228 thoughts on “Anti-americanism redux”

1. We would all prefer to see people employed in high skilled high wage jobs rather than low skilled low wage jobs. I find it unlikely that people could become addicted to low wages. The existance of low wage jobs does not preclude the creation of high wage jobs.

   It makes more sence to lower the minimum wage and create low wage jobs as well as pursue intiatives to create high wage jobs. The best minimum wage is not a legislated one but a practical one resulting from a vibrant labour market.

   It seems foolish to me to maintain a pool of unemployed people because you have good intentions about creating high wage jobs down the track. Having people unemployed does not assist the high wage vision.

2. gordon, although I doubt it would take much to make you angry, I have little interest in your emotional state. References from foreign websites that have nothing to do with the subject under discussion are ignored. That’s why posting a link to a site with a report on the UK was ignored. I wasn’t talking about the UK.

3. Terje, I agree with you, there’s no point in having only a choice between high paying jobs and no jobs. Most people don’t enter the labor market in high paying jobs, nor should they really. You work your way into a high paying job.

4. Ernestine, your objections have been noted.

5. The federal minimum wage in the USA has been $5.15 per hour but can be as low as $2.13 per hour for tipped employees. Some states have set their own minimum wage and this varies from state to state.

6. Ernestine, you’re welcome to the reference. Like the Corak paper I quoted earlier, it compares intergenerational mobility across countries including the US and several in Europe. Unfortunately neither paper covers Australia. Maybe you or other commenters know of comparable work done here?

   Defence of comparatively high and/or increasing social inequality is often based on mobility, the argument going: “inequality doesn’t matter because social mobility allows talented people to rise”. The discovery that unequal societies don’t have the social mobility which would “compensate” for inequality should be fatal to this defence, but unfortunately it is not always accepted. Personally, I would be suspicious of this defence even if increasing inequality and increasing mobility were found together, as in fact (so far as I can gather) they are not. It implies a sort of unidimensional social Darwinism tolerant of very low living standards for those deemed “losers”. It also runs the risk of total circularity – if you are at the bottom of the heap you have no talent because if you had talent you wouldn’t be at the bottom. There is no need for an independent assessment of “talent” in such a circle.

7. gordon,

   I’ve read the article by Blanden, Gregg and Machin, albeit only once. Thank you very much. It is the case that the study uses European data and US data. IMHO, the methods used are solid, hence the findings are worth taking note of.

   I think the points you make are important and should be discussed. Without wishing to precommit, what you say makes sense to me from the perspective of theoretical models of general equilibrium theory concerned with non-dictatorial resource allocation (those which make precise words such as ‘free markets’, ‘personal liberties’, and ‘freemdom of choice’ ) Unfortnately, it takes a little time to present the arguments concicely and I haven’t got the time to do it at present to boil it down to a few crucial sentences. If its enough, I can say that a monumental departure from the philosophical and theoretical framework of ‘market economies’ has taken place in the last 20 years. By making the central unit of analysis ‘an enterprise’ rather than people, the foundations for corporatism have been laid. Totally unnecessary second round confusions (?) are about to be made, namely to distingish employment laws by the number of employees rather than the legal form of enterprise (sole proprietor, partnership, corporation, multinational corporations or other forms of complex corporate structures). By demolising an independent institution, such as a central wage fixing authority (please substitute the exact name for Australia), rather than reforming it to make it work better, and replacing it with what I call ‘kinglets’, the conditions for the circularity you mention have been provided. I am afraid, given the time and space available, this is rather unsatisfactory because I am essentially asking you to believe me. This is not the intension. I am prepared to argue my point but I would need time and space.

8. Gordan,

   A supplementary message. It seems after all these posts, the topic of this particular thread has been forgotten.

9. I owe an apology to Avaroo and others; the link to Blanden, Gregg and Machin (2005) should have been:

   Click to access IntergenerationalMobility.pdf

   There is also a book which sounds interesting: Corak, M. (ed.) Generational Income Mobility in North America and Europe (CUP, 2004)

10. Ernestine, I think it’s about cultural cringe to a large extent. The cringe factor faciltates the importation of foreign practices which are familiar to foreign investors. This makes them comfortable. It is a great pity that cringe seems to prevent Australians from being critical of foreign ideas, and I think this is particularly true of American ideas. Sadly, academics are no less subject to cringe than others. Peter Brain (National Institute of Economic and Industry Research, Melb.) said in his 1999 book “Beyond Meltdown”: “It was fateful for Australia that neo-liberalism arrived in its academic form. It was the neo-liberalism that the Americans preached, and not the one they practiced. …the policy elite had converted to the American export version of neo-liberalism by the early 1980s. It was a remarkable turnaround”.

    I apologise again for taking 3 tries to get that internet reference right. I’m not usually that bad!

11. Gordon,

    I am afraid, notions of ‘cultural cringe’ are outside my area of expertise as are notions of ‘social Darwinism’. However, as I mentioned in brackets on one post (can’t remember the topic), I am aware of the separation of the ‘material welfare’ (as in physical and biological) from ‘spiritual welfare’ in theoretical models in economics and it is conceivable that this separation may not be acceptable to all people, either within a ‘cultural group’ or across cultural groups. Perhaps I should add here that I am using the term ‘culture’ in a commonsensical manner.

