You may be tempted to observe a negative correlation between the length of my blog posts and fraction of the previous 7 days that can be accounted for as “Spring Break”, but I submit that you may simply be omitting from the sample all of the short blog posts I could hypothetically be writing in crisp fall months.
Do read Lionel’s whole thread though. It’s good.
The emerging market in digital art as nonfungible tokens is the strongest signal of expected inflation I’ve seen to date.
Let’s back up.
Digital art is being sold as nonfungible tokens (NFTs). Is this a bubble? Don’t know. Is this art? Don’t care. Is a piece of digital art as an NFT harder easier or harder to duplicate? I imagine it is easier for the artist, but they have an incentive not to issue duplicates, because doing so erodes the market value of all future digital art NFTs the producer might issue. Is a piece of digital art as NFT harder to duplicate for a forger? I imagine so. The NFT as both art and artists signature is certainly harder to duplicate than traditional media and penmanship. Which is to say we have little reason to worry about the value of a piece of art being inflated away by the artist or criminal forgers.
Now that’s interesting.
The general rule of thumb is that the more consumption value a good offers, the worse it will perform, on average, as an investment. Art, baseball cards, comic books, vinyl records, memorabilia, homes – these are all generally inferior to equities as investments. It stands to reason, though I certainly haven’t checked, that the same logic applies to hedging against inflation as well. Precious metals, while less fun, should offer a superior hedge against inflation than art, particular in relation to art by living artists, where the supply is anything but fixed.
In this regard, however, NFTs are a bit of a game changer. The supply of any given Beeple NFT is fixed forever at one, and there is as yet no reason to believe otherwise. Storage and security costs approach zero, which is something that can’t be said about a 20-foot tall metallic balloon dog. The consumption value is subjective and I’ll leave it to market auctions to suss that out. The inflationary hedge value, however – in this manner NFTs may be an game-changing innovation for prominent living artists, allowing them to capture rents from the value they create that has previously eluded them prior to shedding their mortal coil.
The bond market isn’t giving unambiguous signals of inflationary pressures yet, but signs are creeping in, and among those signs I include seemingly rabid excitement for mixing cultural-status consumption with cryptocurrency-enabled hedges against the prospect of what would be the first real wave of inflation we’ve seen in 40 years.
Which is a long winded way of saying I’m not rooting for inflation, but I’d also be happy to sell my mint-condition complete set of 1987 Fleer baseball cards if you’re looking to hedge your portfolio.
Political drama was about to happen and then it didn’t. Across the country, deep and insightful thinkpieces were left unfinished, relegated to the folder for things writers hope will become future brilliance but definitely never will.
The Big Covid Stimulus Bill was about to fall short by a single vote, with Senator Joe Manchin (D-West Virginia) threatening to break against party lines. It was a disaster… until it wasn’t. A political catastrophe, evidence that the Democrats were a failed coalition once again humbled by their ruthless coordinated opposition… until it wasn’t.
So what was the source of this unforeseeable political miracle? Joe Biden’s long-running political strategy of asking people what they wanted, keeping promises, and not being a d*ck.
As much as I want to roll with three paragraphs of clever wordplay referencing stratagems and gambits, the obvious point to be made is that Biden has decades of political capital that the entire Democratic party is currently able to leverage. In contrast, the Republican Party is currently fronted by a Senator who has broken every political norm for short/medium run political gain, while bearing the brand of a career grifter who spent decades opting not to pay his contractors, employees, or lenders.
I’m not much for making forecasts or predictions, so here’s my predictive forecast for the Republican party: they don’t matter and won’t for years.
Make no mistake: their politics still matter a great deal. White ethno-nationalism has a real foothold in chunks of the electorate all over the country, evangelical Christians remains one of the most influential voting blocks, and the US system remains weighted towards the preferences of rural voters. Rather, what I mean is that the institution of the Republican Party no longer brings much to the political bargaining table. The party has spent down decades of political capital and no recourse to trust in their reputation to solve collective action problems. The bill has finally come due for their spendthrift and short-sighted culture. As much as it may hurt our sympathetic sensibilities, we owe it to them to let them learn from this experience and, after a few decades of trustworthy behavior and political saving, they should be able to pull their party up by their bootstraps.
