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2011 October 30 Sunday
The Best Steve Jobs Eulogy Comes From His Sister

Read Mona Simpson on Steve Jobs.

One time when Steve had contracted a tenacious pneumonia his doctor forbid everything — even ice. We were in a standard I.C.U. unit. Steve, who generally disliked cutting in line or dropping his own name, confessed that this once, he’d like to be treated a little specially.

I told him: Steve, this is special treatment.

He leaned over to me, and said: “I want it to be a little more special.”

Intubated, when he couldn’t talk, he asked for a notepad. He sketched devices to hold an iPad in a hospital bed. He designed new fluid monitors and x-ray equipment. He redrew that not-quite-special-enough hospital unit. And every time his wife walked into the room, I watched his smile remake itself on his face.

Death is loss. Death is defeat. Death is waste when a mind is valuable.

By Randall Parker 2011 October 30 05:49 PM  Life And Death
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Occupy Wall Street And Global Top 1%

A great article in the Motley Fool: Lots of Occupy Wall Street protestors who feel poor are in the global top 1% of income. Do you make at least $34k per year? If so, you are in the global top 1%. Never knew you were that elite did you?

The recent Occupy Wall Street protests have aimed their message at the income disparity between the 1% richest Americans and the rest of the country. But what happens when you expand that and look at the 1% richest of the entire world? Some really interesting numbers emerge. If there were a global Occupy Wall Street protest, people as well off as Linda Frakes might actually be the target.

In America, the top 1% earn more than $380,000 per year. We are, however, among the richest nations on Earth. How much do you need to earn to be among the top 1% of the world?

$34,000.

If you are making at least a few dollars a day you are making more than over half the world's population. Keep that in mind when a Prius driver claims he's being more ecologically and economically responsible to the world by driving a Prius. Then ask him how he's spending the money he's saving on gasoline. Perhaps spending it on airplane trips? Or home remodeling?

Any reader not in the global top 10%? I want to know how much you have to make to be in the global top 0.01%. Maybe that's a goal within reach.

That was the finding World Bank economist Branko Milanovic presented in his 2010 book The Haves and the Have-Nots. Going down the distribution ladder may be just as surprising. To be in the top half of the globe, you need to earn just $1,225 a year. For the top 20%, it's $5,000 per year. Enter the top 10% with $12,000 a year. To be included in the top 0.1% requires an annual income of $70,000.

OWS is about declining living standards within America. They would not be pleased to know that part of the reason American living standards are declining is that living standards in Asia are rising. But our natural resources demand now competes with rising Asian demand and we've got to get less as they get more. Plus, rising world population (including rising US population driven mainly by immigration) increases the number of people competing for those natural resources. Imagine all 7 billion (and growing) people of this planet made as much money per year as the average OWS protestor. There aren't enough resources on the planet to support such a lifestyle globally. This will become more apparent as oil production hits limits and starts declining.

By Randall Parker 2011 October 30 10:51 AM  Economics Living Standards
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2011 October 23 Sunday
Few Chinese Americans Hold Non-Mortgage Debt?

If only the rest of the people in the United States could be so debt-averse.

COLUMBIA, Mo. – Bad mortgage loans and rampant consumer debt were two of the primary causes for the recent economic recession in the U.S. Despite a national trend of debt problems, a University of Missouri researcher has found one American population that holds almost no consumer debt outside of typical home mortgages. Rui Yao, an assistant professor of personal financial planning in the College of Human Environmental Sciences at the University of Missouri, found that while 72 percent of Chinese-American households hold a mortgage, only five percent of those households have outstanding auto loans, and only three percent have any other type of consumer debt.

The surveyed group has high average incomes.

In her study, Yao surveyed Chinese-American households in ten Midwestern cities. Income levels of participants ranged from $4,000 to $1.4 million annually with an average income of $106,000. She found that despite a low overall rate of debt, Chinese-American households with higher incomes were more likely to have some type of consumer debt.

If you click thru and read the full press release you'll see Yao would make to see Chinese Americans make more use of debt - i.e. owe more. She thinks this is needed in order to boost consumption demand. I'm not buying it. If all Americans became more averse to taking on debt we'd all be better off - except for the bankers.

