Comments on: Trapped ?

By: Chirag Kasbekar

Chirag Kasbekar — Fri, 12 Mar 2004 06:05:43 +0000

Also, my point was that an obsessive focus on eliminating ‘status comparisons’ and trying to achieve an equality of opportunity (that is, an equality of specific things)—rather than focusing more on improving things, I fear, would inflict harm on independence and innovation. For independence and innovation, you need to allow the possiblity of exit to very some significant degree. But once you do that, how can you have equality of opportunity in any meaningful sense?

By: Chirag Kasbekar

Chirag Kasbekar — Thu, 11 Mar 2004 21:16:00 +0000

It’s a psychological sense of “well-being”. Something pretty close to what’s measured by softer mental health indicators. Do you have cites on this? For one, I suspect this is a very slippery beast. Speaking for myself, nope. I’m an old-fashioned egalitarian. I’m in favour of (more) equality of outcomes (than we have today). Like I said, I would prefer, like Sen seems to, to say that I’d (you’d) like less inequality of outcomes than there is now, rather than to talk of ‘equality’ of this and that. But then that’s probably just semantic cavilling. Actually, to the extent I think distribution is important (and I think it is), I prefer to look at the distribution of outcomes too. I tend to think (substantive) equality of opportunity is probably more demanding. I wonder if that is John’s point as well.

By: dsquared

dsquared — Wed, 10 Mar 2004 09:28:16 +0000

Belgium has no high prestige universities Hmmmm … I’d say that Leuven/UCL is head and shoulders above any other Belgian university. In any case, I still wonder what you’re arguing are the benefits to be garnered from equalising opportunities in some meaningful sense. Is it cultural? Is it greater harmony? Can’t those be had if we had a substantial welfare system that helped reduce inequalities? It’s a psychological sense of “well-being”. Something pretty close to what’s measured by softer mental health indicators. While you’re now talking of degrees of competitiveness, you’re still calling for the equalising of opportunities (I presume). Speaking for myself, nope. I’m an old-fashioned egalitarian. I’m in favour of (more) equality of outcomes (than we have today).

By: Chirag Kasbekar

Chirag Kasbekar — Tue, 09 Mar 2004 19:10:18 +0000

Daniel, First of all, I really don’t want to get into the America v. Europe slugfest. I don’t think we’ve heard the last word on that. In any case, I still wonder what you’re arguing are the benefits to be garnered from equalising opportunities in some meaningful sense. Is it cultural? Is it greater harmony? Can’t those be had if we had a substantial welfare system that helped reduce inequalities? While you’re now talking of degrees of competitiveness, you’re still calling for the equalising of opportunities (I presume). Why not ‘adequateness’? As for Harry’s point about employer-dependent welfare systems, I think it’s a very valid question and one that Rajan and Zingales (Saving Capitalism from the Capitalists) raise in their argument against the high barriers to entry of ‘relationship capitalism’. They argue that it is an important barrier to labour mobility.

By: harry

harry — Tue, 09 Mar 2004 14:54:56 +0000

But back on topic, does anyone know whether the absence of universal healthcare explains the surprisingly weak performance of the US economy relative to Goodin’s comparators? Anecdotally I know a number of small businesspeople who claim that workplace based health-insurance creates a barrier to growth, and protects large enterpirses from competition: and I also know lots of workers who seek or retain jobs that would otherwise be unsatisfactory because they need health insurance. I guess the question is; what is the impact of universal health insurance on labor market flexibility? Do economists include this in indices of flexibility?

By: harry

harry — Tue, 09 Mar 2004 14:46:04 +0000

while I agree with Daniel’s basic point, I’m a little sceptical about the relevance of suicide rates. Don’t they vary with how much sunlight people get, and how prevalent guns are in the society? I know Americans commit suicide a lot, but when you have a gun or can easily get one its a bit harder to fail than when all you have are aspirins. I’m sure, too, that I read in the Economist once that Brits have a very high failed suicide rate because they believe that poison is an effective method. (Too many Agatha Christie novels, Belle). Wouldn’t attempted suicide rates be a better measure? I’m not being flippant, but I am, I know, being a bit off-topic…

