Do Smart, Hard-Working People Deserve to Make More Money?

Last weekend Yves Smith posted a story of a family that was down on their luck and struggling with high credit card bills, including plenty of fees. Yesterday she posted a follow-up. Apparently the story triggered a wave of vindictive snobbery from commenters. Here’s one example:

“Sounds like someone doesn’t know how to manage their money. I would bet they are making car payments and eat fast food at least 3 times a week. Probably have cable T.V. and deluxe cell phone plans. They probably get a new car like every two years. What happened to her reenlistment bonuses?”

Here is Yves’s response:

“I think quite a few readers owe her an apology. But I am also sure those readers are so locked into their Calvinist mindset that they will find some basis for criticizing this family. Some people seem constitutionally unable to admit that success and prosperity are not the result of hard work alone.”

First, I want to agree completely. There is the obvious fact that a person’s income as an adult is highly correlated with his or her parents’ income. (There was a recent debate about why in the blogosphere, but as far as I know no one contesting that this was the case.) But beyond that, we all owe a tremendous amount of whatever fortune we have to luck, pure and simple. Where would Bill Gates be if IBM hadn’t decided to outsource development of the operating system for the first IBM PC? Rich, no doubt, but $50 billion rich? I have worked hard at enough things, and failed at enough things, and succeeded at few enough things, to know how much luck is involved.

Second, I want to go beyond that to another point that seems obvious to me, but that some will probably find controversial. Even if differences in outcomes were entirely due to differences in abilities and effort (which they’re not) — would that make it OK? I think most people would say that it’s fine for smart people to make more money than other people. But why? Why are smart people any more deserving than anyone else? It’s true that in many jobs being smart can make you more productive and valuable, and as a result for many high-paying jobs being at least somewhat smart is a prerequisite. But the fact that a capitalist economy functions this way doesn’t make it morally right that the “winners of the genetic lottery” (a phrase I picked up from some basketball announcer talking about Tony Parker) have better outcomes than the losers.

Surely at least people who work hard deserve to do well. In the hierarchy of American moral virtues, hard work must be right at the top. But I’m not convinced of that, either. The ability to work hard is something that you either inherit from your parents or that you develop in your early childhood as a function of the environment around you. Either way, whether or not you have it is as much a matter of luck as is your IQ. Again, it’s obvious that working hard increases your productivity and therefore the wages you will be paid, all other things being equal. A small part of that differential seems “deserved,” since you are forgoing leisure for work. But the differential goes far beyond that. For example, doctors don’t just make more money than other people to compensate them for studying hard in school and working 36-hour shifts in residency; studying hard and 36-hour shifts are hurdles to clear in order to become a doctor and make a lot of money (if you’re a specialist, that is — some people do go through all the work and then make comparatively little).

Take me, for example. I’m smart and hard-working. I don’t know if it’s because of my genes, or because my parents brought me up right. But whatever the cause, I didn’t do anything to become smart or hard-working. And that’s the reason why I was able to go to good schools, get a good first job, and make more money than the average person, at least for a few years there (before quitting to go to law school). When I was young and frankly immature, being smart gave me a sense of entitlement. Now I just feel sort of lucky (“sort of” because I’ve learned that there are many more important traits than intelligence).

I’m willing to acknowledge that morality simply isn’t a factor when it comes to compensation. Seen from a utilitarian perspective, whether hard-working people deserve more than other people is a distraction. The key issue is that to maximize output in a more or less free market system, it has to be that way, since labor is supposed to be paid its marginal product. But there are still two implications of realizing that everything — even your initial endowments — is a matter of chance, not something you deserve.

The first is that you shouldn’t look down on other people (1) because their parents weren’t as rich as yours, or (2) because they aren’t as smart as you, or even (3) because they don’t work as hard as you. I think most people agree with (1); I think you should agree with (2) and (3), too.

The second is that the moral argument should be on the side of redistribution. I am willing to listen to utilitarian arguments against redistribution (e.g., high marginal tax rates reduce the incentive to work, blah blah blah blah blah); I may not agree with them, but they are a plausible position. However, I have little patience for the idea that rich people deserve what they have because they worked for it. It’s just a question of how far back you are willing to acknowledge that chance enters the equation. If you are willing to acknowledge that chance determines who you are to begin with, then it becomes obvious (to me at least) that public policy cannot simply seek to level the playing field, because that will just endorse a system that produces good outcomes for the lucky (the smart and hard-working) and bad outcomes for the unlucky. Instead, fairness dictates that policy should attempt to improve outcomes for the unlucky, even if that requires hurting outcomes for the lucky. But given that society is controlled by the lucky, I’m not holding my breath.

Update: I want to respond to a comment below by Markel. He accuses me of slipping meritocracy in through the back door with the assumption that income is correlated with intelligence and work effort. I think he’s right. The point I wanted to make is that even if income is correlated with intelligence and work effort, that isn’t necessarily a good thing. I think he’s saying that the premise itself may be wrong, and I agree it’s not something we should assume without support. I wanted to assume it in the rhetorical sense, as in “even if we assume …” I shouldn’t have implied that it is a matter of fact.

By James Kwak

277 thoughts on “Do Smart, Hard-Working People Deserve to Make More Money?

  1. Ecclesiastes 9: 10-12
    Whatever your hand finds to do, do it with your might; for there is no work or device or knowledge or wisdom in the grave where you are going.

    I returned and saw under the sun that–The race is not to the swift, Nor the battle to the strong, Nor bread to the wise, Nor riches to men of understanding, Nor favor to men of skill; But time and chance happen to them all.

    For man also does not know his time: Like fish taken in a cruel net, Like birds caught in a snare, So the sons of men are snared in an evil time, When it falls suddenly upon them.

  2. I guess you are arguing against free will so you cannot blame people for their thoughts on who deserves what.

  3. here in the US we have a long tradition of scorn for poor people — blaming poor people for their own problems and looking down on poor people as inferior.

    i wonder how that contrasts with other societies, not just in the europe-derived world but in china, india, africa, etc.

  4. Your arguments sound plausible but do not match my experience. I spent my first 28 years of life in socialist England. One lesson in forced redistribution came when I got my first real job. One week I worked overtime and it was hard but I was looking forward to the extra money. I was dismayed on payday when I found I my tax bracket had jumped and a great deal of my overtime was taken in taxes. Hence, I worked no more overtime. If I had enjoyed the work maybe I would still work overtime.

    My next 28 years has been spent in the U.S. When the AMT added more taxes and took away deductions my wife switched to part-time work. Higher taxes (more redistribution) will be a disincentive every time. It is just that each person’s threshold is different. Also, if you enjoy what you are doing and/or it is a good cause, it won’t seem like work. Hence when I do charity work I don’t need payment.

    My parents were poor and my wife’s parents were not that much different. Yet my wife and I, though not rich, earn enough to hit the AMT when my wife was working full-time.

    My observation is that people who generally work hard AND make good decisions do better. All people need to be taught to be compassionate and charitable and to give generously for the maintenance of the poor and to help them rise above their situation. The churches that I have been acquainted with (Catholic and Mormon) do a much better job of this than the government.

    When people generally will not help the poor then the government steps in and forces it to be done.

    Lest I am not clear, anyone’s situation can become dire at any time. Even hard work and good decision making can leave someone destitute, though the chances of this happening are reduced. Ours is not to ask why someone is needy but to ask how we can help.

  5. You push a good point too far, eventually sounding no less Calvinist than your opponents.

    A more important point, though: Where do you get the idea that smart people who work hard earn more money, and, conversely, people who earn more money are smart and work hard?

    Anyone who believes this clearly has limited exposure to junior academics, on the one hand, and C-suite executives, on the other.

  6. Unfortunately, what people deserve often doesn’t have anything to do with what they get. Luck plays a large part of it as does personality.

  7. I have some experience in China. It seems they have very little sympathy for beggars. They have scams there where they PURPOSELY amputate people (or burn them) and then they work a kind of “circuit” to beg for money. Then someone else gets most of the money. I’ve been told if you’re just a regular beggar that they won’t throw one Yuan your way (they call them “kuai”). Also students with some sad family story get sympathy (they write their sad story in chalk on the sidewalk). Sometimes mothers in China will hold their young with the hand hidden, when someone passes by the mother pinches the child so it will cry in sympathy to the passersby. Since regular begging doesn’t work in China they work it to a science.

    I realize most people will not believe what I wrote above. I saw it with my own eyes. That’s a reality Americans who spend their time watching “reality” TV don’t want to see.

  8. The whole world has a long tradition of scorn for poor people and many kingdoms and fortunes were built by taking advantage of that scorn.

  9. Luck is a huge part… even to the point that I’d say there are almost no “correct” decisions made in business… only decisions that are made correct – or not – by subsequent events.

  10. Nobody ‘deserves’ anything. The world is full of people trying to satisfy themselves, and smarter people are naturally in higher demand, because they can bring more satisfaction to others under the right conditions. There exists a certain threshold where a smart person would rather subsist than participate in a specialized economy. Crossing that threshold with a policy imperative is probably bad for society as a whole.

  11. Financial success doesn’t correlate with hard work. Financial success correlates with leverage, which is largely a matter of the organization in which an individual’s effort is expended and his place in that organization. The idea that the ‘performance’ of some CEO is responsible for 500 times the value created by individual workers who in fact are enabling him to live simply by talking nonsense to stooge directors chosen by him is transparently preposterous. Yet it is supported by an academic establishment which does largely the same thing albeit on less grandiose terms.

    Veblen explained all this no later than 1904. Even then we had a machine process which makes things and a business system which makes money largely by selective sabotage of the machine process and the periodic recapitalization of productive assets. We have now superimposed a casino on top of the business system which captures 40% of the profits by placing and laying off bets. Although these bets are guaranteed to explode sooner or later, the people making and taking them are permitted to record ‘profits’ for distributing them across the financial system and to keep half the profits personally as a reward for their own ‘performance’.

    Our captive leaders are now hoping against hope that they can preserve this system by propping up the stock market. Whether they can or not only time will tell.

  12. DeLong says the correlation is 0.4, but doesn’t cite a source. There is a ridiculous amount of evidence that income is correlated with educational achievement, so unless you think educational achievement is completely uncorrelated with intelligence that should settle it.

    More importantly, though, my real point is that income is correlated with endowments you receive through no virtue of your own. Whether it’s IQ (genetic or environmental) or the connections you get from your upbringing doesn’t matter; in either case, it’s something that you just fell into.

  13. I’m a progressive, but people have to take SOME responsibility for their actions. There are larger social forces that have contributed to a person’s circumstance, but people also make choices when they buy certain things.

    I’m not saying that there is evidence to apply this criticism to this family, but what is wrong with pointing out how terrible people are with managing money? Cable, a new car, and the latest cell phone are what people waste their money on. I don’t have these things.

  14. When I was in university, we had a student in our dorm from Thailand, studying a subject something like Nucleargeneticochemiobioosmoticmolecular Physics With Much Calculus.

    Seven days a week, he hit the books at 0600 every morning without fail, never turned in before midnight. Exam time meant additional study.

    He would even stand in line in the cafeteria, textbooks in hand, studying diligently. He continued to study while walking back to the dorm or lab. We joked that he would laminate his books so he could study in the shower.

    I don’t know if he was a naturally smart guy or not; he barely spoke any English and none of us spoke Thai. But we all agreed that he had earned any success he got in life.

    Of course, Ted K has a bigger point: Even if our Thai friend invented the cure for cancer and patented it, his pay would doubtless be eclipsed by some securities salesman who waltzed through school on a toothpaste smile and who probably doesn’t have a clue what financial products he is peddling.

  15. The moral argument is in favor of *voluntary* redistribution, when redistribution is calculated to make a difference (rather than simply relocate money from someone with a good sense of how to allocate capital to someone with a poor sense of it).

    That is why we admire philanthropy.

    To argue that morality is on the side of involuntary redistribution is to simply write off a universally agreed moral base: thou shalt not steal.

  16. You paint with an awfully wide brush there and make an awful lot of assumptions. Particularly assumptions about nature vs. nurture, and fate vs. free will. I am a smart guy with two very motivated parents, yet I’ve spent most of my life battling one personal demon: innate laziness. To begin to say “Well, it’s just bad luck that I was born/raised with this” is morally dangerous, in my opinion.

    I’m currently middle to upper-middle class, but I should be doing *much* better based on my intelligence. Lack of drive, lack of hard work, and some really personal choices along the way have put me falling short of what my level of intelligence potentially offers. Now you’re going to offer me an excuse to stop pushing myself? You’re going to offer ALL people like me an excuse to stop pushing themselves?

    Seriously, that’s as morally reprehensible as the greedy attitude that Americans seem to have developed in not wanting to help each other, in my eyes. I’m finally beginning to push toward excelling in my life because I refused to accept “luck” or “fate” as the reason I was lazy, and put it on myself to change it. If I took the attitude you’re encouraging, I’d just be wasted potential and a drain on society my whole life.

    I don’t like the rich folks that feel they have no obligation to help the people on whose shoulders they stand, but to give them very little (if almost no) credit for their own success, or to tell me “Don’t sweat it, we’ll just equalize you with the hard workers” won’t work. Just take a look at EVERYWHERE that pure communism is attempted. It doesn’t work!

    Sure, people must be instilled with the values that helping others is a good and right thing, no matter your standing in life. And yes, I agree intelligence IS largely hitting the genetic lottery. But requiring a full redistribution of wealth from the hard working to the lazy is dangerously naive. I fall on the side of helping the unfortunate only as far as a base degree of survival as long as it helps society, and even then only if they are doing their best to help society out in return. Encouraging the lazy to sit on their tails collecting a check is no better than rewarding rich bankers with rent collection for their ruthless pursuit of money at any cost.

    It creates the wrong incentive for the lazy, and removes the incentives for average to very driven people to accomplish things. Just ask the USSR… oh wait, you can’t. They’re gone now.

  17. I don’t understand this debate. It is not as if many educated and hard working Americans made a great deal of money. They still have been suffering like everybody else from flat income right through the great productivity brought on by the IT decade(s).

    I think this debate is misplaced.

  18. I can’t choose to be athletically gifted.
    I can’t choose to have more IQ points.
    I can’t choose to have an obsessive compulsion towards working really hard.

    But I can choose to work really hard.

    But working hard doesn’t equal riches. Ask anybody @ the day labor center in your area.

    I have to work really hard in the right field and then catch the right opportunities – none of which is automatic.

    At best, I can be systematic with working hard, working smartly, and expanding my network.

    All of these things are necessary but not sufficient.

    And even if I do all of that, I still have to compete with the rest of you.

  19. I worked hard for a math degree and went into the engineering world after graduation. It only took 4 years to realize that every time the economy takes a hit R&D and the scientific job market take a big hit. Job security lies in the business world. I was always able to get jobs in business world, even in bad economies, because I had a math degree therefore hiring managers thought I was smart – even though math was not a job requirement. And it turns out bean-counting is a lot easier than engineering. The icing on the cake was that the money was also better. I find it amusing that there is an occasional cry that we need to be turning out more math and science students in the U.S., without any understanding of the need for proper incentives.

  20. Think about the ramifications of such “free choice” thinking:

    There may be a financial crisis, but the effects on individuals are due their own actions, not the impact of the crisis.

    There is no correlation between unemployment rising and incomes stagnating and individuals getting into debt and losing their homes.

    Yes, there were a lot of people who either ignored what was coming, or took advantage – but the vast majority of the pain is being borne by those who did not design this house of cards and also have the least amount of ability to react to changes.

    Not supporting such individuals is tantamount to supporting those who WERE responsible for this crisis. If this is what American morality has been reduced to, we are in for a very rough ride.

  21. When my son was in high school he started complaining that it wasn’t fair that some kids had all the money while others had none. We had a discussion about distribution of wealth and what it takes to be happy/satisfied in life. I gave him the task of coming up with a fair way to distribute wealth. We have had many interesting discussions on this topic through the years, but still have come up with no universal solutions. It has, however, been an invaluable brain exercise.

  22. If the goal is maximum utility of the population, I think the answer becomes clear. That is, to the extent possible, (1) equal access to opportunity, and (2) compensation equal to contribution.

  23. This is such BS. Next you’ll claim that we need to have a mandate that societally-defined “ugly” people get to date “beautiful” people because their “looks” aren’t their fault. Sounds like affirmative action to me. And that did nothing more than widen the gap and dislike between those classes. How about instead of “redistributing the wealth” we invest in infrastructure like education and job training so those that actually want to “work hard” can do it without penalty? Why not trade “top-down” penalties for “bottom-up” support? There certainly will be less resentment.

  24. A while back I wrote, “If the people who make the world work got the money, Dennis Ritchie (operating systems), the Sutherland brothers (graphics), Grace Murray Hopper (programming languages), and so on would be the rich ones, and Bill Gates would be a successful salesman.”

    Just last week, though, I was astonished to have that reinforced. Ivan Sutherland, at 71, gave a talk at the University of Washington. I had no idea he was even working. He is still doing interesting, creative, and potentially revolutionary computer science research.

    The hardest-working people I have known are working poor. If hard world made us rich, the world would be a different place.


  25. It boils down to compassion, and the lack thereof. The US has historically being supernaturally prosperous, largely due to a having a fantastic endowment of natural resources and being geographically removed from European wars. Combined with Puritanism the result is American culture uses financial success as a proxy for moral rectitude. The poor are poor as punishment, and any efforts to relieve poverty are perceived to be equivalent to encouraging sinners to sin.

  26. Joshua,

    Agreed. Unfortunately, voluntary charity is very much dependent on culture, and culture is very much dependent on the cult.

    “We castrate and bid the gelding be fruitful.”


  27. James,

    Kudos to a very thought provoking post. However, it’s a bit of a red herring. You’re drawing too many nefarious conclusions about posters casting scorn upon the millions of Americans who live above their means. I, like you, feel extremely lucky to be born with a reasonably high IQ to parents who loved me (and each other) and stressed education. I am well aware of the advantages that I have had that many could only dream of. But I am still very proud of “looking down” on people who live “paycheck to paycheck” as they struggle w/ their $30K 6-year car loan, . . . (add in the same stuff as the Yves Smith poster). Now, of course I am horrifed of stories of people who have to go into bankruptcy because of a helathcare issue.

    Due to the events of the last 16 months I believe that many have concluded quite properly that our capitalist system has gone too far. But I’m not ready to become the Netherlands yet and you’d be making a mistake if public opinion has shifted that far to the left.

  28. Wow! What a fascinating Post and such interesting comments. Need more time than available just now to really consider these points.

