Clear graph on US debt ceiling since 1970

He who has the gold makes the rules

It has been said by many on the right, including Milton Friedman, that the left's obsession with how money influences our politics is overblown. Here is an interesting paper that shows at the very least that the concerns of the rich have a higher probability of becoming law than the concerns of the poor.  

Here is Kevin Drum:

I've written before about Larry Bartels' research showing that politicians basically don't care about the views of low and medium-income individuals. The non-rich simply have no impact on their voting behavior at all. But I know you want more evidence. So here it is.

The charts below come from a 2005 paper by Martin Gilens (a revised 2007 version is here). His study is based on a dataset of polling questions about public policy issues between 1981 and 2002 (raising the minimum wage, sending U.S. troops to Haiti, requiring employers to provide health insurance, allowing gays to serve in the military, etc.) in which the responses differed significantly between the rich and the poor. On the left, you can see the impact that support from low-income voters had: when 10% of them supported a position, there was about a 32% probability of that change becoming law. When 90% supported a position, there was a....33% probability. The chart on the right shows the same for median income voters. They did slightly better, but not much.

Rich voters, on the other hand, had a much better chance of getting their way, as the steep solid line in both charts shows. Why? Gilens' guess is that "the most obvious source of influence over policy that distinguishes high-income Americans is money." This sounds like a pretty good guess to me.

As The Economist covered this topic with the title: "government of the rich, by the rich, for the rich". They go on to say:

"Rich Democrats and rich Republicans elect politicians with a diverse range of views, but all of which ultimately respond to the policy preferences of the rich. To put this slightly differently, we all know rich people on the left side of the political spectrum who care passionately about the poor and have no problem supporting policies that aren't necessarily in their own direct interest. These people exist. But the Democrats who end up in Congress tend not to be these people; they're the kind of people who respond to the preferences of the rich. Who knows what their motivations for doing so are; perhaps they view concessions to rich priorities as necessary in order to survive in Washington to fight for other priorities some other day. And it should be noted that the priorities of middle and low income voters are occasionally heard and addressed.

But the asymmetry here shapes the policy that emerges from Washington. Legislators worried about the poor often have to cut deals to satisfy the rich people who support their campaigns and other critical institutions. Legislators worried about the rich basically never have to make these kinds of concessions. Money, by creating this asymmetry, gets what it wants much more often. As Mr Gilens notes, this is a feature of very nearly every political system in very nearly every historical era. What I would suggest is that it is therefore not a tremendous threat to democracy, except in cases when mobility levels across incomes fall dramatically. In that case, you create a permanent class of politically disenfranchised people. And that can be a very destabilising thing."

Ever-changing list of articles to read

Measuring long-term inequality of opportunity
The Earnings and Social Security Contributions of Documented and Undocumented Mexican Immigrants
Church-state separation and redistribution
Conveniently Upset: Avoiding Altruism by Distorting Beliefs About Others
Inheritances and the Distribution of Wealth or Whatever Happened to the Great Inheritance Boom?
The Geography of Fear - "Fear tends to be higher in countries where more people believe in Hell and where fewer believe in Heaven."
Life Shocks and Homelessness
Has Consumption Inequality Mirrored Income Inequality?
Inequality at Birth: Some Causes and Consequences

Public finance meets behavioral economics

Read this free 260 page ebook - "Public Finance through the Lens of Behavioral Economics". It looks fascinating. Recommended by Mankiw, Gruber, Thaler. 

Economists: left vs right

What are some ideological blind spots shared by many on the left? What are they on the right? David Leonhardt gives us his list and then discusses whether left- and right-leaning economists are any less susceptible to them. Here is part of his conclusion:

"I think that liberal economists, by nature, tend to be less economically liberal than your average liberal. That’s not true — or at least it’s not nearly as true — about conservative economists and conservatives generally. As a result, some of the left’s biggest blind spots on economics arise much less often among left-leaning economists... The difference, I think, is that conservative economists’ blind spots overlap more with general conservative blind spots than is the case for liberal economists and liberal blind spots. That’s not a value judgment so much as an observation."

Allow me to assume for a minute that the "truth" is somewhere in the middle, I would venture two possible explanations: one is that there are some mistaken beliefs on the left that many left-leaning economists avoid, two is that there are some mistaken beliefs on the right that right-leaning economists often fail to avoid.

A liberal might say that this is because economics is just a conservative social science that goes too far to try and find common ground with the other side. Likewise someone further right might say that this proves their ideas are true since everyone is coming towards them (I'm not intentionally constructing two straw men, bear with me).

My response to the former would be that frequently (but not always) liberal economists share these quixotic goals, but believe that the ability to achieve them takes time, or isn't possible given our limited resources; additionally the means are often counterintuitive, accompanied by unintended consequences.

My response to the latter would be that conservative economists fail to avoid the pitfalls that other conservatives hold true. I am not sure why this would be. Perhaps at play is a visceral intuition that cannot be dislodged by the tools of economics.

This is a very interesting question. I need to think more about this. In the meantime, here are some more links on this issue. Left-wing misbeliefs, a response to this criticism (by a non-economist), right-wing misbeliefs.

