A conservative approach to poverty and homelessness

From a commenter.

Homelessness is easy to solve.

A) Universal basic dorms for the poor but otherwise normal adults of sound mind.

B) Mandatory institutionalization for adults with severe mental health issues who are found living on the street.

Crime is easy to reduce.

A) Mandatory long sentences for serious crimes, particularly violent crime.

B) Penalties and prosecution for even small offenses, like shoplifting and graffiti, though not incarceration. Fines, public shaming, long periods of community service, etc.

C) Readjust the welfare system to favor nuclear families with fathers.

D) Decriminalize most drugs, with penalties for public use while driving while using, rather than manufacture & distribution. In essence, you can buy heroin at your local pharmacy, but if you shoot it up in the park, you get a citation and a $500 fine.

Inequality isn’t a huge issue and it’s really not solvable. If you raise the minimum wage to $20/hr and eliminate 99% of Mark Zuckerberg’s wealth, there’s still a crazy amount of inequality between him and the minimum wage worker.

Rather than focus on inequality, focus on three issues:

1) Ensure that there’s a decent minimum beneath which you cannot easily fall (universal basic dorms, employer of last resort jobs).

2) Ensure that men in particular can get a decent living so as to be attractive to women, allowing them to get married and have families. This is a hard one, outside of direct subsidies to men, the only thing I can think of is state owned enterprises that employ men specifically at good salaries.

3) Reduce the power of the oligarchs to set and guide policy. A lot can be done here, though it’s hard to say what would be best.

Unrealistic, of course. But it would be nice if somehow the Overton Window would move in this general direction, instead of the other way.

I would note that the fact that inequality is not solvable makes it the ultimate backstop for the left. If everything else is going well with capitalism, you can always complain about inequality and insist that it’s a crisis for government to solve.

1960 vs. 2020: entrepreneurship and inequality

Paul Graham writes,

You could get rich from starting your own company in 1890 and in 2020, but in 1960 it was not really a viable option. You couldn’t break through the oligopolies to get at the markets. So the prestigious route in 1960 was not to start your own company, but to work your way up the corporate ladder at an existing one.

He concludes,

It’s easier now to start and grow a company than it has ever been. That means more people start them, that those who do get better terms from investors, and that the resulting companies become more valuable. Once you understand how these mechanisms work, and that startups were suppressed for most of the 20th century, you don’t have to resort to some vague right turn the country took under Reagan to explain why America’s Gini coefficient is increasing.

Pointer from Tyler Cowen.

Urban income disparities

Joel Kotkin writes,

Gotham’s one percent earns a third of the entire city’s personal income. That’s almost twice the proportion for the rest of the country. But such class disparity is becoming the norm; in the tech haven of San Francisco, which has the worst levels of inequality in California, the top 5% of households earn an average of $808,105 annually, compared with $16,184 for the lowest 20%.

Where will immigrants settle? The stereotypical pattern was that hard-working immigrants would come to the major metro areas, live in tenements, and then climb the economic ladder. It seems as though that might be more difficult today.

The U.S. already is Denmark

Phil Gramm and John Early write,

if you count all government transfers (minus administrative costs) as income to the recipient household, reduce household income by taxes paid, and correct for two major discontinuities in the time-series data on income inequality that were caused solely by changes in Census Bureau data-collection methods, the claim that income inequality is growing on a secular basis collapses. Not only is income inequality in America not growing, it is lower today than it was 50 years ago.

On a pre-tax basis, income inequality has increased. But if their claim is correct, then the U.S. addresses income inequality the same way that Denmark does–with taxes and transfers.

Social class and prep school

Caitlin Flanagan writes,

The result of Yeung’s research is a website called PolarisList. Looking over the data for Princeton’s classes of 2015 through 2018 is bracing. The list of sending schools is dominated by highly selective magnet schools, public schools in wealthy areas, and famous prep schools: the Lawrenceville School, Exeter, Delbarton, Andover, Deerfield Academy. Among the top 25 feeders to Princeton, only three are public schools where 15 percent or more of the students qualify for free or reduced-price lunch.

Read the whole article.

Long ago, when I proposed a voucher system, I wanted a graduated system that gave more money to parents of limited means and/or children with special needs. In addition, I proposed a “luxury tax” on parents sending students to very-high-tuition K-12 schools.

Longer ago, when I arrived as a freshman a Swarthmore College, I came from a wealthy public school, but I felt out of place among the prep school graduates, including my roommate. They pronounced it “Swathmore,” which I never did. Once classes started, I realized that they were not ahead of me in terms of intellectual background. They were ahead of me socially, and in hindsight my friends, even though I had different groups each year, were pretty much all from something other than the elite prep schools.

