Megan McArdle - Those Pesky Principles

It has been a month since I've posted, and it may be another month before I'm on here again the way things are going, but I just read Megan McArdle's article in Bloomberg View and found it interesting. Read the article, it is worth the few minutes.

As I wrote in the last post, I think Trump is a travesty. He represents so much of what is wrong in America, and he does so in a way that almost seems like it should be a joke - that he is some sort of caricature of a Fox News/Rush Limbaugh politician. I feel pretty confident in saying that it is not a joke, he is exactly as awful as he seems. But McArdle makes a really good point in the article - for as awful as Trump is, he knows how to spin the right story. Before even taking office, he has been "making deals" and putting on a show. The self dealing with foreign governments and Trump properties are disgusting, but I think the Carrier deal is probably even worse. If Trump continues to enrich himself, his businesses, and his family through the power of the presidency, he will probably end up impeached, perhaps sued, and maybe even imprisoned. The Carrier deal is just as wrong, but will likely have much farther reaching and longer lasting effects. And the worst part is that Trump's fans love it.

McArdle describes this very problem. Why do so many Americans support this type of protectionism and interventionism? From the article:

Trump’s tiny deal with Carrier was far more politically effective than all the Democratic railing about traitorous companies moving their headquarters abroad. After all that railing, what Democrats were proposing to do in the end was just to create even more impersonal laws, some incomprehensible amendment to an already opaque tax code. What Trump gave them was direct action -- action that said “I’m on your side, and I’m not going to sell you some nonsense about abstract economic principles; I’m going to go out there and save your jobs right now.”

There is an old saying in writing - show, don't tell. Democrats told voters they would fight to keep companies in America, Trump showed them he would. Unfortunately, both of these are bad positions to take, though you wouldn't know it considering the rhetoric throughout both campaigns. But both of those policies sound more appealing than talking about market forces and long run increases in total welfare. Basically, sound policy has a messaging problem.

These well-worn arguments, however true, have the unsavory flavor that Anatole France aptly summed up in an epigram: “The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”

This is the nature of principles-based systems. They are cold and impersonal, and ostensibly neutral machinery often produces results that look grossly unfair by any common-sense moral standard: rich people getting better treatment from the legal system than poor ones, bankers who gambled on mortgage bonds getting a safer retirement than truck drivers who gambled on an overpriced house. If the “fairness” of following principle departs too widely from the “fairness” of following our intuitions, then people are going to start asking what’s so great about those principles.

Who is going to fight for principles that seem to disproportionately benefit wealthy over poor? McArdle brings up the case of banking executives such as Dick Fuld of Lehman Brothers and how well they all seem to have fared after the 2008 crash. While many of those executives have lost substantial amounts of money, power, and prestige, they are still wealthier than 90%+ of Americans. That isn't a satisfying consequence for people who came out of the financial crisis without a job, home, or any savings. But, as McArdle points out, there have been plenty of eager prosecutors that would happily make a name for themselves by throwing the Fulds of the world in jail. The problem is that there isn't enough compelling evidence that a crime was actually committed.

For people who work in finance, this probably isn't that surprising. Financial instruments can be very complicated - there is a reason so many math and physics PhDs work for investment firms. But to compare it to something more tangible, suppose you have a company that makes cars. Well, what if you wanted to make a self charging electric car. This new car uses a new charging system and battery that can go 1,000 miles without stopping. It is a brand new technology, but your engineers assure you that it is safe. They have run all kinds of tests in the lab and based on the test results, the car would only fail if subjected to temperatures of over 120 degrees for more than six hours. Based on simulations, the probability of that happening is 0.01%, and hasn't happened in the US since 1974. So you start selling these new cars and they are immensely popular. Several years later, however, you see on the news that a heat wave is rolling over the southwest with temperatures well above 120 degrees in several large cities. What those engineers didn't think about was that when that extremely unlikely heat wave does come, it will impact a lot more than just a few cars. Within a week, you have a class action lawsuit saying that your cars have been linked to thousands of fires and $500 million in damages and your company goes bankrupt.

This is (mostly) what happened in the financial crisis. Banks and investment firms had developed a new product: credit default swaps ("CDS"). A CDS is basically like insurance on a loan. For example, let's say I owe the bank $1 million. My bank might rightly see that as a lot of risk concentrated on a single person. So they get an insurance company to write a policy that basically says the insurance company will pay off any debt I am unable to pay in case I declare bankruptcy. The bank pays the insurance company a premium and feels all warm and fuzzy because they don't have to worry if I go belly up. The problem in the financial crisis, is that insurance companies forgot to account for how risks relate to one another. They wrote all these insurance policies (CDSs) thinking that the possibility of each policy having to pay out as unrelated. They ran some simulations and found that it might be something like a 0.1% chance that they would get a claim and priced the insurance accordingly. The problem is that these entities don't exist in a vacuum. As it turns out, the conditions that caused one company to fail caused a lot of companies to fail, and suddenly companies like AIG are on the hook for billions of dollars.

