Wednesday, August 01, 2007

Ressentiment on Stilts

Um...speaking of books one hasn't read...and speaking of speaking of books one hasn't read...Here's a review of the book Falling Behind by Robert Frank:

"The arguments here are powerful and multidisciplinary. The crux is explaining how rising economic inequality causes harm to the middle class. It also offers a policy reform--a progressive consumption tax--that serves to mitigate this harm. This is a gem of a book."--Lee S. Friedman, Professor of Public Policy, University of California at Berkeley

So according to this review, the conclusion of the book is that rising economic inequality harms the middle class and so taxes should be employed to reduce it.

Now, this is a conclusion I'm sympathetic with for a couple of reasons. But the reasons Frank employs are allegedly summarized in the following review:

"In this lively provocative book filled with memorable new examples, Bob Frank goes beyond his previous work (Luxury Fever, Winner-Take-All Society, and Choosing the Right Pond) and clarifies that 'falling behind' is a consequence not of envy but rather of the simple fact that a person's evaluation of his own possessions 'depends always and everywhere on context'--an unconscious comparison with his neighbor's possessions or with his own previous possessions. His illuminating interchange with prominent discussants is a unique contribution of this book."
--Laurence Seidman, Chaplin Tyler Professor of Economics, University of Delaware

Now, I want to make it clear that I have not read this book! I'm just discussing the reviews on, especially the one above.

But this argument SUCKS.

This doesn't support the conclusion that we should have a progressive tax to curb income inequality. Rather, it supports the conclusion that the middle class needs to get some perspective and evaluate their possessions in a more rational way.

And incidentally, the use of the phrase 'always and everywhere' is a good indicator that BS is about to follow. And my guess is that it does. Evaluations of one's possessions almost certainly does NOT "always and everywhere" depend on context (where 'context' means, as it is supposed to here, comparison with things other people have). I've got all sorts of things I like despite the fact that they're way, way crappier than the stuff almost everybody else has. Take my mountain bike for instance--it's like a 1997 GT Ricochet with ancient, super-low-end Rock Shox and handlebars off an even older GT. Most people would turn their nose up at it, but I love it. If such evaluations were "always and everywhere" contextual in this way, the I wouldn't like my bike. But I do like my bike. Therefore etc., etc., QED. the extent that these reviews are an accurate representation of the book, it doesn't look promising...

See, now that's how you talk about a book you haven't read...


Blogger Tom Van Dyke said...

Good review of a review. Quis custodiet ipsos custodes?

Well, somebody's got to do it, I guess. Quite a conundrum.

This is a review of Amity Shlaes' new book, Forgotten Man, which attempts to detail Franklin Roosevelt's total mishandling of the Great Depression, prolonging it rather than curing it. (Dubya might have a lot in common with FDR in that autocratic way; only history will decide.)

Sandefur agrees with the thesis, altho he thinks it's a kinda crappy and unfocused book. What to do? Plunk down $20 and see if Sandefur's right?

Altho it likely doesn't apply in this case, we have the structural problem that lesser minds tend to "review" better ones. The former would write their own damn influential books if this were not so.

10:39 PM  
Blogger The Mystic said...

I like how "history" decides things now. Bush and the pubbies tend to be saying that frequently these days. Since they've got history as their decider, maybe Democrats need one.. hmm.. What other non-sentient things could make decisions?

Pumpkins. Pumpkins will decide.


11:11 PM  
Anonymous Anonymous said...

And here are some comments on the Schlaes book by someone who actually knows his ass from his elbow, economically speaking, and one of whose areas of specialty is economic history of the Great Depression:

11:32 AM  
Anonymous Anonymous said...

FWIW, by the way, I agree with you Winston that that is a weak-ass argument. Policy based solely on envy and resentment is a non-starter to me.

Also by the way, IMO, the much better book is The Great Risk Shift by Jacob Hacker. From the book description:

"America's leaders say the economy is strong and getting stronger. But ordinary Americans aren't buying it. They see what the rosy statistics hide: We are all struggling under the weight of terrifying economic instability. No matter how well educated and hard working we are, we know that the bottom can fall out at any moment. Meanwhile, the safety net that once protected us is fast unraveling. With retirement plans in growing jeopardy while health coverage erodes, more and more economic risk is shifting from government and business onto the fragile shoulders of the American family. In The Great Risk Shift, Jacob S. Hacker lays bare this unsettling new economic climate, showing how it has come about, what it is doing to our families, and how we can fight back. Behind this shift, he contends, is the Personal Responsibility Crusade, eagerly embraced by corporate leaders and Republican politicians who speak of a nirvana of economic empowerment, an "ownership society" in which Americans are free to choose. But as Hacker reveals, the result has been quite different: a harsh new world of economic insecurity, in which far too many Americans are free to lose. The book documents how two great pillars of economic security--the family and the workplace--guarantee far less financial stability than they once did. The final leg of economic support--the public and private benefits that workers and families get when economic disaster strikes--has dangerously eroded as political leaders and corporations increasingly cut back protections of our health care, our income security, and our retirement pensions. Hacker concludes by advocating an "insurance and opportunity society" that would safeguard economic security and expand economic opportunity, ensuring that all Americans have the basic financial security they need to reach for and achieve the American Dream. Jacob Hacker brings into focus as never before the pressures that the Great Risk Shift exerts on our pocketbooks and on our lives. Blending powerful human stories, big-picture analysis, and compelling ideas for reform, this remarkable volume will hit a nerve, serving as a rallying point in the vital struggle for economic security in an increasingly uncertain world."