    But much of them remind me of the book ‘Outliers’ by Malcolm Gladwell. His conclusion, if I serve him correctly, is that the fickle finger of fate has as much as anything else to do with success.

    Well done for James in picking up on Yves’ Post.

  29. Since I got laid off in 2001, my wife and I manage to live on her income. I’m the homemaker and my wife gets to relax at home. She is retired from teaching and works 32 hours for healthcare benifits. That paycheck is her allowance.

    I also took care of my brother-in-law, who has severe medical problems and was compromising his condition, just because he believes that men work and social security is for housewives. I arranged proof of citizenship, Medicare, social security, took him to specialists. Sometime three times a week. I applied for long term nursing care for him.
    And on top of that we discovered the hard way that my brother-in-law is suffering from Asperger Syndrom, he was disconnected from reality and conversations had a lack of reasoning.

    He lived with us for almost a year until we got him in a nursing home. I feel really good about what I have done for my family member in need.

    Yet, I’m looked down to by other family members, because I don’t earn my own income. They are aven not willing to acknowledge my care for their own brother. Never a phone call, never genuine interest.

    In their eyes I’m probably a much better person if I wasn’t laid off and consumed all the money that I could have earned.

  30. Mazumder (2005) uses the best data set and finds a correlation of 0.6. Bowles, Gintis and Osborne Groves (2005) do a meta analysis of the empirical work and find that IQ, schooling, race, wealth, and personality traits can explain about half of that. It’s unclear what explains the rest, although it could be behavioral (i.e. trying to replace what you’re used to) as well as things like family connections.

  31. Lately, I’ve been reading reader comments to news articles on a variety of subjects. “Vindictive snobbery” seems to be one of the most common points of view among those who write to comment on news articles. That seems true no matter what the subject.

    I’m curious if anyone has studied this phenomenon and its underlying causes. Is it related in some way to the anger expressed in “tea party” circles. It seems troubling that so many wish others ill. What, if anything, does it say about us as a people.

  32. Mr. James Kwak,

    Have you read Malcolm Gladwell’s book titled Outliers? Interesting research and alternate opinions on factors contributing to the sucess of individuals.

  33. My 11 year old has been a raving “merciful capitalist” ever since she became aware of homeless people, horrible education, people dying because they can’t afford health care, etc. Her basic approach is “floors and ceilings”: We need to have a floor on the misery we will permit in society, as well as a ceiling on wealth and income. Should people want to excel — a worthy goal if directed properly — they can do it in ways that will be rewarded with things other than money. For this to work though, we’d probably have to divide the world in two: One part for those that are willing to accept all others as part of their family, and one part for those that prefer to live in the thunderdome and who don’t have a problem with fighting until only the lonely top-feeder is left.

  34. This strikes me as a funny philosophical argument, James. Most of the nihilists I’ve read end up attaching tremendous significance to personal choice.

    On the other hand, I think it would be cool if we started calling the income tax the “good luck tax.” And required each exemption to have a cosmic basis.

  35. The secret of American culture is the climate of hate.

    Pull the covers of the ‘opportunity society’ and you see a swarming ugly mess of resentment, greed, and blame.

    That is the real reason that hundreds thousands of people are dead because they lacked health insurance, since the nails were put in the coffin of Hillary Care. Surely Hillary Care was better than streets running red with American blood. But no, because of our climate of hate.

    We love to kill Americans, imprison Americans, and send American jobs overseas.

    Whadaya know. After decades of this, ‘them’ now includes us, and the whole middle class is sliding down into the rubbish heap.

    It is one of the big regrets of my life that I was born American and remained American. Our values disgust me.

  36. If society were able to distinguish with precision which part of an individual’s successs was due to luck and which due to his “alpha” beyond the “luck beta” – then taxing luck would make some sense. The problem is, there is no way to do this – for example, you may have good genes and the right upbringing – but it is still your choice whether to work hard or harder than other people of the same level as you. If you tried to tax the luck part – you would end up taxing the non-luck part so much that you would create enormous marginal tax increases and huge disincentives to work – the result of which would make everyone worse off – including the unlucky ones whose lives you seek to improve

  37. This really only scratches the surface. Many people work hard at jobs such as teacher, police, social worker, etc. and make a small fraction of what people in finance make even though they probably contribute more to the well being of society. Many migrant workers work harder than CEO’s. What jobs get highly compensated has little correlation to the amount of work involved or the contribution to society.

  38. I am not arguing with your “real” point. I agree with it.

    But you are slipping meritocracy in through the back door. You allow that, yes, shucks, rich people are indeed smarter and harder-working than the poor, but they can’t take the credit for their virtue.

    But what you shorthand as “smart” is data that does not necessarily represent any such thing. Studies show that high-achieving kids from poor families are far less likely to finish school than dumb kids from rich families. That isn’t smarts; that’s family pressure, or connections, or expensive tutoring. Same is true of the SAT metric–rich families can afford more Stanley Kaplan classes.

    Incidentally, there’s also research that suggests that smart people might have higher incomes, but not any more wealth, than people who aren’t as smart.

    There was also a NYT article about the intelligence of people at the very top of the income and wealth pyramids, which was not, I shall simply say, flattering.

    So, my real point is, you’re still giving the rich and their toadies too much credit for their achievements, allowing them to dismiss your point with babbling about entitlement and personal responsibility. A hedge fund manager doesn’t really work any harder than his house cleaner with three jobs.

  39. I am trying to make this point, unsuccessfully.

    Mr. Kwak acknowledges that the rich really are smarter, and work harder, it’s just that they really ought not to take credit for it.

    Really? Are today’s CEOs so much smarter than foreign CEOs? Than the CEOs that built American industry in the last century?

    I thought that we had already recognized that compensation in the US is based not on value created, but on rent capture.

  40. A long while back Mark Thoma posted a 1936 Joan Robinson essay that seems relevant here.


    Consider the case of a man to-day who has an honest intelligence, a strong social `conscience and an independent income.

    His intelligence tells him that he has no particular right to enjoy a privileged position. ‘Right’ is a vague phrase. A doctor has in a sense a right to a motor-car because it makes him do his work better than he could without it. And if he uses it to visit his friends as well as his patients, no harm is done to anyone. But our man is too honest to try to persuade himself that his own comfort really makes very much difference to the amount of benefit that he does to other people. His conscience tells him that he would be doing a good act if he endowed a hospital with his wealth and worked for his living. But his independent income is not easy to give up.

    He cannot keep all three – integrity of mind, a quiet conscience, and the privileges of wealth. One must be sacrificed. If he is a saint he sacrifices the wealth – but we will suppose that he is not. If he is a man of no definite religious creed he can keep his mental honesty and his income by sacrificing his conscience. He can say “I am a selfish individual. I don’t pretend to have any better right than anyone else to a comfortable life, but I propose to enjoy it if I can.”

    But if he belongs to a definite religion this line of escape is impossible for him. Conscience is more precious than anything else. Without its approval he can have no peace. He will have to sacrifice his honesty of mind instead, and make up arguments to show that it is right for him to be better off than the majority of his neighbours.
    Now, it is here that the economist is a godsend to him. The economist is a self-appointed expert. It is his business to know about these things. A man may have an honest and independent mind and yet take on trust the opinion of experts on a subject that he has not time to master for himself. If the economist tells him it is all right, then he can keep his integrity, his income and his conscience all intact.

    One of the main effects (I will not say purposes) of orthodox traditional economics was to fill this want. It was a plan for explaining to the privileged class that their position was morally right and was necessary for the welfare of society.

    While greed and selfishness don’t seem a particularly modern phenomena, it does seem to me to have been ratcheted up more than a bit after four decades of relative equal income sharing after the 1930 depression by folks such as General Electric VP Boulware, who financed the Friedman’s and Ronald Reagan. See eg

    For one of M Friedman’s more selfish moments, try:

    To me this issue of “earned” and “fair” income is the most important issue facing the U.S. today. Kudos to James Kwak, Gar Asperovitiz, Peter Drucker, Robert Solow, David Korten, James Galbraith, Robert Frank, Robert Reich, Joe Stiglitz and others for also addressing this issue.

    “The modern conservative is engaged in one of man’s oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.” — John Kenneth Galbraith

  41. I agree some (a lot) of the outcomes depend on luck, and the moral argument goes for redistribution; I don’t agree that the full outcome is due to luck.

    You’re taking the completely deterministic view of human behavior; basically if you know what my genes are, and exactly what my environment is, they you know exactly how I will react; there’s no room for Free Will.

    This is a reasonable philosophical posture (philosophy and religion have been dealing with free will for a long time :), however, it is not a practical posture to have, since it will lead us all to be lazy bums :)

    If I believe that I’m completely determined by genes and environment, then talking about moral arguments doesn’t make any sense; there’s no moral; my behavior is fully determined by my genes and environment, so no decision is moral, immoral or amoral; I have no choice.

    As a practical matter, I *have* to assume I have at least some degree of choice, and so that others do too.

  42. James Kwak:

    Let’s break it down.

    Do hard working people deserve to make more money(than less hard working people)? If “hard working” means more hours then yes. If “hard working” means digging ditches faster then yes. “Hard working” has nothing to do with lucky – one doesn’t work more hours or dig ditches faster because of who his parents are. Some people are genetically bigger and stronger making them able to dig ditches faster but that would be a marginal not an orders of magnitude increase. And whether they do or not is a decision they make.

    Do smart people deserve to make more money (than less smart people)? If they use their superior intelligence to organize a group of laborers to dig smarter and increase their output (more efficient work) thereby increasing each laborer’s income the laborers may choose to pay their smart leader a portion of their increased income and that could be a substantial amount of money. That is their (labor’s) choice just as it is the smart person’s choice to become an organizer rather than a laborer.

    It’s undeniable that some people are born into the lucky sperm club. But one reason people work hard and are productive is so that they can pass some advantages to their offspring. How many times have we heard the question, “Are your children better off than you?” An extreme solution would be to put all children into grand egalitarian orphanages immediately after birth. Or perhaps we should limit couples to two children – like thinning a crop of carrots — to give the survivors the best chance for development. Would the range of incomes for the next generation compress? I wouldn’t want to do the experiment. Is it a good that parents have an incentive to educate and train their children? I think so.

    Members of the lucky sperm club (smarter or bigger/stronger or both) have a broader range of choices than non-members. But the financial success of both members and non-members is largely dependent on choices they make.

  43. “unless you think educational achievement is completely uncorrelated with intelligence”

    Well, yes. I would say that it’s unlikely that educational achievement is correlated with intelligence. Educational achievement is highly correlated with a student’s willingness to listen to the teacher (or graduate advisor) and to repeat what the teacher (or advisor) wants to hear. While such docility before authority is highly valued in the workplace and therefore likely to be well compensated, (remember Wall Street was populated in 2007 by people who wouldn’t say no to telling the boss what he wanted to hear — telling themselves “if I don’t do it, somebody else will.”) the idea that it has any relationship to innate intelligence is just plain funny — especially coming from someone with a graduate degree.

    The other side of this: Have you never sat down and had lunch with your plumber or housekeeper and just been really impressed with how smart they are — especially when compared to your co-workers?

    “income is correlated with endowments you receive through no virtue of your own” This I think is a much less controversial claim.

  44. Whoa whoa whoa. I’m with you until you get to hard-working.

    I did something to become hard working! I *sacrificed* a lot of things I’d enjoy to do my job diligently because I believed there would be rewards after. Maybe some people are predisposed to do this, but it started with paying attention to the teacher while the cool kids goofed around, giving up some parties for the library, and continued with giving up Happy Hours to finish projects at work.

    I don’t do these things “because of my genetics”. That’s total silliness. I choose to make a sacrifice and sometimes it’s been really hard. How do you propose, James, to have a productive society if there is no incentive to be productive? You think we can rely on people who, genetically, just enjoy doing a lot of work for no reward?

    I definitely recognize that there are people richer than I who are less productive and people poorer who are much much more. Was anybody ever saying that *all* rich people deserve their wealth?

    This is disappointing nonsense. I come to Baseline expecting something better than this. I actually find this really insulting and even disheartening. Like, you present me as a bad person because I made real sacrifices and worked hard. I don’t live in a mansion, I don’t drive a BMW. But apparently I haven’t even earned a nice dinner — it was just my genetics.

  45. As someone who had zero social life through my 27 years of education, I agree wholeheartedly. I do not lament nor ridicule the lottery winner nor the billion dollar CEO, all the while realizing their good fortune. But don’t tell me I was somehow “given” my lot in life. It’s insulting.

  46. Oh Lark, how I am saddened by your words. If you replace the word ‘American’ with the word ‘human’ then you might better describe that great swathe of humanity, the so called 80%, that don’t believe in integrity.

    All of us, from whatever culture, are incredibly angry at the way governments have been letting us down over too many years. But that will change.

    But of all the nations in this world, America, to me, still stands for a force for good. It’s not the best in this regard but it is the best with the influence to change the world. The 20% of Americans who do stand for integrity, truth and honesty will bring about this change; in their own country and within the world as well.

    This is a long, dark night for all of us but the sun is going to come up again.


    Spoken as an Englishman on his way to becoming a US resident.

  47. Remember Graeme Frost? The little SCHIP kid? They even staked out his family’s home and reported on the types of cars out front (they were just a few years old), the granite countertops (his father was in the trades), the Zillow value of their home (very high – peak of the bubble) all ostensibly to “prove” the family did not need help affording insurance coverage for the kid. This was quite a happening with bloggers camped outside the home with binoculars.

    I’ve had more lives than most cats. From my present vantage point, I see a lot of “rich” people. Are they smarter? Work harder? No.

    What some of them seem to have are connections, and a certain personality type that helps them turn those connections into relationships, and turn the relationships into business deals. The “hard work” part consists of dinners in NY, golf in Bermuda, being in the right places with the right people at the right time so that when the opportunity presents itself, they are already there. Doing things with their free time I personally would not do. Having relationships with people I would not necessarily talk to outside of working hours.

    But can everyone parlay these skills into wealth and success? Of course not. If everyone could do it, nobody could do it. So the people doing it have to discriminate somehow.

    Luck? Yes, lots of that, too. Sure does help when daddy gets you a legacy admission. Or cosigns your first million dollar loan. That seems to be most of the battle right there.

  48. This thread reminds me of a story about survivors of the big Chinese earthquake. They didn’t even have this discussion. Instead, there were were many tales of people who had lost almost everything ) house, possessions, jobs, schools, even some spouses and children) who were busy working to rebuild ( ex made little businesses going to nearby towns to get plastic shoes to sell on a tarp at the camp, then using the money to trAde up to open a food stall or whatever).

    That implies it doesn’t really matter whY we in North America think the answer is – it’s inevitable the Chinese are going to own all the worlds assets.

    Those who don’t work hard and produce useful goods and services for others – eventually work for and rent from those who do, regArdless of philosophy. It’s the nature of capitalism.

    Work produces wealth (ie things other people find useful). The money is only an invention to keep track of the wealth produced.

  49. good article. i always try to think of the poor black kid born in the ghetto. he can work hard all day long but what percentage of them actually escape that poverty?

  50. Great discussion and one with which I can relate. I grew up as the oldest of four children and was the first female going back generations to go to college. I needed a scholarship to pay the tuition and worked every semester to pay for my books and other expenses. I did have parents that encouraged me and provided me with a good influence even though they did not have much money.

    I do believe in volunteerism and this year I am tutoring a five year old child who has a father in prison who had threatened her with a gun. When we read stories she talks about taking a big knife and killing the characters. Without good role models what are her chances of being sucessful in school? And looking ahead would she even want to go to college or even finish high school? How would this affect her adult life? She is not alone as the school is begging for volunteers to work with kids early in their lives.

    We have very serious problems in this country besides making money. And until our government focuses on employment and education for all, I can only see a society run by the privileged.

  51. This is by far the worst post on this blog for as long as I’ve been reading it (over a year now).

    It is not immoral to believe that life ain’t fair and that because someone is lucky his good fortune should not be seized and redistributed. In fact, it is definitely moral and also very American (think of our founders) to believe that people with smarts and good work ethic should reap the benefits of those “lucky” traits. We admire our Nobel Prize winners, the ’49ers who found gold in California and dot-comers who hit the jackpot in the 1990’s. Most of us are fine with Mega-millions, from a moral standpoint.
    That our society is structured so that height and good looks and skin color and parents’ income/education also correlate with earnings are issues for sociologists and economists to come up with solutions to.

    When I watch nature shows, it is kind of sad when the slow antelope or injured buffalo gets eaten. Humans are different, but we have tried to engineer societies that don’t reward hard work or intelligence (they must penalize them to equalize things); my parents escaped from one such country but there are still a few around for James to emigrate to.

  52. Those who don’t work hard and produce useful goods and services for others – eventually work for and rent from those who do, regArdless of philosophy

    You might wish to acquaint yourself, on a passing, breezy level, with a few of the economic events in the United States for the past forty years.

  53. IMO, the primary benefit of wealth redistribution is the prevention of class warfare, rationalize it anyway you want, but successful societies give money to poor people as a form of appeasement. The key issue is what is in the best long term interest of the community as a whole, it is the best long term interest of society to reward people that are the smartest and the strongest so that they will reproduce disproportionately. I think in 50 years, if we are lucky, that we will look back with contempt at the great society as a time unique in the history of world civilization when socio-economic polices encouraged the reproduction of the weakest and dumbest over the strongest and the smartest.

  54. Its clear no one here has read Malcolm Gladwell’s Outliers.

    Life is absurd and unfair, success is mostly a function of socioeconomic opportunities.

    Bill Gates ‘genius’ was his good fortune to be a suburban geek with access to some primitive, but powerful tools which gave him a solid first movers advantage.

    He does an extremely good job at refuting just about every myth posted on this thread.

    And its a fun read.

  55. I assume you, and most of the folks commenting here, donate all of your income in excess of the US median to charity.

    You do, right?

  56. aking of unlucky, Krugman wrote yesterday in his NYTimes column that “Deficit hawks like to complain that today’s young people will end up having to pay higher taxes to service the debt we’re running up right now. But anyone who really cared about the prospects of young Americans would be pushing for much more job creation, since the burden of high unemployment falls disproportionately on young workers — and those who enter the work force in years of high unemployment suffer permanent career damage, never catching up with those who graduated in better times.”

    I hurd that, yo.

  57. If only John Rawls had lived to see the day…

    It is incredibly difficult to understand the idea that the exercise of free will is not, itself, free.

