Do talented children in low-income American families have the same chance to make use of their talent — to get the right education, to pursue the right career path — as those born higher up the ladder? Of course not. Moreover, this isn’t just unfair, it’s expensive. Extreme inequality means a waste of human resources.
The Economics of Jane Austen: Delusional Riches?
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from regard to their self interest.”
… For example, one of the volumes in the Austen family library was Thomas Percival’s A Father’s Instructions: Moral Tales, Fables, and Reflections, a children’s commonplace anthology that proselytized for the new sciences and moral thought of the Enlightenment. A footnote in the reissued 1781 edition points Percival’s younger readers to Smith’s description of the process of making a pin in The Wealth of Nations, the famous demonstration of the division of labor at work. (Yes, indeed: children’s books came with footnotes back then.)
.. But if any Smith book was likely to have sat on an Austenian side table, it wasn’tThe Wealth of Nations, but the work that Smith himself considered foundational, and thus revised a staggering six times over the course of his lifetime, up until the year of his death. The Theory of Moral Sentiments (1759) introduced Smith’s concept of sympathy. This was a word used slightly differently in Smith’s time than in our own, and doesn’t have much to do with the modern tendency to click like on a Facebook friend’s engagement announcement to show our support, or to feel terrible about the plight of child soldiers. It referred instead to the mortar of civilized society, the way that we modify our behavior as we come to an understanding of how others see us and realize that they cannot regard our problems in the same close and passionate way that we do.
.. “As to love our neighbor as we love ourselves is the great law of Christianity, so it is the great precept of nature to love ourselves only as we love our neighbor, or what comes to the same thing, as our neighbor is capable of loving us.” We might, if we listen closely, hear a slight echo in bookish Mr. Bennet’s philosophy: “For what do we live for but to make sport for our neighbors, and laugh at them in our turn?”
.. it is only our self-delusion that it is better to be rich that “rouses and keeps in continual motion the industry of mankind.” This deception farms the fields, builds the cities, creates the surplus that enables the existence of art and literature, something higher than the hardscrabble for mere existence.
.. Smith never can decide how one should feel about the pursuit of wealth. On the one hand, it keeps in motion the industry of mankind. On the other, it doesn’t make people very happy.
.. After all, without Marianne’s earlier self-deception, there wouldn’t be much of a novel. (Elinor and Edward are clearly not emo enough to sustain three volumes of agony, even with the Lucy Steele complication lurking.) Literature is generated in the end by someone’s failure to recognize nature’s deception, just as Adam Smith promised.
Conservative Delusions About Inflation
Confronted with a conflict between evidence and what they want to believe for political and/or religious reasons, many people reject the evidence. And knowing more about the issues widens the divide, because the well informed have a clearer view of which evidence they need to reject to sustain their belief system.
.. And if you look at the internal dynamics of the Republican Party, it’s obvious that the currency-debasement, return-to-gold faction has been gaining strength even as its predictions keep failing.
Cory Doctorow: Thomas Piketty’s Capital in the 21st Century
Piketty challenges the idea that modernity somehow led to “merit” asserting itself as the new determinant of wealth. Instead, he makes a very convincing case that the increasing size of the capital class — which expanded comfortably during the period of colonial expansion — created a hunger for wealth that turned the aristocracy on itself in a squabble over who got to loot the colonies, which was World War I. This war was incredibly destructive of capital, and left many of the aristocracy holding onto potentially worthless government bonds issued by states that had nearly bankrupted themselves during the Great War. These states were so beholden to the rich that they couldn’t contemplate inflating or taxing or defaulting their way out of debt, and so they took heroic and improbable measures to keep bondholders whole, which led to the economic chaos of of which WWII was born.
.. (government bonds, especially US Treasuries, which do not pay well, account for less than 10 percent of all these portfolios and are almost totally absent from the largest endowments). The higher we go in the endowment hierarchy, the more often we find “alternative investment strategies,” that is, very high yield investments such as shares in private equity funds and unlisted foreign stocks (which require great expertise), hedge funds, derivatives, real estate, and raw materials, including energy, natural resources, and related products (these, too, require specialized expertise and offer very high potential yields). If we consider the importance in these various portfolios of “alternative investments,” whose only common feature is that they abandon the usual strategies of investing in stocks and bonds accessible to all, we find that they represent only 10 percent of the portfolios of institutions with endowments of less than 50 million euros, 25 percent of those with endowments between 50 and 100 million euros, 35 percent of those between 100 and 500 million euros, 45 percent of those between 500 million and 1 billion euros, and ultimately more than 60 percent of those above 1 billion euros. The available data, which are both public and extremely detailed, show unambiguously that it is these alternative investment strategies that enable the very largest endowments to obtain real returns of close to 10 percent a year, while smaller endowments must make do with 5 percent.
.. Absent some kind of extraordinary intervention, hereditary wealth will reassert itself as the primary political mover in our world. The people at the top have always convinced themselves that they live in a meritocracy, because hey, they’re the best people they know, and they’re at the top of the pyramid.
.. By comparing various sources of data, moreover, it is possible to estimate that the average income of the parents of Harvard students is currently about $450,000, which corresponds to the average income of the top 2 percent of the US income hierarchy. Such a finding does not seem entirely compatible with the idea of selection based solely on merit. The contrast between the official meritocratic discourse and the reality seems particularly extreme in this case. The total absence of transparency regarding selection procedures should also be noted.