    Incidentally, the link you had posted related to a 2002 paper by Jo Blanden et al. . Having the name ‘Jo Blanden’ was sufficient to find the 2005 paper by Blanden, Gregg and Machin and many more. No need to apologise.

12. This pretty well debunks Gordon’s link.
    It’s by Donald Luskin and addresises the Panel Study on Income cited in Gordon’s link.

    http://www.poorandstupid.com/2005_06_19_chronArchive.asp#111936529591024018

    “Starting on May 13, the Wall Street Journal ran a series of four front-page stories—totaling almost 10,000 words—about what it manifestly considered a major threat to the Republic. Two days later, the New York Times launched a series of a dozen stories about the same threat, most of the articles splashed on page one, above the fold: a total of nearly 50,000 words. BusinessWeek, the Christian Science Monitor, and the Los Angeles Times have taken up the story, too; Michael Kinsley, writing in the L.A. Times, even suggested that the Washington Post get into the act.

    Was the furor about al-Qaeda? Iran? North Korean nukes? Nope. The sword of Damocles hanging over our national future—and discovered, coincidentally, by all of these mainstream liberal media outlets at once—is . . . income inequality. But a concerned citizen who wades through these tens of thousands of words, and pores over the studies they solemnly cite as authoritative, will find a simple, but highly reassuring, truth: There’s no story here.

    The Journal and the Times are exercised by reports that, over the last three decades, a new class of what the Times calls the “hyper-rich� has arisen in the United States, resulting in a disparity in incomes between rich and poor not seen since the 1920s: the most severe income inequality in the developed world today. How did this happen? As the Times explains it, “The hyper-rich have emerged . . . as the biggest winners in a remarkable transformation of the American economy characterized by, among other things, the creation of a more global marketplace, new technology and investment spurred partly by tax cuts.�

    Fair enough. We have indeed seen a transformative era of economic growth. That era has indeed produced a whole new class of extremely wealthy individuals—or, more accurately, a whole new class of individuals became extremely wealthy as their reward for taking the risks that made that growth happen. And indeed tax cuts were at the root of it—supply-side tax cuts that increased the incentives for risk-taking in the first place.

    But none of this is exactly man-bites-dog material. What the Times reports as news is a pattern that should be familiar to economic historians: Times of great prosperity have been associated with greater income inequality (for example, the 1920s), and conversely times of economic decline have been associated with greater equality (the 1930s). The lines of causality here are complex, and no doubt run in both directions: Prosperity is both the cause and the effect of inequality, and decline is both the cause and the effect of equality. So ideological advocates of income equality for its own sake ought to be careful what they wish for.

    The great prosperity of the last three decades has been dominated by American technological and commercial prowess. So no one should be surprised that the emergence of the new hyper-rich has been preeminently an American phenomenon. Today 341 of the world’s 691 billionaires—including five of the top ten—are Americans. These aren’t old-money names, either. You have to get all the way down to number 86 before you find a Rockefeller. At the top of the chart are Gates, Buffett, Ellison, Allen, Walton—precisely the people whose innovations and risk-taking made our current prosperity possible. Much of the rise in American income inequality could probably be erased in one fell swoop just by getting these 341 people to move to another country.

    We need to focus, then, on the question: What harm has it done to have this new class of the hyper-rich on the American scene? The Times and the Journal both go on at length about how Americans who used to consider themselves very rich—one thinks inevitably of the Sulzbergers of the Times, and the Bancrofts of Dow Jones—are rather annoyed to have to compete socially with the new hyper-rich; old money has never liked new money. But in truth, the incomes of the hyper-rich have not come at the expense of anyone else. The poverty rate, for example, hasn’t risen over the last 30 years; it has actually fallen slightly. Average after-tax, inflation-adjusted income has risen for every income quintile in the population. Yes, it has risen the most for the highest quintile, and risen the least for the lowest—but this can be explained to some extent by the great wave of immigration over the same period. The fact remains that income has risen for all: The rising tide has lifted all boats.

    THREE CHEERS FOR DIVERSITY

    Before the present era of transformative growth and its concomitant income inequality, many economists had expected the mid-20th-century trend toward greater equality to persist forever. According to the influential hypothesis of Simon Kuznets, nearly a half-century of steadily rising equality of income following the technology revolution that peaked in the 1920s was explained by the fact that more and more workers were joining the high-productivity sectors of the economy. Now it appears that what Kuznets described may be, in fact, a cyclical phenomenon that restarted at some point about 25 years ago. Income-inequality guru Emanuel Saez, an economist at the University of California at Berkeley, has written that “a new industrial revolution has taken place, thereby leading to increasing inequality, and inequality will decline again at some point, as more and more workers benefit from the innovations.�

    In other words, at the beginning of each cycle a small band of risk-takers get extremely wealthy in the vanguard of economic transformation, but that’s only a one-time effect. For years afterward, everyone else in the economy adapts to the new, higher productivity potential that the new rich have made possible, and incomes gradually gravitate toward greater equality. Happily, then, those who hope for greater income equality need not wish for slower growth, or for the mass deportation of our billionaires. All that is required is patience—and hard work.