So why this result? We'd need to see data on debt levels per generation among immigrant families to see if the children and grandchildren of Chinese immigrants take on more debt.

By Randall Parker 2011 October 23 09:52 PM  Culture Compared
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Median Paycheck Back To 1999

Workers can only afford to party like its 1999.

The median paycheck — half made more, half less — fell again in 2010, down 1.2 percent to $26,364. That works out to $507 a week, the lowest level, after adjusting for inflation, since 1999.

Beats partying like its 1699. But if we were as underexposed to media as 1699ers would we be happier?

The 1999 median figure is even worse than it looks at first glance because the unemployment rate is much higher than it was in 1999. The unemployed have lower potential earning power than the employed and they have no earning power right now.

The median number is for occupations that are pretty low skilled. At about $12 or so dollars an hour employer aren't getting highly skilled workers. Well, the demand for less skilled workers has been declining relative to the demand for highly skilled workers for decades. That's due to both outsourcing and automation. In spite of this it is an uphill battle to stop the influx of low skilled illegal immigrants. Combine outsourcing, automation, immigration, and rising costs of energy and other commodities and the result is median paychecks have gone back in a time machine to 1999. In a rational world where government was enlightened and concerned about its populace these causes would be discussed and policy changed appropriately. But no.

Some argue (incorrectly in my view) that we live in in a period of rapid innovation with big benefits for all. If the innovations really are large and rapid then their benefits are being eaten up by the many other things going wrong.

We wouldn't have an Occupy Wall Street movement or the Tea Party if median incomes still rose like they used to. But a number of factors have come together to halt and reverse median income growth. As a result different political movements are pushing for wealth redistribution, lower taxes, and assorted policies that their advocates (wrongly) expect will reignite economic growth and rising living standards. So you'll read people on the Left crying out for more education, mass transit, (which does less in Europe than American proponents believe) and infrastructure spending in the mistaken belief these forms of spending still offer positive ROI. At the same time right wing calls for lower taxes and less regulation are based on a different erroneous hopes.

One has to diagnose all the root causes before we can try to make the future less bad. But rising Asian demand for commodities, cheaper Asian labor, depleting oil fields, and other causes of our woes do not make it into mainstream debates on what is going wrong. I've laid out in past posts why economic stagnation and declining per capita income are in our future. My practical advice: try harder to make more and save more and think about how to cushion yourself from worse times ahead. Peak Oil along is going to hit the economy very hard. Lots of other factors are combining together to make the decline even worse. I've got no suggestions on how to prevent it. Things will get worse for some years before they get better.

By Randall Parker 2011 October 23 07:27 PM  Economics Living Standards
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Moderate Time Affluence Key To Teen Happiness

Strong desires for material things seems to make for unhappy marriages. Those desires also make for unhappy adolescence, especially when combined with too much or too little time on your hands.

What is more desirable: too little or too much spare time on your hands? To be happy, somewhere in the middle, according to Chris Manolis and James Roberts from Xavier University in Cincinnati, OH and Baylor University in Waco, TX. Their work shows that materialistic young people with compulsive buying issues need just the right amount of spare time to feel happier. The study is published online in Springer's journal Applied Research in Quality of Life.

We now live in a society where time is of the essence. The perception of a shortage of time, or time pressure, is linked to lower levels of happiness. At the same time, our consumer culture, characterized by materialism and compulsive buying, also has an effect on people's happiness: the desire for materialistic possessions leads to lower life satisfaction.

So kids should be moderately busy without too much or too little free time. Plus, if they want lots of stuff they'll be unhappy. Better to keep them away from TV and video ads on the web. I wonder if Amish kids are happier because they are technologically impaired and see far less media images of things to want.

Are compulsive buyers that way because they've got genes for compulsiveness? Are they just genetically ill-adapted to modern life?

Given the importance of time in contemporary life, Manolis and Roberts investigate, for the first time, the effect of perceived time affluence (the amount of spare time one perceives he or she has) on the consequences of materialistic values and compulsive buying for adolescent well-being.