(Mis)perceptions of wealth inequality

This post by Duke behavioral economist Dan Ariely is incredible. It shows that all Americans, Republican and Democrat, male and female, rich and poor, have very similar views of what the ideal wealth distribution in our country should be. Additionally, all Americans greatly underestimate the actual wealth disparity.

Below is the post; I love his takeaway at the end, "What this tells me is that Americans don’t understand the extent of disparity in the US, and that they (we) desire a more equitable society"

Wealth Inequality in America
Perform the following thought experiment. Remove yourself for a moment from your present socioeconomic circumstances and imagine that you are to be replaced randomly into society at any class level.
Now, before you know your particular place in society you are told that it is within your powers to redistribute the wealth of that society in any way that you choose.  What distribution would you choose? This famous thought experiment is the basis of political philosopher John Rawls, as outlined in his highly influential 1971 work, “A Theory Of Justice,” in which he argues that the lowest class should be made as well off as possible. But this of course assumes that we all come to the same conclusion when we perform the thought experiment ourselves. To test this, Mike Norton and I recently conducted  a study in which we asked Americans to first guess at the distribution of wealth in the United States, and then we asked them to perform the thought experiment and lay out what they think would be the ideal distribution of wealth if they were to enter society and be placed randomly in a class.
Here is what we found:

As you can see from the figure, participants rather badly estimated the current state of wealth disparity! Furthermore, they offered an ideal wealth distribution (under a “veil of ignorance”) that was even more different (and more equal) relative to the current state of affairs.
What this tells me is that Americans don’t understand the extent of disparity in the US, and that they (we) desire a more equitable society.  It is also interesting to note that the differences between people who make more money and less money, republicans and democrats, men and women — were relatively small in magnitude, and that in general people who fall into these different categories seem to agree about the ideal wealth distribution under the veil of ignorance.
Maybe this suggests that when there are no labels, and we think about the core of our morality in abstract terms (and under the veil of ignorance), we are actually very similar?

Publishing

A guide by Elsevier on how to get published in academic journals.

Mormonism could be true?

This piece by Sam Harris gives perhaps one of the most credible argument defending Mormonism as true. It starts off like this:

"The Oxford philosopher Nick Bostrom has argued that our entire cosmos could be running as a simulation on a supercomputer of the future. This, needless to say, is a bizarre claim, but it can be defended with a few surprisingly plausible assumptions."

One assumption being:

"if we survive the next few centuries without annihilating ourselves, it is just a matter of time before we build computers capable of running virtual worlds populated by virtual people. Our descendants will likely do this, the way we create video games like The Sims."

However, this implausibility does hinge on the mystery of defining consciousness and whether it can be reduced to computations.

"Of course, this is not an entirely serious conjecture, but it is not entirely unserious either. It isn’t obvious to me that there is something wrong with Bostrom’s simulation argument. It really does seem that one of these propositions must be true: Either (1) consciousness is not a matter of computation and cannot be simulated, or (2) we never do simulate it as a matter of fact (perhaps because we destroy ourselves in the interim), or (3) we stand a good chance of living in a simulation—to which I add a theological twist: This simulated cosmos might be every bit as ridiculous as Joseph Smith said it was.

Voluntary taxes

A response to "If you are so in favor of raising taxes, why don't you pay more?"

"If we want to be truly honest then most people mean something like this: I would prefer a world in which all other rich people paid more taxes and I paid less. However, I doubt that anyone is going to go for this. So I am willing to settle for a world in which all rich people including me pay more in taxes. I am not willing to settle for a world where I am the only rich person paying more in taxes.

This is often how public decisions work. I would prefer a world in which everyone else had to obey speed limits but I could speed when I felt it necessary. Yet, it's unlikely that anyone is going to go for this. So I will settle for a world in which everyone including me is subject to speed limits. I am not willing to settle for a world in which I am the only person obeying the speed limits."

Note to self - future papers to write

1) Who do kids belong to?
Look at the history and international attitudes to custody rights. In the last 100 years or so in the US this has changed from the father (the provider), to the mother (the nurturing caregiver) and now it is (themselves?) whatever is best for the child.

2) Do the poor have a more concave risk function?
They are not in a position to gamble on, say, an entrepreneurial enterprise, even if the expected value of return is positive. Even though these gambles would more likely than not lead them out of poverty, they rationally do not take the risk because even a small chance of failure would be devastating. This would be different if they had a safety net (family, friends, government policy) that enabled them to take the risk.

Gun rights

As this article says, there are no laws against terrorists buying guns. This pits two typically Republican issues against each other: the right to bear arms and protecting America from her enemies. Without getting into the polarized debate of interpreting the second amendment and the influence of the NRA, can we all agree that this is idiotic at best? Seriously.   

Population-weighted history

From The Economist:
An alternative timeline for the past two millennia

SOME people recite history from above, recording the grand deeds of great men. Others tell history from below, arguing that one person's life is just as much a part of mankind's story as another's. If people do make history, as this democratic view suggests, then two people make twice as much history as one. Since there are almost 7 billion people alive today, it follows that they are making seven times as much history as the 1 billion alive in 1811. The chart below shows a population-weighted history of the past two millennia. By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010, according to an updated version of Angus Maddison's figures.