Conservative Pigs and Liberal Bonobos

by on November 27, 2007 at 8:21 am in Economics | Permalink

Herb Gintis reviews Krugman on Amazon:

Krugman’s vision for the future has three key premises, all wrong.
First, he believes progressives can win on a platform of
redistributing from the rich. However, no one cares about inequality.
People care about injustice, unfairness, poverty, sexual predators,
family values, gay marriage, terrorism, and many other problems of
everyday life. People don’t care about Gini distributions and other
abstractions. Moreover, Krugman should know that if the wealth were
redistributed to the middle class, the US investment rate would fall,
since the rich save their money and it is translated into investment,
whereas the middle classes would spend their gains on consumption, thus
driving out investment. A "soak the rich" policy simply cannot work to
the advantage of the middle classes.

Second, Krugman would strengthen the labor unions, which he
credits for their egalitarian effects. However, unions were strong only
when industry was highly non-competitive in such areas as automobiles
and steel. The oligopolistic character of mid-twentieth century
industry, with a few countries in the lead, made fighting over the
excess profits highly rewarding. With globalization, there are no
excess profits to be fought over. Thus, it is not surprising that most
successful unions in the USA are public service, not private (e.g.,
teachers, government employees). There is no future in unionism,
period.

Third, Krugman believes that liberalism can be restored to its
1950’s health without the need for any new policies. However, 1950’s
liberalism was based on southern white racism and solid support from
the unions, neither of which exists any more. There is no future in
pure redistributional policies in the USA for this reason. Indeed, if
one looks at other social democratic countries, almost all are moving
from corporate liberalism to embrace new options, such as Sarkozy in
France (French socialists have the same pathetic political sense as
American liberals, and will share the same fate).

I am sorry that we can’t do better than Krugman. There are very
serious social problems to be addressed, but the poor, pathetic,
liberals simply haven’t a clue. Conservatives, on the other, are
political sophisticated and hold clear visions of what they want. It is
too bad that what they want does not include caring about the poor and
the otherwise afflicted, or dealing with our natural environment.
Politics in the USA is no longer Elephants and Donkeys; it is now
conservative Pigs and liberal Bonobos. The pigs are smart but only care
about what’s in their trough. The Bonobos are polymorphous perverse and
great lovers, but will be extinct in short order.

Hat tip to PrestoPundit.

1 Aaron Fix November 27, 2007 at 8:57 am

“Conservatives, on the other, are political sophisticated and hold clear visions of what they want”

If we are talking about politicians only, then I can at least see some justification. If we are talking about the general populace on average that holds conservative values, the statement is, at best, the opposite of true.

2 reason November 27, 2007 at 9:25 am

I don’t understand the premise (also promoted by Reich) that profits are
low because of competition. Profits are at a record high! He means
manufacturing profits. Basically the world decided in the 1980s that it
needed more competition and so moved to reduce trade barriers. It worked
for a while, but increasing returns to scale are increasing returns to
scale and oligopoly is returning.

3 John Dewey November 27, 2007 at 9:38 am

Herb Gintis: “It is too bad that what they want does not include caring about the poor and the otherwise afflicted”

Do liberals believe this about conservatives or is it just politics? Certainly the right has its share of kooks and bigots. I’ve been working with conservatives for 27 years, and I am certain that the kooks and bigots are a small minority.

Most conservatives believe – and this is opposite of what most liberals believe – that assisting “the poor and otherwise afflicted” just makes them dependent on that assistance.

Most conservatives believe that the near-monopoly the state has on childhood education – and the resulting failure of that monopoly – prevents some children of “the poor and otherwise afflicted” from rising out of their economic class.

Most conservatives believe that “the poor and the otherwise afflicted” have the ability to improve their situation in life without assistance.

Most conservatives believe that affirmative action has harmed far more of “the poor and otherwise afflicted” than it could possibly have helped.

Unfortunately, Herb Gintis has no friggin’ clue what most conservatives want or believe.

4 disinterestedobserver November 27, 2007 at 9:49 am

Are you sure that this is the real Gintis?

Anyone who can write: “But, these countries [France, Germany] are plagued by bureaucratic inefficiency and deeply threatened by the “lean and mean” up-and-coming countries like Poland, the Baltic States, Romania, India, et al.”, clearly knows nothing about Poland, Romania or India.