Null hypothesis watch

James J. Heckman and Rasmus Landerso write,

family influence on many child outcomes in Denmark is comparable to that in the U.S. Common forces are at work in both countries that are not easily mitigated by welfare state policies. Denmark achieves lower income inequality and greater intergenerational income mobility primarily through its tax and transfer programs and not by building the skills of children across generations and promoting their human potential more effectively.

Marriage and inequality

Gregory Clark writes,

a recent study from the UK Biobank, which has a collection of genotypes of individuals together with measures of their social characteristics, supports the idea that there is strong genetic assortment in mating. Robinson et al. (2017) look at the phenotype and genotype correlations for a variety of traits – height, BMI, blood pressure, years of education – using data from the biobank. For most traits they find as expected that the genotype correlation between the parties is less than the phenotype correlation. But there is one notable exception. For years of education, the phenotype correlation across spouses is 0.41 (0.011 SE). However, the correlation across the same couples for the genetic predictor of educational attainment is significantly higher at 0.654 (0.014 SE) (Robinson et al., 2017, 4). Thus couples in marriage in recent years in England were sorting on the genotype as opposed to the phenotype when it comes to educational status.

The paper is entitled “For Whom the Bell Curve Tolls.” Pointer from Tyler Cowen. The conclusion points to a very strong Null Hypothesis view of all forms of social intervention.

n aspirations that by appropriate social design, rates of social mobility can be substantially increased will prove futile. We have to be resigned to living in a world where social outcomes are substantially determined at birth.

Clark has been finding evidence for heritability and for the broader Null Hypothesis for some time. See my essay on The Son Also Rises.

He is one of the few people doing this sort of research. Here is why. Pointer from Tyler Cowen.

The Model T economy and the wealth-work economy

At Yuval Levin’s suggestion, I read Boomers, by Helen Andrews. One of the accusations she makes is that Boomers are responsible for an economy based on servitude. She writes,

The fastest-growing jobs in America are in “wealth work,” that is, the servant class for the metropolitan elite. The only thing worse than spending your adult life as a yoga instructor or dog groomer is living in a city with no one to be yoga instructors and dog groomers for.

She refers to a piece by Marc Muro and Jacob Whitin in July of 2019.

many American cities are brimming with an explosion of low-end employment that has brought some three million workers into mostly low-paid, often-precarious service arrangements helping the well-off walk the dog, clean the house, cook dinner, manage money, and stay fit.

They have the statistics to back up these claims. They credit the term “wealth work” to economics journalist Cristopher Rugaber and MIT economist David Autor. Note that in 2020 the virus undermined the viability of many personal services (although not all–consider home delivery).

In 2011, I wrote,

In an economy where some folks are very rich and many folks are unemployed, why are there not more personal servants? Why don’t Sergey Brin and Bill Gates have hundreds of people on personal retainer?

It turns out that I was on the right track. When the economy finally returned to full employment, it was with a large number of personal service workers.

The workers who produced the Model T could afford to buy what they produced. In a wealth-work economy, the people who can afford the personal services and the people who provide them belong to different classes.

One of my intellectual influences was The Diamond Age, by Neal Stephenson. He depicts a future world in which there are “Vickies,” who work hard (at white-collar jobs) and consume custom products, and “Thetes,” who rarely work and consume cheap, generic goods and services. I have interpreted recent economic evolution through that lens. I could have titled this post “What I believe now: Vickies and Thetes.”

But wealth-work is an emergent phenomenon. The Boomers did not design our current economy. I will have more to say about the Andrews book in a subsequent post.

Extreme Wealth

Timothy Taylor writes,

the big story with US wealth is the growth in wealth/GDP ratio and the growing share of that wealth held by the top 1%. The share of wealth going to the top 1% shows occasional setbacks, like when the stock market fell in 2001 or in the aftermath of the Great Recession, but overall, the share of wealth going to this group has risen from about 24% of the total back in 1990 to above 30% of the total more recently.

Read the whole post.

Note that the ratio of wealth to GDP can be decomposed as the ratio of earnings of assets to GDP times the price/earnings ratio for assets. My impression, and I could check this, is that earnings of real estate have gone up a lot as a share of GDP, but corporate profits as a share of GDP have not gone up as fast. Instead, what has powered the stock market has been an increase in the price/earnings ratio, and/or the ratio of profits of firms on the stock exchange to profits of small businesses has gone up considerably.

As to “shares” of wealth, I bet that if you look at the actual households that were in the top 1 percent in 1990, their share of wealth did not go up over the past 30 years. What went up was an arithmetic measure of the share of the wealth in 2020 held by the top 1 percent of households as of 2020 relative to the share of the wealth in 1990 held by the top 1 percent of households as of 1990.

My guess is that the amount of churn at the top of the wealth distribution is higher than it was thirty years ago, although that is something that one could check. You could compare the turnover in a magazine’s list of the richest people from say, 1985-1990 to the turnover from 2015-2020.