A total of 1,329 adolescents from a public high school in a large metropolitan area of the Midwestern United States took part in the study. The researchers measured how much spare time the young people thought they had; the extent to which they held materialistic values and had compulsive buying tendencies; and their subjective well-being, or self-rated happiness.

Manolis and Roberts' findings confirm that both materialism and compulsive buying have a negative impact on teenagers' happiness. The more materialistic they are and the more they engage in compulsive buying, the lower their happiness levels.

In addition, time affluence moderates the negative consequences of both materialism and compulsive buying in this group. Specifically, moderate time affluence i.e. being neither too busy, nor having too much spare time, is linked to higher levels of happiness in materialistic teenagers and those who are compulsive buyers.

Moderate time affluence. That's the state to strive for. I'm feeling too time unaffluent myself. How about you?

I'm guessing those with too much time on their hands have more time to think about what they want to buy but not enough money to buy it. Better to be busy if you are poor.

Those who suffer from time pressures and think materialistically and/or purchase compulsively feel less happy compared with their adolescent counterparts. Equally, having too much free time on their hands exacerbates the negative effects of material values and compulsive buying on adolescent happiness.

Are advertisers becoming more skilled at making people feel frustrated about what they do not have? If everyone turned off their TV would average satisfaction with life go up?

By Randall Parker 2011 October 23 02:02 PM  Human Nature Happiness
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2011 October 18 Tuesday
Non-Conformists Better At Working Toward Common Good

Non-conformists go beyond the standard and are better at cooperation.

If you follow the pack are you more likely to co-operate with others in it? Not necessarily according to research into social behaviour by academics at the University of East Anglia.

The study, published in the August issue of the journal Personality and Individual Differences, shows that people who do not conform are most likely to work together for the greater good, while conforming to social norms can actually make people less likely to co-operate – a finding which surprised the researchers and could have implications in the workplace for team design and operations management.

To innovate you've got to deviate from the existing way of doing things. Non-conformists are more likely to deviate. The conformists on a team conform to a lower standard.

"Here we've got a measure of people's co-operation, which could apply to any situation where you've two or more people who are trying to co-operate in an activity. For example in a work setting, if you are part of a team working on a project you expect everyone to put the same effort in to the task. The expectation is that people who are high in social desirability will conform to the effort other people are putting into the task, but actually the conforming people may be less helpful because they take their cue from the less helpful members of the team. They are conforming to the person who is not necessarily working that hard."

"If someone is less conformist they may take a lead and put in more effort, so then others may be prepared to put in more effort themselves, and the individuals and the team benefit. Conformity can be a good thing or a bad thing, depending on what you are conforming to."

Some more contrarianism: Attempts to make people less prejudiced can backfire.

Organizations and programs have been set up all over the globe in the hopes of urging people to end prejudice. According to a research article, which will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science, such programs may actually increase prejudices.

Lisa Legault, Jennifer Gutsell and Michael Inzlicht, from the University of Toronto Scarborough, were interested in exploring how one's everyday environment influences people's motivation toward prejudice reduction.

The authors conducted two experiments which looked at the effect of two different types of motivational intervention – a controlled form (telling people what they should do) and a more personal form (explaining why being non-prejudiced is enjoyable and personally valuable).

In experiment one; participants were randomly assigned one of two brochures to read: an autonomy brochure or a controlling brochure. These brochures discussed a new campus initiative to reduce prejudice. A third group was offered no motivational instructions to reduce prejudice. The authors found that, ironically, those who read the controlling brochure later demonstrated more prejudice than those who had not been urged to reduce prejudice. Those who read the brochure designed to support personal motivation showed less prejudice than those in the other two groups.

In experiment two, participants were randomly assigned a questionnaire, designed to stimulate personal or controlling motivation to reduce prejudice. The authors found that those who were exposed to controlling messages regarding prejudice reduction showed significantly more prejudice than those who did not receive any controlling cues.

By Randall Parker 2011 October 18 07:18 PM  Human Nature Excellence
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2011 October 17 Monday
Tablets Making People Spend Too Much?

Does the iPad make impulse buying a bigger problem?