By: Scott Martens

Scott Martens — Tue, 09 Mar 2004 14:05:28 +0000

Steve – I don’t know. I feel like an anthropologist in New Guinea sometimes. Life amongst the Belgians. Promotions at work are a bigger deal here than they were for me in the States. But I lived in Silicon Valley, where you could expect to be promoted to your level of incompetence, and if you wanted more money you quit and got a better job. So, my experience of America is probably atypical. House and apartment sizes are a lot more meaningful here too. Americans with lots of stuff get big houses, Americans with very little stuff get small ones. Status has less to do with it. But then, Belgium is a lot more crowded. Neighbourhood choice, however, is a much bigger deal in the US than here. A townhouse in Manhattan is far higher prestige than a mansion in Omaha. Here, whether you live in the city or in the banlieue has a lot more to do with personal choice than income. I guess that’s the flip side of high population densities. Belgium has no high prestige universities, so there aren’t very many high prestige high schools. I see no “My kid is on the Honour Roll at Snobby Prep” bumperstickers. I can’t tell people’s class by the way they dress. There are very poor people in Belgium and people do look down on them, but they live mostly in Brussels and Antwerp and are distinguishable by their skin colour. So, this is not some class-free paradise by any means. Certainly, there are competive elements of life within the broad Belgian middle classs, but they seem less entrenched and more personal than in the States. At most, it seems to be about competing with the Joneses next door, not some relationship to an external hierarchy. I just don’t know.

By: Steve Carr

Steve Carr — Tue, 09 Mar 2004 13:37:17 +0000

Anecdotally, it certainly seems to me that Americans are far more competitive than people in many other societies. (Of course, I also think that’s why the U.S. has been far more innovative than most other societies, too.) But what I was trying to get at in my post was the question of whether the status competition that centers on economics and wealth in the U.S. is present in other countries, but is centered on other matters (politics, fashion, success with the opposite/same sex, what have you). In other words, if Belgians don’t worry about not having as much money as the next guy, do they worry about not having (or doing) something else as much as the next guy? Or are they genuinely more free of that competitive/aspirational push? If they aren’t, then that raises the question I asked: Is making money a socially unproductive focus for status anxiety? If they are, then Daniel’s argument about mental health and suicide becomes crucial.

By: Scott Martens

Scott Martens — Tue, 09 Mar 2004 09:11:30 +0000

Just think about it this way; how many of the TV advertisements you see in the US market could be lifted wholesale and used in a campaign in the Netherlands? Of course, the relation holds in the other direction too. Since I started getting Dutch TV, I’ve seen more breasts on display in primetime commericals on Dutch TV than you see late at night on American cable. I’ve noticed something peculiar moving from Silicon Valley to Belgium. In San Jose, if you asked people to name five billionaires in their area code, they could easily do it. Most Belgians, in constrast, have difficulty naming a single Belgian billionaire (Euro billionaire, not francs). But, for all its repuation as the most taxed state in Europe, Belgium has very low capital gains taxes – something like 5%. It is, in fact, the home to quite a few of Europe’s wealthiest people because it is a good tax haven for someone whose income comes primarily from capital gains. The thing is, no one’s heard of them. They’re not public figures and people don’t think of them as something either to aspire to or as something being held over their heads. The same goes for the titled nobility. Most Belgians can name more titled British nobility than Belgian nobility. I just asked my office partner, and he says that the Christian Democrat mayor of his town was known as “the Baron” because he was titled. But, he was a professional politican rather than someone who was known for his personal wealth. I remember being told about how the building that housed my department at the usinversity was the Château d’Arenberg and that the Duc d’Arenberg had donated it to the university in the 80’s when his businesses went bankrupt and he ran off to Switzerland. That’s it. Even if status games are natural behaviour that can never be eliminated, it is certainly clear that America is far more status conscious than the minimum that human behaviour or necessity requires.

By: dsquared

dsquared — Tue, 09 Mar 2004 07:37:02 +0000

Steve, Chirag Committing to not playing the status-comparison game sounds nice, and may be possible on an individual level (that is, an individual can consciously decide to overcome his or her hardwired impulses) but on a social level it seems to me roughly impossible (or else it would require re-education of the worst sort). Yeh, but there are degrees, aren’t there? There are some human societies which are much, much more egalitarian than others, and some in which status comparisons are emphasised much more. Just think about it this way; how many of the TV advertisements you see in the US market could be lifted wholesale and used in a campaign in the Netherlands? My perception, which I can support with some extremely tendentious and inconclusive data from mental health and suicide statistics, is that people are happier in societies which do not systematically encourage those competitive urges which are normal to humans.