In the case of the self charging car, I don't think people would be parading down Pennsylvania Avenue asking for the car engineers' and CEO's head on a platter. But they did come out with their pitchforks and torches ready for AIG, Lehman Brothers, and Bear Stearns. There were even calls for Obama to throw someone in prison even just as a symbolic gesture. Why? People wanted to see action. Explaining the complexities of derivatives and financial contracts wasn't going to pacify anybody. Unfortunately, McArdle doesn't have a great answer for this problem either. As the world becomes more complex, this issue is likely to get worse, not better.

For the post-election blues.

This is as much an exercise in therapy as it is a thought exercise, but last night at about 11:30pm, I went to sleep with near certainty that Donald Trump would be the next president. From the beginning of the election, I had prepared myself for another disappointment on election night. As a sort of bleeding heart libertarian-type, nobody in this election would have implemented the type of policy agenda that I can really get behind. I have spent the year becoming more and more dismayed at the type of rhetoric and (only very occasionally) policy coming from all sides. Even still, this election felt like a real gut punch. Yes, the sun still rose this morning, but the world felt a little darker, a little colder. (I realize this is November, and the world actually is a little darker and a little colder every day.) My first thought was, how in the world can we, the greatest nation on earth, elect Donald Trump, a man who embodies our nation's dark underbelly?

Hope can be hard to find in a moment like this. More so when you think of the 50+ million people that are celebrating this colossal failure. Yet I know people who voted for this monster, and despite that fact, they are my friends and my family. These are people that stand up on Sunday to sing about a loving God and denounce sin. These are people that have fought overseas to protect freedoms that Donald Trump finds inconvenient. These are people that believe in community and helping your neighbor, both the one down the street and the one on the other side of the planet. They have faced real struggle, and instead of succumbing, they have risen. They are doctors, they are engineers, they are pastors, and they voted for a cruel predator. How can I reconcile these things?

Plenty has been written about the correlation between Trump voters and racism, misogyny, nationalism, authoritarianism, economic anxiety, and everything else. As someone who lives in the heartland, which has been the fertile ground that gave rise to the Trump presidency, I give my best shot at explaining what I see and hear from those that supported a candidate who clashes with many of the "American Ideals" that I and others hold dear.

• Trump is not Hillary. When the Democratic Party nominated Hillary Clinton, they signed off on a candidate that even their own base didn't want. Say what you will, but the DNC managed to assemble a primary in name only that served the nomination to HRC on a platter. They disregarded their own constituency as it clambered for ANYBODY other than Clinton. After being wholly rejected in 2008, Clinton walked into the nomination as one of the least popular nominees ever. With such an unappealing alternative, more independents ended up voting for third party candidates this year and disaffected Republicans felt justified in voting for an even worse candidate.
• They didn't know what they were doing. When I would tell people about Trump's ties to Russia, his shady business dealings, his flirtations with white supremacists, etc., people were often surprised. I read a lot, and I read a wide variety of sources. These were issues I thought were beaten to death, yet others hadn't even heard of this. I attribute this mainly to three factors: a lack of quality journalism, partisan echo chambers, and election fatigue. The decline of print journalism is pretty self-explanatory. Fewer people subscribe to newspapers and the entire medium is struggling to adapt to the new economics of a digital age. Part of this new digital age of journalism, however, seems particularly bad at providing quality reporting that reaches a wide audience. I fear that the days of objective investigative reporting are behind us. Instead, we have a country that clings to their partisan media. Fox News, Breitbart, Red State, and the rest of the hyper-right media pump out absurd stories that serve the interests of their investors, not their listeners. When a significant percentage of Trump supporters believe that Clinton is an actual demon, we have gone all kinds of wrong. The "alt-right" commentariat lies, conceals, and confuses on its way to burning down the political fabric that holds this country together. Short term profits for long term anarchy, but hey, we're all dead in the long run, right? And last but not least, election fatigue. I can sympathize here, as someone who got sick of hearing about every skeleton in Trump's closet (there are A LOT). The election cycle was way too long. As the contest dragged on, people stopped paying attention. Trump's campaign manager worked for a pro-Russian upstart in Ukraine? Trump abuses women? No tax returns? At some point, people just stop caring and walk into the voting booth with a willful ignorance of just how awful Trump is.
• Deeply rooted political tribalism. I spent two years living in Poland as a missionary and part of my responsibility was to convince the people to change religions. Poland is a staunchly Catholic nation, and Pope John Paul II is a hero there. One phrase that I heard often during that time was "I was born Catholic, and I will die Catholic." Some people said that to me directly after telling me that they don't believe in the supernatural. Consider that. They are Catholic, and yet they not only believe something different than the Catholic church, they fully reject the entire premise. So it is with politics. These people grew up in staunchly Republican households. That red elephant is as much a part of their identity as their last name. When Trump said he could kill somebody in Times Square and it wouldn't matter, he is probably right. As long as his name is on the line for the Republican ticket, he will get at least 40% of the vote, and probably more. As with pretty much everything on this list, the same is true for Democrats. Romney was demonized for his 47% comment, but, tone deaf as it was, he was right. American politics are a team sport, and both teams are in it to win.
• The enemy of my enemy is my friend. In exit polls, voters willingly admitted to pollsters that they thought Trump would be a bad president, but they voted for him anyway. Why? Because he hates blacks/women/Jews/immigrants/Muslims/etc. Trump magnifies the worst in everybody. Even good people have deep-seated prejudice, and Trump preyed on fears of terrorism, crime, economic anxiety, and religious fanaticism. His campaign speeches portrayed an apocalyptic wasteland that was either already here or well on its way. I heard a lot of "I really don't like Trump, but he would stop group X from ruining our country."
• One last hope for those that thought hope was lost. Trump appealed to those who have been left behind in the digital economy. Factory workers, coal miners, steel mill workers, etc. have all seen their industries collapse with the rise of global markets. For the displaced worker who doesn't have much hope of regaining their dignity in a world they no longer recognize, Trump seemed like a risk worth taking. Trump explicitly promised to revive the coal industry in West Virginia and put people back to work. He promised tariffs and reversals of free trade agreements to bring jobs back onto American soil. Spoiler: those jobs are gone, regardless of who is president. While the blue collar crowd generally supports Democrats, Trump took up their mantle with much more vigor (and magic fairy unicorn dust) than Clinton. With the Trans-Pacific Partnership, she was for it only until it became politically expedient for her to be against it. After eight years of losing under Obama, they convinced themselves to take a chance on Trump.