    I can choose to work hard or eat a balanced diet and perceive the sacrifices entailed. I can adjust my efforts in view of society’s levers – perhaps I will pick a different work/leisure mix if tax rates are different, or eat more omega-3s as medical knowledge evolves. So I look at people who do not make my decisions and assume they have faced the problem as I have and made different choices, and figure they should live with the consequences of their choices.

    The problem is that my very ability to assess these options is what separates me from some other people. There are people who find it more difficult to sustain work, or are more tempted by unhealthy foods. They process society’s inputs as differently as a falcon’s eye and a bee’s eye.

    One of my lessons from Mike Konczal’s articles on CFPA is that just because I can understand certain financial products does not mean other people can. Hell, it’s my very understanding of those products that gives me the good fortune to afford to do without them. The people who took out massive negative amortization mortgages did so because they wanted bigger houses and did not understand the circumstances under which the investment would be forfeit.

    They were wrong, and should lose the houses. They should not, however, lose our sympathy as human beings, nor our best efforts going forward to ensure that they are protected from the consequences of the limits of their abilities.

    It would be cheaper to build roads without guardrails or warning signs, and great drivers would not notice the difference. We put them in for the mediocre, and we rarely fault people for not having the reflexes of Jensen Button. We might as well have the same humility about the rest of our talents.

  58. Let’s posit the converse: Do stupid, shiftless people “deserve” to make more money? This is, after all, one consequence of denying smarter, harder-working people of income for redistribution. Forget the ivory tower moralizing: As a PRACTICAL matter, there is only so much production, and only so much income. If we take it from the productive to give to the less productive, we ALL end up with less. Simple math.

  59. ” The people who took out massive negative amortization mortgages did so because they wanted bigger houses and did not understand the circumstances under which the investment would be forfeit.”

    Wrong, for the most part. This was about greed, not about sophistication. The simple act of taking out a loan is a gamble. To choose between a fixed rate and a variable rate is even more of a gamble. But “real estate only goes up.” So… gamble with no risk. Plenty of savvy flippers took out these loans knowing full well what the risks were. Others used mutant loans to purchase their own permanent homes, vacation homes, rental homes, commercial property. The less sophisticated saw the more sophisticated doing it. The entire bubble was built on greed and our innate drive to dominate.

    Why would Rawls have anything of value to say about what’s going on now? Did he devise an actionable mechanism by which we can reform society? If so, what is it?

  60. @Clifford Nelson: These goals are in direct conflict. Bill Gates may be productive as hell, but if you compensate him accordingly, his children will have opportunities other children don’t. (So did he, as a child.)

    Even without considering the larger free-will and capacity-to-contribute issues, we have a problem. The consequences of the short-term incentive structure create long-term injustice for people who chose the wrong parents.

  61. It comes from a feeling that playing by the rules no longer has any value, and that the incentives we’ve set up for ourselves are so screwed up they can never be fixed. And by the way, we’re going to load on another few thousand pounds of health care and environmental “obligations” which just might snap the horse’s spine. Reagan worked with horses. He knew that if you overload them, they QUIT.

  62. I wonder if we’ve sold ourselves short with the idea that hard work equals entitlement. It makes plenty of sense when objectives are well-defined and conferred from the outside (e.g. a foreman telling you to move a pallet of sandbags from one side of a construction site to the other). Likewise with the notion that intelligence equals entitlement. How do you measure it? How do you know it’s not a well-rehearsed parlour trick? And then, of course, there’s the idea that entitlement (i.e. inheritance) equals entitlement.

    What happened to results? You can be a wealthy, drop-dead gorgeous genius with a solid determination and still not get anywhere. (Moreover, in such a position you’d likely get inundated with messaging that it should be easy for you.) But how do you achieve a result without a clear objective? And how do you execute it without an opportunity?

    When we say “I work hard/am smart/am rich so I deserve X” it seems asymmetrical to me. What if we were to realign the exchange so that rewards were directly connected to results instead of inherited traits, training or best efforts?

    I empathize with people who bought into the notion that if they work hard, study hard, etc., they will be rewarded. But this reward doesn’t have a principal, it doesn’t have a figure and it doesn’t have a delivery date. Moreover, we can scan the history books for copious evidence of squandered fortunes, destitute luminaries and misguided deeds.

    We seem to be in a state in which a given person has unprecedented influence over what he or she does with his or her own resources, especially time. As such, it seems like trying our best simply doesn’t suffice anymore because we make the ultimate decision on what direction of effort will produce a meaningful result. This is especially true for those who innately have more information about their work than the people evaluating it.

    If we are to expect a reward for a given outlay of effort over and above the process and outcome of the activity itself, it follows that we have an explicit deal with a specific entity for a specific reward in return for a specific result. This entails that the result is known and desired (an objective), and that we have the means (an opportunity) to carry it out.

    A friend of mine said to me a long time ago: we don’t get what we deserve, we get what we negotiate. I wonder how many of these implicit deals we’re making will serve us much farther into the future.

  63. Dr. Kwak,

    So, getting back to the point: Yes, luck has a lot more to do with outcomes than most of us want to admit, mostly because it makes us feel powereless.

    However, for ANY society to actually function, no matter how socialistic the philosophy, requires it embraces the benefits of good individual decisions.

    So, IMHO it’s really senseless to debate whether people who make “better” decisions (as the result of whatever lottery the’ve won) deserve the consequenses of those good decisions because the reciprocal of the argement is obviously folly.

    My 2c

  64. I think the only issue should be one of fairness. In the end, it is entirely fair that some make more money due to skill, luck, or genetic ability. What is wrong with our society as currently constructed is that we have devalued labor. If you work full time at a minimum wage job (in other words you work pretty hard) you should not be living in poverty and have no unpaid vacation, no access to quality medical care, and little prospects for retirement. To me it comes down to valuing labor. We should offer at least modest and respectable living wages and conditions to people able to work (and support to those who cannot for a variety of reasons). Too often those in powers of position are working to devalue the conditions of the working man (outsourcing, removing federal union status from TSA employees, etc., etc.) while enriching themselves.

  65. There is a difference between being poor and being broke. Broke is a temporary situation – Poor is an ingrained attitude. Folks that are broke will find a way to rectify their circumstance and with a little help can do it sooner rather than later. People that are poor will remain so regardless of the amount of help they receive.

    Redistribution of wealth is an attitude and as much as some would like to think it will cure “poor” it never has and never will.

  66. I have read Outliers and think it is brilliant work.

    However, if you boil all of these arguments down to their most basic level, Charles Darwin would laugh at these comments. Ultimately, we are all here only because of a tremendous amount of luck and random chance. If you look at it scientifically and without emotion, cheating evolution (survival or economic) makes our society weaker in the long run. As I said earlier, better to encourage from the base up than to penalize from the top down.

  67. The question is pointless. Do leaves deserve to be green? Did Patrick Swayze deserve to get cancer? There is nothing to be “deserved” here; the verb applies, at best, to individual social interactions. Income distribution, on the other hand, is an aggregate, unpredictable, natural phenomenon.

  68. If you are going to get this abstract about who “deserves” what, then you should be as abstract about WHAT any person deserves. You have focused on material wealth as the outcome and identified how inequality in intelligence impacts that outcome. But why not focus on happiness as an outcome? Or sex, or fame, or any other desirable outcome one can imagine?

    Look at the Amish – is success in that community based on intelligence? There ARE other options in the world beyond the current Western materialism, and maybe more people should consider those belief structures…

  69. James (who clearly has a privelidged background) forgets the role of risk in this. Most people who score big took massive risks to get there. On a risk adjusted basis they don’t make much more than others. If you tax them on that you are basicly screwing them over as in heads I win, tails you lose. If they fail, then everyone scorns them and if they succeed it is all taxed away in the interests of fairness.

    Look at doctors for instance. They actually give up the best years of their lives (as well as a lot of money) for the slavery of residency in the hopes that it will be rewarded. If we then tax them at the end, they are basicly hosed as they have given up most of their life and now just get a “fair” income as compensation. What a crap deal! Flash forward 20 years and all the bright people will become slackers. Might as well work hard at “partying”, meeting women (or men) or seeking adventure if you are going to be taxed to make outcomes “fair”

  70. Your argument seems to be an attempt to expand the Efficient Market Hypothesis and belief of randomness to encompass the entirety of human society and existence.
    The planet currently suffers from massive human overpopulation. The natural laws identified by Malthus and Darwin will likely run their course over the next decades.
    Excess human population is straining the earth’s ecosystem and the tax-eaters’ pie has reached the tipping point and has started to shrink.

  71. I’d settle for everyone having their basic needs fulfilled through well-paying jobs, redistribution of income, works programs, take your pick. After everyone has access to enough food, energy, education, shelter, and healthcare, then I’m fine with people struggling against each other, or not, for extra material wealth.

  72. Sounds utopian. How much is enough?

    Does the alcoholic get a 1/2 million dollar liver transplant? Does the C student get law school paid for? Does the guy who’s “sick from work” 3 days a week get a free house?

    The problem is that as the government tries to define exactly what is a right and what is not, the bureaucracy created costs 10x more than the actual benefit. Today I read a story about the California state law that bans cell phone use in your car. Apparently, 100,000 tickets have been written this year but they don’t think it will have any effect because the $20 ticket isn’t enough. In the article, it states that after “administrative” fees, it ONLY costs $150-200 for the violator. Does anything see anything wrong with a $20 ticket that costs $150 to settle?

  73. I was referring to James’ recreation of the veil of ignorance: some state of affairs where all of your talents have not yet met up with “you.” Of course, the problem with the concept is that it is nearly meaningless to speak about you without your talents or experiences – you would be so different from the person who looks at you in the mirror that it isn’t very useful to worry about that guy.

    Anyway, I am more than happy to say that people who invested in housing were making the bet that housing would go up. They took their chances and should lose their money. I am very opposed to any sort of government price support for housing.

    Where I might part company with you is whether the buyers of these houses really had the suite of skills to understand the financial commitment they were making. People in the desert southwest were buying for outrageous percentages of their incomes. Could they process the risk of stagnant wages, stagnant markets, illness, divorce? I’m not sure.

    Guy walks into a casino and decides to play a Martingale strategy. He has a strategy; it’s just a bad one, and he hasn’t figured out the flaw. He is responsible for his losses. But maybe we should urge him not to gamble.

  74. Basics needs, huh?

    From one of Wretchard’s comments at the Belmost Club:

    I remember being taken through an “inner city” area once when I had just got in from the Philippines. My first thoughts were: “these guys are poor?” They had real roofs, floors. They had running water. They had electricity. They had doors. Try and find any of that in Smokey Mountain. Yet even the poorest of us moderns — even the poor devils on the old Smokey — has more energy at his disposal than a ancient king. Back in the day they didn’t even have lights after dark. The castles of yesteryear had rushes scattered on the floors to attenuate the cold stone floors. They didn’t have indoor plumbing in Versailles.

  75. You can keep making the point, but very few people are going to grasp it. It’s not even part of the discussion. The author doesn’t bother making the distinction, so it’s probably safe to assume he finds it irrelevant from a moral standpoint.

    Forced redistribution is taken as a given in just about any article I ever read on this topic. People just don’t care.

    The whole mindset seems bent on playing god, with the extreme arrogance that they will be able to divine what’s “just” across all of society, and magically bend a political system to implement it without corruption creeping in.

    We will never achieve just “ends” on this topic, so we should focus on just “means” instead. That starts with crossing theft off the list.

  76. This is just philosophically naive. There is no “you” apart from traits created by heredity and environment, and at the next remove by circumstances of social structure and luck. So it isn’t “you” that’s all puffed up by these things – it’s the smarts and the hard work and the luck, compared to the stupid, the lazy, and the unfortunate. What is this “you” – a placeholder tabula rasa? But the things for which it placeholds are already there.

  77. “So I look at people who do not make my decisions and assume they have faced the problem as I have and made different choices, and figure they should live with the consequences of their choices.”

    So what is really being said here – don’t whine about your problems because we don’t want to hear from you? Because from my perspective what people are saying is that they ARE facing the consequences of their actions – and they are looking for help.

    Lets think about this – financial crisis hits the fan, jobs lost, credit crunch. People don’t complain – they just suck it up and live with the consequences. Then I guess there really wasn’t a financial crisis, since no one is complaining.

    How do we find out about the impact of corrupt behavior if it doesn’t affect anyone? With the exception of Goldman Sachs bitching that people didn’t approve of their bonuses, the people who are complaining aren’t the ones who made the problem. By and large, the ones who caused the crisis are keeping their heads down and NOT drawing attention to themselves. Not a bad idea.

    It’s funny, we like to use individual responsibility then switch to systemic determination depending on what justifies our position. Since there was a financial crisis, anyone who participated in the financial crisis is automatically responsible for what happens to them, regardless of their individual circumstances. Or, if something happened to you that wasn’t your fault, well nothing is guaranteed in life anyway, suck it up. And if what happened to you was a black swan event, well you must have been stupid (or have an ingrained attitude of poverty).

    If any of us saying this were physicians, we would never discover/administer a cure for any ill – if you got sick, well you must not have taken your vitamins, or sometimes that just happens, or you are stupid, or you want to be sick anyway.

    I hope this is just due to laziness or unwillingness to change beliefs that this crisis demonstrates are hollow.

    If this is really the level of ethics we hold, we don’t have much chance for this crisis to ever be solved.

  78. Any cost to save a life?
    If talking on a cell phone is illegal, why not eating food? And no study has shown that handsfree makes it any safer.

    Predictably, you missed the point entirely. I’ll leave it to you to re-read the post. Let me know if you need pictures.

  79. What you don’t seem to acknowledge is that the system maintains all sorts of incentives most of which are perverse. Sensible critics do not mindlessly demand redistribution of spoils. But lazy apologists compress all intelligent criticism into a call for some kind of utopian socialist nirvanna. We are threatened far more by lazy thinkers than by slacking workers.

  80. Warren Buffet has noted many times he pays a lower percentage of his income for taxes than his secretary does. I guess capital gains wasn’t covered in your nihilist readings.

  81. “That our society is structured so that height and good looks and skin color and parents’ income/education also correlate with earnings are issues for sociologists and economists to come up with solutions to.”

    Some of us are attempting to, maybe you should visit a non-economics blog if you don’t want to hear solutions you don’t agree with.

    Don’t confuse humans trying to engineer societies that require less work with those don’t reward hard work.

  82. Simple assumption. If you start with “those that have deserve it”, then the whole question is mute – why change what is the best of all possible outcomes?

    The whole point is that it is the LESS productive who are currently receiving MORE income. Or lets at least argue the point.

  83. Without delving into the determinism vs. free will argument, I should note the following:

    My work-a-holic nature, while offering certain pecuniary advantages, creates distinct disadvantages in certain social domains. Which is the short way of saying: I’m not the most enjoyable person to sit down and have a friendly beer with. I have a tendency to be downright depressing in conversations.

    Many have expressed the notion that society may have a responsibility to equalize individual endowments to some degree (the Rawlsian argument). This is usually expressed in a financial context, but finances have less relationship to happiness than other aspects of life. If we reframe this, how much responsibility does society have to help me be happy?

    How far does this argument get carried?

    I suppose my concern with the arguments framed above is that it tends to draw the dividing line between Capitalism and Morality based on the following dichotomy:

    Effort/Efficiency vs. Morality/Equity

    It presumes there’s a pareto curve where we can tradeoff between these goals – where would say that surely _some_ degree of Equity is desirable (though not the total Rousseau-style equity described above). (Recall Isiah Berlin’s definition of Positive Liberty.)

    In practice, that is NOT the problem with our economy – it is simultaneously immoral, inefficient, inequitable, and rewards rent-seeking effort instead of value-creating effort. It is _systemically_ broken, and NOT because (as some hard-core libertarians would argue) of government interference. Rather, because government has abdicated the role of maintaining functioning markets.

  84. If you want to know what God thinks of money, just look at the people he gave it to.

    Dorothy Parker

    For the record I do think the people described do ‘deserve’ the support they asked for, that is, ideas and advice, not a handout.

    As a community, society, country, or whatever organization it seems to me we should either help them with our words, or shut the f up and ignore their plea and debate utopian ideals on another thread.

    Their pain is immediate, this debate is eternal.

    It seems it would make good business sense for the banks or govt to negotiate with people in their current situation who are broke, rather than drive them into real poverty with usurious credit card rates.

    Isn’t there a huge pool of formerly diligent credit card holders who are now,due to unemployment, relying on credit cards to tide them over. (I’ve been there and recovered). Wouldn’t it make sense, as that pool grows for the banks to put them in a different pool and forbear 30+% during their period of distress, and provide a steady stream of credit for a temporary period, rather than perversely incent them to max out and default.

    I think the family in Yves post were trying to see if there are any ideas/programs like this out there. Look at the Debtors Revolt video. Sure she may get exploited or corrupted but the need and urgency for a forum like hers is real and potentially powerful.

  85. Maybe greedy people get rich and smart greedy diligent people have an advantage.
    Salk decided not to patent his vaccine for polio. How do you explain his behavior?

  86. I haven’t read Outliers, but perhaps we can look instead at those with above-average but more ordinary outcomes, such as careers in the professions such as law or medicine. What roles do luck and merit play in allowing someone to succeed in such areas?

    A high level of talent – top 5-10% (?) – is required and a matter of luck. But merit includes the persistence in obtaining the education and training necessary to succeed. Discipline may be acquired in adulthood, if not in childhood, so we cannot ascribe this to luck. We might say the successful professional deserves the success relative to those with similar abilities who pursued other less challenging paths. But where is the merit relative to those with less talent, who may have applied themselves to their chosen paths, and may have wanted to become doctors but realized they never had the talent? What of the great majority of the U.S. population that doesn’t realistically have the talent to go to college?

    Does anyone consider “income redistribution” immoral, i.e. theft by law? Is the prohibition against theft rooted in human nature or is it an arbitrary construct? Aren’t many people going to be angry and resentful if they are taxed, i.e. their property taken without their consent, not for any general social purpose, but to hand their property to specific segments of the community? Isn’t the resulting animosity and social conflict a substantial cost inherent in redistribution schemes? Is there a possibility that the redistributive state will eventually destroy or substantially damage the society? Is that a worthwhile risk? I see arguments for redistribution that ASSUME equalizing wealth is desirable based on equalizing marginal utility of money to different people. These arguments ignore social conflict and the subjective damage to the victim as well as the risk of social destruction; and such arguments could also apply to justify individual theft.

  87. What an amazing variety of feelings and opinions. I’m just grateful that I am part of a society that gives voice to such freedom of speech. Nothing more weighty to add.