In four years, two with control of all three branches, the GOP was never ever able to pass legislation as impactful on the US landscape as what the Democrats pulled off this week. The Republican party remains an efficient fundraising organizing and cultural brand for running a campaign, no doubt. There’s not going to be a third-party usurping of their status as one of the two dominant parties, at least not any time particularly soon. But as far as the legislative marketplace is concerned, the Republican party is dead broke.
Let’s get through the easy parts quick. This Vox feature does its best to argue for, without ever explicitly stating or committing to, the thesis that Dolly Parton should be canceled because she has never said or done anything controversial, let alone anything justifying cancelation.
It is not good and is largely unworthy of comment. As much as some of you crave dunking on the proponents of cancel culture with a an intensity that sometimes feels a lot like, well…cancel culture, I’m bored with the whole family of skirmishes, vendettas, and public identity burnings.
I want to talk about sh*t jobs.
I don’t mean unpleasant, dangerous, or low status jobs. There are positive compensating wage differentials for such things. No, I submit to you that the new sh*t jobs of the modern developed economy are relatively pleasant, safe, and within the appropriate social circles, quite high status. And therein lies the trap. Let me set the scene.
You’re at a top 100 undergraduate university. English is your first language, you’re accustomed to receiving high grades, and are sufficiently socially adept that attending college parties is at least moderately enjoyable. In choosing your major, you are persuaded that you should choose the subject within which you experience the greatest pleasure executing your assignments and participating in class. While math is by no means beyond your capacity, studying it brings you little pleasure, and there is no similar mechanism for you to earn approbation from your professor or impress you classmates. You don’t get excited about telling your friends you are planning to become an engineer or chemist, and, perhaps most importantly, imagining your future self as an employee in sensible work slacks fills you with an almost crippling amount of ennui.
So you start on the path to become a writer. You know that fiction writing is a brutally competitive field, dominated by a handful of (what you imagine to be) supernovas of talent. You’re practical, you tell yourself, and imagine a career in journalism or journalism adjacent publications where you research beat stories and features, allowing yourself to get excited about climbing the ladder and eventually writing a regular column where you blow our collective minds with your insight and pith. It only takes six months into your first gig that you realize the problem. The really big problem.
Every other English major in the country had exactly the same idea. A lot of sociology, history, critical theory, and field studies majors, too. The field is flooded. But it gets worse. It’s also filled with engineers, economists, psychologists, biologists – people with specialized knowledge, often with advanced degrees, all competing with you for space in a brutally selective ecosystem where every ounce of attention and influence is measured to the last eyeball.
But it gets so much worse.
Thousands of those people are willing to do the job– your job — for free. For nothing. Hell, some of them are willing to pay the publisher for the opportunity to do what you considered the vocation that would pay your rent. How can you compete with that? It’s beyond our fears of being underbid by people willing to take less pay, of our job being outsourced to workers in another country with a lower standard of living and weaker labor laws. Nobody’s worried about the execs at their company discovering a sweatshop in Vietnam full of employees willing to pay your boss for the right to do your job.
But that is exactly what’s happened to everyone who wanted to write about sports, music, partisan politics, or, for that matter, any subculture where being a tastemaker or cultural curator is catnip for the teenage soul. There’s been a revival of unionization in the digital print business and its easy to see why: they need to close shop. Everyone who’s gotten their foot in the door and ridden the elevator up to their new 6th floor cubicle has been greeted with the same horrifying sight. Teeming masses, as far as the eye can see, all desperate for their job, for their identity, as a writer. So desperate they’ll do it for free. Some want a chance to prove themselves, but many of them just want a hobby. They competently teach 7th grade band during the day for a pay package that includes health and dental insurance, all while wearing a very sensible skort from Costco. But by night they write fiery, in-depth, shockingly well-informed features about their favorite North London soccer team, Icelandic DJ subculture, or how to get the most bang for your buck shopping at Costco. The research, the writing, the promotion, they do all of this for free.