5 John Dewey November 27, 2007 at 9:54 am

Reason: ” increasing returns to scale are increasing returns to
scale and oligopoly is returning.”

Where is oligopoly returning, sir? Here’s what I see in the U.S.:

– the share of the top three vehicle manufacturers is much lower than it was 30 years ago;

– the airline industry is deregulated, and route oligopolies no longer exist;

– telecommunications in the U.S. is no longer limited to AT&T and GTE, as it was 30 years ago;

– tiny oil refiners have gone out of business, but there are still over twenty operating in the U.S..

How many industries that were not oligopolies the past 20 years have become oligopolies today?

6 Floccina November 27, 2007 at 10:12 am

Moreover, Krugman should know that if the wealth were redistributed to the middle class, the US investment rate would fall, since the rich save their money and it is translated into investment, whereas the middle classes would spend their gains on consumption, thus driving out investment. A “soak the rich” policy simply cannot work to the advantage of the middle classes.

Is the above true? I had always believed that it was true but then I read something by Julian Simon that said that said something like the middle class save as much as the rich. Did I miss read Julian Simon?

If it is true why are conservatives and libertarians not shouting it from the house tops? Even if it is true does that Federal Reserve provide a substitute for saving though money creation?

Does anybody know?

7 R. Richard Schweitzer November 27, 2007 at 10:42 am

Why, why, why is so much attention directed to Krugman’s stuff?

Ignore him. He will wither.

8 perianwyr November 27, 2007 at 11:01 am

An exercise;

Which is worse, the article in question or the comments section on this blog entry? They’re neck in neck in the screaming downward race to Information Hell.

9 Mark November 27, 2007 at 12:23 pm

Is this worthy of a MR entry? There’s more informative reviews out there, and I realize that liberal-bashing hyperboles Gintis satisfies AT’s need for a PK slam but comon.

10 Keith November 27, 2007 at 1:10 pm

“But how many economists think, like Krugman, that unions are a great thing? Is this a fringe view or are a lot of people behind him on this?”

You can certainly make a case for unions as a cartel that counterbalances the monospony power of employers. But then you could defend a lot of cartels on that basis. And it doesn’t look like there’s a whole lot of monopsony power in most labor markets. And I don’t see pro-union economists defending a lot of other cartels on this monopsony basis, even where it might make more sense than in the labor context.

I think this is one of those cases where some economists do some wishful thinking and suffer some confirmation bias and attach themselves to a pro-union theory based on monopsony power, mainly to stay in the good graces of their political allies. (I mostly think that self-deception, rather than explicit cynical selling out, plays the dominant role in this process.)

I’d say that economists, perhaps like most people, systemically underestimate their own capcity for and tendency towards self-deception. This reduces their usefulness in informing policymaking.

11 Bernard Yomtov November 27, 2007 at 1:30 pm

Gintis also says;

I suspect Krugman is correct in saying that the degree of inequality in the USA today is the product of politics, not economic necessity.

That’s quite a concession.

Then he writes:

Moreover, Krugman should know that if the wealth were redistributed to the middle class, the US investment rate would fall, since the rich save their money and it is translated into investment, whereas the middle classes would spend their gains on consumption, thus driving out investment. A “soak the rich” policy simply cannot work to the advantage of the middle classes.

So the stupid middle class doesn’t know what’s good for it, and would just waste the money, while the Paris Hilton’s of the world build factories that benefit everyone. Hardly in keeping with the idea that people should be trusted to act rationally in their own interest.

In any case, the combination of the two suggests that Gintis approves of redistribution of wealth upward, but not downward, so that our betters can protect us from our own misjudgments. Somehow I wouldn’t think a libertarian like Alex would find these views to his liking. But maybe any Krugman-bashing at all appeals to him, as it does to so many.

12 Keith November 27, 2007 at 1:44 pm

I agree, John. In the right legal context, i.e. one where the employer is not legally obligated to negotiate with unions, unions can be very useful.

I think unions could definitely have a future in corporate settings by acting as a direct conduit from workers to the board of directors, enabling workers to report managerial misconduct and waste directly to the board. This would protect shareholders, and it would be helpful to many corporate cultures.

Maybe the future of unions is to be found in the financial sector!

13 Keith November 27, 2007 at 2:28 pm

Right, John, and I believe it certainly helps the relationship in that Southwest is not legally obligated to deal with the unions.

Let’s distinguish between the desirability of negotiating with unions under certain circumstances and the desirability of legally mandating such negotiations. I have no problem with the former.