    Interestingly, there is a discernible difference in the comments to Yves original Post and to this Post. The former attracted much more anger and bile than this one.

  88. Higher wages or bonuses on Wall Street fuels more inequality which isn’t good for economies.I suppose if the people who get the big paychecks complain about government intrusion, they with their campaign contributions will restrain any government action. Inequality can’t be good for the country , but who cares about the country these days.

  89. Home run!
    The same also goes for teachers, especially high school, where actual expertise in the fields they teach is not necessary.

  90. Proof that most people don’t care about wealth redistribution is what we’ve been living for the last decade, if not longer.

  91. Yes, it is the truth that we of the lower classes must disparage and fight each other endlessly so that our masters can live a life of Olympian serenity.

    Brothers, art thou ready to rock the ship though we might perish with it? Only when we death cease to fear, shall we be able to shake off slavery. For, though our chains be invisible, that is what we are: slaves.

  92. James Kwak, just pray your children won´t get hold of this writing.

    Not only are you assuming responsibility with “There is the obvious fact that a person’s income as an adult is highly correlated with his or her parents’ income” but you are also completely releasing them of theirs.

    Are you now telling all those who work their hearts out in very hard circumstances and find some human satisfaction and pride in their very limited achievements that though a hundred times higher than the comparable achievements of their fellow countrymen, all that is just the result of them being lucky or not enough lucky?

    No criticism intended, but you sure sound like a very sophisticated spoiled brat! Don´t look at the tip of the icebergs, life is not about the tip of icebergs.

  93. And consider the cost of working really hard: Family time? Time for creative pursuits? Time to prepare and eat a healthy meal? Time to blow off steam and have some fun? Time to go and see the world, or at least a slice of it, just because you can? Or how about time to get some rest because you are feeling ill?

    Hard work is really overrated, and I would much rather have time for all of the above than be well compensated for my hard work – if only I had the choice.

  94. This is a point John Rawls made in his classic, A Theory of Justice. How can you be said to deserve greater rewards and opportunities because of your greater talents and ability (including the willingness to work hard), if there’s nothing special about you that makes you deserving of those greater talents and abilities? What justifies greater rewards and opportunities for the more talented is only the way it can work in a socio-economic scheme which makes it possible for everyone, especially the least advantaged, to enjoy the most opportunities for a good life they could possibly have (what Rawls calls “the difference principle”). I know this is just a restatement of your point. I just wanted to note that this was one of Rawls’ most important arguments for his theory of justice.

  95. Interesting piece and discussions…recognizing that there are societal forces and biases at work….I still have to fall on the side that more questions these people’s decision making, than feels sorry for them for having “unfortunate” backgrounds. Exactly where and when does personal accountability fit into the equation? Where is the faintest notion that if you can’t make ends meet that you have to scale back. If that’s not sufficient motivation to take the medicine and come back at it stronger down the road – than there’s really no hope other than to hope to plunder off of OPM. You know, live the Socialist Nirvana.

    Most (?) people understand that Government (and Banks) are horrible role models – as common vermin such as us (taxpayers) don’t have the largesse of a printing press in our basements (I think), or the connections of a corrupt political/banking class.

    However, it’s time for the excuses, moaning and self-loathing to end. Speaking in general terms, people are responsible for their own happiness, fate, finances, and life outcomes. There is no other way any of this works as a society. Hopefully, this gets fully applied to the political / financial class by the time all of this is over.

    As a disclaimer – I could care less what people spend their (devalued) US$’s on…providing its their own devalued US$’s and not that of others…

  96. Then state as much. Don’t call it generic “laziness”. Call it lazy thinking. Call it conservative thinking. Call it uncreative. Don’t just call it laziness and offer excuses of “luck” and talk of redistribution. Further, the good thing about laziness of *all* kinds is that it’s NOT something impossible to change like intelligence most likely is. It’s something that self discipline and drive can (and will) change given time and perseverance.

    And yes, there are some screwed up incentives out there right now. I’ve always felt that hard workers who weren’t gifted with high intelligence (or in the case of some execs, lack of scruples) should none the less be rewarded for their hard work. When I eventually start a company, should I have such a type working for me, they will be. For the moment, I have no direct control over such things, but I still don’t think the solution is good ol’ “redistribution”. You’ll wind up handing it out to the lazy workers AND the lazy thinkers by taking from the hard workers, as opposed to right now where just the lazy thinkers are getting rewards.

    Lazy thinking and lazy working should receive no rewards from the pockets of those that work hard. That would be my goal in the matter.

  97. This post and the 99 comments on it have been a really fun read. Let me try to avoid repeating things that others have said and try to add something new.

    Working hard isn’t necessarily a result of virtue. My co-workers think I’m the hardest working person they know. And it’s true I put in very long hours at my job. But they didn’t know me in some of my earlier jobs where I was the biggest slouch around. The difference is not that I got religion. The difference is that I finally landed in a job that I just love. It gets my juices going. I don’t think of it as hard work. I think of it as fun! And while I’m really glad I get paid reasonably well to do it (though not as much as I made slacking at other jobs), it’s really hard for me to grasp why they do. If I were independently wealthy, I’d do this job for free. I’d even pay for the privilege. And don’t think that my virtue was in finally identifying where I could be most productive and choosing to go there: it was just dumb luck. I had no idea at the time. It _is_ better to be lucky than smart!

    Both today and at other times on this blog the view has been expressed that with equal opportunity, results would follow merit, blurred a bit by the effects of luck. But consider the following simple game. We each start with the same amount of money. We toss a fair 50-50 coin repeatedly. With each heads, I win $1. With each tails you win $1. Clearly this is an equal opportunity game in every respect. There is no role for strategy or virtue of any kind. Luck alone determines the results. But the result, with probability 1 is this: one of us will bankrupt the other and keep all the capital we both started with. The game does _not_ go on forever with both of us about equal in our stakes, switching the lead every now and again. It is equal results in the sense that you and I each have a 50% chance at the outset of being the winner. Now, this is clearly a far more simplistic model than any real world economy. But it points out that the principle that equal opportunity does not necessarily lead to roughly equal results.

    An interesting follow-on to the above is this observation. If we change the game by “expanding the pie,” that is, injecting new capital into the game by giving both players some extra dollars at regular intervals, then the game does have a non-zero probability of continuing indefinitely with both players staying nearly equal. The “moral” of this story is that the creation of new wealth helps blunt the inequality-generating effects of luck. While it is easy to point to tax policy and other things that have contributed to inequality in the US in the last several decades, I often wonder to what extent, if any, the root of our problem is that we are no longer producing enough real new wealth to promote and sustain a modicum of equality.

  98. I completely agree. I am a perfect example. During my career in business, I worked hard every day, got some breaks, but was never paid for my smarts or my hard work until I started my own business. I had that business for 22 years, working mostly 50 to 60 hour weeks, and grew the business until I had 65 employees. Then the economy collapsed, and my business, inspite of having a good, hard working manager (me) failed. We had no work. I had to lay off almost every last person, and held on until both the business and I went bankrupt, trying until the end to do right by my employees.

    The great gains were earned through hard work AND good fortune, the bad times were caused by purely external factors. But the work ethic and lessons stuck, and, my reputation carried me forward to a very productive career working for others. I am proud of my accomplishments, but I know many people as bright as I am, and as hard working who have failed miserably, and many not as smart and not as hard working who have become multimillionaires.

    As my mother told me when I was young, don’t expect life to be fair, because there is no essential fairness in life. But, be happy and enjoy each day, take pride in what you do, and make a major goal of helping others improve their lives because of your efforts. You can’t go wrong. And learn to accept the hard knocks.

  99. I agree with your statement. “Erudite” is an adjective often used to describe me, yet I never finished college. I couldn’t stand 4 more years of the memorize/spew back process that passes for education now.

    It doesn’t mean I’m not smart. It means I’m quick to call BS on the status quo, and still successful.

  100. By the way, massive risks aren’t the issue. A lot of gambling addicts take massive risks, but the government doesn’t bail THEM out. Sorry, but the ones who took massive risks and failed shouldn’t now be getting massive bonuses because we “enabled” their addiction to greed by guaranteeing their losses. THAT is NOT RIGHT!! Never, no how!!!

  101. There is no “deserves” in life, unless our transgressions are so great that they harm others in the process, then we deserve to be punished. The risk taking oligarchs deserve the death penalty, period!! That is the only suitable punishment for destroying the lives of millions of people by the expression of over the top avarice.

  102. Vastly oversimplified. At least one shining example: Ray Kroc, totally defies the upbringing, education, hard work, and emphasizes the “luck” in the equation, that is, the luck to be in the right place at the right time, etc. Darwin is out of this picture.

  103. I agree. Look at life in Europe. They have a far higher respect for a person’s humanity, and less respect for his skill. They take more and longer paid vacations, don’t have to worry about health care, and live a better quality of life. Our value system is screwed up by what we refer to as the “American Dream” (fast cars, big houses, big boats, beautiful women, etc.) and have lost sight of the really essential pleasures of life, like balance and time to smell the roses.

  104. Okay, but you replied to taxpayer’s post and completely ignored his example. And ended your post with 3 exclamation marks to boot!

  105. My point is that there is a penalty to helping the weak (or too big) to survive. Whether it be an investment bank or a homeless person, there is a cost to society to provide a safety net. I’m not making a judgement – society needs to decide what is “worth saving” and what is not, but for every reaction, there is equal and opposite and so forth.

    BTW, your argument is illogical. How does your example prove “Darwin is out of this picture”? Perhaps you should read more Simon J. and the globalization of our economy. Darwin’s theories have and will apply to our current predicament and the future.

  106. I agree in part. However, I would challenge the claim that the ability to work hard is, somehow, in your genes. How hard you work, is about choices you make, not about the genetic lottery.
    The question whether smart people should get paid well is trickier. If everyone gets paid the same, that removes all incentives for work, and leads everyone worse off as a result.
    However, I’m not sure whether it is really true that smart and hard-working people make the most money. Two years ago, Bernie Madoff would have looked like an prime example of a guy who got immensely rich as a result of his talent… By now, we know what his real talent is.

  107. I would like to play NBA ball. I hear thay make a lot of money, only work a couple of hundred hours a year, and sometimes get to be on TV.

    I think its unfair that no team will hire me, just because I’m relatively short, not in very good physical condition, have at best average physical skills, don’t practice, and really don’t like basketball enough to pay any attention to the finer points of the game.

    Its just not fair, you know.

  108. I have to say I was surprised to see this post and many of the posts that came after it on an economics blog. It has been obvious to me since long before I started my own business, that neither hard work nor intelligence, nor their existence in the same individual was the primary determinator in income or wealth. In business, as in all gambling, return is roughly correlated to risk. People aren’t lucky because they have more “luck.” Luck is a fictional material or energy that does not exist. The are lucky because they have a higher appetite for risk than average. This appetite or tolerance for risk can combine with high intelligence and discipline to produce very high “earning” individuals. But not always. There are losers too, but in good times, we don’t hear about them. Having a high appetite for risk does not guarantee that one will be wealthy, but having a low one generally means one won’t. The American public understands this instinctively, if not consciously. I believe a big part of the public outcry over huge “bonuses” at failed, bailed-out zombie banks was the instinctive anger at how successfully wall street employees had decoupled risk from reward. The idea that people who are essentially very smart high functioning professional gamblers would be paid handsomely whether they won or, as happened, lost spectacularly was and is abhorrent.

  109. I’m heartened by the discussion this post has inspired, with sincere and thoughtful replies that track from libertarianism to communism. This conversation lays bare the essentially political nature of our economy–we have as a society determined the distribution of resources among us. The vaunted “free market” of finance capitalism is no less a tool of state distribution than are food stamps: all the difference is in operating parameters and delivery mechanisms.

    The perfidy of our business elite, the staggering smallness of our leaders, the insanity of our trade policy, all these are political outcomes to which we, the people, have given our consent. Can’t recall approving of the latest round of Goldman Sachs bonuses? Didn’t sign off on systematic deindustrialization of the midwest? Nonsense. You gave it, we gave it, everyday we put our heads down and went to work, shrugged off wider injustice, focused on the family, got by.

    Our private virtues are no longer enough. Never were. It’s time to rediscover the community. Public virtue is the only treatment equal to the scale of our social disease.

    It is time to organize ourselves. We must, once again, make a people of the people.

  110. Brian,
    are you trying to say that you spend no money whatsoever on frivolous i.e. not strictly necessary stuff?

    If you do isn’t that kind of anti-social? After all look at all the jobs which will get lost, if we all bought only necessities?

    Cars for example seem to be so much longer-lasting today than they used to when I was young. What would happen, if we all drove them until they were really fit for nothing? What would happen to auto-workers and their families? My bet is that returning to a sound? repair and make-do economy is not really a choice we have anymore.

  111. Redleg
    being German I am all for wealth distribution because it offers a lot of comfort to the ones that do-well because it enhances social peace. That said, I have to admit that it is extremely hard to do well because whenever you are in need and have to resort to public money you, the needy, have to accept rules and regulations that put shackles on your self-help possibilities.

    Thus getting the balance right i.e. allow enough space to maneuver while at the same time prevent fraud is extremely hard to do. Still I much prefer the needy to be entitled than to be dependent on charity. Yes that means higher taxes but it also means more dignity for the hard-up (at least on the face of it)

  112. You are just a killer and your hands are red with American blood.

    45K every year die because they don’t have health insurance. A harvard study, link
    100K preventable deaths, due to lack of regular care.

    Folks like think you are “good” because you can pay your bills but you are just a cog in a killing machine. For shame. The rotten heart of this rotten Republic is what you have expressed here.

    Such views and the vicious policies they inspire have caused the decline in welfare and prosperity of the American people.

  113. Another disgusting aspect of your views is your slavishness.

    You wish to worship and coddle and suck up to the very fiends who have destroyed our financial system and housing market and outsourced our manufacturing and destroyed the American middle class.

    The perversity of your desires is astounding.

    Not for you the dignity of standing up for yourself, family, and community. No. You must grovel before our parasitic and predatory elites. What exactly do you get out of your groveling?


  114. they will reproduce disproportionately

    do you have any figures on how many children financiers have on average?

    to the best of my knowledge they tend to marry professional successful women who cannot afford to be pregnant as often as they might want to – where and how is then the reproduction proportionate to their wealth taking place?

    with mistresses, with outsourced pregnacies

    please specify

    to my knowledge what you say applies to societies where food is scarce – but it hasn’t come to that yet in the US or has it?

  115. I would agree that it’s a good and pleasant thing not to get shot or jailed for speaking ones mind, but we should never forget that these freedoms do not empower us. It really doesn’t matter much what we as individuals say on blogs. The general themes and messages are being doled out elsewhere. We have trifling control over the political process, and we have much less control over the general direction of society and values than we thing. It could actually be hurting us to be living under the illusion that we have these freedoms.

  116. Public virtues serve the public interest, the good of the people as a whole. Justice is a public virtue–personally, it’s often costly (i.e. whistleblowing). It is sacrifice, in all its manifold colors, for our fellow citizens and for our collective future.

  117. James – you have it so right in this piece, and more will agree with every passing day. However, the re-distribution thing hurts like hell, and could reward idleness and sponging, so my guess is no change for the future.

  118. Intriguing post, and many excellent and thought provoking commentaries. This is a discussion that should glean wider appreciation. That said, it is question of metrics. If the metrics are measured in purely dollar terms, or most wealth, – then the entire discussion is wildly distorted and blurred. Crip crack dealers have great wealth, and some would claim they are smart (in the street metrics), so are various sundry mafiosi, and other gangbangers. They have great wealth, power, respect, and so they are glorified in their respective circles and in larger society, because the metrics are totally based on wealth or the illusion of wealth. If you make a great fortune selling coke, or killing people, or in the case of the fiends and shaitans on Wall Street deceiving and robbing people – you are viewed by society as smart and elevated, because the only measurement is wealth, money. Show money and you are elevated to some greater rank. It does not matter if you wealth or money is gleaned by criminal enterprises, or “hard work”, or luck nepotism or legacy. All the ill and wayward society cares about is that you are ‘rich’ and then you are ranked among the chosenfew. The masons who build grand buildings and vaulted ceilings that house todays financial titans were smart and gifted artisans, – yet who knows any of their names? Today Amerika is conditioned to adore wealth. It does not matter if that wealth is won by jackass entertainment, outright thievery, thuggery, murder, exploitation of religion, or any criminal enterprize. As long as you have cash, you are elevated to Olympian ranks and adored because money is the single metric that defines success for Amerikans. If you have money, you exist, and the more money you have the more vaunted is your existance. This metric is false and damaging but it is the only metric that matters in Amerika. Here I think we can learn from our European and old world cultures who are not so focused on the simple metric of monetary wealth.

    Amerika is a society where criminals, Wall Street thieves, gangbangers, murderers, charlatans, jackass reality series entertainers, and other socially and societally worthless freaks are elevated to the realms of stardom, and artisans, artists, innovators, inventors, partical physicists, and other hardworking individuals are relegated to positions of inferiority, because by wealth metrics alone, – these individuals are percieved as somehow inferior, or in someway lesser human beings.

    Our principles, ethics, and perceptions are wildly distorted, polluted, and toxic.

    If money is the only metric, – let the robbing and killing begin in earnest, and let us all see who among us is rich and who is poor.

  119. Bret had it right.

    Most people have no idea how much smart stuff needs to be done to keep them in (relative) comfort and plenty, and most of them couldn’t do that stuff to save their lives.

    It’s imperative that we incentivise those who ARE capable of these things, so that we can all benefit.

    And money is the best incentive we have.

  120. As a conservative right-wing Swede (which typically slots me in alongside center right Democrats in the US) I have the following position on this topic:

    1. I don’t mind if people become rich and think we need to incentivise individuals to work hard, for everyone’s benefit

    2. No human being deserves to live in penury, no matter how dumb or unwilling to work. Especially, no child deserves to grow up in poverty.

    3. Large social differences create divisions within society that are detrimental to social cohesion and harmony.

    4. Society need to ensure a minimum standard for all its members. This can be done by a combination of low taxes for low-income households, direct financial aid and social responsibility for key services (e.g. education, health care, housing, retirement, etc.).

    Naturally, some individuals will take advantage of this type of minimum standards system. However, to a certain extent that is the price you have to pay for a caring society.

    I acknowledge that societies are different and there is no one solution for all. One observation is that, generally, the more diverse a society is (e.g. through large-scale immigration or the existence of substantial ethnic or religious divisions) the weaker the base for a ‘caring society’.