By: Steve Carr

Steve Carr — Tue, 09 Mar 2004 04:05:43 +0000

The U.S. poverty rate was 15.1% in 1993 and it was 11.3% in 2000. That seems like a significant improvement, though I think it was only connected to the cuts in defense spending insofar as those contributed to the boom of the late 1990s.

By: BF

BF — Tue, 09 Mar 2004 02:01:12 +0000

“There were big cuts in defense spending in the 90s and that didn’t make much difference to poverty rates in the US.” The cuts in defense were not very large. The defense budget languished without inflationary increases, creating many of the effective “cuts”. The apparent cuts were in relation to markedly expanding GDP in the 90’s and all of it did not go to social programs – so one could not expect much of an effect on poverty in a mere decade. The supposition of using ALL the savings for the poor is indeed implausible, but that was your supposition, not mine. Historically, US defense spending has been 4-6 percent of GDP . The 1990’s saw the greatest flux of immigrants INTO the US since the turn of the 19th century – this would also skew your 1990’s poverty argument. BTW, why would these millions have chosen US immigration if economic opportunity was indeed greater in the social democratic nations of Western Europe? Just wondering… The last time the Netherlands worried about national defense was 1940, so let me put the argument this way: If Western Europe did not have its collective military derriere covered by the United States these last six decades, how much of their social welfare state would they have been able to afford? A corollary issue is whether the United States could or would have developed a more social-democratic policy over this time had it not been the lynch pin of Western defense. As a US liberal democrat I certainly would have liked to see this occur. And as a US taxpayer, I would be relieved to be unburdened of European defense. I would posit that the form of capitalism enjoyed by Western Europe, and the US form decried by social democrats, are linked causally – through the accrued benefits and disadvantages conferred by the saving vs the expense of trillions of dollars.

By: John Quiggin

John Quiggin — Mon, 08 Mar 2004 23:03:35 +0000

Prior to the Iraq war, the US was spending about 3.5 per cent of GDP on defense, compared to about 2 per cent for most European countries. The gap is equivalent to about $150 million per year. If the US cut spending to European levels, and spent the proceeds entirely on the poor, it would certainly make a difference. But the second part is pretty implausible. There were big cuts in defense spending in the 90s and that didn’t make much difference to poverty rates in the US.

By: BF

BF — Mon, 08 Mar 2004 22:42:17 +0000

How valid a comparison is the Netherlands vs the United States? The analysis in the link elides major differences in history, cultural composition, and obligation. If the United States could take the difference in percent GDP expended on defense (indeed on defense of the Europe and Netherlands) and divert the cash to social welfare, this would amount to 300-400 billion dollars per year. How then might the analysis shift? Of course, if the United States had maintained a defense establishment which was the proportionate equivalent of the Netherland’s armed forces, the distinction between ‘liberal’, ‘corporatist’ and ‘social democratic’ forms of capitalism would be moot – as the latter two states would likely now be communist.

By: Steve Carr

Steve Carr — Mon, 08 Mar 2004 18:10:27 +0000

I don’t fully understand the argument here about status. It seems fairly uncontroversial (of course, I would say that) that status comparisons are an ineradicable part of any society, however it’s organized economically. At least there’s no other primate society in which status comparisons are absent—although the importance of such comparisons clearly varies sharply from species to species—and we are most certainly primates. Committing to not playing the status-comparison game sounds nice, and may be possible on an individual level (that is, an individual can consciously decide to overcome his or her hardwired impulses) but on a social level it seems to me roughly impossible (or else it would require re-education of the worst sort). That doesn’t mean status comparisons have to be framed in economic terms, though, and clearly in a socialist society they would take a different form. The real question, then, is whether there’s something especially nefarious or destructive about status being defined economically. If economic “status” translates into civic or political power, then I think clearly it is destructive. But if it doesn’t, then I think there’s an argument that it’s not a bad thing for society that getting rich confers status, insofar as it provides an incentive for entrepreneurship, hard work, and all those other things that help fuel economic growth. I am, though, making a distinction here that may not be able to be sustained over time, which is the distinction between earned wealth and inherited wealth. I see little wrong and much right with a society in which the first confers status—assuming, as I have, that status comparisons are inevitable. I see much wrong with a society in which the second (inherited wealth) confers it. Having people get rich is a good thing for any society. Having people be rich isn’t.