    But income inequality will never go away entirely—and it’s not at all clear that we should want it to. Even if a socialist-minded fairy godmother were to wave her magic wand and set all incomes to perfect equality, in a free economy they would immediately drift toward inequality owing entirely to voluntary choices made by each individual. Each of us would choose freely whether to work hard or take it easy; to marry a working spouse or a stay-at-home; to educate ourselves for a better job, or settle for less; to invest in income-producing securities, or just spend our money. All these things would determine our unequal incomes, just as they do today. To be sure, in the real world we don’t make those choices from an initial position of equality. Some of us are born rich, others poor, most in between. Nevertheless it’s choices like these that determine whether we will rise or fall within the class in which we are born, or move upward or downward to another class. So we shouldn’t fear income inequality: We should celebrate it as “income diversity.�

    Changing our incomes by making choices different from those of our parents is called “income mobility.� Both the Wall Street Journal and the New York Times correctly acknowledge this practice as fundamental to American life (and both happen to discuss Benjamin Franklin as its exemplar). Yet the papers argue that income mobility is on the decline just as income inequality is on the rise. You’d think that the emergence of a whole new class of the hyper-rich would prove that income mobility is alive and well (they had to come from somewhere, after all). But no.

    The Times and the Journal cite many authoritative-sounding studies on declining income mobility. But to get an accurate picture of income mobility, you’d have to track hundreds of millions of individuals through time, monitoring changes across generations in such factors as their income, tax rates, wealth, lifestyle, and education. Looking back further than a couple of decades, robust statistics are hard to find in standard databases; you can’t ask all the individuals concerned, because many of them are deceased. So researchers end up relying on surveys of small samples of people, containing what they can recollect about their parents’ and grandparents’ economic circumstances. As a result, hard facts about economic mobility are elusive, and studies about it are approximate and subjective at best.

    Yet for all that, the Times and Journal stories are peppered with definitive-sounding statements, like this one from the Times: “One study, by the Federal Reserve Bank of Boston, found that fewer families moved from one quintile, or fifth, of the income ladder to another during the 1980s than during the 1970s and that still fewer moved in the 90s than in the 80s.� If you follow the Times’s link to this study, it turns out actually to be about women in the workforce and what happens to families when a spouse dies; the more general findings cited by the Times are buried in an appendix. Yes, that appendix shows that about 4 percent more households stayed in their income quintile during the 1990s than in the 1970s. But it also shows—though the Times doesn’t mention this—that in the 1990s more households than ever jumped from the poorest quintile to the richest. But none of this is reliable anyway: A footnote reveals that the statistics are derived from the Panel Study of Income Dynamics database, an ongoing survey that tracks only 8,000 families out of a U.S. population of 295 million individuals.

    The other studies cited are based on evidence equally unreliable, and come to conclusions even less interesting. At most, these surveys suggest that—maybe—income mobility has stopped improving over the last 30 years.

    Perhaps the best research method for getting our arms around the slippery topic of income mobility is simply to take a poll, and ask people how they feel about it. The New York Times itself took such a poll, and its optimistic results are strikingly at odds with the paper’s gloomy conclusions. Eighty percent of respondents said “it’s still possible to start out poor in this country, work hard, and become rich�—up from 57 percent in 1983. Twenty-five percent said they believed their children’s standard of living would be “much better� than their own—up from 18 percent in 1994. Forty-six percent said hard work is “essential� for getting ahead in life—up from 36 percent in 1987.

    RESENTING PROSPERITY

    So where’s the beef? Everyone’s gotten richer—and a few have gotten hyper-rich. And there’s no real reason to think that income mobility isn’t alive and well. So why this full-court press by the liberal mainstream media to create the impression that America is becoming a feudal society? Maybe it’s a media thing; there’s no other industry more obsessed with pigeonholing people by class. Here, for example, is how the New York Times sees its readers: They’re “nearly three times as likely as the average U.S. adult to have a college or post-graduate degree, more than twice as likely to be a professional/managerial and more than twice as likely to have a household income exceeding $100,000.�

    Or maybe it’s a liberal thing. You’re more likely to vote Democratic if you’re convinced that “the rich� are keeping you from getting your fair share—you know, “Two Americas� and all that. And you’re more likely to support liberal initiatives like affirmative action if you think that the American dream based on income mobility is falling apart. So liberal media outlets like the Times go through periodic frenzies about income inequality, regardless of who’s in the White House. (Two typical Times headlines, from 1998: “In Booming Economy, Poor Still Struggle to Pay the Rent� and “Benefits Dwindle for the Unskilled Along with Wages.�)

    And, of course, the putative problem of income inequality is yet another opportunity for the liberal media to excoriate the Bush tax cuts. Whatever the problem—Social Security solvency, economic growth, outsourcing to China, budget deficits—repealing those tax cuts is always the liberal answer. In this case, the Times claims they “stand to widen the gap between the hyper-rich and the rest of America.â€? This year Congress will vote on the extension of President Bush’s tax cuts on income from dividends and capital gains, and on making permanent the repeal of the estate tax. For the liberal media, demonizing the rich is a powerful way to fight against those conservative initiatives. There’s good reason, though, to think it won’t work. That Times poll that showed how much faith Americans have in their income mobility also produced a striking result about taxes on “the richâ€?: Seventy-six percent of respondents said they opposed the estate tax.”