  121. Perhaps “need more math and science students” has nothing to do with it; perhaps people call for more math and students because we need proof more people are “smart” for those who have to sort us into the “hire” and “don’t hire” buckets.

  122. This was a good post. Reminds me of the movie called Jerry McGuire when Jerry has a bad pizza and starts something of this sort. Economics sometimes do get into deep philosophy but I guess things have been this way since the departure of dinosaurs perhaps…

  123. I am just gonna go and put this out there. There is no luck, you choose your potential major and minor experiences before incarnating. Some choose to be rich and others to be poor, not because anyone wants to be poor or rich, but because of the valuable lessons that are learned from experiencing either. And no this shouldn’t lead to arrogance realizing that you chose, because we are not separate, sure this could lead to arrogance if you continued to think you are separate from everyone else, but your not. The poor are the right hand and the rich are the left hand. They need each other for the experiences provided. People really need to start thinking deeper and more retrospectively then just, its all luck. Its not, wake up people, you are so much more then this one life.

  124. You know people love to talk about China. Even the great pundits love to tell you some fact about China. Let me tell you 99% of the people who haven’t lived in China (that includes the journalist who spent 2 weeks or less in a 5 star Hotel in Shanghai or Beijing) have absolutely NO IDEA what they are talking about.

    You know why most of those Chinese died in that earthquake???? Poor building construction. They have similar size earthquakes in Japan and no one dies. Why? The Japanese don’t cut corners on resources and quality so some government official can walk away rich. There were places there in Sichuan where hundreds or thousands of school children died in a middle school and less than 2 blocks away was a Government administration building without hardly a crack in the wall. And it happened over and over again.

    Do me a favor people…………If you didn’t live in China at least 6 months shut the fudge up about it.

  125. I think Tolstoy had something to say about causality in War and Peace. His take was that Napoleon only thought his actions led to his successful campaigns.

    I think we subscribe too much to “great man theory” believing that people work in complete isolation and that networks do not contribute mostly to success.

    Separately, the morality at play lately is simply I take what I can get in salary. There is no social commitment or sense of shame. As such, there should be no shame if the rest of us rise up and take back. It is the same ethic.

  126. you’re doing a fine job. most impressed by your 12:12 post.

    agreed, jake chase and, as always, james excellent posts.

  127. Oskar – with all due respect to your political self-positioning, you would be seen as a left-wing radical in the US.

  128. I think you are wrong.

    Virtue is a intrinsically individual, one-person-at-a-time, one decision at a time.

    One dictionary definition “conformity of one’s life and conduct to moral and ethical principles; uprightness; rectitude”.

    The basics are pretty widely agreed, variously expressed, and endlessly debated in detail, but more or less boil down to something like – tell the truth, keep your promises, do your duty (voluntarily assumes obligations), deal fairly with others, “walk the talk”, etc

    Whistle-blowing is not public virtue. It is an individual doing their duty, living up to their commitment, etc.

  129. You literally couldn’t be more wrong. Nobody worked harder than the cave man. People 100 years ago worked “harder” than they do today. It was not labor that brought people up out of bondage to the soil. I wasn’t the one that conceived of and built DOS, although I do enjoy its benefits, for a modest price.

    Ideas and organization advance human achievement, not “work”. Labor is by and large the execution of an idea, not the other way around (that is, labor itself doesn’t lead to ideas or the organization necessary to implement them). It’s a pleasant-sounding delusion to believe that general economic redistribution can lead to positive outcomes.

    While it’s true that outstanding success (e.g., Bill Gates) is frequently attributable to luck, more limited success (e.g., a typical physician) is due to effort and skill.

  130. “Not only are you assuming responsibility with “There is the obvious fact that a person’s income as an adult is highly correlated with his or her parents’ income” but you are also completely releasing them of theirs.”

    Well, I don’t know if James has any children, but if he does I hope he will teach them what “correlated” means and how it is different from a causal connection, and how complex events like personal income can flow from multiple interacting causes.

    Maybe he will even teach them not to take their own privileged background with relatively wealthy and well-educated parents for granted. I for one would regard that as a positive development.

    Some people seem extremely resistant to being asked to see beyond the triumph of the will. But sometimes you work your heart out in very hard circumstances, do everything right, and lose anyway. Don’t take it personally when that happens to you, and don’t take it personally when it happens to someone else either (i.e. as a reflection on them).

  131. Measured against other nations, the US ranks very high in charitable giving by individuals ( blame that on Puritanism I’d guess). However, the US doesn’t do as well in providing gov’t funded safety nets.

  132. That is well said by Chris. Limited success seems to have good correlation with effort and skill. Given that one is adequately educated with decent skill-set, the outcome could be described by a probabiliy description. (The horizontal axis would be salary). So, at the extremes, the probability that you fail miserably or do as well as Bill Gates, is very small. This is similar to the risk management theories in which they say that 100 year event is very rare. I feel one should focus on the middle of the curve at the least for a better future because everyone wants progess.

  133. The idea that one’s station in life is purely (or mostly) a matter of luck is just a convenient assumption for a thought experiment.

  134. There is a distinction between pure luck and positioning yourself for success. In the book “Outliers”, the author speaks of people like Gates and the Beatles being at the right place at the right time. However, they were only made iconic by taking advantage of the opportunity by their readiness and following that up with hard work.

    As the previous posts suggest, their lives one in a million events due to extraodinary times. However, these situations play out in more regular intervals all the time

  135. Gates’ grandma used to dangle chocolate bars as incentives for him and his friends to win foot races. The Beatles were at the right place and right time and diligent for 30 years. :)

    So far on the thread we’ve had the nature/luck discussion. Nurture… aren’t we forgetting something? Dangle the chocolate bars!

  136. I would bet that most people here don’t give the majority of their income to charity because there is no guarantee that when they happen to fall through the cracks, the same will be done for them.

    I gladly pay unemployment insurance for the comfort of knowing that unemployment can come to me if I get laid off.

    Charity is not a guarantee.

  137. Why do we value hard work – ask Silent Cal:

    “Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan, ‘Press on,’ has solved and always will solve the problems of the human race.” —Calvin Coolidge

    Talent and genius are purely nature. Persistence is the only one within our ability to control. Admittedly, there are unlucky souls who did not win the “gene lottery” and have a natural dearth of industriousness or who had their natural propensity for hard work wither on the vine for lack of nurture.

    I submit that there is a great degree of luck evident in all success and bad fortune can happen to even the most diligent. However, rewarding persistence is perhaps the most equitable of all possible schemes for allocating scarce resources.

    Otherwise, just roll some dice…

  138. I’m sure that’s a nice religion to follow, but it’s cold comfort for children born in poverty who die from disease at 6 months; a very valuable lesson they’ve learned, indeed.

    Such religious and spiritual ideas are always inadequate for dealing with the big messy breadth of reality as it actually is. They’re comforting to believers, but such believers always edit what they see to force it to conform to their beliefs. Thus, the person who believes in absolute pre-destiny and reincarnation conveniently overlooks the millions of lives that end senselessly, brutally, victims having really gained nothing from having been cut down. The believer either has no experience with, or has averted his eyes, from the lives of countless people who are harmed by the impartial cruelty of luck, chance, and circumstance; he places himself at a distance and twists what he sees around to support his comforting belief system.

    You need to wake up, and realize that this one life is so much more than a conveniently packaged metaphor. This is as real as it gets. And it counts.

  139. “. . .there is a cost to society to provide a safety net. I’m not making a judgement – society needs to decide what is “worth saving” and what is not, but for every reaction, there is equal and opposite and so forth.”

    Most Darwinian corpratists also think that “just because I’m rich doesn’t make someone else poor”, which is the other half of your darwinian equasion they always forget. Survival must be affected by limited resources for a “cost” to be incurred to survival of a species.

    Also, we’re a cooperative species, and for survivial of a species, not every single member of that society needs to be the top/best/brightest. Lets take an ant Colony for example. Imagine if an ant colony decided that the Drones (which cannot reproduce and are fairly stupid among the ant colony) weren’t worth feeding because they weren’t smart enough. All the sudden, none of the work would be done to allow for the continuation of the colony.

    Now, i’m not saying that we are analagous to ants directly, and this is a simplification, but arguing that “survival” is as basic as “only the the smartest reproduce” is a gross mischaracterization and misunderstanding of what “survival of the fittest” really means.

  140. You sound like Margaret Thatcher. I suppose you’d applaud her claim that “There is no society.” The blinkered insistence on seeing all actions strictly from the perspective of the individual is what got us into this mess.

    Individual acts aggregate to social action. You, as a human being in society, bear responsibility for the nature of the society in which you live. Your private virtues are a necessary but not sufficient condition for public virtue.

  141. Such a struggle of all against all. If we take James Kwak’s basic assumption that talents are distributed radomly throughout the population–where? who knows?–then I think we might be able to agree that masses of people ought not be overly restricted by the chance circumstances of their birth.

    I don’t think we can say this today, and we seem determined to move in the direction of more and more restriction, largely because various interests–not all equally powerful–have determined that doing so improves their own lots. We seem to have bought into–perhaps been led into–a series of zero sum calculations, where the gains of some necessarily spell the losses of others.

    This seems peculiar to me, this idea that restricting people in the development and exercise of their talents should be a good thing in a “free market” capitalistic society.

    Perhaps the problem is allowing “competition”–the fight to the death– to be the universal controlling mental paradigm, rather than a more liberal entrepreneurialism that seeks opportunity for growth and (dare I say?) “progress.”

    We only pretend, in the US today, to be concerned with “growing our economy.” Our definition of growth seems to have been a “competitive” fight to the finish, with predictable results.

    I remember the discussions about the fiscal stimulus. It was determined there would be one, but no one could seem to come up with really good ideas for what to do with the money. Kind of sad, really.

  142. You know what happens when you “assume” – you make an “ass” of “u” and “me”. You may wish to read the post before cracking wise about it.

  143. That remark is the result of a combination of intelligence, ignorance, and unreflective bias – atypical of you. This particular hypothesis has a great deal of empirical support (Gladwell barely scratches the surface).

    Besides, Albert Einstein’s greatest intellectual power (one that he used to revolutionary effect) was his ability to create thought experiments that cut to the chase of a problem and highlighted its crucial aspects exactly. He was known for his relative weaknesses as mathematician and experimental physicist.

  144. I completely identify with “There exists a certain threshold where a smart person would rather subsist than participate in a specialized economy.” Especially a political economy that continues to ignore the economic and social destruction being caused by the unwillingness to value ethics. I must also partially disagree that “Crossing that threshold with a policy imperative is probably bad for society as a whole.” Not if members of a democracy can establish a well-informed majority consensus. Unfortunately, I continue to come to the same conclusion that a majority of people are angry, but not so angry with the current system that we are willing to make the necessary sacrifices to effectively achieve change.

  145. Read the literature. Look at the world around you. Societal redistribution of some wealth balanced with an organic reward structure works quite well in those societies where they’ve tried to find a reasonable fulcrum point for balancing outcomes on several dimensions (income, education, environment, enrichment, entertainment, etc.). Examples of imperfect, yet, “better-than-America” (on what metrics?) social arrangements exist right in front of you.

  146. Well put, Milo. As Krugman wrote in a blog-post responce to a reader’s question, “Economics isn’t a morality play.”

    If we have “free will”, we are free to choose not to play the economics game. But, even free will isn’t absolute in the sense that there are no unknown limiting factors or hidden behavioral drivers (eg, the influence, by example and/or genetics, of alcoholic parents on the probability that their children will develop addictive behaviors that dominate their lives)

  147. Wise words! But how much of a person’s persistence comes from a strong self-belief? And are not the roots of a positive self-belief planted deep by supportive parents – the ones that don’t tend to call their kids stupid?
    Gladwell seems to support the thesis of persistence in his 10,000 hours chapter.
    As is said, “Nothing great is easy.”

    p.s. is this Post going to generate more comments than any other one? Wonder why this touches so many?

  148. Actually, taxpayer, your example is not very good. The investment in time, physical energy, money and emotional energy required to become a doctor is so high precisely because the rewards are so certain, once you gain entry into the “club”. The members of this club have invested a lot of money in ensuring their certainty (likewise the other professional societies whose licenses to practice have legal or quasi-legal-accountants-standing).

    I’m not judging doctors, here. I’m just pointing out that the CAPM (the economic version of a more general risk/reward conceptual scheme) is not a very effective conceptual model to apply to human behavior generally, especially if you want to inject a moral dimension into your assessment. Taking on huge risks doesn’t “justify” huge rewards; it doesn’t even “explain” them. High risk is likely to be associated with high reward (and with total loss, btw), but, there is no causal relationship between them. In fact, this particular model or paradigm was developed to explain events in a very small universe of discourse, but, has achieved some sort of mystical standing as a one-parameter law of the universe (probably as a result of 30 years of B-school preaching).

  149. Malthus didn’t discover a “natural law”. He discovered a statistical relationship between birth rates and population growth. Malthus’ “law” was an accurate description of the cycle of population growth if left unchecked by disease, famine, war, pestilence and natural disaster before the industrial revolution. But, increases in productivity have disconfirmed this relationship since roughly 1800.

    Neither did Darwin discover an immutable law of nature. Evolution is not about survival of the “strongest”; it’s about survival of the most adaptive (the “fittest” for a given environment). Given advances in science and technology and the possibilities evidenced by research programs currently underway, the practical limits to sustainable populations haven’t even been approximated. The problem isn’t too many people, it’s ineffective distribution of the outcomes of production. It’s not a zero-sum game, yet.

  150. Point well taken; life could be a lot worse and still be ok. Yet, “happiness” seems to be a relative state. We are “happy/unhappy” relative to our local circumstances. Your 5,000 sf house may be large by standards in New Guinea, but, it may be the smallest house on the block. You may vacation in San Maarten during the Winter and Nantucket in the Summer, but your neighbors may own houses in Aspen and Cannes. In Ethiopia, I may have a well with a pump, two wives, three sheep and a ram, four cows and a bull, but, you don’t. Who is happier, me or the folks with houses in Aspen and Canne?

  151. Electricity follows the path of least resistance, Charles. The reality is that many of our most gifted students have been comforted by that “risk/reward conceptual scheme”. Namely, if you work hard and go to school until you’re 35 learning a valuable trade, you will make a good living (physician). So the decline that I worry about is that many of the gifted hard working students will be attracted to the shorter path to financial comfort that our society currently rewards. I’d rather have the “best students” looking at my EKG than looking at my retirement portfolio. And getting paid well to do it.

    By the way, if you’re defining “huge rewards” as a physician’s salary, then I’d love to hear what you call a CEO of a health insurance company’s salary. Or a hedge fund manager’s salary. Or a malpractice lawyer’s salary. Or a Goldman Sacks executive’s salary.

  152. Nice post; quite nice, indeed, StatsGuy, but, although I agree completely with nearly every sentence in your post (individually and combined), I find your view of the role of government, as expressed in your final sentence, too narrow, even though I agree with it. I didn’t read James’ post in quite the same way, i. e., as highlighting the dichotomies you note.

    You may recall that Berlin’s paradigms of positive and negative liberty are Plato’s Republic and Aristotle’s Polis, respectively. In both cases, a social contract was established to govern a civil society, and the (very large) differences were about who should govern (the philosophers or the citizens), how (but mostly about who) and the source of government legitimacy (“philosophical wisdom” or “the citizens” themselves). This social contract makes society possible precisely because it’s a social contract, not merely an economic contract or a social contract only in the sense that a broader contract is required within which to establish an economic contract (“let’s agree to reach an agreement about economic matters” only). Hence, broad questions of equity are core issues for governance. Such issues as who should receive medical care, as maintenance/preventive, emergency or even “elective”, whether there should be a social security program or public education, or should fire fighting departments be private or public, are not resolvable by an optimized economy, even when governing bodies function properly and wealth is, practically infinite. This failure of wealth to address the matter of the greater good is evident in the oil-rich kingdoms that have progressed materially, yet, the quality of life is suboptimal (even by the standards of the governed – ask enough of them to get a random sample).

    The amount of wealth doesn’t obviate the question of its distribution, neither does it affect its allocation in any necessary way (greater wealth doesn’t imply more or better music or statuary). This question is simply not an issue of economics alone. Price is a marvelously efficient resource allocation tool, but, it works only on those items for which prices can be determined.

  153. That’s the nature of risk, isn’t it. You win some; you lose some. Sometimes, you win big; others you lose it all. The correlation is only rough, as you point out, and it’s only a correlation, not a causation. The goal of “risk management” is to maximize potential returns and control the associated risk, or, as you point out, the best situation is to decouple risk from reward completely. Hence, protected cartels, legislated monopolies and legal oligarchies – skewed and rigged markets.

    I also think that the anger of the American public resulted from the subconscious assumption that risk and reward couldn’t be decoupled without some collusion between both economic and political agents, which is regarded as a violation of the social contract on which this civil society is founded. In many nations, this wouldn’t be a fairness issue, just a matter of envy and resentment at accidents of birth that placed political largess out of reach.

  154. Charles, to quote “I don’t know if it’s because of my genes, or because my parents brought me up right. But whatever the cause, I didn’t do anything to become smart or hard-working.”

    I am responding to this point. I completely disagree with him. I did something very specific to become hard-working — I sacrificed a lot! James is very dismissive of the sort of sacrifice that many hard-working people have made. It’s both rude and idiotic to suggest that hard-working people did nothing.

  155. Just catching up on the comments.

    I completely agree that we are in a phase where we have allowed governments progressively to take too much control. Life has been too comfortable for us to bother to get involved, perhaps?

    But what has been visited on society as a result of the power of vested interests, esp. the financial sector, is making middle-class America (and Britain) very uncomfortable. If this doesn’t produce significant change then I will be amazed.

  156. I don’t think you’re right. You may have sacrificed a lot. You may also be hard-working. But sacrificing a lot did not make you hard-working. Having the capacity to work hard is like being tall — it’s something that you acquire through no virtue or fault of your own. You may choose to use that capacity, and in the course of using that capacity you may sacrifice other things in life. But you did not consciously choose to have that capacity, nor did you do anything that made you hard-working, any more than your height is the product of your conscious effort.

  157. I do not know about modern China, but traditionally the unfortunate were cared for by their extended family, which could be a huge wealthy organization. If you became a beggar, it meant that even your family would not take care of you.

  158. “I’m willing to acknowledge that morality simply isn’t a factor when it comes to compensation. Seen from a utilitarian perspective, whether hard-working people deserve more than other people is a distraction. The key issue is that to maximize output in a more or less free market system, it has to be that way, since labor is supposed to be paid its marginal product.”