Marriage may be good, but it may not be desirable to legally obligate people to get married.

14 John Dewey November 27, 2007 at 3:56 pm

Daublin,

I don’t fault union leaders for trying to gain an advantage. That’s what they are hired to do. IMO, the problem is with the lawmakers who favor special interests over the welfare of the entire electorate.

Now, I’m not condoning illegal bribery. I’m also not excusing labor unions that unyieldingly drive companies into bankruptcy. But, IMO, labor troubles are more the fault of: a) politicians who write the rules to fatten their wallets; and b) corporate leaders who sacrifice long term survival for short term peace (and bonuses).

15 reason November 27, 2007 at 4:27 pm

pharmaceuticals, electronics, telecoms, retail …
Give me a few minutes I’ll think of some more.

16 reason November 27, 2007 at 4:30 pm

If competition is so fierce, why are profits so high?

17 reason November 27, 2007 at 4:31 pm

If competition is so fierce, why are profits so high?

18 John Dewey November 27, 2007 at 5:57 pm

reason: “If competition is so fierce, why are profits so high?”

Why did you post this four times?

It’s all supply and demand. High profit margins do not indicate oligopolies. Agriculture profit margins soared after our silly Congress mandated ethanol in our gasoline tanks. That’s because the supply couldn’t keep up with the demand, and prices increases were the only way to ration. But those prices are still determined in the free market.

In some indutries, production costs dropped faster than prices, but prices still dropped. In others, such as airline travel, profit margins are not high at all, but have improved as capacity has dropped. Still, improving profit margins do not prove oligopolies exist.

19 spencer November 27, 2007 at 6:25 pm

Why should anyone take this seriously when the basic premise he starts out with is completely in error. He makes the theoretical claim that increased inequality leads to greater savings and investment. It is great economic theory. But the data shows that exactly the opposite has happened in the US over the last quarter century. Income inequality has risen sharply but the savings rate has plunged to essentially zero and investment has fallen from a peak of 14% of GDP in 1981 to its current level of 10.7% of gdp. Moreover, the share of nonresidential fixed investment done by individuals, partnerships, s-corps and other entities subject to the individual income tax has fallen to only 11% of total nonresidential investment. At the rate we are going it will soon be less than the share done by the nonprofits sector.

Alex, I repeatedly report these facts on your blog and you always ignore them.

I guess you had rather continue living in you fantasy world of the 1800s when corporations did not exist and your theories actually had some reverences to the real world.

I challenge you to explain why rising inequality in the US has been accompanied by falling personal savings and investment as a share of GDP. I am still waiting for you to explain why your theories have been 100% wrong over the last quarter century.

20 Tom G. November 27, 2007 at 7:36 pm

As a Marginal Revolution fan, I’m disappointed with this post.

The review starts with a claim so strongly worded as to sound ridiculous. If it’s really true that _no_ redistribution policy can have any positive impact, it would be interesting but you really ought to provide some evidence.

I lack the knowledge to judge the comments about unions but the high emotion / low data quality of the piece is not encouraging.

The final paragraph should be offensive to everyone with it’s extravagant, unsupported claims.

Perhaps I being too harsh on an off-the-cuff opinion piece, but I can not see why Alex would want to highlight this light-weight work. Surely he can find higher quality put-downs of his opponents.

Tom

21 Tom G. November 27, 2007 at 10:27 pm

But surely posting/linking does imply a view that the material is worth reading.

Perhaps I have become spoiled by the usual high quality of Marginal Revolution posts.

Tom

22 green apron monkey November 28, 2007 at 1:21 am

It is interesting. The most interesting thing is the first criticism. Inequality isn’t a bad thing all on its own, and if you take care of the bad things that the left has traditionally been concerned with, then no one is going to care if society is unequal or not. It is a good point, and, I think, a nigh unanswerable one.

23 Allison November 28, 2007 at 3:23 am

Anyone who thinks that income inequality is irrelevant to everyday life has really become quite removed from life on the lower end of the distribution.

24 John Dewey November 28, 2007 at 6:28 am

Simon, you quoted Mankiw’s text: “When unions raise wages above the level that would prevail in competitive markets,”

I guess I do not understand this. What qualifies as a “comptetitive market”?

If a group of small businessmen form a co-op to improve their purchasing power, are they still operating in a “competitive market”?