I don't claim that any of these reasons are satisfying, but at least I can understand them. And hopefully understanding where the Trump support comes from can help craft solutions that don't involve voting for another president that could destroy this great republic (should she survive this one).

For progressives, get over yourselves. The elitism and condescending attitude only further alienates those you obviously don't understand. "Let them eat cake" didn't end well last time, either. Get involved in your community, but also get involved in a community that exists outside of your urban trappings. Recognize your solutions aren't THE solutions. There isn't a right answer in politics, so quit with the stupid "mic drop" commentary.

For those that voted for Trump, get over yourselves. As we learned from Brexit, be careful what you wish for. And if you find yourself justifying your vote for one of the above reasons... I hate to be the bearer of bad news, but Trump isn't going to make things better. I hope for the future that Trump's campaign was an elaborate con just to get elected president, and now that he is there, he will simply hire good people and get out of their way.

I keep trying to find a silver lining in all of this, but the best I can think of is perhaps we have seen how fragile our freedoms really are. Maybe by opening this festering wound, we can finally treat it - maybe in exposing our weakness, we can become stronger. Let us be diligent now, lest we destroy the things that have always made America great.

Sumner - Non-materialistic millennials and the Great Stagnation

I saw this today, and because I'm a millennial and a sucker for anything people say about millennials (which is probably a very millennial thing to do), I read with much interest. Right at the beginning, he makes a pretty interesting point that I hadn't realized. Sumner:

When I was a teenager in the early 1970s, I looked forward to getting a nice stereo system, with a receiver, amp, turntable and big set of speakers. My 17-year old daughter also likes music, but has no interest in those things. I have no idea why. And I notice this patter in lots of other areas. ... When I look at her lifestyle, it seems shockingly unmaterialistic. (Or maybe she has all these things embedded in her iPhone.)

What I thought was interesting is that when I was a teenager in the early aughts (is that the term we have settled on? because it sounds decidedly like something a millennial would never say), I also wanted a nice stereo system, with receiver, amp, speakers, but no turntable. I'm not a monster. I also wanted a lot of other things, like a nice Les Paul Classic electric guitar like Paul McCartney, a Mitsubishi 3000GT, and a sick Pentium 4 computer with an nVidia GeForce4 graphics card and a gig of ram. What is interesting is that as I got older, I found that a lot of the things that I wanted as a teenager weren't that important to me, e.g. a sports car (I have a car, it gets me from point A to B at about 35mpg with comfort and ease); or that with a full time job, the expense of those things were relatively small compared to my earnings (I recently added up all the material things I really want and found that it would probably only take me about 2 years to save up to splurge and get them all). Part of that is my tastes have changed significantly over the last decade, but perhaps a larger part is that the cost of these materialistic wants has declined substantially. The speakers, computers, guitars, TVs, and cars that I wanted then are either much cheaper now or have cheap substitutes that work just as well or better.

What I most want now is something entirely different than what I wanted as a teenager: time. Time to spend with my awesome wife and three amazing children. Time to actually listen to those speakers, play on that Les Paul, or boot up a game on my sick computer. When I'm working now, I actually think of income as a means of exchange for future time. Every dollar I save is buying back future time. This sounds a lot like slavery, and in some ways, I think that accurately describes how many millennials view their working lives. The rise of extreme early retirement and the gig economy are both ways that millennials are moving away from the traditional American Dream of a 9-5 job and a nice house with lots of stuff. Sumner talks about the rise of camping as another rejection of materialism. I think part of the rise of camping is actually a way for millennials to travel on a budget. Instead of paying $200/night at a hotel, pay $40 for a camping pass. Modern camping is usually a drive in affair with bathrooms and a hot shower nearby. Since technology travels so well, you can be as (un)connected as you want to be.