Tablets represent a huge opportunity for Bezos, not only to sell a new kind of device but also to entice people to buy more stuff. Even with only 28.7 million iPads sold, e-commerce sites say they see an increasing amount of traffic coming from tablets. Forrester Research (FORR) reported this summer that online purchases made on tablets now account for 20 percent of all mobile e-commerce sales, and that nearly 60 percent of tablet owners have used them to shop. Bezos says tablets “are a huge tailwind for our business.” Amazon once saw spikes in traffic during the workday lunch hours. Now traffic is more evenly distributed as people pick up their tablets anytime of the week, buying the books and albums they see on television and making impulsive decisions about replacing their dishwashers.

If you can call up goods to buy at a moment's notice with something you carry with you all the time it seems to me that a substantial portion of the population will be more likely to spend than would otherwise be the case.

By Randall Parker 2011 October 17 09:25 PM  Economics Human Weakness
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Materialism Works Against Happy Marriage?

Money can't buy you love.

New research to be published Oct. 13 confirms The Beatles' lyrical hypothesis and finds that "the kind of thing that money just can't buy" is a happy and stable marriage.

Scholars at Brigham Young University studied 1,734 married couples across the country. Each couple completed a relationship evaluation, part of which asked how much they value "having money and lots of things."

The researchers' statistical analysis showed that couples who say money is not important to them score about 10 to 15 percent better on marriage stability and other measures of relationship quality than couples where one or both are materialistic.

"Couples where both spouses are materialistic were worse off on nearly every measure we looked at," said Jason Carroll, a BYU professor of family life and lead author of the study. "There is a pervasive pattern in the data of eroding communication, poor conflict resolution and low responsiveness to each other."

In a way this makes sense. The ideal combination of traits would be the desire to work hard, the desire to save, and the lack of desire to own things. You'll make more money, keep more of it, and need less of it. Your desires won't be out of whack with your capabilities.

By Randall Parker 2011 October 17 09:22 PM  Economics Family
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DNA Exonerates Imprisoned Man For Wife's Murder

25 years in prison after someone else took his wife from him via murder.

GEORGETOWN, Texas — A Texas grocery store employee who spent nearly 25 years in prison in his wife’s beating death walked free Tuesday after DNA tests showed another man was responsible. His attorneys say prosecutors and investigators kept evidence from the defense that would have helped acquit him at trial.

One of the less noted problems with high crime is that the higher the crime rate the more innocent people are jailed by mistake. You are less at risk of being unjustly imprisoned if you live in the lowest crime neighborhood you can find.

It also helps to live a highly visible life where lots of people know where you are for long periods. If you at the office for 12 hours with lots of witnesses you can't be charged with murder or rape that happens somewhere else during that time.

I'd love to see IQ tests done on prosecutors who imprisoned innocents and also on other prosecutors. Are the ones wrongly putting people in jail dumber? What could be done to lower the false conviction rate? IQ tests for jurors?

IQ tests could do the society a great deal of good if only they were not taboo.

By Randall Parker 2011 October 17 09:11 PM  Justice
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2011 October 14 Friday
Harvard Routes Yale At Presidential Level

George W. Bush has a Yale undergrad degree (from before Yale raised admissions standards) and a Harvard MBA. Barack Obama has a Harvard law degree. Mitt Romney (the most likely Republican Party presidential candidate in 2012) has a Harvard MBA and Harvard law degree. You see a trend here? I'm thinking in 2016 2 Harvard degrees will be the minimum for a Presidential candidate to win party nomination. 3 Harvard degrees would provide a distinct advantage.

So what about Yale? Yalies had their high point in the 1990s with George Bush Sr and Clinton and even George W. Bush. The tide is now running toward Harvard in a big way. You can think of George W. Bush as having drawn on both Yale and Harvard. But it is clear that 2nd best is no longer good enough.

So we've got to start thinking: Which Harvard alums would make good Presidential timber in 2016? Harvard ought to make available an online searchable database of Harvard grads with ability to restrict by age range so we can troll online for people to promote as Presidential candidates. Time to fill up the pipeline and get those folks elected to the Senate or a governorship in 2012 to get them ready for 2016.