13. What fun.

    I particularly like the way avaroo insists on backup docs and references etc and when presented with them by gordon and Paul, shoos them away because they’re not written by Americans or at least Europeans sensible enough to agree with him. Quite a sidestep.

    All that archness must be causing pain in some muscle or other avaroo.

    And re your befuddlement as to our bothering to compare and contrast your country and ours, you might have noticed our current government is buried somewhere in your national colon and our societal institutions and arrangements, always creeping your way, have in recent years begun galloping across the Pacific. Our deputy PM is a nuance free pro-American and should he ever ascend, some of us worry we’ll become a defacto 51st state but without the benefit of a vote (or even the illusion of a vote like the poor folks in Ohio). Many of us feel we have gone too far down that road already.

    Call us old fashioned.

14. This pretty well debunks avaroos’s link.
    It’s by Brad Delong and addresses Donald Luskin’s nonsense:

    http://delong.typepad.com/sdj/2005/06/intellectual_ga.html

    Intellectual Garbage Pickup

    Yes, it’s time for our once-every-three months websurf over to Donald Luskin. Why? As a public service: somebody needs to lay down a marker that he simply does not know what he is talking about, and that anyone who believes anything he writes without very careful verification is asking for big trouble.

    And it is unbelievable. You don’t have to read a dozen paragraphs before you run across something so bats— ignorant that it should cause every National Review editor and writer to resign in shame, move to Rwanda, and take up a life of anonymous service to others.

    This time Luskin denies the existence of the entire discipline of statistics–the idea that a properly designed random sample can tell you important things about a much, much larger population:

    The Conspiracy to Keep You Poor and Stupid: The Times and the Journal cite many authoritative-sounding studies…. But to get an accurate picture… you’d have to track hundreds of millions of individuals…. [N]one of this is reliable… the Panel Study of Income Dynamics… tracks only 8,000 families out of a U.S. population of 295 million individuals.

    And then goes on to reveal that he has never eyeballed the time series on growth and inequality:

    Times of great prosperity have been associated with greater income inequality (for example, the 1920s), and conversely times of economic decline have been associated with greater equality (the 1930s). The lines of causality here are complex, and no doubt run in both directions: Prosperity is both the cause and the effect of inequality, and decline is both the cause and the effect of equality. So ideological advocates of income equality for its own sake ought to be careful what they wish for…

    The relationship between growth and inequality in the U.S. in the twentieth century? None–neither positive nor negative: inequality is high in the fast-growing 1920s and low in the faster-growing late 1950s and 1960s; inequality is not low but high in the depressed 1930s.

    Stupidest man alive.

15. Glenn, had you read my link, you would know that the issues I raised are:

    1) the Panel Study of Income Dynamics database, an ongoing survey that tracks only 8,000 families out of a U.S. population of 295 million individuals.

    and

    2) to get an accurate picture of income mobility, you’d have to track hundreds of millions of individuals through time, monitoring changes across generations in such factors as their income, tax rates, wealth, lifestyle, and education. Looking back further than a couple of decades, robust statistics are hard to find in standard databases; you can’t ask all the individuals concerned, because many of them are deceased.

    If you are using statistics for the US that do not measure either in terms of time or numbers of people so that you can get a clear picture, then your reporting isn’t going to be very accurate.

    Comparing the US to other countries won’t work simply because a currect government of another country is politically aligned with the current US administration. It’s kind of a silly argument to even try to make.

16. Glenn, as my link pointed out, there are basically 2 main problems with the link you referenced.

    1) the Panel Study of Income Dynamics database, an ongoing survey that tracks only 8,000 families out of a U.S. population of 295 million individuals. and

    2) to get an accurate picture of income mobility, you’d have to track hundreds of millions of individuals through time, monitoring changes across generations in such factors as their income, tax rates, wealth, lifestyle, and education. Looking back further than a couple of decades, robust statistics are hard to find in standard databases; you can’t ask all the individuals concerned, because many of them are deceased. So researchers end up relying on surveys of small samples of people, containing what they can recollect about their parents’ and grandparents’ economic circumstances. As a result, hard facts about economic mobility are elusive, and studies about it are approximate and subjective at best.

    If you have some reason that tracking 8,000 families out of a population of 295 million for basically only a 20 year period is sufficient to measure income mobility, then I would like to hear it.

    The fact that any government is politically aligned with any current US administration doesn’t mean that a comparison of vastly different populations makes sense. That’s kind of a silly argument to even attempt to make.

17. My apologies for the duplicate post

18. “If you have some reason that tracking 8,000 families out of a population of 295 million for basically only a 20 year period is sufficient to measure income mobility, then I would like to hear it.”

    Fortunately, Brad DeLong has already done this

    http://delong.typepad.com/sdj/2005/12/donald_luskin_s.html

    Your point (taken from Luskin) really is a Stats 101 error. Basic sampling theory says a well-designed sample of 8000 is more than enough for reliable estimates. How do you think opinion polls work?

    There are more sophisticated arguments to be had, but anyone who makes an elementary error like this (and for Luskin, this is par for the course) can’t be regarded as a serious participant in the debate.