If a group of craftsmen in an artists’ colony agree on minimum price levels for their wares, are they still operating in a “competitive market”?

If a mutual fund combines the assets of a million investors, and thus reduces overall administrative and transaction costs for those investors, are those investors still operating in a “competitive market”?

If AARP negotiates better insurance rates for its members, are those members still operating in a “competitive market”?

I can see where a labor market may not be “competitive” where employees are required by law to join unions. But in right-to-work states, how does group bargaining tactics mean that markets are not working? As I said before, it seems to me that the problem with unions is the bad laws passed by legislators who do not act in the best interest of the entire population.

Even in closed shop states, are those economists Mankiw mentions defining “market” too narrowly when they do not consider the global sourcing options available to businesses? If businesses are allowed to import product from other states or other nations, doesn’t a competitive market for labor exist even for those unions in closed shop states?

25 John Dewey November 28, 2007 at 2:58 pm

Barkley Rosser: “the recent rise in inequality has coincided with a decline in the
US savings rate, although I suspect that these are more independent than linked.”

I can think of three factors that contributed to the decline in savings rate:

1. Despite my own apprehension about the program, I believe the majority of Boomers expect social security to fund their retirement lifestyles. Many just haven’t perceived a need to save. For Boomers grandparents and parents, social security benefit levels had not increased to the real levels Boomers expect. So they needed to save more.

2. Boomers’ parents and grandparents suffered the 1930’s depression. The ones I know felt less financially secure than did those of us raised in the 50’s and 60’s boom years. Our elders saved not just for retirement but also for emergencies.

3. Consumer credit was just not as easily available for everyone 30 and 40 years ago. The only option for large purchases was to save.

26 Barkley Rosser November 28, 2007 at 4:25 pm

John Dewey,

I would agree with your second and third points.
On the first one, looks like you want to continue our
contretemps from Cafe Hayek on social security over here,
:-). OK.
I am well aware that Martin Feldstein has made a
career out of arguing your first point. But I think there
is a lot of reason to doubt it. Again, I would point to
data on other countries. Just to be boring and tedious,
and recognizing that in a number of areas it does not do
as well as the US economy (while doing better in some others)
I will drag up the example of Germany. It has a much more
generous universal, government-provided old age pension
program than does the US, and has for a long time. Indeed,
it had the first government-provided social security system
in the world, dating back to the era of Chancellor Bismarck,
with the US system being modeled substantially on its system.
The payments in some cases are twice what they are in the US
social security system. Yet, Germany has a substantially
higher savings rate than does the US. Again, there are lots
of other similar examples, countries with generous
government-provided pension programs with respectable levels
of savings, well above those in the US.

Savings is a poorly understood phenomenon. Maybe the
indexation of social security starting in 1971 had an
effect on US savings, but my sense is that other factors
have been much more important.

27 John Dewey November 28, 2007 at 5:32 pm

Barkley Rosser: “Maybe the indexation of social security starting in 1971 had an effect on US savings, but my sense is that other factors have been much more important.”

You are probably correct, Professor Rosser. I should have led with points 2 and 3, which I myself felt were much stronger than point 1.

I had to look up “contretemps”, Barkley. I’ll try to keep up, but I started a little behind. My father was a blue collar union leader, not a world-renowned genius :-). He was still a very good man, of course.

28 stephen November 28, 2007 at 6:34 pm

Dewey,
Agreed, my Dad grew up in the depression era and one would think that he would be a saver. I can tell you he is not. But I honestly think that this is tied to peoples fundamental tendencies to want more than they have. I would argue that people of his generation are as likly to spend more than they have for the same reasons that you argue they would save. Those times are long gone (great depression) time heals many wounds and boy that credit card offer sure looks good and WOW! I had no idea you could get a flat screen TV for under $1000. I need that to forget the old days. Just my opinion.

29 RJ November 28, 2007 at 11:06 pm

“Contemporary conservatism is based on southern white racism”

Could that shot be any cheaper, or more inaccurate? I don’t think so.

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31 Barkley Rosser December 3, 2007 at 1:07 pm

Mogens,

I am in agreement with your general argument, and most of your specific points
are correct. But, a few are not. Thus, the US does have a higher real per capita
GDP on PPP measure than Denmark, although not by very much. Also, Denmark does not
have the lowest rate of inequality in the western world. Finland does, although
Denmark is not far behind. In any case, your general argument is reasonable.

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