Which means every assignment could be your last. Which means you need to get attention, no matter what. Most days it’s not that big a risk. You churn out 1-2 posts per day, mostly just recapping news or taking a few shots at someone who wrote something you don’t like or, at least, you think other people won’t like. But every now and then you shoot the moon on a big feature, going through old sources, putting together a collage of links that you think will jar readers into not only reading your work, but responding to it and, most importantly, sharing it with others on Facebook, Twitter, or even Instagram. A viral hit is the kind of thing that your overlords will remember the next time your writing hits a fallow period.
But if your feature doesn’t pan out, that could be a problem. If a beloved country singer with a reputation for virtuoso talent, kindness, and often overwhelming generosity that actually makes the world a measurably better place, well, you don’t have the luxury of letting three weeks go to waste. If you can’t find evidence that she’s a bad person, well, you’ll have to go with your gut. And your gut tells you that everyone who is successful is a bad person. Lack of evidence to their secret depravity is itself only evidence to how much they have invested to hide said depravity.
That’s the problem with trying to make what you love at 19 into a career. You’re a kid, you don’t know that much about what you’re going to like in 10 years, all you know is what is fun and what is hard. And, in rough approximation, the same things are fun and hard for all of us. Only studying the things that are fun, dodging whenever possible the things that are hard, will leave you with nothing to rely on but your talent. And, ample as that talent may be, it is unaugmented by the skills and tools that are harder and less fun to come by, tools which would differentiate you from the teaming oceans of talent sloshing against the sides of that cubicle, all desperate to do your job. For free.
A very brief story:
My advisor was Laurence Iannaccone, student of Gary Becker, seminal and in many ways founding contributor to the economic study of religion, now of Chapman University. His observation is a common one in academia, a point of pride for some even, though that varies greatly by discipline, as does their market options outside of the academy. And, yes, flexible work schedules, post-tenure job security, and sometimes picturesque campuses all should be counted towards the total compensation of those fortunate enough to secure a faculty appointment. But the power of the observation goes far beyond proper labor market accounting.
As I find so often to be the case, there is good sociology to be done, but the best first step in doing so is a little bit of economics. To wit:
The academy is, on average, considerably to the left of the population at large. Now this difference, mind you, is grossly exaggerated by your typical right-wing windbag who seems to think that universities begin and end in the English department, but the difference remains. So why would your typical economics, chemistry, or architecture professor tend to be left of the popular center? Well, if the median self-identified lefty got to choose the federal and state tax rates, what would they be? Ok, and how much of that will I have to pay out of my non-pecuniary income? Until they figure out how to tax the thrill of pursuing my own self-determined research agenda, not very much. Taxes are cheap when half of your compensation is non-pecuniary.
The academy is a club.
Scratch that.
The academy is a hierarchy of nested clubs. Which means that we often suffer from exclusionary FOMO akin to fourth tier English gentry trying to marry off five daughter in the early 19th century. Membership in those clubs– those famed research groups, donor-named centers, or even (god forbid) schools of thought — they become more than just sources of funding, workshop critique, and coauthor match-making sock hops. These clubs become the well springs from which ever increasing portions of our non-pecuniary income come from. They become our social networks, our friends, and even ,with a handful of co-authors you’ve gone into scientific battle alongside, a second family. The next time you see someone dig in their heels, seemingly denying the mounting evidence that they were on the wrong side of a scientific argument, don’t just blindly assume they are too stubborn and arrogant to acknowledge they might have been wrong. Consider how unfunded or, more importantly, how lonely they stand to be if they’re the first to give up the fight.
It’s why we covet tenure so much. Don’t get me wrong, everyone wants job security. But for most of us, the prospect of being laid off doesn’t necessarily include the possibility of being jettisoned from what you’ve slowly constructed as a separate parallel universe within which you have carefully curated the technical, educational, and social capital necessary to produce your career and life. If you get laid off from programming for Netflix, the next few weeks or months will be unpleasant, scary even. You may begin to doubt your ability or life choices. But that next job will come, and you will as often as not find yourself with a nearly identical life on the other side.
There are those in the academy though for whom this is all they’ve ever known. Bachelors, doctorate, tenure-track academic placement. Throw in a post-doc and that’s 20 years, and you’re entire adult life, in and around universities. Even if they’re from a field fortunate enough to have robust private sector options, how much will doubling your salary really soften the blow for such a person?