19. Avaroo

    1 It was SJ, not me that provided the link.

    2 This thread appears to have narrowed focus to ‘income mobility’ when it began with a much broader concern about labour market conditions here changing to become more American in terms of the balance of power between employers and -ees. Many of us are worried about that and we are not suffering from mass dementia. Many of us also see it as only one component in a policy drift to US models, most of which are also of major concern (elective war for gain, antidemocratic terror laws, corporatisation and politicisation of media – including payola at home and abroad, loss of independence of bureaucracy, creation of expensive and unaccountable intel/security apparatus, decay of ethical behaviour in business, creeping influence of religion in public institutions, whitewashed national historical narratives, suppression of legitimate dissent, privatisation of public resources, greater implicit racism permitted in discourse, de-emphasis on provision of health and education to the needy, relentless use of ‘noble lies’ to sell policy or to evade the law… to name just a few)

    There are lots of things to admire about America, but we seem to be cherry picking the stuff that’s going to make life worse for most of us and better for just a few. You might see your country as something the rest of us should aspire to. As little as 6 years ago much of the world would have agreed with you. The sea change is due almost as much to Katrina as to Iraq. How are all those displaced people going by the way? Finding out is as hard as getting an accurate Iraqi body count.

    3 It’s a depressingly familiar tactic; when faced with a general argument which is hard to refute, demand minutiae and when it appears, zoom back to the general, claiming apples and oranges can’t be compared. They are both fruits, and the alternative is what… forget about it altogether?

    ‘doesn’t mean that a comparison of vastly different populations makes sense’

    So why demand the data, if it’s so useless?

    4 The march of our institutions and policy outcomes (and therefore the whole tenor of relations between Australians) toward US exemplars is the great unspoken issue of Australian political life right now; all the others tend to fall under it’s rubric. The deputy PM made an ‘all the way with the USA’ comment earlier this year. When Katrina struck about a week later he looked like a goose, but did our fearless media pursue the implications of his position? No they did not, which helped solidify my convictions about where our gatekeeper media is headed.

    5 Have a merry Xmas and a happy New Year!

20. I don’t know where those black lines came from.

21. Glenn Condell Says: It was SJ, not me that provided the link.

    No, avaroo’s not making that mistake, he’s still referring back to gordon’s link.

    Apparently there aren’t any Republican Talking Points that can refute DeLong, so avaroo is forced to pretend my post isn’t there.

    The “ostrich” defence works sometimes, but it doesn’t work so well here.

22. “Basic sampling theory says a well-designed sample of 8000 is more than enough for reliable estimates. How do you think opinion polls work?”

    Sorry but this isn’t a well-designed sample. That was my point.

23. “This thread appears to have narrowed focus to ‘income mobility’ ”

    the current discussion is about income mobility.

    “Many of us are worried about that and we are not suffering from mass dementia.”

    Actually, I’d saying that worrying about the US when you’re considering your own situation does show a bit of dysfunctionality.

    “Many of us also see it as only one component in a policy drift to US models, most of which are also of major concern (elective war for gain, antidemocratic terror laws, corporatisation and politicisation of media including payola at home and abroad, loss of independence of bureaucracy, creation of expensive and unaccountable intel/security apparatus, decay of ethical behaviour in business, creeping influence of religion in public institutions, whitewashed national historical narratives, suppression of legitimate dissent, privatisation of public resources, greater implicit racism permitted in discourse, de-emphasis on provision of health and education to the needy, relentless use of ‘noble lies’ to sell policy or to evade the law… to name just a few)”

    Since you show so little understanding or even familiarity with the US, it’s doubly important that you just worry about your own situation. Fantasies about the US won’t help you.

    “You might see your country as something the rest of us should aspire to.”

    I don’t see the US in relation to your country in any way. Personally, I’d be horrified if all US pols could do was talk about Australia. Or any other country.

    “The sea change is due almost as much to Katrina as to Iraq. How are all those displaced people going by the way?”

    They’re leaving the country, haven’t you heard?

    “So why demand the data, if it’s so useless?”

    you seem confused again

    “Have a merry Xmas and a happy New Year!”

    you too.

24. “Apparently there aren’t any Republican Talking Points that can refute DeLong, so avaroo is forced to pretend my post isn’t there.”

    democrats don’t generally use republican talking points, but I understand if you cannot refute my argument and just need to say something back

25. “If you have some reason that tracking 8,000 families out of a population of 295 million for basically only a 20 year period is sufficient to measure income mobility, then I would like to hear it”

    this point still needs to be addressed, particularly the short time frame of the Panel study.

26. “Sorry but this isn’t a well-designed sample. That was my point”

    Where did you make this point? And on what basis? Have you submitted your criticisms of the PSID sampling procedure for publication in a peer-reviewed journal? It is, after all, the basis of dozens of journal articles, and your criticisms,if valid, would be very important.

    Or would you prefer to withdraw this claim?

27. Avaroo,

    QUOTE: Terje: Not likely. At least not minimum wage laws in the US. Most minimum wage workers in the US are in service industries, things like cleaning services, retail, things that you cannot export.

