In discussions of net-worth of the bottom half of our society seem a bit irrelevant as many are living paycheck to paycheck with disastrous financial understanding and consistently making very poor decisions. Some of us who are not in the bottom half of wealth started in the same position but bought a $225 car (total cost when we got married with that car as our only net worth) that I kept running for 17 years whereas (half a century later) a tenant of our accessory dwelling who has trouble making the monthly rent just bought a car based upon the monthly payment that is worth more that both of our Pirus's. I don't think she even know the interest rate, terms, or "fees" being added in.
The concept of wealth is complicated in that real wealth is control over the disposition and use of an asset, not who owns the pink slip (ownership of cars in California). In terms of food, transportation, clothing, etc. the consumption variation in the population isn't that related to either income or wealth distributions. Food stamps alone could cover 80% of our daughters family food budget (she keeps track of every penny spent realtime on her phone) and they eat very well even satisfying our grandchildren love of sushi, sashimi. and oysters on the half-shell. He budget includes eating out.
The ability of handle the normal "shit happens" problems of life is a lot easier with higher wealth, but wealth accumulation requires spending control. Higher income helps on spending, but not that much as many very high income people get themselves behind and into trouble when something goes wrong. But the wealth that minimizes these life risk issues is individual decision making and planning for the future which is something that our education system should cover.
Net worth growth: The large jump in home values in the last few years had t a big impact on net worth. I am amazed by the housing values in the Little Haiti section of Miami. Tiny homes are now selling for $500K each and they are not falling. Rising home prices made many much richer. Nevertheless, this growth mostly occurred in the "hot spots" and not everyone benefited.
I don't believe there's any shortage of job applicants for $90k nor even $60k/yr jobs, but quite a shortage of workers accepting less than $40k/yr (~$20/hr; 40 hr week; 50 wks/yr).
The open border Dems (& Libbers) accept endless immigrants willing to work, even work hard, for less. Closing the border would raise the wages of low-wage earners faster than most other gov't politices. Like Trump want and most Republicans claim* to want.
As Arnold said years ago about boomers retiring, decades even, "the wage rate increases and the rate of return on capital declines."
I look at Fed printing money as likely to be driven by the rich NOT wanting that lower rate of return on capital, and the economy being twisted to keep the rich getting richer, faster.
I think you're right to lean against the kibbutz theory and suggest the summer camp contribution. I feel this problem solving can take many forms, ranging from active participation in sports to hobbies that involve any form of physical construction to music performance to volunteer activities. Anything that happens with other people in real meat space and involves some sweat equity. Just regularly mowing your own lawn introduces you to a whole host of real-world limitations of weather observation, scheduling, and equipment maintenance. The consistent focus of our society is on mind work being the work that is 'really valuable', and any physical labor as 'menial', coupled with the drive for experiences (aka participation trophies) rather than accomplishments (actual medals).
Shortage refers to the decline in prime age workers as a share of the population (such that even achieving highs in participation rates won't boost the total number of job-havers). Fewer people doing the same or more work, especially in service and trade work, has led to a wage bump at the lower ends. That seems to be a secular new-normal. Perhaps if it's "normal" then it's not a shortage anymore?
Thanks so much for sharing this and other of my essays with your readers, Arnold. What I have in mind when I write about pioneer communities is something far less communal and utopian and far more pluralistic and heterogeneous than kibbutzim. What I'm most focused on are a couple of goals: (1) breaking down the work/life distinction by centering more economic production in the home (including market-based work like WFH or home-based business), which then allows friends and families to live close by or in co-living arrangements; (2) exploiting progress in (1) to develop greater small-scale self-reliance in taking care of our children and aging parents. These goals seem practical given current technologies. If we can make progress in new technologies that support small-scale abundance, it's my hope that having our country seeded with communities where the participants actually understand and operate and maintain those technologies would produce a constituency whose culture is considerably more open to and capable of ongoing dynamism than the surrounding one. The reputation for "American ingenuity" developed when we were a nation of small-town tinkerers, and that reputation has faded as we have become a nation of urban service workers. I'm really still at the thought experiment stage with all of this, but the prompt for the experiment is the sense that our contemporary culture is profoundly unhealthy, which leads to the search for social structural changes that could elicit a healthier response.
No doubt the supply and demand curves always meet but concluding that this means there is no labor shortage is bad economics. It ignores all the other economic variables that might suggest there is a labor shortage even when the curves meet.