I say all of this now not as a critique of academia, or even to lead to prescriptions or advice. You want my advice? Fine, here: don’t go straight to grad school. Dip your toe in the real world, see how you like it. Come back in a few years with a little experience and distaste for office life. It’ll serve you well when your dissertation hits one of its many inevitable nadirs.
Rather, I invite you to consider this: what does the world start to look like when our utility comes less from the goods that we buy and the experiences we have, and more from the clubs we are members of? What does it look like when those clubs find newer and better ways to monitor our behavior and our expressed beliefs? What does it look like when the purging of membership rolls becomes a part of the culture of those clubs?
As a dedicated supporter of Tottenham Hotspur Football Club, it is with much shame that I have referenced the anthem of Liverpool FC, but the sentiment implied by their club slogan is a powerful one.* To promise someone they will never have to suffer the torments of loneliness is to promise them a lifetime of riches. When we soft, vulnerable human beings find a source of community and support, we are loathe to give it up. Which is to say the promise of membership and threat of banishment are powerful means of solving collective action problems.
The promise of forever walking within columns of lockstep compatriots is a big part of why Gamestop (GME) went to the moon 🚀🚀🚀, but also why it came back down to earth. As Scott noted in his post, the story of the last, and most meteoric, stage of the Gamestop saga was the “short-squeeze”– short-sellers suddenly desperate to cover their positions found themselves needing more shares than existed, while the “unsophisticated” gamblers of r/wallstreetbets refused to sell their shares. Specifically, the large, but uncoordinated institutional short-position holders all pursued their independent self-interest, while the seemingly disaggregated redditors managed to solve their collective action problem. Which raises what, to me, is the most interesting question of the whole saga: if coordinating a short-squeeze is so lucrative, why doesn’t it happen more often? Put another way, why were a large number of strangers able to coordinate a complex financial gambit rarely pulled off by sophisticated institutional investors?
The answer, in part, is that they weren’t strangers. They may be anonymous to one another, absent recognition or connection in real life (IRL aka meatspace), but that doesn’t make them strangers. These men and women had built a community so deep they had their own (often incredibly offensive) language. Their own jokes. They had a culture and sources of status, going so far as to create their own within-group celebrities. And, absent any visible coordination, that culture had evolved in this moment toward a single idea: hold the stock. They were playing a massive prisoner’s dilemma game with each other. Can you form a group for the express purpose of creating a short-squeeze? Probably not – the very action of creating an identity around profit from financial speculation belies the prospect of building an identity valued more than pure profit by its members. That’s the rub – if you want to pull off a massive collective financial action, you’re going to have to build a group of people interested in financial collective action that nonetheless values the identity of the group above the profits of collective financial action. That’s what makes this Planet Money podcast about Gamestop so special– more than anyone anyone else, they seemed to understand that the absurdist emoji usage and language, the elaborate memes, the actual freaking sea-shanties, those weren’t just color for the story, they were the story. Hedge funds weren’t losing tens (hundreds?) of millions of dollars in a zero sum game to a bunch of idiots obsessed with chicken tender-centric memes and sea shanties. They were losing a millions of dollars in a zero sum game because of the memes and sea shanties.
Put succinctly, at every stage leading up to and during the short-squeeze, each and every holder of Gamestock shares would have been better “defecting” on their r\wallstreetbets comrades-in-arms. Yes, the group is better off if everyone holds, but everyone knows the incentives faced by everyone else, which creates a seemingly irresistible economic gravity of self-interest (defect, defect). So how do we solve these collective action problems? Well, first and foremost, we change the payoffs. That’s what we do in successful families, mafias, and religious groups. It’s what we fail to do in our misfiring coups, cooperatives, and communes.
Yes, your bank account balance will increment upwards if you defect and sell your stock. But that also means you’re no longer a true Son of Gondor. Sure, no one else on the subreddit knows it, but you’ll know it. You’ll know it in your cold, lonely, traitorous heart. Sure, you can use the words and participate in the jokes, but will you ever know the same sense of fellow-feeling within the community as you knew before. That’s a real cost. Is it worth cashing in $5000 in profit a week early, especially knowing it might be worth more next week? Remember – the benefit of group identity doesn’t have to be greater than the profit at hand, it only has to be greater than the risk holding the stock bears for your future profit. Combined with a little motivated reasoning, and it quickly becomes clear how a community, formed independent of profit-via-collective-action, now suddenly becomes an engine of pro-social decision-making sufficient to create an existential threat to any institution over-leveraged on a short position.