    RESPONSE: some of these services might simply not be done if the wage rate was too high. Home cleaning services can be readily insourced (ie done by the home owner) or done less often. So whilst some service jobs do not get exported with an increase in the minmum wage they may still disappear.

    In any case it was Ernestine point not mine. I was just indicating that his was not a revolutionary point.

    Regards,
    Terje.

28. “Where did you make this point? And on what basis?”

    In my original post on the issue. Not only is the sample too small, but the study only looked at a very short time period, 20 years. That simply isn’t adequate.

29. Terje, I think you missed my main point, which was that a huge number of minimum wage jobs are in the service sector and simply aren’t affected by outsourcing, because they cannot be done overseas. Home cleaning cannot be outsourced, it must be done by someone inside the country, it’s the same with retail jobs. Retail jobs won’t disappear, prices will simply go up for employers to cover the increased cost.

30. avaroo, your point (from Luskin) about the sample size reveals Luskin’s complete ignorance of statistics, as has already been pointed out. I assume, therefore you are relying on your own knowledge of the subject.

    Perhaps you would care to calculate the standard error associated with income estimates from a sample of 8000 and explain why you think it is too large for useful analysis. Assume, for argument’s sake, that the population coefficient of variation is 1.5 (or substitute your own value, if you prefer). Or, if you have a different argument, spell it out.

    As regards the time-frame, a couple of responses
    (i) retrospective questions asked of new entrants to the panel extend the time-frame
    (ii) can you nominate an alternative dataset with a longer timeframe, or are you just saying that we can’t know anything for sure.

31. I understand that you don’t agree that 8,000 out of 295 million is simply not adequate. I just disagree. Hopefully you can do that politely.

    “As regards the time-frame, a couple of responses
    (i) retrospective questions asked of new entrants to the panel extend the time-frame”

    I’ll reiterate the point:

    you’d have to track hundreds of millions of individuals through time, monitoring changes across generations in such factors as their income, tax rates, wealth, lifestyle, and education. Tracking through time does not mean a 20 year period with new entrants every year. The Panel Study does not do that.

    “(ii) can you nominate an alternative dataset with a longer timeframe, or are you just saying that we can’t know anything for sure.”

    and again:

    Looking back further than a couple of decades, robust statistics are hard to find in standard databases; you can’t ask all the individuals concerned, because many of them are deceased. So researchers end up relying on surveys of small samples of people, containing what they can recollect about their parents’ and grandparents’ economic circumstances. As a result, hard facts about economic mobility are elusive, and studies about it are approximate and subjective at best.

    As to a better method of determining income mobility:

    “Perhaps the best research method for getting our arms around the slippery topic of income mobility is simply to take a poll, and ask people how they feel about it. The New York Times itself took such a poll, and its optimistic results are strikingly at odds with the paper’s gloomy conclusions. Eighty percent of respondents said “it’s still possible to start out poor in this country, work hard, and become richâ€?—up from 57 percent in 1983. Twenty-five percent said they believed their children’s standard of living would be “much betterâ€? than their own—up from 18 percent in 1994. Forty-six percent said hard work is “essentialâ€? for getting ahead in life—up from 36 percent in 1987.”

32. Avaroo,

    QUOTE: Terje, I think you missed my main point, which was that a huge number of minimum wage jobs are in the service sector and simply aren’t affected by outsourcing, because they cannot be done overseas.

    RESPONSE: Thats funny, I thought I actually acknowledged your point. If it was missed then let me acknowledge now that many jobs (eg retail) can not be done abroad.

    Regards,
    Terje.

33. and won’t disappear

34. Avaroo,

    A higher minimum wage may still make some retail jobs disappear. For instance if the minimum wage is too high many restaurants may swap from table service to counter service.

    Regards,
    Terje.

35. Terje,

    A lower minimum wage (and other wages which we call award wages Down-Under) may make customers disappear. Simple reason: no money to spend.

36. “I understand that you don’t agree that 8,000 out of 295 million is simply not adequate. I just disagree. Hopefully you can do that politely.”

    Avaroo, sampling theory is not a matter of opinion or taste. You can’t “just disagree”. Luskin is wrong and that is all there is to it. If you have not studied statistics enough to understand the issues, you should accept the advice of those who have.

    If you can find a competent statistician who endorses Luskin’s criticims of the PSID, feel free to point this out. Otherwise, I think further discussion is pointless.

37. Terje, most restaurants do not pay minimum wage and are not subject to it. Their employees live off tips.

38. Sorry jquiggen, but I’d put Luskin’s credentials up against those of anyone here.

39. Avaroo and John,

    When I learnt statistics we would do calculations along the following lines.

    Lets say that 80% of the sample of 8000 are more than 4 feet tall and 20% are less than 4 feet tall (or exactly 4 feet tall).

    We might then form a interval Hypothesis that in the real population the number of people taller than 4 foot will be between 79% and 81%.

    If we sampled the full population (say 295 million) then we would get x% of ths population are more than 4 feet tall (ie the real answer).

    We could calculate that our Hypothesis failed (ie x was not in the range 79% to 81%) due to pure statistical chance (ie unlucky sampling).

    When such calculations of Hypothesis error are done it is found (from my recollection) that as the sample size increases the probability of error declines. However it is also found that beyond a sample size of about 1000 the improvement in accuracy (decrease in probability of error) is very small.