Popping in to say hello...

Slow month for posting, but busy month for me. My wife and I welcomed our third baby this month and I am finally settling back into my normal routine of husband/father/worker/student/blogger/programmer. At least, I think that it is a normal routine.

Much has happened over the last few weeks, but one of the most interesting things I saw was the presidential debate. While I don't much respect either candidate and thus didn't have high hopes for the debate, I was still surprised and disappointed at just how economically illiterate both candidates seem to be. Hillary was better than Donald, but that is like saying being punched is better than being stabbed. Both are painful and neither one is good for you. From what I heard, you would think the general consensus is that trade is ruining the world. If this kind of thinking gains traction, I genuinely fear for our future. Markets and trade have done more to lift people out of poverty than every charitable and humanitarian effort in history combined. No, I don't have research to back up that statement, but I don't know many serious people who would disagree with it either.

As for what I've been reading lately, I just saw a post this morning that I thought was interesting on Andrew Gelman's blog about air rage on planes with first class seating. The article talks about a poorly done statistical analysis of air rage incidents that managed to get published in a journal despite all the obvious issues. One part I really liked:

When posting on this study, I threw gratuitous shade at one of America’s most trusted news sources in my “tl;dr summary”:

NPR will love this paper. It directly targets their demographic of people who are rich enough to fly a lot but not rich enough to fly first class, and who think that inequality is the cause of the world’s ills.

The next day I posted a roundup of media outlets that’d fallen for this story, including CNN, the LA Times, and ABC News, along with respected tech sources Science and BoingBoing. I discussed the selection bias that occurs when the best science reporters realize this study is empty and don’t report it, while everyday journalists just follow the PPNAS label and don’t even think there could be a problem. All jokes about “stat rage” aside, this is a big problem in that consumers of the news only see the sucker takes, never the knowledge.

I think Andrew points out something here that doesn't get enough thought. News outlets report what they think will be interesting to their readers, but often don't have the technical knowledge about some of the subjects they cover to really know if what they are reporting is true. They rely on gatekeepers, such as field journals, to weed out good information from bad. So when these journals drop the ball and let shoddy work through, we end up with gross misinformation. It goes back to my concern with the presidential debate. When the two most visible candidates for the highest office in the US are spouting nonsense about trade, that matters. People will assume these candidates are smart, or at least have smart people advising them on these subjects, so what they say will heavily influence people.

Part of the reason I decided to write this blog, and why I agree with Miles Kimball that blogging is important, is to have another voice to contradict bad information and influence other thinkers. This also provides a forum for me to put ideas I have out in public, which makes me think about them more. An example is a post I have probably rewritten a half dozen times (or more) about the guaranteed basic income ("GBI"). Morgan Warstler had a post a while back that proposed an alternative to GBI that I thought was interesting. But whenever I have put together a post to comment on it, I realize I have more questions that I want to dive into before I post. That process continues to sharpen my own thinking on the subject and I feel more confident that when I do finally post something, I will at least have taken the time to think through many of the issues with such a policy change. From the Andrew Gelman piece, it seems like more journalists need to go through that process as well.

Cowen and Smith debate government role in boosting growth

They call it a "debate," but there really wasn't much debating going on (link). After reading it, I was disappointed how little substance there was to the whole thing. Many of the responses felt like they were talking past the other side, not even engaging the ideas. If I could sum it up, it would be:

Cowen: We have pretty much reached full employment, so increasing demand through government spending doesn't make much sense.

Smith: Maybe, but there might be some room left for government spending, and I would rather spend money on infrastructure that we need anyway, even if it turns out there isn't really any demand gap. Besides, wages are still flat so we probably have at least a little slack.

Cowen: Government spending should pass a supply-side test - if we go beyond that, we are likely misallocating resources. Even if wages are flat, it might be that employers value labor less, and maybe human labor is actually less valuable. Video games and porn might be more enjoyable for workers, so they don't care to work hard for more pay.

Smith: But if some workers are valuing leisure time over productivity and work, then shouldn't we see wages going up? That would be a negative supply shock to labor.

Cowen: Not if labor quality is lower. You have fewer workers but they aren't as valuable.

Smith: But women are staying home too... are women staying home and playing video games/watching porn?

Cowen: Maybe we just hit a bubble in the labor market and this is more of an equilibrium level of women in the workforce.

Smith: Even if there really isn't any demand gap, more stimulus! More infrastructure!

Cowen: Sure, more infrastructure is fine. But only in cases where it is really necessary.

