generate and create economic growth and thus wealth, but rather they themselves, the elected elite and their bureaucracy…. Mark Zuckerberg; Bill Gates; Larry Ellison; and Steve Jobs…. Under the Democratic Party’s now dominant philosophy, they are people who must be vilified under the label of “too wealthy…. This may be good political rhetoric but it fuels bad economics…’That’s the best they’ve got? Pretending that Democrats have actually held the reins of government since 2010? Pretending that tax rates on the wealthy are at historic highs, rather than near historic lows? Pretending that Mark Zuckerberg has created lots of jobs, or that people actually like rather than tolerate Facebook and Microsoft? Pretending that computers and social media would never have existed without the biggest players in those fields making billions? Pretending that most of the super-rich are tech innovators rather than Wall Street tycoons and hedge fund managers?… It’s such a pathetic, half-hearted attempt that it’s a wonder Politico even bothered publishing it…”

  3. MattBruenig: On civility, again: “The media is full of children of privilege who have never meaningfully known someone from the class of people they so often say horrific things about. To read the daily internet happenings on poverty in the US is to basically just watch a parlor game of elites opine in extremely ‘uncivil’ ways about the plight of people that they don’t afford any dignity, humanity, or decency. But because everyone in the media is upper class, they gloss over this stuff without even noticing it. I don’t though. The same anger you feel when I run down McArdle and her plight as an example for my pro-material-security argument is the way I feel when she runs down poor people and their plight as an example for her anti-material-security argument. If you get hot over my usage of McArdle here, but not over her usage of poor fast food workers, you should ask yourself why that is. Are you against incivility itself or are you against incivility towards those in your in-group who you actually contemplate as a real live human being?”

  4. The Vox.com Comment Policy: “We love working to bring you the news and its context each and every day. And we want to hear your perspective on these stories, to learn from your insight and to participate in conversations with you around important topics. We ask that you treat this space as a place for fun, engaging and edifying conversations. Abide by the following, overarching rule, or you will be moderated and banned from the site. That rule: Be respectful. No racism, homophobia, sexism or any other kind of discriminatory language in the comments. Don’t be rude. Don’t be mean. If you disagree, disagree in the spirit of generous debate. Treat this place as we see it: an opportunity to learn from one another. We’re a small team, but we’re going to work hard to make these comments the best they can be. But we can always use your help. If you see a problem comment, flag it. If you notice something that needs more attention than just a flag, email webmaster@vox.com. Help us help you!”

  5. Chris Dillow: Stumbling and Mumbling: Begging the inequality question: “Sure, you can write models in which inequality emerges as if it were the product of free choices in a free market economy. You can also model a man’s empty house as if he had called in the removal men–but if he has in fact been burgled, your models miss something. I fear that some free market advocates… forget that the textbook perfect competition model is not a description of reality but rather of a utopia against which to assess actually-existing markets…. You might reply that this error is not a common one. Maybe not. But it could be a costly one…”

And:

Already-Noted Must-Reads:

  1. Tyler Cowen (July 2013): Wealth Taxes: A Future Battleground: “The coming battles over wealth taxation may prove especially bitter and polarizing…. It doesn’t seem fair to the holders of that wealth to suddenly pay additional taxes on assets that they thought were in the clear, and such taxes would signal that previous policy has failed. Higher wealth in a nation means that there is more to take, and growing inequality means there are more problems that its government might seek to remedy. At the same time, however, this new economic configuration will mean greater political influence for the holders of that wealth, and that will make higher wealth taxes harder to achieve. Historically, economists–including me–have generally favored taxes on consumption, on the grounds that they would do the least damage to long-term savings, investment and economic growth. Yet in some eyes, rising wealth will become a tempting target for short-term political gain. And note that while most Republicans currently oppose consumption taxes, they may dislike the relevant alternative, namely wealth taxes, even more. Get ready to choose a side.”

  2. Why America s Essentials Are Getting More Expensive While Its Toys Are Getting Cheap Derek Thompson The Atlantic Derek Thompson: Why America’s Essentials Are Getting More Expensive While Its Toys Are Getting Cheap: “Here’s a fascinating snapshot…. You occasionally hear conservatives say that poor people aren’t really poor because, you know, they have refrigerators and TVs, don’t they? Yes, they do…. But the power to alter the temperature of your food and watch FOX is not quite the same as being rich…. Why does it seem like the least important things in life—TVs, toys, and DVD players—are getting cheap while the most important parts of the economy are getting more expensive?…. 1. On poverty: Jordan Weissmann nails it: ‘Prices are rising on the very things that are essential for climbing out of poverty’… college… sick[ness]… daycare…. Just as the benefits of wealth create a virtuous cycle of behavior, the challenges of poverty start a vicious circle that continues to spin down through multiple generations. 2. On productivity: When you look at the items in red with falling prices, they largely reflect industries whose jobs are easily off-shored and automated…. Now consider education, health, and childcare, the blue sectors above where prices are rising considerably faster than average. These are service industries that employ local workers. They are not, to use the economic term, ‘tradable’… are mostly gaining jobs, not shedding them…. Health care, education, and childcare have entirely different products than a television or iPod. Their product is people: healthy people, educated people, and safe baby-people…”

  3. Simon Wren-Lewis: Pareto, Inequality and Government Debt: “The only possibly original point is that the absurdity of restricting policies to Pareto improvements becomes immediately apparent if we think about government debt. Measures to reduce current… debt… almost certainly make current generations worse off…. Yet I do not often hear people arguing that we have to let debt stay high because the government can only implement Pareto improvements….