In the book, Hacker also shows how increased risk is stifling the risk-taking and entrepreneurship that is the lifeblood of a market economy. When the risk of failure is too great, people are reluctant to embark on the same ventures they might have been willing to take on years ago.

12:31 PM  
Blogger Tom Van Dyke said...

Actually, it's instability, not comfort, that encourages risk and that other even more important factor, effort.

4:31 PM  
Blogger Winston Smith said...

So the more instable and frightened we are, the better!

7:47 PM  
Blogger Tom Van Dyke said...

There's a dynamic tension between need and creativity. It's how we're wired.

I simply object to the notion that we need security before we'll take risks, as it's antithetical to human nature. It might be better if it were true, but Europe, having experimented with the proposition over the past 50 years, is at this very moment discovering that it ain't.

9:24 PM  
Anonymous Anonymous said...

It is absolutely NOT antithetical to human nature to feel secure before being willing to take risks. Any perusal of sociological and anthropological texts will demonstrate that. A secure base from which to operate has been the fundamental precursor to exploration and expansion of one's domain, unless one is faced with no other choice.

And Kahneman and Tversky demonstrated that, economically speaking, people are generally risk averse.

Sure, people sometimes take risks because they have no other choice, but that isn't an ideal from my point of view. And those with a family to consider would certainly hesitate to leave even a moderately secure position to put it all down on black. Twenty years in financial services has taught me that, if nothing else.

9:54 PM  
Blogger Tom Van Dyke said...

Yes. I deal in a risk-adverse milieu myself and time after time am turned down by people who aren't in the mood. Not that I blame them: I'm risk-averse myself, but to be so requires having something to lose in the first place.

Sure, people sometimes take risks because they have no other choice, but that isn't an ideal from my point of view.

I acknowledged that, my gracious Anonymous, one of so very many. You could look it up.

You're actually agreeing with me. All the great risk/rewards of history have come from putting it all down on black. You could look that up, too.

10:29 PM  
Anonymous Anonymous said...

I'll be the first to point out I guess that our economy is becoming increasingly volatile and more prone to shifts. However, this is due to severe specialization and globalization, which are both helping us achieve greater growth. So though our economy is becoming "riskier" it is becoming stronger and growing at a faster rate than more "stable" currencies (e.g. euro).

The original poster does make a few errors that I find (at least). When it comes to evaluating your possessions it doesn't mean that you don't like/hate a possession but that you only judge its position in hierarchy/price/quality by similar products. In other words, it's relative.

To put it in an analogy, gold is only esteemed for its ascetic value because of its relative beauty over less appealing metals (e.g in jewelery).

You cannot rank and/or classify items without context into organize them.

3:57 PM  
Anonymous Anonymous said...

Anon, I don't disagree with the thrust of your post, but left out of it is an important point; the success of our economy can't be measured merely by its size. The distribution of its benefits is important too. And while in a perfect world a larger economy makes it easier to provide security for everybody, the fact of the matter is that in reality it hasn't.

So the typical guy, whose productivity has been rising rapidly of late without corresponding increases in earnings, says to himself, why am I working so hard for the economy if it isn't working for me?

4:08 PM  
Blogger Winston Smith said...

Well, none of this really has much to do with the original post, but:

Tom claims that insecurity promotes risk-taking. This may be true, but it is inconsistent with the view that taxes on the rich should be low on the rich in order to promote economic risk-taking. On that view, it is financial security that promotes risk-taking.

I don't know who's right about that...but Tom's position here is purely speculative and not terribly plausible. Here's the way it probably goes:

Security promotes certain kinds of risk-taking and squelches others, and the same goes for insecurity. If I'm a millionaire, I'm more likely to risk $100,000 dollars in order to make $50,000 than I would be if I only had only $100,000 to my name. On the other hand, I'm probably less likely to risk everything I have for ten bucks.

Without being more precise about what we're saying, and without some data, we're just bullshitting.

6:23 PM  
Blogger The Mystic said...

You know, I was going to say that, but I feel like I've had that opinion about a few of the recent threads, and I didn't know if it was just me.

6:26 PM  
Blogger Tom Van Dyke said...

We all are correct, if we make a distinction between capitalism (reinvestment of your money, usually your excess) from entrepreneurship.

It's a shame that the French have no word for entrepreneur. (Old joke.)

11:56 PM  
Anonymous Anonymous said...

Except that entrepreneurship is inherently riskier than participating in capital markets because putting excess capital to work doesn't require forgoing wages/remuneration as well.

Entrepreneurship requires both: use of capital and diversion of time and effort to the enterprise with the possibility, indeed the likelihood for a while, of no income. As well as other risks like loss of health insurance.

10:11 AM  

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