I had a lot of questions reading through their exchange that I would have hoped they would have addressed. My thoughts -

• What types of infrastructure does Noah propose? Another bridge to nowhere (what I call "Krugmanian stimulus") doesn't seem like a worthwhile investment, even if there is a demand gap. I agree that some spending might be justified even if unemployment is essentially 0.
• There is a lot to be said about the value of leisure. It has become extremely inexpensive to maintain a comfortable lifestyle with more and more consumer goods available at ever cheaper prices. Anecdotally, I see many of my peers happy to accept less disposable income for more disposable time. Turns out that a comfortable life is easy to afford. Is this a problem? And if so, what are potential solutions? I don't know if it is a problem yet, but if more people trade in work for leisure, there is probably a tipping point where things get bad.
• Why aren't wages increasing with labor participation getting back toward historical levels and unemployment below 5%? Tyler says it's because of a lack of skills among those workers who are playing games in their spare time. But Noah has a good point, if the labor pool is shrinking for skilled workers, why aren't we seeing more wage growth? I would guess that substitutes for labor are improving, and not just for unskilled workers. As the perceived value of human labor has declined, companies would be more willing to invest in technology which picks up the slack in labor markets.
• What is happening with women in the labor force? Are we seeing any sign that women are leaving the work because of family responsibilities? Are industries dominated by women (service, education, etc) shrinking?

Frances Woolley: The Educational Smorgasbord

There is a lot to digest in this post - and if you didn't read it, you won't get the pun (and you don't deserve to!). While the post is a kind of "thinking out-loud" put to paper, Woolley makes some great points about the university conundrum (he is writing specifically about Canadian universities, but I think it applies to the US as well). With so many options in front of students, why are the classes that one might think of as the most valuable (courses that teach skills that will be most profitable after graduation) often under-subscribed while "fluff" courses are so popular?

Education has some serious issues, both for our neighbors to the north and here in the US. Woolley points out that some of this problem is likely due to the poor preparation we give to college students. From my own experience, if I didn't seek out career guidance, I likely would have graduated from college even more poorly prepared than I was. It wasn't until my senior year that I had somebody to help me with putting together a coherent plan for my career, and he was not employed by the university. Instead, we connected through a business society for students. He gave me invaluable guidance (for which I am extremely grateful) that I should pursue the Chartered Financial Analyst (CFA) designation. I had studied business administration and finance in college, but lacked the type of training that would make me valuable to an employer. My timing was especially poor as I entered the job market in 2010, just as thousands of well-qualified, experienced financiers were seeking employment after the fallout of the financial crisis. In pursuing the CFA charter, I gained the skills that helped me get into my current career in financial analysis and (now) credit risk analysis.

I imagine that I am a fairly bright individual, and though the resources available now are far and away better than they were over a decade ago, I didn't have a clue what I was doing in college. I am currently pursuing further education, in part to make up for what I should have done as a full-time student. I went to a school counselor, and even met with a few professors during office hours, and still my education leaned more toward "fluff" than substance.

So what went wrong?

One issue - I didn't know enough about what I wanted to do with life. As someone that has now spent nearly a decade in finance, I still don't exactly know what I want to do with my life. I have way more interests than I have time, and my freshman year I spent split between political science, economics, and journalism. After my freshman year, I had dropped the journalism bit, and instead focused on finance and business with a minor in politics that focused more on social theory and economics than political systems. Still, I graduated with very little insight as to what employers might want from a prospective employee in those fields. I took courses across a wide variety of subjects, from western swing to accounting to theatre history to biology. Fortunately, I was able to find work quickly (probably as a result of applying to anything that bore even a passing resemblance to finance and investment analysis).

Had I known what I know now, I likely would have done several things differently. First, I would have chosen an institution where I would have worked with experts in the fields that I am most interested in (political/experimental economics, finance, statistics). I instead chose a school where I could play football. While I love playing sports, I don't think the trade-off was worth it. I don't think this is stressed enough to high school students - we put a lot of emphasis on going to college, but not nearly enough emphasis on choosing which school to go to and what to study. The "what to study" should be the most important factor in the "where to go" equation, but it didn't even cross my mind when applying to schools. I mostly thought about things like location (I wanted to be in the mountains, close to a beach was a bonus), cost (despite trying to go somewhere to keep costs minimal, I graduated with over $20k in debt), and overall academic reputation (at least I considered that piece!). Since I didn't give much thought to what I wanted to study, I didn't put nearly enough emphasis on where I should go. None of the top 3 schools I applied to my freshman year would have made the cut.

Second, I would have spent more time doing research projects or internships. This is a crucial piece of the educational experience that does not get enough attention. I think education would ideally have more time spent outside of a classroom doing real work. If a typical degree took six years instead of four, but the extra time was spent in a real world setting doing real work, I think the overall product (i.e. the laborer/employee) would be much better. This could also greatly reduce the cost of education because a student would be able to earn income while attending school instead of foregoing any earnings while getting a degree.