If Harvard doesn't take steps then this is going to create an opening for Yale or even Princeton.

By Randall Parker 2011 October 14 06:57 PM  Politics American Presidency
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2011 October 12 Wednesday
Mitt Romney Nomination Seen As Inevitable

With Rick Perry fading with every gaffe Romney's biggest challenge now shifts to the general election.

NASHUA, N.H. — Buoyed by a series of strong debate performances, Mitt Romney is suddenly attracting new support from major donors and elected officials, some of whom had resisted his previous entreaties, as people across the GOP grow more accepting of the presidential contender as the party’s standard-bearer.

Romney's the smartest of the Republican candidates. I count that heavily in his favor. Plus, he's worked in the private sector quite successfully.

I see the election pivoting in large part on how the economy goes. Just as the recession assured Republican defeat in 2008 the economy is working against Obama's reelection. All the people not working and not getting raises want a change. A bank crisis emanating from Europe could make this much worse between now and November 2012.

FDR managed to get reelected in spite of very high unemployment rates because he wasn't blamed for the economic disaster. Can Obama put the blame on others? Harder to do when he's so aligned with reviled bankers.

If Romney gets elected he will have a hard time getting reelected because I expect the economy will still be doing quite badly in 2016. If world oil production is shrinking by then people will remember 2011 as the last of the good times. This is not the decade for easy incumbent reelections.

By Randall Parker 2011 October 12 10:13 PM  Politics American Presidency
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2011 October 09 Sunday
True Paramilitary Groups Operating In Mexico?

Paramilitaries operating outside the law in Mexico to kill drug cartel members?

MEXICO CITY — Top Mexican security officials said Thursday that there is no evidence that true paramilitary groups are operating in Mexico, countering video boasts by a shadowy group of masked men who asserted responsibility for the torture-murder of 35 alleged drug cartel members last week.

Mexico looks to be following Colombia's path. Recall that the Los Pepes paramilitary group in Colombia played a big role in bringing down Pablo Escobar. Mark Bowden wrote a book about it. Los Pepes may have been funded in part by rival drug cartels. But the CIA or US special forces probably helped Los Pepes too. Here's a Borderland Beat discussion forum debate on whether Mexico needs paramilitaries to hunt down and kill their drug lords. Los Pepes went around killing people who supported Escobar in any way. So people just doing white collar services for Escobar got offed. Given the extensive corruption of Mexico such severe measures might be the only way to bring down the drug lords and stop the violence.

By Randall Parker 2011 October 09 11:06 AM  Mexico
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Free Trade Versus Mercantilism

The Washington Post editorial board strikes a morally superior pose for free trade. This is called fighting the last war.

THE AMERICAN Recovery and Reinvestment Act of 2009, a.k.a. “the stimulus,” had its pluses and minuses. But few would dispute that some of the worst bureaucratic hassles and international disputes associated with that $825 billion measure stemmed from its protectionist “Buy America” provision, which prohibited the use of imported steel on tens of billions of dollars’ worth of infrastructure and building modernization projects.

Yet President Obama proposes to do it all over again.

And this upsets the WPost editorial board. But why spend several hundred billion in economic stimulus spending just to have a substantial part of the money go to buying goods from China? We are running up debts (payable by our future selves) in order to stimulate China's economy.

What I'd like to hear from the WPost editorial board: a realistic plan for closing the US trade deficit. The trade deficit, and not an excess of US trade barriers, is the biggest trade problem facing the US economy by far. In fact, the trade deficit is one of the biggest problems facing the US economy, though not its biggest one.

Also in the WPost read Robert J. Samuelson's "Our one-sided trade war with China".

Just how many American jobs have been lost to subsidized Chinese exports is unclear. Economist Robert Scott of the Economic Policy Institute, a liberal think tank, estimates the number at 2.8 million from 2001 to 2010. A study by three academic economists concludes that imports from China account for about a quarter of lost U.S. manufacturing jobs from 1990 to 2007; that’s almost 1 million jobs. These are both large declines, but they are only a modest fraction of America’s present jobs shortfall. The recession cost 8.8 million payroll jobs.