The same payoff matrix, however, also demonstrates that a short-squeeze built around a group identity is living on borrowed time. With every short position that gets closed out, the price climbs both higher and closer to its (actually) inevitable peak. There are a finite number of short positions, and there is a finite number of days their share lenders will allow them to hold out, all of which mean a peak will be reached, after that point the price will begin to rapidly decline. Which all means that as the price rises the risk to holding also rises, both of which are increasing the opportunity costs of holding the stock, shifting the payoffs back to a classic Prisoner’s Dilemma. Sure, your group identity might be worth $5K, or even $50K, but there’s a point at which anonymous community is dominated by the prospect of material wealth. I’m not saying you can buy true friends, but eventually you can buy something that offers a close substitute for anonymous friends. Or an island.
*I mean, I personally believe “To Dare is to Do” is a far smarter and sexier slogan.
I’ve been a homeowner not quite long enough to watch the entire run of Parker Lewis Can’t Lose in one sitting, but I have already arrived at the incontrovertible conclusion that being a landlord is foolish. Renting is a blissful paradise that I am wistfully nostalgic for, a glorious time when I had only one job: feasibly above-average economist. Now I’m also the worst plumber, woodworker, mason, electrician, and landscaper I’ve ever met. To be clear, none of that is true. Rather, I am a poor home inspector and over-qualified errand boy who moonlights as the manager of a hastily assembled team of contractors to whom I write a litany of checks.
I know the rent is too d*mn high, but the interesting question is why? Thinking about high rise apartments, rowhouses, or detached homes, its seems pretty clear that there are significant returns to specialization and scale. Whether its 212 apartments or 25 detached homes, a team of salaried handymen, inspectors, and property managers offers considerable efficiency gains, a reality borne out by the inexorable rise of HOAs and their continuing growing reach into their constituents lives. But as anyone who’s ever attended an HOA meeting can attest, the limits to contracting and the value of our time provides the opportunity for an industrious individual or firm to bundle collective ownership and services into a single entity, selling the turnkey solution that is the modern rental residence, at considerable potential savings to the tenant in a competitive market.
So why are we so mad at our landlords? I see a couple possible answers:
(1) likely has some behavioral truth to it, but isn’t a very satisfying explanation*, while (2) has likely more merit in the short run or in areas where landlords have solved their collective action problem sufficiently to stymie growth of the housing supply at every turn (<cough> San Francisco <cough>).
But perhaps (3) is underappreciated. Everyone who’s ever lived in a major city, especially when they were young, has a story about how they were screwed over by their landlord. At the same time, landlords (particularly smaller, independent ones) live in terror of tenants arriving at a cost-benefit conclusion that paying their rent is a suboptimal decision. Plenty of states and cities have enacted tenant bills of rights, creating considerable variation across states, often making it incredibly difficult and costly to evict someone. Regardless of state laws, however, I am comfortable saying without any evidence or additional research that landlords and tenants continue to have a strained relationship. Tenants think landlords are getting rich off their backs without any labor, only the property their wealthy parents no doubt handed them on a silver platter, property they themselves acquired by exploiting their employees while running a puppy mill. Landlords, meanwhile, find out real quick they’re not actually making that much profit trying to keep a home intact as their hippie tenants burn sofas and flush paper towels while the bathtubs been flooding the 2nd floor for a month.
The interesting question, to my mind, isn’t whether landlords are exploiting tenants or vice versa, but rather why have property tenant laws evolved to such an inefficient equilibrium, where there doesn’t seem to be any satisfied parties?** If no one feels protected by a contract, then it’s likely not a very good one.
* The behavioral answer in (1) shouldn’t be dismissed too quickly, to be fair. Given that size of rent as a fraction of most household budgets combined with profits to be had churning tenants in supply-restricted cities, its possible that all parties are constantly trying to scam each other, leading to the observed acrimony.