And third, schools need to improve the onboarding and academic advising process. Almost all the advice I got from the two universities I attended was " to earn a degree in Major X, you need to take courses A, B, and C." What about asking if Major X is the right one? The advisors in universities need to take on a more prominent role in helping students navigate the academic experience. Woolley wonders if there is a bit of homo economicus to blame as colleges might steer students toward courses that may be more profitable but aren't as beneficial to the student. Since all students are charged a flat rate for full time tuition, it is in the best interest of the college to have more students taking Literature of the Western World from the professors that make half (or less) than the professors that teach Advanced Econometrics or Business Law. Another explanation in the blog is that this information isn't intentionally hidden, people are just less interested in knowing which courses are most valuable so it isn't as visible.

One other explanation that Woolley doesn't cover, but Bryan Caplan gives great insight into, is that of signaling. If a degree is more about getting a high GPA in a subject that tells employers that I would be a profitable hire, then why waste time taking difficult courses that I might not do well in? Instead, I will take the bare minimum of difficult coursework to get my degree, and the rest will be in fluff classes to pad my GPA. While I didn't do this personally in college (as a result of my indecisiveness, I took major courses in several subjects which used all my extracurricular slots), I know people who did. Once they met the bare minimum for the degree, they filled the rest of their schedule with known fluff. I admit to doing this in my final semester of high school. Knowing that I was already accepted to college, I took the easiest classes I could and had a great time.

As the price of college soars, the points Woolley raises are important. As an aside, I'm amazed at the thought that universities aren't awash in money. With how much they charge for tuition, I can't understand where it all goes. If anybody knows where I can see itemized financial statements for public universities, pass that along (I know, I could search, and I'm sure I will get around to it... eventually...).

Thoughts on minimum wage

As more and more cities push to increase the minimum wage, I wonder how it will affect the type of labor in those cities compared to places that have left the minimum wage at or near the federal level. My first thought was simply that inequality will increase because low-productivity or low-skilled labor will be shut out entirely from the (visible) labor market. This might take a while, but I think in the long run this is true.

Imagine a business owner, let's call her Stella, who relies heavily on low-skilled labor (and remember, unskilled or low-skilled labor doesn't necessarily mean the work is easy, just that it doesn't require extensive training or education). We'll say this person runs a local grocery store in Seattle. The new minimum wage law is passed, but the full increase in minimum wage is spread out over a multiyear phase-in period. Stella essentially has an extended audition for her employees to see who is worth $15/hr. Low-skilled labor has a higher rate of turnover than higher-skilled labor, so Stella will likely turnover the majority of her workforce over the next three years. As the cost of a new employee increases, Stella is likely to increase her requirements and become more selective with each new hire. As anybody who has had to hire for low-skilled positions can tell you, the selection process is extremely inefficient. Before, Stella might have been able to hire riskier employees, ones with spotty work histories or poor educational performance, at a price that reflected that person's level of perceived skill. Maybe Stella offered a starting wage of $8/hr for this type of employee compared to a starting wage of $10/hr for someone who looks much stronger on paper. Now, Stella needs to select high productivity employees at a much higher rate because labor is so much more expensive - she no longer has the option of offering $8/hr to the riskier hire. And surely Stella is investing anything she can into capital improvements that will reduce her reliance on expensive labor wherever it makes sense. By the time the $15/hr minimum wage is in effect, she might only need 6 people on staff instead of 10.

So who gets left out? The people that were already at the bottom will now find it even harder to make ends meet. And even if they would like to improve their lot, they will find a much less receptive audience among hiring managers. Why hire someone at $15/hr if they struggled to show they were worth $9/hr? An argument might be that $9/hr is simply not enough to survive, so we need to lift the floor on wages to make sure every job provides a "livable" income. Certainly a job paying $9/hr, which would equate to a full-time annual salary of $18,720, doesn't sound appealing. I'm sympathetic to the idea that we don't want people who work 40+ hours each week to live in squalor. But by raising the wage floor, you are essentially raising the productivity floor as well. Waving a magical government wand does not suddenly make mopping a floor worth $15/hr.

Another thought I had is that maybe by raising minimum wage, you are effectively forcing labor providers to increase their skill level. I can imagine many of the workers who currently get by working 50-60 hours each week at $9-10/hr going through some sort of job training or going to school. The problem, of course, is that education costs money. For someone making around $20k annually, that likely means debt and possibly leaving the workforce for some number of years. It will be interesting to see if cities with higher minimum wages essentially sort the country geographically according to income. Areas with $15/hr minimum wages have only high productivity, high wage labor with lots of capital and technology replacing human labor wherever possible, and areas with $8/hr minimum wages become the only places where low-skilled labor can find work. The minimum wage acts as a signal - unless you are highly educated and skilled, you are not welcome in our city.

Are financial markets built on informational asymmetry?

In a post on Bloomberg View, Noah Smith has some interesting comments about asymmetrical information in financial markets. From the article:

For most products, there are things you can do to resolve the information gap -- if you don’t trust a used car salesman about the quality of a car, you can have it checked out by a mechanic. In most markets, reputation is also important.