- if a developing country seems unstable, is unstable, or otherwise experiencing a major devaluation of its currency, capital is likely to leave the country. The supply and demand curves still meet but clearly there is a shortage of capital.
- if a developing country has one doctor for every 100,000 people, the supply and demand curves still meet but clearly there is a shortage of doctors. Maybe they even train lots of doctors but trained doctors keep leaving the country.
There is no reason to think a similar if less extreme situation cannot happen in the US.
There might be a labor shortage despite the curves meeting because other factors are changing and there is no equilibrium. Deficit spending by our government is creating demand for labor in excess of equilibrium. Similarly, the more than doubling of net worth of the "bottom 50%" in the last ~4 years is also likely to increase demand for labor.
While the curves do indeed always meet, when variables change by large amounts too quickly for adjustments to keep up, it can be explained crudely as if the curves do not meet. Take the opposite. If unemployment jumped to 20%, would it be informative to say there isn't enough demand for labor?
Arnold's S & T econ explanations don't discuss wealth & income as much as needed for a "school", which are oriented more at understanding so as to support gov't policy, rather than true interconnectedness and sub-optimality of central controls.
The AEI summary of the 72 p Credit Suisse report talks about wealth. Focus on the median person is a good metric for comparisons. But wealth, for most workers in bottom 60%, (3/5), and maybe even 80% (4/5), is far less important than income.
". In the United States, African American and Hispanic households saw the largest percentage increase in wealth (+22.2% and +19.9%, respectively) in 2021 thanks to increases in non-financial wealth ā
mostly housing" (p5)
"aggregate global wealth grew by 12.7% in 2021, which is the fastest annual rate ever recorded. " (p7)
Wealth growth driven by asset price inflation driven by gov't debt deficit money expansion - mostly benefitting the rich financial asset owners, tho also a big plus for all home owners. "The most significant development in 2021 was the widespread and sizable gains in share prices." (p10)
For most folk, most of their wealth is in their owned housing asset. So they want cheap housing for others to buy BUT don't want the value, the wealth, of their own home to go down. For non-homeowners, "wealth" is an income rounding error - except for Social Security (& Medicare?), which is excluded from the wealth graphs. But the (p13) table of mean vs median wealth clearly shows the huge differences caused by wealth inequality (US $579k mean vs. $93k median).
The majority of folk will never make it into the top quintile nor have non-home financial assets (> 1 yr wage). The top with fin assets hugely benefit from Fed money printing tho asset price increases are excluded from "inflation." There are good rational reasons for 80% to NOT save, and instead enjoy their youth, or middle age, as much as they can afford and their health allows. The gov't will semi-cover them if there is a catastrophe, after their own assets are used up - less personal assets means more gov't support. Enjoy yourself! (While you're still in the pink)
And let's focus more on how to increase wage income for low IQ, low-skilled American citizens - like a highly imperfect but possibly improvable set of job guarantee programs at different state levels.
NOT UBI - but more low paying jobs. Sub-optimal gov't Job Guarantees can, possibly, improve - especially if they are privatized.
News (Flash?): UBS on Thursday (5/25) won unconditional EU antitrust approval to acquire Credit Suisse as part of a government-orchestrated rescue of its Swiss rival. Gov't gotta bail out the rich bank owners no matter how bankrupt they allow the overpaid managers to become thru false belief in "risk-free" assets. And a failure to understand duration risk in operation, rather than in theory.
Lindsey is promoting things good for one's mental health and community, which doesn't overlap much with what is good for skill-building or trade promotion in 2023.
Staying on the computer even longer to figure how to integrate ChatGPT into your website < "touching grass" if the goal is sanity.
In terms of AI's impact on industries, I just ran into a page suggesting it can save the news industry, AI can be used as a writing partner to detect bias and aid writers to overcome their natural bias. The news media is in decline due to loss of trust by the public, and yet they've avoided fixing what most people view as a poor quality product. How many industries get away with this? AI can help. This page I ran into https://FixJournalism.com has a good image to illustrate "AI Nudged To Neutral" and explores detail, and notes the absurdity of the news industry:
'A study by Gallup and the Knight Foundation found that in 2020 only 26% of Americans reported a favorable opinion of the news media, and that they were very concerned about the rising level of political bias. In the 1970s around 70% of Americans trusted the news media āa great dealā or a āfair amountā, which dropped to 34% this year, with one study reporting US trust in news media was at the bottom of the 46 countries studied. The U.S. Census Bureau estimated that newspaper publisherās revenue fell 52% from 2002 to 2020 due to factors like the internet and dissatisfaction with the product.