**Yes, I know people have become quite wealthy as landlords, but my read on that market outcome is not the profitability of property management but rather of property speculation, with equal parts winners and losers. Rental management is principally in service of subsidizing said speculation and lower property tax rates.
The Labor Theory of Value goes like this: the value of a good, and the price it should command in the market, will (should) reflect the amount of labor it takes to produce it. It’s a classic fallacy, but not one we should mock. Yes, Marxist thought still often cling to it as it chases its own Hegelian dragon, but Adam Smith and David Ricardo both struggled with understanding why something that yields so little predictive value could still feel so right.
Which brings me to the updated credentialist version of this fallacy:
Now, I apologize for picking on this person, and this tweet, in particular. Similar gripes appear appear regularly in social media and The Chronicle of Higher Education on a regular basis. The formula runs as such: I, and people such of myself, have spent many years in school, have successfully been credentialed with a BA/MA/MFA/PhD, but the labor market refuses to reward us appropriately.
To be clear, I understand the deeply intuitive appeal of the Labor Theory of Value– the more labor I put into making something, the more people should pay me for the product of my labor. The problem with this logic is the very core of the economic puzzle: goods are only worth what people are willing to exchange for them. If you spend a year molding rotting eggshells into a 25-foot statue of Mickey Mouse, it might earn you something at an art auction, but probably not as much as you would have earned working an equivalent number of hours at Taco Bell. At the same time, you could take an art class at a local community college, paint a soft focus acrylic of the local high school, and sell it to an alum for $100. Or you could find a dinosaur egg in your backyard the day after you bought the house and sell it for $2000. Which is the more compelling artistic statement or mantle centerpiece is debatable, but the price each commands in the market is entirely objective, and has nothing to do with the hours of labor that went into them.
Which me brings to me the Matriculant Theory of Value: the more labor and tuition money I put towards producing a more credentialed version of myself, the more people should pay for the product of my labor. I’m sorry to report that the market doesn’t care about your degrees, it cares about what you can produce and the value the market places on that product. If you didn’t acquire any skills valued by the labor market, then your degree is only worth however much the firm values any marginal prestige it might enjoy from your credentials or the interesting conversation you may offer in the break room. If I’m an academic drawing a salary from an institution of higher education (and I am), then I’m reading not as a sign that I should be angry we’re not getting paid enough, but as a sign that I should be terrified that employers don’t value educational product I am currently producing.
Now, unlike a lot of scolds, I am sympathetic to the academic misinformation that students often find themselves marinating in. Professors enjoy telling students who might be wary of joining the glut of PhDs applying for scarce academic jobs, “Don’t worry, you’ll get a job. You’re special and brilliant and you deserve a job.” Given that these professors need cheap labor, but often lack resources, they are all to happy to pay “in trade” i.e. with an advanced degree. For that deal to work though, you have to convince students that the degree has value. They are all too quick to valorize a “life of the mind” not unlike acolytes being invited to take a vow of poverty, and with more than a little implied denigration of more proletarian endeavors.
We also have a tendency to grossly overemphasize grades, academic status, and completion. Rarely do I see a student told that it might be better to get a C in a challenging technical class than dodge it for the sake of their GPA. Who is going to be better valued in the market: a 3.9 GPA student who glided on fluff for four years, or a student who took 5 challenging technical courses over 4 years, failing 2 of them, and collapses at the finish line with a 2.1 GPA and hard earned BS?
What I am less sympathetic to is the frequent failure to admit the other allures of degrees less valued by the market: they’re fun. For a certain type of person, there is pleasure bordering on euphoric to sitting in a comfortable chair and reading histories, grand theories, and poetics for 8 hours a day. If you love your job, you don’t have to work a day in your life. True, but that doesn’t mean anyone has to pay you for it. It should worry you if your anticipated vocation is what other people do on their vacation. Not that it doesn’t have social value (it may have significant social value), but you should be terrified of trying to make a career doing what someone else is willing to do for free. You’ll not be surprised to learn no one is paying me to write these rambling diatribes.