In finance, however, these tools have often proven to be less reliable than for cars, houses or other products. Taking complicated credit products to a “mechanic” didn’t work in the run-up to the 2008 financial crisis -- the more opaque the product, the more willing the credit rating agencies were to sign off on it. As for reputations, these often simply added to the crisis -- people were probably too willing to enter into contracts with risky banks like Lehman Brothers and Bear Stearns, precisely because of these companies’ sterling reputations.

First - the comparison with the mechanic would make more sense if you took the car you were about to buy to the mechanic that works for the dealer. Banks hire rating agencies to sign off on products as part of the marketing for that product. For many institutional buyers, any investment without an investment grade rating isn't going to even get a sniff. There is an inherent conflict of interest here. The bank needs a highly rated product, and the rating agency needs clients. While the products that were sold with supposedly AAA credit turned out to be extremely risky, I doubt the rating agencies fully understood the product and should have said as much. If you take a Tesla to a diesel mechanic, you would hope the diesel mechanic would tell you that he can't help you rather than tell you that everything looks fine.

Noah continues:

Why is asymmetric information so crucial to an understanding of financial markets? It’s probably related to the reason people want financial assets in the first place. People want cars and bananas and microwave ovens because those things are immediately useful. But most people who buy and sell financial assets have no intrinsic desire for the asset itself -- they only care about how its value to other people will change in the future. That means that while information is important for many products, when it comes to financial markets, information is the product....

...Suppose you come to me offering to sell me a stock for $100 a share. Why are you offering to sell it to me for $100? Maybe you’re selling stocks because you’re shifting into bonds, or ready to retire, or need to pay a sudden medical expense. But chances are, you think the stock is worth less than $100, and you’re trying to unload it. That should make me wary about taking you up on your offer. But on the other hand, if I jump at the offer, that should tell you that I have reason to believe the stock is worth more than $100 … and that should make you wary.

I may be misreading this, but Noah seems to think of financial markets as a sort of hot potato where everybody makes money except the person left with the potato when the music stops. If I sell an asset, it is because I believe that asset will no longer continue going up. I'm holding that potato as long as possible, with the hopes of dumping it off to somebody else right before the last note. And if I am the one with the most information, I have the best guess as to when that music is going to stop. So why should anybody buy anything in the financial markets if the game is to make every buyer the bigger fool? The only things for sale would be things I wouldn't want to buy.

Of course, markets don't work that way. The volume in stock and bond markets far exceed what you would expect if most trades are just to offload a soon-to-be dead asset. So why are these markets so active? If markets are efficient and react quickly on all publicly available knowledge, once any material information is released, prices will reflect that new information. Suppose you have a stock that was worth $10 yesterday, but something happened today makes you think it is now worth $5. You might decide to sell it, but how much can you get? If you are the only person that has this bit of new information, maybe $10. If the information is public, then much less. Someone might think that new piece of information is not as awful as you do, and maybe offers you $6. Happy to get rid of something at what you now see as a 20% premium, you make the trade.

Did anybody get screwed in this transaction? If the seller made the trade based on non-public information, then the buyer probably did. That is the purpose of insider trading laws. If market participants aren't comfortable making trades out of fear that counter parties have material non-public information, the market will dry up. But if both parties have the same information, but that information leads to different assessments of an asset's value, transactions can occur. The same principles apply in business acquisitions. Wanda's Farm Supply might be doing just fine today. But Wanda might think the future is a little bleak so she takes bids to buy out her business. Maybe Rupert's Feed Store has been looking at opening a farm supply store and decides that buying Wanda's shop would provide a much higher return on his investment than starting from scratch. Rupert pores over Wanda's financial statements, customer lists, etc, and decides the business is a good buy. Rupert pays Wanda what he thinks is a fair price, Wanda is happy to get paid on what she thinks is a declining business, both parties are happy. The stock market is the same - people are buying and selling businesses based on current profits and projected growth.

Unfortunately, the stock market has become Wall Street's version of Caesar's Palace as speculators throw money at things they don't understand. If I want to buy a car but don't understand how a car works, I should find my own mechanic to take a look at it - and a mechanic that understands the type of car I want to buy. If I want to buy a stock but don't understand balance sheets or income statements, I should find my own financial professional to take a look at it that has expertise in the type of stock I want to buy. If I play the market like a slot machine, I should expect the house to win.

Noah says that asymmetrical information "is at the core of finance. It's key to the way traders, including high-frequency traders, make their profits." If asymmetrical information was so key, I would expect more traders to have higher risk-adjusted returns than their respective benchmarks. The fact is, they don't. The reason is that, for all the information that traders might hoard, they are still guessing on what will happen in the future, just like everybody else. While they might have some very smart guesses that turn out to be profitable, they also might wildly miss on others. Noah says traders are more informed because they "know something about the asset's fundamental value," but unless they have (illegal) insider knowledge, they have the same set of information that others have. The more information, and the more complex that information is, the wider variation in "fundamental value" among traders.