    That is to say increasing the sample size will decreases the chance that your Hypothesis is wrong (due to bad luck sampling) but beyond a certain point it will only make a tiny difference.

    One might call this the diminishing returns of sampling size.

    Regards,
    Terje.

40. Lukin attended one year of Yale before he dropped out. What ‘credentials’ (not those that come in cereal packets) are you referring to?

    Holy crap on a stick man! If every econometrician in the world had access to 8,000 observations for a population of 295million, then their prayers would have been answered! Even under the loose assumption of weak dependence, correcting for heteroskedasticity using covariance consistent estimators, this data and conclusions found from it are going to be statistical truth.

    Don’t know what I’m on about? Why don’t you take some time and find out a little about the study of statistics.

41. You can easily look into Luskin’s background and employment record if you are interested, alpaca. I do understand that what some people disagree with Luskin on is his political views.

42. “Sorry jquiggen, but I’d put Luskin’s credentials up against those of anyone here.”

    Presumably you’d also prefer medcial treatment from someone who dropped out after one year of medcial school rather than from a qualified doctor.

43. avaroo says: “Sorry jquiggen, but I’d put Luskin’s credentials up against those of anyone here.”

    Look avaroo, when Brad DeLong (professor of economics at U.C. Berkeley, a research associate of the National Bureau of Economic Research, a former deputy assistant secretary at the U.S. Treasury) labels Luskin as the “stupidest man alive”, and goes on to demonstrate that Luskin is ignorant of high-school concepts such as statistics, and hasn’t even look at the data he’s using to prove a point, that’s a strong hint that there’s a serious problem with your source.

    avaroo says: “You can easily look into Luskin’s background and employment record if you are interested, alpaca.”

    Have you actually done this yourself, avaroo? If I do it the standard way, and google the words “Donald Luskin bio”, the top link is this one:

    http://en.wikipedia.org/wiki/Donald_Luskin

    Donald Luskin is the Chief Investment Officer for Trend Macrolytics LLC, an investment consulting firm.

    Luskin also writes a blog, The Conspiracy to Keep You Poor and Stupid, which is also the title of his forthcoming book. As his blog says, his endeavor is to explain how “Big government, big business, big media and big academia block your road to financial freedom — and tell you it’s for your own good.” He has written two other books, Index Options and Futures: The Complete Guide and Portfolio Insurance: A Guide to Dynamic Hedging. His self-written biography states, “Attended Yale in 1973-1974; dropped out to rejoin the real world as soon as possible.” Luskin also writes a column for National Review Online, discussing financial, economic and political matters.

    Much of the blog is spent detailing and explaining how economic facts, figures, and trends are distorted by politicians, pundits, and the media. He has a particular animosity towards the New York Times, especially columnist Paul Krugman, and former public editor Daniel Okrent. This animosity has been abated recently, after Okrent, in a ‘farewell’ to the New York Times, accused Paul Krugman of “shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.”

    In August, 1999, at the top of the tech bubble, Luskin and David Nadig started the MetaMarkets Open Fund, the first mutual fund, according to media reports in the breathless and hyperbolic style of the times, to publish trades and list its holdings on the web. This “transparency” and “openness,” according to Luskin, was a step forward in the financial world equivalent to the political revolutions and international democratic tranformations of the 90’s, leveling the playing field for the average investor and overthrowing financial elites everywhere.

    In particular, Luskin was dismissive of naysayers who talked of bubbles and P/E ratios, contending the world was entering an unprecedented era of innovation and prosperity, and that the market boom had only begun.

    At its peak, Metamarkets Open Fund received 16 million dollars in investments, and Luskins’ biggest bets included notorious companies like MCI WorldCom and Lucent Technologies. Unfortunately, Open Fund lost more than 75% of its value for Luskins’ level field playing average investors before being liquidated in the summer of 2001, freeing Luskin for full time freelance writing and blogging

    Luskin is the de facto leader of the “Krugman Truth Squad”, a group of National Review Online writers dedicated to detailing and rebutting what they consider the lies and distortions of Krugman. In 2003, Krugman accused Luskin of personally stalking him. Luskin defended himself against the charge here. The issue about whether Krugman had been stalked by Luskin became controversial: The New Yorker published interviews with both men on the issue.

    Critics, especially Berkeley economics professor Brad DeLong, argue that Luskin knows very little about economics and makes frequent errors. Many of Luskin’s supporters counter that academic economists have lost sight of the real world and/or are blinded by punditry. Angry Bear is a blog that is often critical of Luskin (and supply-siders like Larry Kudlow). DeLong publishes an “Intellectual Garbage Pickup” every quarter with errors he finds in Luskin’s work, and recently he has called Luskin “The Stupidest Man Alive.” [1] Some claim that Luskin’s response was to put a quote from DeLong on his blog’s homepage; actually, that quote had been there since January 2004. It comes from an interview with Delong, who named Luskin when asked who is his “worst blogging experience.”[2] Some contend that DeLong’s deep resentment also stems from when Luskin alerted the University of California Regents to many intellectual property violations on DeLong’s website.