A journalist explained in a Washington Post column that she stopped reading news, noting that research shows she was not alone in her choice. News media in this country is widely viewed as providing a flawed product in general. Reuters Institute reported that 42% of Americans either sometimes or often actively avoid the news, higher than 30 other countries with media that manage to better attract customers. In most industries poor consumer satisfaction leads companies to improve their products to avoid losing market share. When they do not do so quickly enough, new competitors arise to seize the market opening with better products.
An entrepreneur who was a pioneer of the early commercial internet and is now a venture capitalist, Marc Andreessen, observed, the news industry has not behaved like most rational industries: āThis is precisely what the existing media industry is not doing; the product is now virtually indistinguishable by publisher, and most media companies are suffering financially in exactly the way youād expect..ā The news industry collectively has not figured out how to respond to obvious incentives to improve their products. '
Anything not scalable (basically all interpersonal care, and much home maintenance) should be done in the non-formal sector more often than it is today. Either directly in the household or within the community.
Learning pods for young children seemed to be especially effective during the pandemic, I see no reason why they canāt be a norm. There is no reason for young children to go to an education factory.
I think the reason this doesnāt happen is that formal interpersonal care and low wage house maintenance are both heavily subsidized by the government. The terms of the game arenāt fair so we donāt know peoples true preferences.
The two blocks, beyond special interests and status quo bias, are:
1) people who donāt trust other people to do it right (FOOL). What if someoneās kids are genderqueer and the parents arenāt supporting! They need to be in an education factory where trained professionals can spot that and fix it!
2) some people honestly seem to not like their families and donāt want to be around them, and are happy to be subsidized for a lifestyle they already want
"Of course, āobservable demographic characteristicsā probably does not include conscientiousness, propensity for substance abuse, etc."
"In our analysis, we controlled for everything we had data on, which means we didn't control for some of the most important things (but we'll pretend we did)."
In discussions of net-worth of the bottom half of our society seem a bit irrelevant as many are living paycheck to paycheck with disastrous financial understanding and consistently making very poor decisions. Some of us who are not in the bottom half of wealth started in the same position but bought a $225 car (total cost when we got married with that car as our only net worth) that I kept running for 17 years whereas (half a century later) a tenant of our accessory dwelling who has trouble making the monthly rent just bought a car based upon the monthly payment that is worth more that both of our Pirus's. I don't think she even know the interest rate, terms, or "fees" being added in.
The concept of wealth is complicated in that real wealth is control over the disposition and use of an asset, not who owns the pink slip (ownership of cars in California). In terms of food, transportation, clothing, etc. the consumption variation in the population isn't that related to either income or wealth distributions. Food stamps alone could cover 80% of our daughters family food budget (she keeps track of every penny spent realtime on her phone) and they eat very well even satisfying our grandchildren love of sushi, sashimi. and oysters on the half-shell. He budget includes eating out.
The ability of handle the normal "shit happens" problems of life is a lot easier with higher wealth, but wealth accumulation requires spending control. Higher income helps on spending, but not that much as many very high income people get themselves behind and into trouble when something goes wrong. But the wealth that minimizes these life risk issues is individual decision making and planning for the future which is something that our education system should cover.
Man, if I had to homeschool my kids and minister to my aging parents Iād be on the barricades in a New York minute
Net worth growth: The large jump in home values in the last few years had t a big impact on net worth. I am amazed by the housing values in the Little Haiti section of Miami. Tiny homes are now selling for $500K each and they are not falling. Rising home prices made many much richer. Nevertheless, this growth mostly occurred in the "hot spots" and not everyone benefited.
I don't believe there's any shortage of job applicants for $90k nor even $60k/yr jobs, but quite a shortage of workers accepting less than $40k/yr (~$20/hr; 40 hr week; 50 wks/yr).
The open border Dems (& Libbers) accept endless immigrants willing to work, even work hard, for less. Closing the border would raise the wages of low-wage earners faster than most other gov't politices. Like Trump want and most Republicans claim* to want.
As Arnold said years ago about boomers retiring, decades even, "the wage rate increases and the rate of return on capital declines."
I look at Fed printing money as likely to be driven by the rich NOT wanting that lower rate of return on capital, and the economy being twisted to keep the rich getting richer, faster.
Backyard steel production worked pretty well in China...I say we give it a go.