    “Textbooks still make a big deal of dynamic inefficiency…. Government intervention to discouraging saving would be a Pareto improvement: the current generation consumes more because they save less… future generations consume more because less output needs to go to replacement investment. The symmetrical case is where there is too little capital…. Yet the implication… is that this case is not one we should worry about, because to change it (by raising saving) would make the current generation worse off and is therefore not a Pareto improvement…. We don’t think this way about government debt, so why should we when it comes to productive capital?

    “Why is there this emphasis on only looking at Pareto improvements? I think you would have to work quite hard to argue that it was intrinsic to economic theory…. Many economists use social welfare functions…. One thing that is intrinsic to economic theory is the diminishing marginal utility of consumption. Couple that with the idea of representative agents… and you have a natural bias towards equality. Focusing just on Pareto improvements neutralises that possibility. Now I mention this not to imply that the emphasis put on Pareto improvements in textbooks and elsewhere is a right wing plot–I do not know enough to argue that…”

Should Be Aware of:

  1. Felix Salmon: Facebook’s Horrible, Stroke-of-Genius IPO: “The technology world moves fast, and companies need to be able to change or die…. Zuckerberg knew, circa Facebook’s IPO, that his company was not good at mobile… he knew that asking his existing corps of engineers to turn their attention to mobile would probably not work. But… he… [now had] a highly-valued acquisition currency in the form of Facebook stock. The world of mobile is in large part a lottery. The most successful products aren’t the best-made; they’re just the ones which managed to catch on…. Facebook bought Instagram for $1 billion in 2012 not because the product was particularly great, but because the product was insanely popular. The same when he offered $3 billion for Snapchat…. Facebook’s acquisition of WhatsApp sums up Zuckerberg’s strategy perfectly. WhatsApp is an ugly, clunky product with a juvenile name…. But… it’s also insanely popular… hundreds of millions of incredibly loyal users…. Issuing Facebook stock, especially if doing so buys you the future, in terms of a young global user base, costs Zuckerberg effectively nothing…. The WhatsApp acquisition is a statement by Zuckerberg that mobile matters more than money. He’s right about that. Without mobile, it doesn’t matter how much money Facebook has…. He’s playing large-stack poker, and he’s playing it in textbook manner. I, for one, wouldn’t want to be competing against him…”

  2. Digby: Has the GOP message machine on wealth inequality really run so low on ideas?: “If… Judd Gregg column… is the best the right wing can come up… [on] wealth inequality… they’re in some serious trouble: ‘We often hear… from President Obama and his chorus… that there is massive income inequality in America and that he and his minions are committed to correcting this situation….. It is an interesting observation. It means that after almost six years of control of the presidency and the majority of the government, those who anointed themselves to resolving the problem now implicitly–but never explicitly–acknowledge that they have failed to do so…. If this were a business confronting an issue so precisely seen by its leaders, one would presume those leaders would be out of work for not having come up with an effective solution…. But they are not in business; they are the government, where there is no actual accountability…. They seem to genuinely believe that it is not individuals who generate and create economic growth and thus wealth, but rather they themselves, the elected elite and their bureaucracy…. Mark Zuckerberg; Bill Gates; Larry Ellison; and Steve Jobs…. Under the Democratic Party’s now dominant philosophy, they are people who must be vilified under the label of “too wealthy…. This may be good political rhetoric but it fuels bad economics…’That’s the best they’ve got? Pretending that Democrats have actually held the reins of government since 2010? Pretending that tax rates on the wealthy are at historic highs, rather than near historic lows? Pretending that Mark Zuckerberg has created lots of jobs, or that people actually like rather than tolerate Facebook and Microsoft? Pretending that computers and social media would never have existed without the biggest players in those fields making billions? Pretending that most of the super-rich are tech innovators rather than Wall Street tycoons and hedge fund managers?… It’s such a pathetic, half-hearted attempt that it’s a wonder Politico even bothered publishing it…”

  3. MattBruenig: On civility, again: “The media is full of children of privilege who have never meaningfully known someone from the class of people they so often say horrific things about. To read the daily internet happenings on poverty in the US is to basically just watch a parlor game of elites opine in extremely ‘uncivil’ ways about the plight of people that they don’t afford any dignity, humanity, or decency. But because everyone in the media is upper class, they gloss over this stuff without even noticing it. I don’t though. The same anger you feel when I run down McArdle and her plight as an example for my pro-material-security argument is the way I feel when she runs down poor people and their plight as an example for her anti-material-security argument. If you get hot over my usage of McArdle here, but not over her usage of poor fast food workers, you should ask yourself why that is. Are you against incivility itself or are you against incivility towards those in your in-group who you actually contemplate as a real live human being?”