The Chinese government keeps its currency weak in order to encourage multinational corps to shift more of their manufacturing to China (in addition to helping local champions steal tech from the multinationals). Those manufacturing jobs take engineering and research jobs with them.

The intractable trade deficit is attributable in part to manufacturing’s shaken status. And in many areas, craftsmanship in America has been eroding. Forty percent of the nation’s engineers work in manufacturing, for example, and that profession’s numbers have been declining. That is a particular problem because innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines.

...

As multinationals place factories abroad, they are putting research centers near them, with as-yet-undetermined consequences. At the very least, this trend challenges the view that the United States has the best scientists and research centers and is thus the research-and-development pacesetter.

We need to make more stuff in order to afford our energy imports. We need factories in order to keep research centers. We also need basic research spending that translates into jobs in the US rather than jobs in China.

A look at median earnings of men over the last few decades shows how far we've fallen. Women entering the work force for a while masked the decline in buying power per worker. I expect this decline to continue for a whole host of reasons. At best better policies could slow the rate of decline. But the Tea Party and "Occupy Wall Street" movement haven't yet shown a clue as to root causes for declining living standards. So there's no push from either side of the political spectrum for policies that will attempt to attack the problem.

By Randall Parker 2011 October 09 10:32 AM  China Mercantilism
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2011 October 08 Saturday
Clueless Voters Defeat California Reform Attempts

In a recent post I pointed you all to a piece by Michael Lewis about sick American states in which California plays a big role. If you haven't read it yet here's an excerpt from page 3 about Arnold Schwarzenegger's failed attempt to turn around the state's finances. He was badly beaten by the public employee unions which used their money to get the public to oppose the public's interests.

Two years into his tenure, in mid-2005, he’d tried everything he could think of to persuade individual California state legislators to vote against the short-term desires of their constituents for the greater long-term good of all. “To me there were shocking moments,” he says. Having sped past a do not enter sign, we are now flying through intersections without pausing. I can’t help but notice that, if we weren’t breaking the law by going the wrong way down a one-way street, we’d be breaking the law by running stop signs. “When you want to do pension reform for the prison guards,” he says, “and all of a sudden the Republicans are all lined up against you. It was really incredible, and it happened over and over: people would say to me, ‘Yes, this is the best idea! I would love to vote for it! But if I vote for it some interest group is going to be angry with me, so I won’t do it.’ I couldn’t believe people could actually say that. You have soldiers dying in Iraq and Afghanistan, and they didn’t want to risk their political lives by doing the right thing.”

Arnie was ready to fix the place. If he'd been dictator he could have made California a much better state. But its decay will continue. Democracy has failed.

The clueless voters were every bit as irresponsible as their elected representatives.

He came into office with boundless faith in the American people—after all, they had elected him—and figured he could always appeal directly to them. That was his trump card, and he played it. In November 2005 he called a special election that sought votes on four reforms: limiting state spending, putting an end to the gerrymandering of legislative districts, limiting public-employee-union spending on elections, and lengthening the time it took for public-school teachers to get tenure. All four propositions addressed, directly or indirectly, the state’s large and growing financial mess. All four were defeated; the votes weren’t even close. From then until the end of his time in office he was effectively gelded: the legislators now knew that the people who had elected them to behave exactly the way they were already behaving were not going to undermine them when appealed to directly. The people of California might be irresponsible, but at least they were consistent.

This is one of the many reasons I am very bearish on the future of California. The coastal region will continue to have great weather. But the voters want plenty of services without paying for them. The voters of California are a microcosm of the voters of America. The American people are deluded into thinking their living standards can be maintained. They engage in reckless actions to try to maintain them. Time to admit government must do less and the public must spend less.

Click thru to the page above and read the details about just how thoroughly the public employee unions have managed to make the California government exist more for the employees than for the voting public.

We need some form of modified democracy. The voters are clearly not up to the task. Got any ideas on how to reform democracy?

By Randall Parker 2011 October 08 07:15 PM  Democracy Failure
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2011 October 06 Thursday
Status Hierarchies And Trust

The higher your status the more you can count on good treatment from those below you.