    And the capitalist bosses and landowners get the rest? Yeah, that’s distributive justice.

  159. James,
    As a geneticist I may agree at the absolute most basic level. Many breeds of dogs are bred specifically for their personality.

    However, I really have to disagree about free will. The choice to sacrifice or work hard is not “given to you”. It is a conscious decision that many choose not to make. That is where the agreement on this post breaks down for many.

  160. Watch it Jay. Charles will now ask you to re-read the post since you missed his point completely.

  161. Perhaps, but I do think there is a diminishing return to dollar spent towards the opportunities given a child. I would guess that if all children received a baseline level of access to developmental tools (food, love, teachers … etc.) we all would be much better off. Of course, those children would then need to have access to opportunity to actually be able to make their contribution. If the access is ultimately not available … I guess the only lesson that would be learned is learned is “why bother.” I think the greater issue is the societal loss that occurs from depravation of access.

  162. And in the USA we all have the opportunity to become more hard working, smarter, better positioned for a little luck, and so, become capitalist bosses and landowners.

  163. Isn’t that what taxes/wealth redistribution do? How do “we” invest in infrastructure and education without taxation? Giant undertakings such as infrastructure and education take giant amounts of money and effort from giant organizations such as government.

  164. Easy. Clearly defined taxation. I would gladly pay a 5% “invest in American education and jobs training infrastructure tax” if I were guaranteed that’s what it would be used for without greedy hands in it (see Social Security for an example). One of the huge leaps of faith that many on the left have is that government will do the right and effecient thing with their tax monies. I no longer have that faith.

  165. But here in the US the wealth was redistributed – UP.

    The rich got a lot richer, and the rest of the people have been reduced to peons by borrowing to maintain their lifestyle.

    Peonage: a situation the US should get used to, the way things appear to be going…

  166. And your metric for determining the nature of “lazy thinking,” society-wide, would be what? I’d start with religion, but I understand that isn’t everyone’s first choice.

  167. Almost every theoretical question in this very long discussion receives a brilliant treatment in Ronald Dworkin’s 1982 series of essays, What is Equality?, especially the essay “Equality of Resources.” They have been collected in his book “Sovereign Virtue”, which analyzes the complex relationship between equality and individual liberty. We can have both!

    James, I first encountered the essay sitting in on Jules Colman’s class in Yale Law School back in 1989: you should take advantage! Dworkin is the great thinker on this subject, and I’m surprised that in 200 comments, no one has mentioned him.

    Maybe our problem is information overload: really valuable work gets swamped…and so we keep trying to reinvent the wheel. In any case, seek it out and enjoy a great mind at the peak of its powers.

  168. James, I do agree with you when it comes to being intelligent or having a reasonable amount of foresight and planning to chart out your future- they’re genetically derived. I’m a living example of that. My family is filled with achievers- right from my parents to my grandparents, my cousins, relatives almost everyone is very well off with most of them serving in senior management and director positions at fortune 50 companies.

    I’m not there and I know that I’m not even close. I know what I want and I’m perfectly aware of what my intelligence can deliver (thanks to my genetics). BUT, luck does not favor me, at least not now and needless to say, I’m not even CLOSE to what I want to be. What can I do? I’ve two choices.
    1. I can TRY to substitute a part of it by hard work. It is a CHOICE driven by a necessity. Your choice to work hard is ONLY dependent on the amount of ambition and zeal in you. But of course, not that all attempts would succeed.

    2. I can sit back and blame my laziness on my genes. But that’s not going to get me anywhere either.

    Hard work doesn’t need any capacity. It just needs practice, patience and perseverance.

    You’re right- One’s mindset, ambitions and goals are ENTIRELY dependent on the environment, IQ and intelligence of one’s parents and the resources they’ve access to. For example, when most people have enough money, they might choose to buy a car or a house, I would on the other hand, love to explore Europe with that money coz I don’t believe in inventing the wheel again as we already have houses. For me, personally it’s about doing things I, or for that reason, my parents have never done. In the end, I believe that I’m going to be intellectually better off touring Europe than buying a house now. I may pass off as an arrogant guy whom people would love to flame, but this is what it really is!

    And on the other hand, I would also have to work hard and have a fair amount of luck to get where I want to end up and therefore, no matter how much money I amass, unless I reach there, I’m not going to rest. I’m not going to take my focus off the goal. I’m probably a hybrid- well off but still needs to go a long way. Call me greedy if you want, but humanity and more importantly, economy would cease to exist without the basic human nature- GREED. And yes! I do my bit for the society as well.

    Parting quote: Luck is when preparation meets opportunity.

  169. As a system, Calvanism worked pretty well. If we tear it down, a competitive culture will recreate Calvansim to our detriment.

    The only solution is a world fascist state, where a few elites have the power to control the distribution of wealth. Only then can we hold the forces of Calvinism at bay.

  170. I am not much into biographies but one genius who definitely lacked success even though he sure was persistent was Van Gogh and I have vague memories of lots of persistent geniusses who didn’t make it. Where they all “flawed”?

    – but maybe measured by that persistence mantra Van Gogh suffered from a surplus of persistence, was too single-minded, too stubborn? hadn’t gotten the work-life-balance right? was a work-aholic? I wonder how much money there is in mantra-spouting …

    If I were an employer I’d sure love the persistence mantra — no better way to get my underlings to give me more for my buck and to keep them from looking around and maybe re-evaluate the situation.

  171. yesterday heard news like in bad news from the small businesses around here and realised that those small businesses get squeezed and robbed front and back from the big ones whose products they are selling – my examples are the local T-Mobile shop and a self-employed excellent electrician cum plumber – after hearing their stories I understood how on the spot James Surowiecki is – see quote below. My conclusion is those self-employed small-small business owners will get killed and squeezed and bled white without a lobby/a union – name it any way you want and they have to get us consumers on board – I am (almost) sure a lot of us would be glad to help if they’d band together and publicize the heinous tricks the devious big ones are playing on them.

    “The real competition in this price war is not between Wal-Mart and Amazon but between those behemoths and everyone else—and the damage everyone else is incurring is deliberate, not collateral. Wal-Mart and Amazon have figured out how to fight a price war and win: make sure someone else takes the blows.”

  172. Most of my life I’ve been advocating this view.

    It doesn’t take much knowledge to make money, just a little luck and even less scruples.

    A fitting challenge to a lucky person (with as you point out a solid education, work ethic, and previous big win at the genetic lottery) is to make the world a better place for everyone.

    True wealth is not material gain of the individual, but enriching the beauty of harmony and richness of diversity of the community in which one lives….and a whole lot of loud music to celebrate with.

  173. This is as real as it gets. And it counts.

    Thank you!
    and on top of it all “we” should stop feeling the need to always refer to children to prove our point: Love your neighbour as you do yourself (or however that translates) does not exclude any age-group and is even acceptable to former communists if you talk about it without proselytizing for the church.

  174. Oh, come on, Charles. It is one thing to assume for the sake of developing a theory of justice that everything you have and maintain is accidental.

    But how does someone who discounts habits of action to this degree actually live their life?

    I love philosophy generally, but I think you are giving it way too much credit with the Einstein remark.

  175. The idea that one’s station in life is a matter of persistence is just a convenient assumption for a thought experiment.

    i.e. assuming that any one factor is THE factor determining all the rest is always dead wrong but it is a beautiful tool to make society members feel the way the proclaimer wants them to feel, always deficient, always lacking, always somehow not up to it.

    The ones proclaiming luck dream of docile easy to command and to trick or cheat rather indolent (not feeling the pain) individuals.

    The ones proclaiming persistence want the driven individual willing to not noticing the signals of his body. and so on and so on

    … and all want to make you feel guilty that you are not the person they want you to be – just like mom and dad or teacher and priest once might have done …

  176. Thanks for this humble post James. We agree fully. I’d like to point out my experience of the equation which is that smarts and hardwork are not the full picture because what I’ve discovered is that those qualities are great for KEEPING ones wealth status. A different thing from earning it which I’ve also often discovered is largely down to luck. I’ve had luck and I’m happy I’ve seen how random it is.

    Lastly if it’s about smarts and hard work then why is the US up to its neck in debt to a developing economy. Or can we not aggregate this?

    So many wealthy people are clouded as to their ability. There’s only a handful of people who I know can claim they deserve there millions. One is a close to me and I can verify he’s also little more than a farmer when it comes to intellect outside of making money.

  177. The perfect solution to this discussion would be the implementation of the so called Tinbergen talent tax (first economics nobel prize winner). The main idea is to tax people on earnings capacity instead of earnings. IQ and schooling could be proxies for earnings capacity. A lump sum tax wouldn’t distort economic efficiency and would improve efficiency if we lower marginal tax rates on income. What do you think?

  178. There are plenty of smarts out there so that competition among smarts should keep their relative earnings down but being of course the smart smart, the smarts have created mechanism to avoid being squeezed. The Smarts Union has among other delivered the of intellectual property rights. What would many smarts earnings be without patents? And if you look at it most of those who are awarded patents have just the luck of walking the last few steps on an idea that has been cooking for quite some time. And what would many smarts earnings be without their Union fighting against the powers of the shareholders? Question: Do we now need Maggie Thatcher for some smart Smart Union busting?

    Look at what the smarts have done in the financial industry. They have induced the creation of some new artificial standards like credit ratings and credit scores and against which they can now trade to capture a margin that did not exist previously. Is that not smart? It would not be so bad if they were art dealers creating value through classes of art appreciation but the problem is that finance is not a final good but an intermediate product and so if the financiers capture too much of the value, then the entrepreneurs who we need to prosper find it more difficult to prosper.

  179. Charles
    just remember how nice it was when it was still possible to sit on the steps of the Parthenon on an Akropolis lit by nothing than moonlight which would turn the marble blue and the city lights down there would sparkle in the waning heat of the August night – I still had that incredible luck in the 70s more than once …

    now Athens has grown to the point that the wonderful building and lots of other stuff has to be protected and so it is everywhere (I still saw the Mona Lisa without bullet proof glass and stood before it by myself without appointment in 1962 on a lot of Thursdays and Sundays when museum-entrance was for free in Paris)

    – maybe resources can be managed to the point that we can all live a comfortable couch potatoe life interrupted by excursions to the fitness center and sight-seeing tours through the country in fully climatised coaches.

    So to talk about sustainable populations not even having been approximated leaves out a lot of stuff that is important to me and even if it should still apply to the US in Europe a lot of our wonders have reached visitor densities that make the encounter with them such highly managed and orchestrated one.

  180. First off, did you really just say that we should try to improve the possible outcomes for the unlucky? How do you determine which people are at a disadvantage because they’re unlucky and which are at a disadvantage because they just don’t care to try and better themselves? How about kids who are lucky enough to be born rich and then blow all of it. Now that they’re poor does that make them unlucky?

    Second, I don’t think that Thomas Edison would agree with you that luck plays a factor. How many times did he fail and keep trying before he finally invented the light bulb? How about Karl Friedrich Benz, inventor of the automobile, was he lucky? These two men made life better for the world because they were smart and they were hard workers. If you don’t think they deserve more money than the guy who runs the cash register at wal-mart then there is something not working quite right in your brain. You ask why smart, lucky people deserve more money than low IQ, poor people. I ask why they don’t when they improve quality of life for the rest of mankind.

  181. Per
    never thought that you of all people would buy into such an oversimplified view on intellectual property rights

  182. Wow, what are you talking about James? Hard work takes time. I made the CHOICE to spend my time working instead of screwing around. I didn’t genetically have less free time than other people. I CHOSE to sacrifice my free time to instead work.

    The way you diminish this is just the most incredibly insulting thing I’ve ever encountered on the blogosphere. What is wrong with you?

  183. A friend sent me this link and I have to admit that I absolutely cannot believe that people think like you do. My dad was poor & I started poor. I worked my butt off (maybe I’m smart) and made a little money. Now you think it should be given to others because I don’t deserve to reap the rewards of my work?

    Let me make 2 suggestions: (1) that you send me all your money and I will give it to the many poor people I meet when I volunteer my time to serve and minister to them; and (2) that you move to Cuba and enjoy the communist lifestyle.

  184. This sounds a bit like something I have been thinking about lately. How about, instead of college loans, the gov’t subsidizes college education, in return for a small percentage of future earnings? I. e., the subsidy is an investment in the student, buying equity.

    As for a lump sum, if it came up front it would be prohibitive, and would discourage ambition in the youth. Better to collect it over time, not?

  185. Do smart, hard-working people deserve to make more money than lazy dumbos?

    Yes, as a rule. OTOH, the Unabomber was smart and hard-working.

  186. Minor philosophical point: You cannot be lucky to be born with certain genes, to certain parents, in a certain time and place, because before you were born you did not exist to be lucky. OTOH, you cannot deserve the circumstances of your birth, either, for the same reason.

  187. Thank you for the reply. I’m sorry I wasn’t clear, I should have clarified a few things. I am a 28 year-old professional. Statistically, my wife and I are in the 10% of income, which is wonderful. Yet, I don’t even buy that stuff because it is NOT essential. I am not entitled to them. You are right that I spend money on things that aren’t essential, but only because I can easily afford them.

    I know people who are being foreclosed because they bought a home they couldn’t afford. They felt entitled to be owners of the home in a nice neighborhood, have nice clothing, cable, new phones, cars, etc and put it on a credit card and got an interest-only loan. They haven’t worked hard and are extremely lazy. Oh an they spend money going out partying all the time. Can’t I still complain how poorly they spent their money? How they need to wake up to the fact that half of America has a below average income and they are part of them. That means they aren’t entitled to those things.

    Genetics or not, they made a choice as to how to spend their money, right?

    Please feel free to rip this apart because, as a progressive, I am not proud to feel this way, but it just seems rational.

  188. Brian
    thanks for your reply
    there is a book by George Orwell called the Road to Wigan Pier and there are also his notes to Wigan Pier. In these books he looks closely at how people on the dole spend their money and draws some compassionate conclusions why they rather spend it on a totally unnecessary pair of fancy shoes instead of the oranges which they should buy to stay healthy. It taught me a lot.

    I see the same behaviour you do but I always keep Orwell in mind and thus find it a lot harder to judge. Wikipedia has links to the text of the book but doesn’t say whether it includes the notes and I do not remember whether the point which changed my view of it in the book or in the notes.

  189. Good evening Silke,

    While trying to track down the version you referenced, I found this in an amazon review of Wigan Pier, “Read “Wigan Pier,” and for more information, read Orwell’s diary he kept during his trip to the north in Volume 1 of the Collected Essays. ”

    Do you think you read it in a version of this book and not Wigan Pier itself?:

    Thank you for your help.

  190. Do people deserve to be awarded for specific behaviors? Society says so, otherwise we wouldn’t have Pulitzer prizes, Peace prizes, Tonys, Grammys, Emmys…and on and on. So if a person’s behavior is financially more responsible (ie. they took the time to learn to manage finances properly) or results in some other desired effect, why shouldn’t they be awarded for their efforts?

    That is not to say that the disparity between those awarded and those not awarded should be a ridiculous gap as it is now, or that those who have exhibited morally poor behaviors should be allowed to be awarded, as is currently done.

  191. Good evening Brian
    I read it ages ago when English books were still really hard to get in an Omnibus sold by a legendary outfit called The English Book club so I wouldn’t know, but diary sounds about right. And his essays are a treat in any case. Even if there is some doubt now whether for example “Shooting of an Elephant” is entirely non-fiction it tells you all you need to know about the difficulties soldiers/civil servants face in foreign lands.
    But even though I am glad for everybody who discovers this unique writer why don’t you check Wigan Pier out online first:
    it is here
    or even better on this Russian site which has it all in one piece so it is easier to scroll through
    I happen to have the book you linked and would gladly check for you but the book has already been moved to my new apartment and it will take me quite a while to unpack.
    I guess life in the US is not as dreary as this but the basic pattern probably still holds:
    “Whole sections of the working class who have been plundered of all they really need are being compensated, in part, by cheap luxuries which mitigate the surface of life”

  192. Joshua, the same culture that gave you, Thou shalt not steal, also gave you jubilees and told farmers to harvest a square field in a circle, leaving the rest for the poor.

  193. Well, if the idea of the logarithmic utility of money is right, then maximum utility is achieved by equal distribution.

    Even so, consider a property with a magnificent view. Is utility maximized by allowing only a few (the owner and friends) to enjoy that view?

  194. The problem with too much wealth is that it causes too little wealth for others. This is bad for the poor people and for the economy. Oddly it is probably bad for the rich. It is probably better to be rich in a rich country with income protection for the poor than in a poor country without that.

    All the rest is rationalisation.

  195. Both of these men were exceedingly lucky. They made incredible gambles, spending large parts of their lives working on outlandish, borderline insane technologies that promised to change the world. The lightbulb could have proved impossible to make. The motor car might have proven so expensive and difficult to maintain compared to a simple horse and buggy that no one would buy one. It is important to view certain types of hard work as the risks they are. Bill Gates dropped out of Harvard to start Microsoft. This was a major risk for someone in his position at his age. All business is gambling, and no one wins the lottery that doesn’t buy a ticket.

    I strongly believe that wealth does not flow to the smartest, or the hardest working, but to the smart and hard working people who who have the courage to let it all hang out there. Either by investing countless hours in a crazy scheme like the lightbulb, or computers, or by investing hundreds of thousands of dollars, and years of their lives in schooling, or by committing fraud, or theft, or other felony crimes, or trafficking in illegal narcotics, or stolen art. “Who dares wins.” (and loses too.) Our economy won’t recover until this basic natural law is reinforced.
    The current western oligarchs have managed to open up vast legal rent-seeking operations on an unheard of scale, largely by lobbying to have their frauds decriminalized, their downside risk subsidized, and the rest of the laws they break unenforced. Compared to the rest of us, rich and poor alike, they live in a strange bizzaro world of entitlement and legal plunder.

    For all us non-bankers, the only way to win is to bet.

  196. “Some people are genetically bigger and stronger making them able to dig ditches faster but that would be a marginal not an orders of magnitude increase.”

    Some people are much, much, much better at some physical tasks than others. It can be a factor of two or three, which is hardly marginal.

  197. How do you determine which people are at a disadvantage because they’re unlucky and which are at a disadvantage because they just don’t care to try and better themselves?

    It’s hard work is how you do it. You just want to work hard for yourself or for your country?