44. The wikipedia story can be accurately summarised thusly:

    Donald Luskin writes stuff about economics, but has no qualifications. He runs an investment company that loses money. Luskin is a Republican partisan.

45. Given his hostility to academic economists and his decision to “rejoin the real world as soon as possible” you have to wonder what grades Luskin was getting in Economics.

46. Hey, US conservatism is a religion, not a science. Gotta take it on faith, man, not grades.

    http://www.huffingtonpost.com/rick-perlstein/i-didnt-like-nixon-_b_11735.html

    I get the question all the time from smart liberal friends: what is conservatism, anyway? They’re baffled. “As far as I can tell, anything someone on the right does is, by definition, ethical. It’s not about the act, or even the motivation. It’s about who’s perpetrating it.” It has become the name for a movement that can scream from the rooftops that every Supreme Court nominee should have an expiditious up-or-down vote, then 15 seconds later demand tortuous proceduralism when that nominee is Harriet Miers. Flexibility is the first principle of politics.

    I’m trying to make here an argument not about instances, but about a structure of thought. It is the structure of thought betrayed, I think, by Ahmed Chalabi, explaining his deliberate deception of U.S. intelligence: “We were heroes in error.”

    Is Chalabi, or Jerry Falwell, a “principled conservative” or a “pragmatic conservative.” That’s a question I’d like to pose to you all. My head hurts just thinking about it.

    This part of my talk, I imagine, is long after the point a constitutive operation of conservative intellectual work has clicked on in your minds: the part where you argue that malefactor A or B or C, or transgression X or Y or Z, is not “really” conservative. In conservative intellectual discourse there is no such thing as a bad conservative. Conservatism never fails. It is only failed. One guy will get up, at a conference like this, and say conservatism, in its proper conception, is 33 1/3 percent this, 33 1/3 percent that, 33 1/3 percent the other thing. Another rises to declaim that the proper admixture is 50-25-25.

    It is, among other things, a strategy of psychological innocence. If the first guy turns out to be someone you would not care to be associated with, you have an easy, Platonic, out: with his crazy 33-33-33 formula–well, maybe he’s a Republican. Or a neocon, or a paleo. He’s certainly not a conservative. The structure holds whether it’s William Kristol calling out Pat Buchanan, or Pat Buchanan calling out William Kristol.

    As the Internet’s smartest liberal blogger, Digby, puts it, tongue only partially in cheek: “‘Conservative’ is a magic word that applies to those who are in other conservatives’ good graces. Until they aren’t. At which point they are liberals.”

47. SJ, people who write articles with the phrase “Stupidest Man Alive” aren’t taken very seriously by most people. If you cannot make your case without such vitriol, then people wonder what’s wrong with you. Serious people don’t do that.

    I’ll just point out something in your own wikipedia link (which by the way, wikipedia isn’t really a definitive source for anything, did you catch the latest John Siegenthaler fracas?)

    “Many of Luskin’s supporters counter that academic economists have lost sight of the real world and/or are blinded by punditry.”

    I’d add blinded by political demagoguery as well as punditry. Partisans often twist numbers to mean what they’d like them to mean. Luskin points that out. Partisans don’t like it.

48. “I get the question all the time from smart liberal friends: what is conservatism, anyway?”

    Huffington appears to confuse conservatism with republicanism. In fact, there are conservative democrats and liberal republicans. I find that many people outside the US confuse the two terms, and don’t recognize the enormous numbers of people who vote for both parties, but here we have Huffington doing it inside the US.

    I’ll give you an example: I am pro-choice but anti-Roe vs. Wade. I think the people should decide the abortion matter, not the USSC. I’m against issue specific vetting of USSC nominess of either party. I’m anti-gun and anti-school choice. I believe the founding fathers meant to prevent the federal government from establishing a national religion as you’d find in Great Britain. I do not believe they meant for people not to be able to openly practice their religion, whatever it is.

    I do not believe we should be talking about the Vietnam War. I didn’t care that Clinton didn’t serve and I don’t care that Bush didn’t either.

    But from an economic standpoint, I’m very libertarian, very much a free market supporter, pro-business. I am against social programs that keep people in poverty.

    My voting record is more democratic than republican, Reagan, Bush, Clinton, Clinton, Gore and Kerry.

    It’s not quite as black and white as some people think it is. There are many people with very mixed records, who vote the candidate, not the party.

49. “Some contend that DeLong’s deep resentment also stems from when Luskin alerted the University of California Regents to many intellectual property violations on DeLong’s website.”

    I’d never heard this before but if it’s true then it might explain DeLong’s seemingly personal rather than professional disagreement with Luskin and it might explain DeLong’s inability to even mention Luskin’s name without some pretty heavy emotional baggage.

50. Avaroo, I think it’s highly probable that “some contend”=”Donald Luskin contends”, and that Luskin himself added this sentence to the Wikipedia entry. Or maybe it was the UC Regents :-).

    In any case,
    (i) Luskin’s (self) reported behavior is pretty despicable
    (ii) Obviously the claim makes no sense – Luskin and DeLong must have been in dispute before Luskin made these allegations

    More importantly, the fact that Luskin is totally innumerate is true, whatever DeLong’s motives in pointing it out so regularly. This thread has illustrated it.

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