COLUMBUS, Ohio – When you start a new job, your boss may be more likely to trust you than you are to trust him or her, a new study suggests.

The reason has to with the role that social status plays in relationships.

In three separate experiments, researchers found that high-status people tended to trust people more in initial encounters than did people with lower status. One experiment showed why: high-status people rated others as more benevolent, which led them to trust more.

These findings indicate that having high status fundamentally alters our expectations of others’ motives toward us, said Robert Lount, lead author of the study and assistant professor of management and human resources at Ohio State University’s Fisher College of Business.

People with more power are more able to hand our rewards and punishments. So they can expect better treatment.

This is another reason to raise your game and get ahead and move up. Don't trust your boss? Move up and then people will become fawning and solicitous.

By Randall Parker 2011 October 06 07:33 PM  Human Nature Status
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2011 October 05 Wednesday
Michael Lewis On Local Government Finance Nightmares

See this Vanity Fair piece.

The smart money says the U.S. economy will splinter, with some states thriving, some states not, and all eyes are on California as the nightmare scenario. After a hair-raising visit with former governor Arnold Schwarzenegger, who explains why the Golden State has cratered, Michael Lewis goes where the buck literally stops—the local level, where the likes of San Jose mayor Chuck Reed and Vallejo fire chief Paige Meyer are trying to avert even worse catastrophes and rethink what it means to be a society.

Lewis argues that Meredith Whitney's 2007 comments on 60 Minutes about muni debt have been misrepresented and basically a straw man version of her comments has been pummeled. What's important is what she sees going wrong in state economies.

What Meredith Whitney was trying to say was more interesting than what she was accused of saying. She didn’t actually care all that much about the municipal-bond market, or how many cities were likely to go bankrupt. The municipal-bond market was a dreary backwater. As she put it, “Who cares about the stinking muni-bond market?” The only reason she had stumbled into that market was that she had come to view the U.S. national economy as a collection of regional economies. To understand the regional economies, she had to understand how state and local governments were likely to behave, and to understand this she needed to understand their finances. Thus she had spent two unlikely years researching state and local finance. “I didn’t have a plan to do this,” she said. “Not one of my clients asked for it. I only looked at this because I needed to understand it myself. How it started was with a question: How can G.D.P. [gross domestic product] estimates be so high when the states that outperformed the U.S. economy during the boom were now underperforming the U.S. economy—and they were 22 percent of that economy?” It was a good question.

From 2002 to 2008, the states had piled up debts right alongside their citizens’: their level of indebtedness, as a group, had almost doubled, and state spending had grown by two-thirds. In that time they had also systematically underfunded their pension plans and other future liabilities by a total of nearly $1.5 trillion.

Why did citizens pile up debt? One possibility: To delay a decline in living standards. Why did government spending increase faster than the economy grew?

Tyler "Great Stagnation" Cowen argues we are using tax cuts to partially make up for declining incomes. Basically, after-tax incomes haven't declined as much as pre-tax incomes. At the same time, people are trying to get more from government, again because they are poorer. The declines are quite dramatic.

The median income for Wisconsin fell 14.5% in the last 11 years. That's tanking.

If you're making do with less, you're not alone -- especially in Wisconsin.

The state's median household income, adjusted for inflation, fell 14.5 percent between 1999 and 2010, according to U.S. Census Bureau estimates released Thursday.

That 14.5% decline is with 11 years of technological advance. Do technological advances deliver higher living standards? If so, imagine what else must be going wrong to swamp out the effects of 11 years of technological advances. Nationally household median income is down 7% ($3,800) since 1999 and household median income is still declining. New Jersey's median household income is down 2.9% just last year. Since 1969 median male earnings (including those not working) have declined 28%. Also, either the value of a college degree has declined or the quality of the people getting college degrees has declined on average.

Tyler Cowen thinks the Republican drive to prevent tax increases has become an obstacle to making needed cuts in government spending.

IN a debate in August, Republican presidential candidates were asked whether they would support a budget deal that bundled $10 of spending cuts for every $1 of tax increases. All said no. They rejected any deal that involved raising taxes.