  198. I was struck when listening to several podcasts about the crisis recently how the jobless figured in.
    At these institutional venues one says WE have high unemployment. One doesn’t say there are x millions of unemployed.
    i.e. the well remunerated egg heads are saying WE have a …ment, very convenient isn’t it, after all WE are all in the same boat, do not want to leave the jobless alone in their misery. A …ment is so conveniently abstract as compared to mentioning the actual plight of actual people as in xmillions of jobless. Way too delicate for that we are, aren’t we?

  199. This very entertaining thread has proven to me that thefew, thosewhoarewealthy, are heartless, uncaring, obdurate, greedy human beings, who don’t give a damn about anyone or anything that doesn’t advance or glorify their wealth.

    Again, many criminals are smart, hardworking, and wealthy. Wealth is a hollow metric! Wealth alone does not define a great or smart or had working individual. Wealth based on pure numbers alone is a false calculation. The billionaires in the finance sector provide NOTHING of measurable value to the greater society. And I would hazard that any fool, wearing a $4000.00 suit, and given the insider access and government protection and largess bestowed on the predatorclass criminals and fiends supposedly managing the finance oligarchs would be just as successful, running these TBTF institutions. The only difference is one heartless, uncaring, obdurate, greedy human being for whatever reason, (and it has NOTHING to do with being smart or hardworking) has the job, and the rest of don’t.

    Do you people actually expect me to believe the slithering reptiles in the finance sector who piloted the entire world to the brink of economic collapse through wanton criminal enterprizes and PONZI schemes are smarter and more hardworking than the individuals who designed and build the their oppulent mansions, or their cars, or their furniture, or their artwork, or thier music, or their electonics. Your principles and your humanity are wildy blurred and distorted. It’s freakish.

    Money is not the root of all evil. It is the ‘love’ of money that is “well and truly” the root of all evil. If money is the only metric, – why not simply take it, or rob from the wealthy by whatever means necessary (Maddoff style or by more violent means) and elevate yourself to the relms of the socalled smart and hardworking deserving of wealth?

    Wealth is great if and deserving if it is won honestly and legally – but – in a world where there are no laws, – there are no laws for anyone predatorclass biiiiiaaaaatches!

    “Some day a real rain will come and wash all the scum off the earth”.

  200. You are mistaken.

    I’m too busy making money to enlighten you. Getting enlightened is your job.

    But, here’s a hint: ROI.

    Oh, and the fact that we don’t have a moral economy does not impugn the idea of a moral economy or that the solution to crony capitalism is more cronies.

  201. Thank you Silke. You have given me more than enough to read without having to get into the collected essays, given my busy hard-working life. And the free link appeals to my thrift. ;-)

  202. given my busy hard-working life

    oh I’m so sorry you have it so tough – you sure you really need all that money that you are making? and if yes for what?

    and I sincerely hope you do Orwell the honour of not READING him on the screen, at least you should spend some money on ink and paper for your printer but in my book in the end nothing can compete the sensual thrill of an actual book and a pencil to emphasize and scribble and the feeling of achievement when giving it its place on the shelve (or the dustbin) after I’ve turned the last page – (maybe the Kindle is good enough for devouring printed matter if you want to use your time well while commuting but using it in a bath tub seems potentially tricky to me)

    btw if I were poor and books would be my vice making me spend wrecklessly to the point of eating badly, would you object as much to that as you do to partying?

  203. I have a religious perspective to share on this issue, based on Hinduism. What many people call luck or chance, I call fate or karma. Yes, if you don’t believe in reincarnation, it will seem like people have good or bad things happen to them without deserving it. However, if you consider that we have all lived many incarnations before this one, then it all makes perfect sense. If anything happens to you which seems undeserved, it is really reward or punishment which you deserve based on one of your past lives.

    So if it seems that one person has better fortune than the other person, it is really an indication that the first person deserves to have a better life than the second person.

  204. Keshav
    I have always guessed that reincarnation was a friendlier model than the christian one of heaven or purgatory/hell but the way you describe it it sounds like an even better instrument to keep the “great unwashed” from protesting.

  205. I think you misunderstood me. Hinduism does not in general encourage people who are suffering misfortune to simply grin and bear it. The point of karma is that actions have consequences, and that you reap what you sow, either in this life or your subsequent lives. So if you are currently suffering misfortune, you should pursue actions which will improve your fortune.

    Now your efforts may not always succeed, but as long as your motivations are noble and your actions are virtuous, you can have faith that your efforts will be rewarded. Just don’t be so short-sighted as to think that all your actions will be rewarded or punished in this current life.

  206. you can have faith that your efforts will be rewarded. Just don’t be so short-sighted as to think that all your actions will be rewarded or punished in this current life

    seems like a lot of Western employers (except financial institutions ;-) have subscribed to that. Why else would they be so generous with the warm hand-shakes and promises of future rewards but then the “circumstances” never allow them to let act follow promise just in this year.

  207. Reagan (or his administration) helped to create and exacerbate the screwed-up incentive structure.

  208. I agree with you, Oskar. Many people are so averse to the notion of someone else getting a free ride that they will vote against their own interests. And that “someone else” is a group comprised largely of people you don’t know – and therefore larger countries and more diverse areas have a tougher time with caring acts done by the state.

  209. We, the forgotten man (90% of the population), are to blame for the clusterf!*$ that is now the “American Dream.” We lack the collective desire to question authority and demand accountability from the entrenched, clannish, political and economic elite leaders. This is a debate we need to have a national spotlight on. Why should we have to continue to live by the norms of an almost entirely prostitution based society? Some people are born into pimp empires. Almost all of us are born into some degree of prostitution. The best prostitutes eventually become pimps and may one day be lucky enough to rule their own cruel pimpdom. Many people sadly accept their state of prostitution while the luckiest (most harmful to the rest of us) are too ignorant to recognize anything is wrong.

    Nobody wants to be a prostitute. But what do we want? Do most of us really just want to be pimps?

  210. Many people are terrified of the concept of randomness. They don’t want to think that bad luck — an auto wreck, an illness, being laid off and unable to find another job — could put them into bankruptcy and/or on the street at any moment, so they convince themselves that if they just work hard enough and make good decisions, it will never happen to them. In some cases, this also takes the form of “bargaining with God” — if they are good enough, God will make sure nothing bad happens to them.

    The corollary of this position is the assumption that if someone has a misfortune, they must have done *something* to deserve it. Hence the mean-spirited attacks on this unfortunate family. Admitting that they might not have somehow caused their own problems means admitting that it could happen to YOU too, and for a lot of people, this is simply unacceptable.

  211. No. Wealth redistribution is the government stealing funds from one set of citizens to give to another. It is not an investment in any way shape or form. It is using the wealth of a few to buy votes from the poor and/or lazy. I cannot fathom how anyone could be in favor of that for moral reasons.

    Taxes for education and training programs to help train people so they can be production citizens isn’t a bad idea. However, as with most government programs, there are way too many people that use it as a way to leech off the system (ex. incompetent staff & bureaucrats – with support of the education unions, of course).

  212. “The other side of this: Have you never sat down and had lunch with your plumber or housekeeper and just been really impressed with how smart they are — especially when compared to your co-workers?”

    No. I’d have to have a housekeeper first, and while many seem like dolts at times, my co-workers are more intelligent than the average person. I guess I’m not in an area where PhDs have to resort to being plumbers or housekeepers because there are no jobs for them in academia. oh well….

  213. How is pointing out that we are subsidizing the breeding of the “weakest and dumbest” to the detriment of all of society sucking up “to the very fiends who have destroyed our financial system”? If you accept that “having the capacity to work hard is like being tall”, how is good for society to subsidize the production of individuals that don’t have that capacity? This country was founded at a time when a person either worked hard or they died. Friends, family, fellow church members would help each other out, but there was no ‘safety net’ for people to loaf on for generations. The strong, smart, hardworking, & industrious prospered and multiplied. The same traits explain why those that immigrate to the US now succeed. However, we have turned the concept of charity on its head and turned it into an entitlement that is a right. This has resulted in increased numbers of the weak, dumb, and lazy – it’s no wonder we aren’t as competitive with other nations and our economy is sluggish. Slathering on more wasteful entitlement programs isn’t going to make the US a better place. It will just add more fuel to the race to the bottom.

    BTW, the American manufacturing sector is hamstrung by unions that live by the motto “maximum pay for minimum work” and provide very little value to their employers. GM and Ford operate some of the most cutting edge factories in the world. Unfortunately, none of them exist in North America due to UAW work rules. Not surprisingly, the US workers for Toyota, Honda, etc are more productive and turn out better products than their “Big Three” bretheren.

  214. Hmmm…about 40% of my take home pay goes to “child support” – 1/2 so my own child won’t have to live in a cardboard box due to his mother’s foolishness and the rest so my 70+ yr old parents can live in their own home. About 35% goes to my own living expenses and the rest goes to taxes, ‘benefits’, and some savings. How much more do you think should go to ‘charity’?

  215. And Europe is essentially dying out because their birth rate is below the rate needed to maintain a steady population. With that goes support for all their social programs and time to smell the roses. Their values are screwed up because they value leisure time over their survival of their people and civilization.

  216. As I said in the comment I made before, the concept of reincarnation clarifies these issues greatly. Where you see pure randomness, I see a cosmic order. The family in question may have done absolutely nothing wrong in their current lives to deserve their situation, but their hardship may instead be punishment for actions they took in a previous life. Their situation is not permanent, however, since the actions they do now can still improve their fortunes. That’s how karma works: the outcomes you get throughout your life are a consequence of your actions, whether in your current life or your previous ones.

    Please note that nothing I said implies that we shouldn’t help the less fortunate among us. The thing I disagree with James Kwak about is not the fact that the “unlucky” should be helped, but rather *why* they should be helped. James seems to think that the reason we should help them is that “lucky” people often don’t deserve the good things that happen to them, and unlucky people often deserve more than they get. On the other hand, I believe that everyone always gets EXACTLY what they deserve. So the reason I want to help “unlucky” people is not because I think they deserve or are entitled to that help, but purely out of compassion and pity. In other words, I think people who deserve to have more should give aid to people who have less.

    For example, suppose that a man used to be a serial killer, but then lost all his money in the stock market and is now homeless. Clearly, such a person truly deserves his current hardship. But I still think it would be a compassionate deed to help him out.

  217. kws
    how ignorant you are …

    Moaning about the wrong people breeding too much has been popular with the simple-minded wannabe elite all through the millenia. Wherever there are written records you find somebody complaining about the poor the weak the undesirable having too many children.
    But if you really want to be worthy of joining that proud line of ancestors you have to include the “misshapen” and “mentally lacking”
    – imagine the horror if they are allowed to breed.
    but this time around please don’t call it euthanasia, call it by its proper name which is premeditated m..rder.

  218. Pity the poor plants. Except for the stroke of genetic luck that gave animals mobility, they would not get eaten by animals. Therefore, animals should redistribute themselves for the nourishment of plants before the natural course of the animals lives has been run.

    Stupid argument right? Yes, but it makes as much sense as a moral case for reditribution amongst human beings that is argued on the same basis. Look, there are probably an infinite number of ways that social organization could be accomplished. The particular arrangement we have is a contingent fact of our particular development but it has one obvious thing going for it. It’s relatively stable and people seem to be able to keep the species going in its presence. There are a lot more ways of being dead than there are of being alive. Sticking with what works and has worked for quite some time is not intrinsically a stupid idea.

    At the very least, people need to be really, really cautious about which direction they jump in if they want to change the social order. All sorts of phenomena work in concert to make communication and social cohesion possible and changing one part without looking at the whole from a vantage point of an understanding we do not yet possess is dangerous.

    Beware the law of unintended consequences.

  219. Unlike such employers, fate has a very good reason for not doling out all your punishments and rewards in your current lifetime: some of the outcomes you have in your current lifetime are determined by the actions you did in your previous lives, so fate may not have enough “opportunities” to give you all the punishments and rewards you deserve before you die.

    For example, consider a terminally ill cancer patient who is guaranteed to die within six months. If he kills someone right before he dies, there will be no opportunity to punish him in his current lifetime. Similarly, if he saves someone’s life, there will be no opportunity to reward him before he dies. So it will have to be postponed to a future lifetime.

    My key point is this: whenever some asks “What have I done to deserve this?”, the answer is never “nothing”.

  220. The point you’re making reminds me of the following quote from the declaration of independence:
    “Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.”

  221. Don’t forget the next line from the Declaration:

    “But when a long train of abuses and usurpations, pursuing invariably the same object evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.”

    The point being that as conscious beings we have the right and our obligation to improve our situation – we can’t use the “natural” order as an excuse to avoid the hard work involved in providing liberty for all.

  222. This is only valid if you assume that you only start existing when you are born. But if instead you believe in the soul, which existed before you were born and will continue to exist after you die, it becomes perfectly sensible to talk about whether your soul was lucky or not to be born as a person with certain genes. And you can equally well talk about whether your soul deserved the circumstance under which it was born as a specific individual and not some other individual.

  223. Yes, if the evils of our system should someday become insufferably bad, it would definitely be justified and necessary to fundamentally change it. But I think that the flaws of our current system are tolerable, and are outweighed greatly by the benefits. It’s human nature to dwell more on the negative aspects than the positive aspects. Thus many people fail to see that our system does a lot of good. By rewarding hard work and punishing laziness, we are a lot more productive as a people compared to other countries. But instead of focusing attention on facts like that, we tend to more often think about examples and anecdotes where the system produced bad results.

  224. I don´t write comments back about what´s happened to people, to me I don´t have enough information to judge anyone just by a news story. I do however have frustration with people, especially in my own family, who have consistently make bad decisions which lead to financial dificulties. To me, these people don´t lack intelligence, but they do seem to lack wisdom. So, I personally get frustrated that if we are going to go out to eat, or on vacation, and I want these relatives to come, I need to pay. I do get frustrated with the neighbor who took out a second, bought a boat and a pool, and then walked away from the house even though the husband and wife were still working. Why am I frustrated? Because I will be there, picking up a part of the bill. I think that´s why so many people are frustrated, much of the bill will be paid by us, without us having any say about it, and without us gaining any benefit. To me it seems like, although life isn´t fair, it used to be fairer. Now the Investment Banks and the Fed got to shake the snow globe, and the rising storm is engulfing more and more people. Maybe I´m mad because I might be next!

  225. I wouldn’t go so far to say that “The ability to work hard is something that you either inherit from your parents or that you develop in your early childhood as a function of the environment around you.” I would say that the encouragement to work hard IN THE RIGHT PLACES EARLY is a factor determined by “luck.” The doctor is formed very early- you need the right homework help and the right motivation to do well on school work as early as middle school to start on teh academic track toward a doctor, a time when you are still mentally, physically and emotionally a dependent.

    Also, a fourth factor, other than class, intelligence or hard work should be mentioned as regards to outcomes- frugality. It makes a big difference.

  226. JD is a dangerous person because he speaks truth. It is actually somewhat refreshing to hear the dark truth of the privileged classes spoken so clearly(we are all members here). Since the Great Depression it has been the primary preoccupation of those in power to avoid a repeat and to avoid the creation of a cohesive political-philosophical basis for a more equitable society which rewards, reasonably, achievement (which should be the goal), while providing good (as opposed to “adequate”) opportunity for everyone in the society. This would mean not having the rewards become the goals, and would mean being honest about the self-perpetuating nature of privilege, and the ways that the rules of the game evolve to support privilege.

    The idea which seems to find support here is the assumption that wealth accumulation is an obviously laudable goal. This says volumes. What if wealth accumulation is not a laudable goal but is actually a pathology? Perhaps the real answer to the question is that truly intelligent (emotionally as well as intellectually) and hard-working humans work to create a more compassionate civilization where the natural world is respected and where self-understanding, and therefore understanding of, and compassion for, others is a treasured characteristic. This would be a world which has a future instead of a downward spiral of violence and environmental destruction. One would think that this is pretty obvious, and one would think that, after the last year or so, the mental world inhabited by the most privileged members of the Financial/Economic sectors would have been revealed as pathological as regards the future of the human race.

    This does not mean that there are not honorable people in the privileged classes (isn’t it interesting how our language is weighted… what does “honorable” mean?) or mean and reprehensible people in the working classes. There is a great deal more gray than black-and-white. However, for a very long time societies have evolved patterns of behavior and structures which have the effect of maintaining the powerful (wealthy) in their position. Part of that is the recognition of up-and-coming members of classes not in the club. It is surprising if you find this surprising.

  227. There are some profoundly important things that have been said here.

    Want to include a few comments in a forthcoming post on my Blog. James Kwak is happy with that but mentions, technically, each of you own the copyright in your own comments.

    Anyone here prefer that their comments are not used in another Blog?

    If so, let me know and I will respect that. Email to learningfromdogs AT gmail DOT com

  228. The question is: “Do smart, hard-working people deserve to make more money?”

    The underlying question is this: “Do poor people who find themselves in financial hardship deserve our sympathy and deserve to be treated with dignity?”

    Another unstated question is: Do smart hard-working people who work on Wall Street deserve to earn more than “ordinary” people?

    IMHO a complicated set of questions.

    To the first question: My answer is a qualified yes. Smart, hard-working people deserved to be rewarded for their — honest — work and contribution to the real economy.

    As for a Bollywood glamour. We have it in spades and it is a dream.

  229. Although I didn’t have a chance to read all the replies, I’d like to put a different “take” on this:

    You can work very hard, be extremely well educated and intelligent – BUT unless you picked the “right” field of work, you can easily find yourself SOL.

    After all, if the “education” that you sank years of your life and much of your savings into is suddenly “outsourced to India” you can work as hard as you like but will find yourself struggling to stay north of the poverty line. The people who went to school for engineering and computer programming in the 80’s and 90’s weren’t “lazy” and the weren’t “stupid” but they didn’t choose the “right field.” OOOOOOHHHHH MY BAD!!! I broke my back in the wrong field…I DESERVE a life of poverty.

    The trouble is that there has been a narrowing of fields that are truly remunerative. If you were “stupid enough” not to select from the handful of career choices that have remained remunerative, you are in a world of hurt just now.

    I’m a Ph.D. trying who worked roughly 70 hours a week for 15 years in a field that no longer has any real opportunity. I’m now working 70 hours a week on a business start-up. Forgive me if I find the grandstanding by those who happened to luck out and hit on a jackpot career none too amusing.

  230. Mr. Kwak, your position in this matter would be strengthened by defining pay justice.

    We must define pay justice. How can we know how much people should be paid unless we have sound, fundamental ideas of pay justice? James Madison said “The purpose of government is justice”. The state built on injustice cannot stand – so to be democratic, for the people to do their job of ruling, to save the state, to be patriotic, to love your country, to love yourself, to pursue happiness (of which pay justice is a very important part), you need to be able to locate pay justice.