So, yes, $38k a year for 9 months of work giving 10 hours of lectures a week, plus prep, grading, and office hours maybe doesn’t seem like much in the way of wages to you. I was paid $34k (2003 dollars) for 10 months a year teaching 19 hours of lectures a week, plus prep, grading, and parent meetings when I was a high school teacher, so I guess I could make a snarky case that the professor in question is being overpaid, especially since I hold to the belief that public K-12 teachers are underpaid relative to the social value they produce, but that is another post. But I also have enough awareness to know not to complain too much about how an indoor job with no heavy lifting is underpaid, particularly if we are resorting to any version of the labor theory of value. I dare you to walk into any professional kitchen and tell them these exact contract details, the nature of your work, and then explain to them that you’re the one who deserves to be paid more.
One last gripe. If you are sufficiently talented, conscientious, and privileged to complete a PhD, but your field of study offers you no option better than $38k/year to teach, my guess is that you’ve been not just unlucky, but proactively diligent in dodging every bit of coursework that could lead to a higher wage in the market. And I don’t just mean all of that unpleasant math you hate. Or statistics. Or java/C++/Python/etc. I mean even the adjacent courses of study or research projects where the skill acquisition path is that much more taxing or unpleasant. You didn’t study computational anthropology or physical anthropology or field anthropology. You studied cultural anthropology, fine…but you were also careful to avoid data at every step, opting instead you to memorize soft theory jargon and write the kind of dissertation that tells everyone exactly how smart you are, but not much else. Make no mistake, if you spend 5-8 years getting a PhD you may have gotten bad advice, you may have suffered the fallacy of sunk costs, you may have been done a gratuitous disservice by the faculty guiding your education, and may have been deluded by the matriculant theory of value, but on the bright side you chose a safe and comfortable line of work.
And make no mistake, you did choose it.
It is an odd thing watching the pro-labor, pro-redistribution portions of our advocacy and activism classes capitulate to the notion that the welfare state must be channeled through employment. When did this framing become so dominant? One of you just yelled “the Welfare Reform Act of 1996!” through my office window, but I think that’s wrong. I think the game was lost when we decided the minimum wage was a core policy signifier. There’s something irresistible about it– if there is one thing median voters everywhere seem to agree on is that their wage should be higher and their rent lower. Everything else is policy nerd gobbly-gook.
To my mind, the minimum wage is a policy failure strictly on the terms of (my own) left-of-center preferences. It is a victory of both political framing and strategy for coalitions against economic redistribution and the social safety net. That most of the left doesn’t even see this as a defeat makes it all the more devastating. Those outside the workforce are quietly placed outside the discussion and, in turn, are of secondary concern. More subtly, and perhaps more importantly, though, it builds into the policy construct a bargain that must be repeated and updated as national and local price levels change. Those repeated bargaining events force supporters to expend resources in each new iteration while, at the same time, giving their antagonists votes they can dangle when trying to secure support for their own pet policies. You want a higher minimum wage? Well, I’ve got a military procurement bill coming up next month that is slated to build 4 more F-35s in my district...
I subscribe to the belief that the failures of the US healthcare system most frequently stem from its connection to employment. Instead of heavily (or, yes, even entirely) subsidizing its purchase by consumers, we instead opted to grant a tax break to insurance provision by employers and here we are. The Affordable Care Act tried to weaken this connection, but still we are here. If you believe that health care is a human right, then connecting it to employment is a grievous error. If you believe a “living wage” is a human right, then why would you advocate making the same mistake again? We don’t live off wages, we live off consumption. If you want to guarantee an adequate standard of consumption, why would you include my employer as a go-between?
Which is not to say there isn’t political value to be mined from the $15 minimum wage debate. It has certainly crested the threshold of credible threat. It could be used as a political cudgel to bargain for a Universal Basic Income (UBI), and then bundled with the carrot: repeal the minimum wage entirely from the US law books in return for a $1,000 a month UBI that every citizen receives once they are no longer claimed as a legal dependent. For all the theoretic struggles the market might have with distortionary effects of a price floor (unemployment, low-cost discrimination) and substitution effects of a more expensive labor force (robots), I have all the faith in the world it can handle broad income effects just fine, thank you very much.