Sorry for the hard snark; I like Brink Lindsey, but his proposal sounds rather like a commune or kibbutz, rebranded.
"disconnected from physical problem-solving"
I think you're right to lean against the kibbutz theory and suggest the summer camp contribution. I feel this problem solving can take many forms, ranging from active participation in sports to hobbies that involve any form of physical construction to music performance to volunteer activities. Anything that happens with other people in real meat space and involves some sweat equity. Just regularly mowing your own lawn introduces you to a whole host of real-world limitations of weather observation, scheduling, and equipment maintenance. The consistent focus of our society is on mind work being the work that is 'really valuable', and any physical labor as 'menial', coupled with the drive for experiences (aka participation trophies) rather than accomplishments (actual medals).
How odd that a writer at something called Business Insider would write something that no one that had passes an econ 101 course would say?
Shortage refers to the decline in prime age workers as a share of the population (such that even achieving highs in participation rates won't boost the total number of job-havers). Fewer people doing the same or more work, especially in service and trade work, has led to a wage bump at the lower ends. That seems to be a secular new-normal. Perhaps if it's "normal" then it's not a shortage anymore?
Thanks so much for sharing this and other of my essays with your readers, Arnold. What I have in mind when I write about pioneer communities is something far less communal and utopian and far more pluralistic and heterogeneous than kibbutzim. What I'm most focused on are a couple of goals: (1) breaking down the work/life distinction by centering more economic production in the home (including market-based work like WFH or home-based business), which then allows friends and families to live close by or in co-living arrangements; (2) exploiting progress in (1) to develop greater small-scale self-reliance in taking care of our children and aging parents. These goals seem practical given current technologies. If we can make progress in new technologies that support small-scale abundance, it's my hope that having our country seeded with communities where the participants actually understand and operate and maintain those technologies would produce a constituency whose culture is considerably more open to and capable of ongoing dynamism than the surrounding one. The reputation for "American ingenuity" developed when we were a nation of small-town tinkerers, and that reputation has faded as we have become a nation of urban service workers. I'm really still at the thought experiment stage with all of this, but the prompt for the experiment is the sense that our contemporary culture is profoundly unhealthy, which leads to the search for social structural changes that could elicit a healthier response.
No doubt the supply and demand curves always meet but concluding that this means there is no labor shortage is bad economics. It ignores all the other economic variables that might suggest there is a labor shortage even when the curves meet.
- if a developing country seems unstable, is unstable, or otherwise experiencing a major devaluation of its currency, capital is likely to leave the country. The supply and demand curves still meet but clearly there is a shortage of capital.
- if a developing country has one doctor for every 100,000 people, the supply and demand curves still meet but clearly there is a shortage of doctors. Maybe they even train lots of doctors but trained doctors keep leaving the country.
There is no reason to think a similar if less extreme situation cannot happen in the US.
There might be a labor shortage despite the curves meeting because other factors are changing and there is no equilibrium. Deficit spending by our government is creating demand for labor in excess of equilibrium. Similarly, the more than doubling of net worth of the "bottom 50%" in the last ~4 years is also likely to increase demand for labor.
While the curves do indeed always meet, when variables change by large amounts too quickly for adjustments to keep up, it can be explained crudely as if the curves do not meet. Take the opposite. If unemployment jumped to 20%, would it be informative to say there isn't enough demand for labor?
Arnold's S & T econ explanations don't discuss wealth & income as much as needed for a "school", which are oriented more at understanding so as to support gov't policy, rather than true interconnectedness and sub-optimality of central controls.
The AEI summary of the 72 p Credit Suisse report talks about wealth. Focus on the median person is a good metric for comparisons. But wealth, for most workers in bottom 60%, (3/5), and maybe even 80% (4/5), is far less important than income.
". In the United States, African American and Hispanic households saw the largest percentage increase in wealth (+22.2% and +19.9%, respectively) in 2021 thanks to increases in non-financial wealth ā
mostly housing" (p5)
"aggregate global wealth grew by 12.7% in 2021, which is the fastest annual rate ever recorded. " (p7)
Wealth growth driven by asset price inflation driven by gov't debt deficit money expansion - mostly benefitting the rich financial asset owners, tho also a big plus for all home owners. "The most significant development in 2021 was the widespread and sizable gains in share prices." (p10)
For most folk, most of their wealth is in their owned housing asset. So they want cheap housing for others to buy BUT don't want the value, the wealth, of their own home to go down. For non-homeowners, "wealth" is an income rounding error - except for Social Security (& Medicare?), which is excluded from the wealth graphs. But the (p13) table of mean vs median wealth clearly shows the huge differences caused by wealth inequality (US $579k mean vs. $93k median).