    At the moment, many are saying: these people should have less, these others have more. But how much should they have? What are the principles of pay justice? Happiness [everyone’s everything], survival of the state, peace, order, satisfaction – all depend on justice. Those are ‘pretty important’ things, yet we look in vain for thoughtful study of where pay justice is. It should have been the focus of all education, from young age right through. People should have been very sophisticated about pay justice, able to pinpoint it by good principles. Instead, all the debate we hear boils down to: they should have less, no, they shouldn’t have less, they should have more, no, they shouldn’t have more.

    Pay justice is the great wallflower, waiting to give us the world average pay per hour, which is approximately US $40 per hour including paying housewives and students. Pay justice waits to give us peace and plenty – and give us our future back.

    Pay ranges widely while no one asks how widely it should range. How are people going to be able to say: “This far and no further. This is the line between right and wrong, between fairpay and robbery, between fairpay and overpay-underpay.”? Children should all grow up knowing that overpay-underpay is the cause of the shaking of societies to pieces. People should worry about their society being shaken to pieces. People should know that every empire so far has been shaken to pieces by pay injustice. There is no subject closer to civic responsibility and pursuit of happiness – no subject more worth our care and mental labour – and it is utterly neglected. Vigilance is the price of liberty – but vigilance about what? Very few can answer that question.

    Proper pay is what a person’s work would win them in a state of nature, plus an equal share of the benefits of division of labour. An equal share, since division of labour is a community effort, with equal contribution, so everyone should reap the benefits equally.

    Pay justice is no-pay for no-work, pay only for work [= sacrifice], equal pay for equal work. Pay justice is taking out of the social pool of work as much as you put in, as your work puts in. [We pool the workproducts because of division of labour, and trade is ideally the exchange of items of equal workvalue, in order to remix goods separated by division of labour, job specialisation, to get the mix of goods everyone wants and needs.] The variety of goods we take out is ideally of equal workvalue to the workproducts we produced in our job. Anything more or less than this is overpay or underpay, and overpay-underpay is unjust, causing tensions which escalate endlessly as people try to get justice and people tug to and fro, causing violence, war, crime, weaponry growth – which has grown for 3000 years – and brought us to superextreme pay injustice and danger, and corruption, tyranny, slavery, wageslavery, disorder, undemocracy, falling states – all our gigantic problems.

    What things are there, that justify unequal pay per unit of work, unequal pay/hr, unequal pay/yr? Are there any? Provided society pays students for studying, there are NO reasons for unequal pay per hour. Close scrutiny of the reasons given for unequal pay do not, as far as I can see, stand up to rational examination. (I’m open to rational discussion.) One common, universally accepted reason given for payment is personal gifts – he’s really smart, she’s especially talented, but reason says that these gifts are work done by mother nature. It doesn’t take any work, any sacrifice, by anyone, to have these gifts, and using them doesn’t mean the gifted person is sacrificing any more than a lesser gifted person does who uses the gifts he got. No one got to choose greater or lesser gifts. No one who has lower intellect or more fragile health or lesser innate abilities chose that for themselves, so it is no part of justice to force the lesser-gifted to give up equal pay in order to give overpay to those who won greater gifts. Rationally, [as distinct from the irrational invalid fallacious argument to the authority of irrational but accepted ideas, in which people put such great reliance] pay for natural gifts is as irrational as payment for receiving Christmas gifts, which has not received the fallacious support of custom.

    Personal sacrifice of time and effort spent developing one’s gifts is different. Pay for developing gifts [of commercial value] is just, because developing gifts is work. There is no *reason* anyone can give for payment for natural gifts, and no reason anyone can give for others having to fund this payment, and because the pool of wealth is finite, it is the underpaid who must take less for their sacrifice in order for there to be more to give the better-gifted. Everyone loves being paid for gifts, because they hope to benefit by them, but it hasn’t worked out like that and it never will work out like that. 99% are paid less than the world average pay per hour. The downside of funding this payment is, for 99% of people, much greater than the benefit, but few are aware of this – of how they rob themselves by supporting this payment, of how they con themselves out of money by this, of how they open the floodgates of limitless overpay-underpay [and consequent violence and misery] by this support.

    Again, and similarly, people support pay for experience – but cold, hard sense says that experience is gained at no extra sacrifice of time and effort beyond that made in doing the paid work that provided the experience. Again, people support it, defend it, although for 99%, the costs of funding this exceed the financial benefit to them. They con themselves out of their full rightful pay by mis-thinking that pay for experience gives them more money, and they thus open the floodgates to unlimited uncontrollable growth of overpay-underpay [and consequent unlimited uncontrollable violence, war, crime, weaponry ever-growing]. People don’t want to look at justice because they fear it will mean less money – they never suspect that justice will mean more money and the destruction of violence.

    How could stopping myself from getting pay for things like gifts and experience give me *more* money? It doesn’t make sense to people – it doesn’t make sense to people because they are looking at a tiny part of the picture – themselves only. Not being paid yourself for non-work things gives you more money because it stops others being paid for these things at your expense. Overpay, pay for nonwork, is funded by work for no pay, underpay, by others. The overpay buys things other people have worked to make. Your participation in this injustice prevents you stopping others benefiting from this leak – the line is crossed, erased, and there are no principles of justice left to limit pay, to prevent unlimited pay/hr, hence we have pay per hour, after 3000 years’ growth of inequality, from $10,000,000 to 1cent – an inequality violence misery war crime weaponry tyranny slavery undemocracy unliberty unfraternity corruption brutality torture state-terrorism private-terrorism warmongering cannonfoddering disinformation rights-trampling factor of one billion, and rising – to extinction soon, thanks to e=mc2. Happy people have no history. We have heaps of history – and history is now accelerating exponentially.

    Get the idea of pay justice, and we get a history-free golden age. Keep faith with pay injustice, and we get oblivion. The bombs are global. Global means every house. Culture is based on ideas. Our idea for 3000 years has been wrong – it has produced underpay misery for 99%, overpay misery for 1%, and violence for everyone.

    Overpay is necessarily always happiness-negative, because 1. satisfaction waits on desire, overpay is just 3000 pairs of shoes for two feet, 1000 rooms for one body, etc., and 2. erosion of overpay [individual, national and imperial] [by both underpaid and overpaid] is myriad and relentless, so the labour of keeping it is constant and danger-fraught: the sense of justice in people is indestructible.

    The same “logic whoopsie” governs the universal support for private inheritance. The heir has done nothing to deserve that money, done nothing to earn/create that wealth. People see themselves getting money from private inheritance, they don’t see themselves funding this gift, impoverishing themselves, and they don’t see they are thereby starting the evergrowth of inequality violence misery.

    The same logical error governs the universal support of profits above fairpay for work. By definition, the owners have done nothing to earn profits above fairpay for work – others fund that gift. For various reasons, it is not good to interfere directly with this injustice. It can be controlled at the macro-macro level by making everyone equal heirs of large deceased estates. Everyone has done the work that the overfortunes represent and buy, so overfortunes belong to everyone.

    And the same logical error [seeing only part of the picture, imagining themselves gaining, not seeing themselves losing by funding the bigger gains for others, not seeing themselves opening the gates to ever-growing inequality violence misery, which gets to everyone, overpaid and underpaid] governs the support of capital gains. People do the work that builds cities or other infrastructure, but only landowners get the added value – and get it in proportion to their fortunes – for no work, for no sacrifice of personal time and effort to working.

    We only have to see the reality, we only have to see the real enormous badness of pay injustice, and the real enormous goodness of pay justice, and human culture is changed forever, violence dies forever – [war is not human nature – human nature is unchanging and violence has grown for 3000 years – no correlation, therefore no causality. And so-called religious and racial wars are pay-injustice wars along religious or racial lines; where there are religious or racial differences without pay injustice, there are no wars – again, no correlation, so no causality.] Culture is ideas. A change of ideas is change of culture. And the ideas are not hard to see.

    No force is needed, just education, just epiphany – no evergrowing bureaucracy, but a massive reduction of bureaucracy [lower taxes, more money and freedom for productivity] – no group, just individual realization and tell your friends – no economic upheaval, just a little law with gigantic benefit – no restriction of ambition, just efficient prevention of evergrowth of pay injustice. Pay injustice is the vital justice, because money is the joker good, good for most things, including social power.

    Justice causes happiness. We can secure far, far greater happiness for this whole planet, but not by pretending to believe in justice but by knowing the reality: pay injustice is theft, theft is injury, injury ricochets untiringly as atoms. As doormats, people are totally unreliable – every plutocracy has fallen. Where is Spanish Inca gold? Honey attracts bears. The Golden Rule is ironclad: hurt people and they hurt back. Other-injury is self-injury – ask Hitler, Marie Antoinette, Ceausescu, Nero, Richard III.

    Justice is not a cost, it is happiness out of the vast quagmire, at the cost of objective, patient examination of a new expression of an ancient idea, at the cost of ditching idols that have hurt us enormously, that are set to kill us – is the price too high?

    Everyone, understandably, but mistakenly, as it turns out – it isn’t in their interests after all – wants maximal pay for minimal work.
    So everyone supports the specious arguments for pay for no work, like: risk, delaying gratification, responsibility, stress, willingness to work crazy hours, creativity, vision, being on call, mental effort, mental focus. (See below for explanation that they are in fact pay for no work.) People focus on the good of pay for no work, and overlook the bad of it. People want the apparent good of overpay so much, that an automatic mental delete function makes it very difficult to see the enormous downside, even when it is explained. People simply cannot pay enough attention to the reasoning, because it is, they mistakenly think, not in their interest. This is how we have conned ourselves, richest to poorest, out of 99% of natural birthright levels of happiness. This is why we are today drowning in history. (Happy people have no history.) This is the root of ‘all evils’, of 99% of problems of all types.

    The underpaid want more, to reduce their underpay. This means they are perpetually scrabbling and scratching at the overpaid. And this means that overpay is brief, arduous and dangerous. The overpaid are under siege from the whole of the rest of the world. Perpetual siege. Which must in time exhaust the funds and power of the overpaid. Because of gravity, no one can go higher without someone going lower. Everyone is scrabbling to get higher, and the overpaid are very few, so clearly many have fallen. (History is biased to telling the stories of ‘winners’ (overpaid), because everyone mistakenly thinks overpay is good, so we don’t hear much about the equal number of fallers from overpay, so we overestimate how safe it is, high up.)

    If we come to see as fact that overpay (wealth, over-wealth, overpay) is miserable, necessarily miserable, then we will be free to see the rationality of the demonstrations of the pays for no work.

    Overpay and underpay cause violence, which escalates perpetually, destroying quality of life of everyone. All the work equals all the pay equals all the work-products. So overpay causes underpay (theft, theft of money, the joker good, good for most things, good for essentials and social power too), which causes righteous anger, which causes violence, which escalates perpetually. One injury causes an endless escalating vendetta back-and-forth of injuries (Example Israel. Israeli average income 20 times Palestinian).


    Risk is pay for no work, because risk is not work. Only work produces wealth (work-products), so only work deserves wealth. There is no measurement of risk, and no way of determining pay per unit of risk, if we could measure risk, so no one is, and no one can be, paid for risk. What there is, is people being paid, and people taking risk, but no pay for risk. The overpaid put forward every argument in defense of their wealth as part of their self-defense. Words are cheaper than swords. Even false arguments are valuable, because they fool so many. And these arguments acquire the force of custom: people begin to feel it can’t be wrong, because everyone has thought it for so long. There is nothing special about business risk, it does not deserve special treatment. If there was measurement of risk, we would find that there is no correlation between risk and pay. Worker risk is far greater. The risker is risking for his own benefit. Do we pay the fisherman for risking his bait in trying to catch a fish for himself? People rake money by various means, and the risk argument is one of the ways they try to reduce the opposition to it. And most people cannot see the answer to the risk argument, so it wins by default, and then it acquires the force of custom. If it were true that we could pay for risk, and true that we should pay for risk, we would have to run around assessing every risk, and paying for it. And how would we justify people having to pay for this payment for risk? The absurdity is very hard for us to see, because we are blinded by custom and by the ‘over-confidence’ of the person giving the risk argument.

    Pay for delaying gratification, by going to school. In justice, students are paid for studying (work), and, in justice, they are paid by society, which benefits. We, the perpetual nutty screw-ups, who will do anything in an illogical way if at all possible, get parents, scholarships or the students to pay the students for studying (theft from parents, scholarships, students), and then give a market-variable (unjust, overpay or underpay) premium for having studied. There is no work in having studied. The ‘smart’ ones give this argument in defense of pay for having studied, and the rest cannot see through it. Pay for delaying gratification! Oh, I see, the students are superior, fine, disciplined people who, unlike some they could think of, are fine enough to delay gratification. Students don’t live on air. And they don’t delay gratification. It sounds so plausible, doesn’t it. The uneducated are running around gratifying themselves without stint, but students are delaying gratification. The human characteristic of attributing virtues to oneself is well known. And the rest of the people swallow this falsehood and the insult it contains.

    Every overpay that escapes detection contributes to the pay injustice (injury, theft) and every pay injustice produces its quota of violence, which gets to everyone, from richest to poorest. People flee to wealth for security, but has wealth been secure? Does one observe in history that the richer a person has been, the less they have been attacked? No, because, while wealth is power to defend oneself, it is also stimulus to be attacked. Caesar, Ceausescu, Marie Antoinette, Hitler, etc, etc, etc. The person with the goods of 1000 people has 1000 enemies. Honey attracts bears. Bigger banks have stronger vaults because they need them. Every empire and plutocracy has fallen.

    Both the overpaid and the underpaid are miserable. Overpay is proportional to attack and isolation. And the overpaid cannot get more satisfaction, because of the limits of desires. Satisfaction waits on desire. The poor man searches for food, the rich man searches for appetite. But everyone is still convinced that wealth is good, so the wealthy are mindlessly convinced they are happy. And everyone is subject to violence, which is proportional to overpay-underpay. And overpay-underpay is from 10,000th of world average to 100,000 times the world-average pay, of $40 for every working person, paying housewives and students too, $100,000 a year for every working person in the world, including housewives and students, or $200,000 a year per family.

    Pay for responsibility or stress is pay for no work. It sounds so plausible to us: He has more responsibility, so he should be paid more. There is no work in responsibility. The person high-up in an organisational hierarchy is just doing a job with the abilities he has. Responsibility isn’t harder work. It is just the same hardness of work higher up. People lower down are not working irresponsibly. There is everywhere this conviction that higher up is better, superior. There is deference to this attitude. There is no measuring of ‘responsibility’, no way of determining the just pay per unit of ‘responsibility’, if we could measure it. It is just the old underlying excuse, I deserve more than others, and people deferring to that. It just drives the pernicious ladder of ‘success’, on which everyone, from top to bottom, is extremely unhappy. (Being ‘happy’ by ignoring all the unpleasant realities of present human life doesn’t count.)

    Willingness to work crazy hours. Oh, he’s so good! He, unlike lesser folk, is willing to suffer crazy hours. What a guy! Noble! Fine! Throw money at him! Justice pays for hours of work. Working twice as many hours doesn’t justify being paid any amount; it justifies being paid twice as much. Put twice as much in to the social pool of wealth by twice as much work, take twice as much out, no injury to others, no anger, no injury, no violence, no weapon growth, no nuclear extinction.

    Pay for creativity, vision, mental effort, focus, is pay for no work. Ideas come without effort. Justice pays for work before and after ideas, work implementing ideas, but not ideas, which are not work. They come in a moment. They are gifts from nowhere. It is impossible to work harder per unit of time. Slackers get noticed or fired. Everyone works about the same, per unit of time. It takes more energy to try to get away with slacking than it does to just work.

    In all these excuses for limitless overpay, there is the underlying attitude: I want to be paid more, I am better than other people, If I have got more money, it is because I am divinely superior in my work. And we think: If I get paid more, I will be able to attribute my higher pay to these fine reasons, too.

    But everyone loses. Everyone is stressed climbing, everyone is rising and falling, security, safety, peace is minimal. Everyone is being pressed down on from above, everyone is being attacked from above and below. And everyone could stand on the ground of equal pay for equal work, no pay for no work, no work for no pay! Fraternity, equality, justice, peace, non-injury, everyone mates, friends, no attack, a golden age. Work, create work-products, get fairpay for work, no problem. The more overpaid you get, the more underpay you create, and the more you get attacked. Happiness is horizontal. Vertical society is hell from top to bottom. Pay justice pays the highest dividends, and we utterly neglect to collect these dividends. We are all losers. Pay justice is win-win. We are in a super-extreme lose-lose system. Thinking that somehow, somewhere, sometime, we will be winners. With bombs going off louder and louder in our ears. We ignore the noise, and carry on. If limited intelligence was gold, we’d all be rich. We are all extremely poor.

    Why do we love pay injustice so much? Let pay justice flourish and let all other inequalities flourish. The person who wants to prove he is superior is a person who feels inferior.

    It would be impractical to try to root out all these and the other overpays. We can compensate for them by making everyone in the world equal heirs of large deceased estates, and giving everyone in the world equal shares of a 1%-a-month increase in the money supply. All the overpays make money pile up with few, we spread it out again among all. Everyone is happy. Anger goes, violence goes. It benefits everyone, so we only need to study and ponder until we see it. We don’t need to force it on anyone.

    Obviously, everyone is unhappier if one person has all. We are close to that, with 1% of people with 98% of world income and wealth. Our systems have been like 100 children with 1000 sweets, all grabbing from each other. No fun at all. ‘Stealing’ from Nature is harmless, because nature is happy for us to steal from her. Stealing from people is dangerous. There isn’t a shortage. There is super-abundance. Inequality (pay injustice) drives inequality. The underpaid are, naturally, trying to get more; the overpaid are trying to get more, because they are under attack from the underpaid (99% of people) trying to get more. Accept that people have never taken and will never take theft lying down, and aim for pay justice. Individual contribution to wealth (work-products) by work is limited. Getting more than your fair share is hell, getting less than your fair share is hell. Pay justice is heaven.

    One great advantage of pay justice is that freedom to search for the work that gives maximal intrinsic satisfaction is maximal. The corruption of the personal search for the work of maximal intrinsic satisfaction by ‘better’ pay in other work is minimal. And thus job satisfaction and personal fulfilment is maximal. Everyone is happy.

    Love of overpay (theft) is the root of all evils. Virtually all evils will disappear with pay justice. Cut that and the whole tree of problems will fall and die.

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