...

Furthermore, this refusal to contemplate a tax increase — which I’d characterize as an extreme Republican stance — has brought what seems to be an extreme Democratic response: President Obama’s latest budget plan is moving away from entitlement reform and embracing multiple tax increases on the wealthy. We may be left with no good fiscal options.

If living standards continue to fall then the pressures both for and against tax increases will intensify. On the one hand, government finances will get even worse as tax revenues go down on declining incomes. On the other hand, lower living standards will make people even more opposed to paying more in taxes. People won't want to give up more of a shrinking pie.

Reihan Salam reacts to Tyler saying but don't forget the potential to make government more efficient. I agree with Reihan. We need to push for higher productivity and also lower staffing governments. Do more with less. That's the only way to raise living standards (or at least slow the descent).

I see the "Occupy Wall Street" movement as a populist response to declining living standards. Just as social media helped enable Arab Spring and Arab Spring was a response to declining living standards so again social media is helping the "Occupy Wall Street" protestors to organize and express frustration that comes as a result of declining living standards. Will a further decline in US living standards lead to a much more aggressive and demanding protest movement? Is serious political instability possible in the United States?

By Randall Parker 2011 October 05 10:04 PM  Economics Living Standards
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2011 October 02 Sunday
Romney And Perry Compared

Mitt and Rick are unalike in important ways.

One was born into a privileged family in a tony Michigan suburb; the other, onto a flat expanse of West Texas dirt with no indoor plumbing. One spent his youth tooling around his father’s car factory; the other, selling Bibles door to door so he could afford to buy a car. One excelled at Harvard University, simultaneously earning law and business degrees and swiftly climbing the corporate ladder; the other, his hope of becoming a veterinarian dashed when he flunked organic chemistry at Texas A&M University, joined the Air Force.

Organic chemistry is not hard. It is a lot of memorization. But it does not require complex feats of logic. Someone who can't pass organic chemistry probably should not become President of the United States. Someone who can simultaneously earn law and business degrees has a lot more intellectual octane and is more up to mastering everything a US President had better understand.

Perry and Romney both have experience as governors. That executive branch experience is essential, as Obama's lack of such experience has showed. You've got to be good at managing people and sizing up the people offering you advice. The fact that the Republican front-runners are both governors is a good thing.

Unfortunately, Romney's background as a northerner works against him in the current Republican Party. Ditto his Mormonism. But we really would benefit from having a very smart former governor and accomplished businessman as President. America's problems are large and growing. Things are going to get worse regardless of who gets elected. But the rate of decline could be less under better management.

By Randall Parker 2011 October 02 09:20 PM  Politics American Presidency
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2011 October 01 Saturday
Chinese Kids Feel More Obliged Toward Parents?

Do American kids start losing the feeling of obligation toward their parents in 7th grade?

CHAMPAIGN, Ill. — According to a new study, American, but not Chinese, children's sense of responsibility to their parents tends to decline in the seventh and eighth grades, a trend that coincides with declines in their academic performance.

The study, in the journal Child Development, found no difference between American and Chinese students' feelings of responsibility to their parents at the beginning of the seventh grade. The American children's sense of obligation to their parents and desire to please them by doing well in school declined over the next two years, however, while the Chinese students generally maintained their feelings of obligation and increased their motivation to please their parents with their academic achievements.

It would be interesting to compare children in Mennonite, Amish, and other more socially or physically isolated communities in America and other Western countries. Does isolation from some elements of American culture prevent this change attitudes?

Would isolation from American culture enable kids to do better in school? Is American culture poisonous to young minds?

"These different trends are notable because when children were able to maintain a sense of responsibility to their parents, they were not only more motivated and engaged in school, but also earned better grades over time," said University of Illinois psychology professor Eva Pomerantz, who led the study. "Chinese children's maintenance of a sense of responsibility to their parents may protect them against the decline so common among American middle schoolers in their engagement and achievement in school."

A comparison with successive generations of Chinese immigrant kids would be useful as well.

By Randall Parker 2011 October 01 04:29 PM  Culture Compared
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