The majority of folk will never make it into the top quintile nor have non-home financial assets (> 1 yr wage). The top with fin assets hugely benefit from Fed money printing tho asset price increases are excluded from "inflation." There are good rational reasons for 80% to NOT save, and instead enjoy their youth, or middle age, as much as they can afford and their health allows. The gov't will semi-cover them if there is a catastrophe, after their own assets are used up - less personal assets means more gov't support. Enjoy yourself! (While you're still in the pink)
And let's focus more on how to increase wage income for low IQ, low-skilled American citizens - like a highly imperfect but possibly improvable set of job guarantee programs at different state levels.
NOT UBI - but more low paying jobs. Sub-optimal gov't Job Guarantees can, possibly, improve - especially if they are privatized.
News (Flash?): UBS on Thursday (5/25) won unconditional EU antitrust approval to acquire Credit Suisse as part of a government-orchestrated rescue of its Swiss rival. Gov't gotta bail out the rich bank owners no matter how bankrupt they allow the overpaid managers to become thru false belief in "risk-free" assets. And a failure to understand duration risk in operation, rather than in theory.
https://www.credit-suisse.com/about-us/en/reports-research/global-wealth-report.html
Lindsey is promoting things good for one's mental health and community, which doesn't overlap much with what is good for skill-building or trade promotion in 2023.
Staying on the computer even longer to figure how to integrate ChatGPT into your website < "touching grass" if the goal is sanity.
In terms of AI's impact on industries, I just ran into a page suggesting it can save the news industry, AI can be used as a writing partner to detect bias and aid writers to overcome their natural bias. The news media is in decline due to loss of trust by the public, and yet they've avoided fixing what most people view as a poor quality product. How many industries get away with this? AI can help. This page I ran into https://FixJournalism.com has a good image to illustrate "AI Nudged To Neutral" and explores detail, and notes the absurdity of the news industry:
'A study by Gallup and the Knight Foundation found that in 2020 only 26% of Americans reported a favorable opinion of the news media, and that they were very concerned about the rising level of political bias. In the 1970s around 70% of Americans trusted the news media āa great dealā or a āfair amountā, which dropped to 34% this year, with one study reporting US trust in news media was at the bottom of the 46 countries studied. The U.S. Census Bureau estimated that newspaper publisherās revenue fell 52% from 2002 to 2020 due to factors like the internet and dissatisfaction with the product.
A journalist explained in a Washington Post column that she stopped reading news, noting that research shows she was not alone in her choice. News media in this country is widely viewed as providing a flawed product in general. Reuters Institute reported that 42% of Americans either sometimes or often actively avoid the news, higher than 30 other countries with media that manage to better attract customers. In most industries poor consumer satisfaction leads companies to improve their products to avoid losing market share. When they do not do so quickly enough, new competitors arise to seize the market opening with better products.
An entrepreneur who was a pioneer of the early commercial internet and is now a venture capitalist, Marc Andreessen, observed, the news industry has not behaved like most rational industries: āThis is precisely what the existing media industry is not doing; the product is now virtually indistinguishable by publisher, and most media companies are suffering financially in exactly the way youād expect..ā The news industry collectively has not figured out how to respond to obvious incentives to improve their products. '
Anything not scalable (basically all interpersonal care, and much home maintenance) should be done in the non-formal sector more often than it is today. Either directly in the household or within the community.
Learning pods for young children seemed to be especially effective during the pandemic, I see no reason why they canāt be a norm. There is no reason for young children to go to an education factory.
I think the reason this doesnāt happen is that formal interpersonal care and low wage house maintenance are both heavily subsidized by the government. The terms of the game arenāt fair so we donāt know peoples true preferences.
The two blocks, beyond special interests and status quo bias, are:
1) people who donāt trust other people to do it right (FOOL). What if someoneās kids are genderqueer and the parents arenāt supporting! They need to be in an education factory where trained professionals can spot that and fix it!
2) some people honestly seem to not like their families and donāt want to be around them, and are happy to be subsidized for a lifestyle they already want
"Of course, āobservable demographic characteristicsā probably does not include conscientiousness, propensity for substance abuse, etc."
"In our analysis, we controlled for everything we had data on, which means we didn't control for some of the most important things (but we'll pretend we did)."