  4. The Vox.com Comment Policy: “We love working to bring you the news and its context each and every day. And we want to hear your perspective on these stories, to learn from your insight and to participate in conversations with you around important topics. We ask that you treat this space as a place for fun, engaging and edifying conversations. Abide by the following, overarching rule, or you will be moderated and banned from the site. That rule: Be respectful. No racism, homophobia, sexism or any other kind of discriminatory language in the comments. Don’t be rude. Don’t be mean. If you disagree, disagree in the spirit of generous debate. Treat this place as we see it: an opportunity to learn from one another. We’re a small team, but we’re going to work hard to make these comments the best they can be. But we can always use your help. If you see a problem comment, flag it. If you notice something that needs more attention than just a flag, email webmaster@vox.com. Help us help you!”

  5. Chris Dillow: Stumbling and Mumbling: Begging the inequality question: “Sure, you can write models in which inequality emerges as if it were the product of free choices in a free market economy. You can also model a man’s empty house as if he had called in the removal men–but if he has in fact been burgled, your models miss something. I fear that some free market advocates… forget that the textbook perfect competition model is not a description of reality but rather of a utopia against which to assess actually-existing markets…. You might reply that this error is not a common one. Maybe not. But it could be a costly one…”

And:

Already-Noted Must-Reads:

  1. Tyler Cowen (July 2013): Wealth Taxes: A Future Battleground: “The coming battles over wealth taxation may prove especially bitter and polarizing…. It doesn’t seem fair to the holders of that wealth to suddenly pay additional taxes on assets that they thought were in the clear, and such taxes would signal that previous policy has failed. Higher wealth in a nation means that there is more to take, and growing inequality means there are more problems that its government might seek to remedy. At the same time, however, this new economic configuration will mean greater political influence for the holders of that wealth, and that will make higher wealth taxes harder to achieve. Historically, economists–including me–have generally favored taxes on consumption, on the grounds that they would do the least damage to long-term savings, investment and economic growth. Yet in some eyes, rising wealth will become a tempting target for short-term political gain. And note that while most Republicans currently oppose consumption taxes, they may dislike the relevant alternative, namely wealth taxes, even more. Get ready to choose a side.”

  2. Why America s Essentials Are Getting More Expensive While Its Toys Are Getting Cheap Derek Thompson The Atlantic Derek Thompson: Why America’s Essentials Are Getting More Expensive While Its Toys Are Getting Cheap: “Here’s a fascinating snapshot…. You occasionally hear conservatives say that poor people aren’t really poor because, you know, they have refrigerators and TVs, don’t they? Yes, they do…. But the power to alter the temperature of your food and watch FOX is not quite the same as being rich…. Why does it seem like the least important things in life—TVs, toys, and DVD players—are getting cheap while the most important parts of the economy are getting more expensive?…. 1. On poverty: Jordan Weissmann nails it: ‘Prices are rising on the very things that are essential for climbing out of poverty’… college… sick[ness]… daycare…. Just as the benefits of wealth create a virtuous cycle of behavior, the challenges of poverty start a vicious circle that continues to spin down through multiple generations. 2. On productivity: When you look at the items in red with falling prices, they largely reflect industries whose jobs are easily off-shored and automated…. Now consider education, health, and childcare, the blue sectors above where prices are rising considerably faster than average. These are service industries that employ local workers. They are not, to use the economic term, ‘tradable’… are mostly gaining jobs, not shedding them…. Health care, education, and childcare have entirely different products than a television or iPod. Their product is people: healthy people, educated people, and safe baby-people…”

  3. Simon Wren-Lewis: Pareto, Inequality and Government Debt: “The only possibly original point is that the absurdity of restricting policies to Pareto improvements becomes immediately apparent if we think about government debt. Measures to reduce current… debt… almost certainly make current generations worse off…. Yet I do not often hear people arguing that we have to let debt stay high because the government can only implement Pareto improvements….

    “Textbooks still make a big deal of dynamic inefficiency…. Government intervention to discouraging saving would be a Pareto improvement: the current generation consumes more because they save less… future generations consume more because less output needs to go to replacement investment. The symmetrical case is where there is too little capital…. Yet the implication… is that this case is not one we should worry about, because to change it (by raising saving) would make the current generation worse off and is therefore not a Pareto improvement…. We don’t think this way about government debt, so why should we when it comes to productive capital?

    “Why is there this emphasis on only looking at Pareto improvements? I think you would have to work quite hard to argue that it was intrinsic to economic theory…. Many economists use social welfare functions…. One thing that is intrinsic to economic theory is the diminishing marginal utility of consumption. Couple that with the idea of representative agents… and you have a natural bias towards equality. Focusing just on Pareto improvements neutralises that possibility. Now I mention this not to imply that the emphasis put on Pareto improvements in textbooks and elsewhere is a right wing plot–I do not know enough to argue that…”

May 4, 2014

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