When economists talk about the minimum wage in bars, amongst themselves, without cheering and jeering onlookers, it is almost inevitably turns into a story of technocratic calibration. If we accept there is non-zero monopsony power, but also eventual disemployment effects, given the observed numbers, the optimal minimum wage is X% of the Zth percentile of the wage distribution. When these conversations happen on twitter, onlookers and participants are frequently less interested in calibration or generous in spirit. I’ve been on Twitter long enough to know that animal spirits are real, particularly when blood and memes are in the air.
Arguments over the minimum wage nearly always include references to an empirical literature that sometimes finds negative effects on employment while other times finds little to no disemployment at all, quickly followed by the theoretical point that there has to be some minimum wage above which employment would decline (or, at least, shift out of the legal sector). Part of what lets this debate persist are the modest sizes of past minimum wage increases. The one glaring exception I know of is when the Fair Labor Act of 1938 imposed a minimum wage that was roughly four times as large as standard worker wages in Puerto Rico, resulting in 65% unemployment . An exemption for Puerto Rico did not arrive for over two years and it is fair to say large portions of the economy were decimated. Future hikes had similarly negative, but far less cataclysmic, effects on Puerto Rican employment.
When the Fair Labor Act smashed into Puerto Rico with all the technocratic precision of a drunken mammoth, ~65% of the workforce ceased to be employed. But… do we really believe that 65% of people stopped working for a living? Of course not. Rather, the island labor market went gray. Under a hypothetically crushing minimum wage, employers will pay people in cash, off the books. They will hire family members, take them out of retirement or out of school. Yes, they’ll hire robots too, but I’m not really worried about 2nd order employment shifts favoring upper-middle class engineers. What I’m worried about is when whole classes of people enter the gray market (or markets even less legal), they no longer operate under the layering of legal and regulatory protections we often take for granted, especially ostensibly pro-market types who think that labor and safety standards are emergent phenomena. This sounds suboptimal to me, and probably to most labor advocates, but you know who it might sound great to? Libertarians who want the government entirely out of the workplace.
The minimum wage has become a left wing shibboleth, but that doesn’t make it good left wing policy. If anything, its one of the great right-wing gambits of the last 100 years. A policy that undermines its own ambitions at semi-regular intervals and inoculates the political marketplace against superior policies that would help far more people but, yes, would demand a larger tax bill. What more could Republican’s have asked for than a policy that holds the welfare state tax bill at bay while handing ammunition to the Democratic coalition members purging their own ranks?
Armies, both for violence and social change, are costly. Costly to recruit, to train, to provision. But what of mobs? Mobs are cheap, if difficult to plan. Born of the moment, more opportunism born of wildfire than carefully orchestrated arson.
When I see footage of the attack on the Capitol and threads of the angry anonymous on Twitter, I see something in between an army and a mob. At first glance they appear like mobs, phenomena emerging from countless micro-interactions, absent an organizing force. Within the chaos of recent years, however, we’re seeing increased evidence of organizing agents. Within the scores of angry teenagers on the social media warpath for a stronger welfare state and MAGA zealots pushing white ethno-nationalism, we’re finding incepting Russian trolls and coordinating Capitol intruders equipped for ghastly violent theater. These mobs offer evidence of ambition. Ambition to undermine US governance; ambition to prove true the prophecies of some guy from Jersey.
Social media has radically lowered the cost of rousing a mob. Even in the face of technological advancement, however, it remains an unmitigated truth that you get what you pay for. The rabble are filled to the brim with fools, absent leadership, pulling from the tails of distribution. Those with the lowest opportunity cost of time and risk. If democracies are ruddered by the median voter, what guides the mob? The people with the most time on their hands? The least to lose? The most rage? The most bored?
If the median voter is on social media, they’re listening to the mob and also getting what they paid for. What I’m curious about, however is more statistical in nature. One of the points in favor of the median versus the mean is it’s resilience to outliers. But what happens when the median is endogenous to the outliers? What happens when the median voter finds its information increasingly filtered through an army of fools?
Armies are expensive, but mobs have never been cheaper. Why bother with the risk and investment of raising an army, or build a social movement, when you can raise a mob without leaving your home?
Economist Writing Every Day 