Labor Mobility in the US

I've been staying very busy with my actual work as well as side projects lately, but Prakash Loungani has a post on his blog linking to a new paper about labor mobility. I've only skimmed through the paper so far, but it seems to show that people are not moving for better prospects as much as they used to.

The result doesn't particularly surprise me. As some anecdotal evidence, I live in Indianapolis, which is not exactly a hotbed for financial professionals. Yet, I have remained here in spite of the restricted career opportunities due to family ties. At the start of my career, I even worked in accounting as it was the only offer I had, and I hate accounting (and really, hate is probably not strong enough). But, the job would pay the bills and keep me in Indiana. I wonder if there have been some significant cultural changes that cause people to take worse economic opportunities in favor of better social opportunities. I grew up in a military family and attended five different school districts by the time I graduated high school. As a parent, my goal is to avoid that kind of nomadic life for my own children.

Asher Schechter: “Why Argue With the Government When You Can Buy the Government?”

Great article on antitrust and how it fosters innovation. An excerpt:

"In a modern IT economy, we have network effects at a very strong level. We’ve always had some network effects—for the telegraph, the telephone—but network effects are really pervasive in the software industry and, since at least 1986, economists have been pointing out that that is fertile ground for predation.

Companies that understand how those markets work, that get a lead in those markets and then use predatory conduct to suppress their competitors, they can stay in control for a very long time, perhaps indefinitely.

These economic forces are different from traditional markets like agriculture or steel smelting, where there may be a small network effect. The fact that you drive a Chevrolet isn’t going to convince me to drive a Chevrolet. [However,] in software, the fact that you use Microsoft means I have to.

I remember after Joel Klein²⁾ had brought the case against Microsoft, we were chatting and he said to me, in a lot of industries it’s like a mile run: if somebody gets ahead on a false start, over a mile the better guys will win anyway. But these industries, they are like a 100-meter dash where, if somebody gets an unfair advantage, the race is over before everyone else gets up to stride. I think that’s a very good analogy, and that is why governments have to be even more vigilant in these industries than they have to be in other industries."

The whole thing is worth reading. It's encouraging to see more attention being paid to the tyranny of corporations here in the US - and I don't mean that sarcastically. I often hear this as a "left" or "progressive" issue, that in some sense enforcing antitrust legislation is supposed to be antithetical to business growth. The reality is the exact opposite. Monopolies and oligopolies prevent market forces from working, they limit consumer choice, and stifle innovation.

Those that know me have heard me (on more occasions than I would like to admit) go on filibuster-style rants against companies such as Comcast and Anthem. One of the things that makes me so angry about them both is that I am stuck with them. Comcast runs a government sponsored monopoly on high speed internet and television service in my city. Despite the fact that my service is so poor that I generally only have internet access about 30% of the time, Comcast will do nothing to improve their network. Why? Because they don't have to. I can either pay them exorbitant fees for an awful product or go without high speed internet. Anthem is part of a health insurance cartel that provides miserable service and doesn't care if I don't like it. In their case, I am legally required to carry insurance so either I use them (through my employer), or I pay a fine. That's the type of business plan that Warren Buffet dreams about.

President Obama urged the government to address noncompetitive industries in the US, and politicians on both sides have campaigned on the issue. The common refrain I hear against more intervention is that government is putting a ceiling on growth for companies that do their job very well. If everybody wants to use Comcast (I know, but just go with it for the example), then why should we stop them from using Comcast? Maybe Comcast has the best product. That may be possible that a certain business captures such a significant portion of the market share that they become a sort of natural monopoly. If that happens, the role of government becomes as sort of referee to make sure that market share is maintained through monopolistic practices. One of the most common ways this happens now is through acquisition. Facebook feels threatened by Snapchat? Facebook buys Snapchat; competition extinguished. Reback even goes so far as to say if a company does achieve a durable natural monopoly, the company should have to go through a government orchestrated break up, just as AT&T and Microsoft did.

The article doesn't provide specifics about how to reduce anti-competitive practices in the US, but it does bring up the influence of corporate money in politics. Reback says it isn't so much regulatory capture, but purchased influence that is hampering antitrust enforcement. Because companies develop alliances with politicians, they get "overlooked" by regulatory and enforcement agencies. If we want to see a more competitive marketplace, we have to stop companies from buying allies.

Guy Rolnik: Political Rents and Profits in Regulated Industries

Great article on the Pro-Market blog about political rent-seeking. Bessen recently wrote a piece about how corporate profits are increasing due to rent-seeking behavior and regulatory capture, the article is a Q&A with Bessen on some of his findings.

Noah Smith: Trump happened because conservatism failed

In a good article over at Noahpinion, Noah Smith gives a bit of an explanation as to why Trump has been so successful in this election. He points to a failure what he calls the three main pillars of conservatism: economic, social, and foreign policy conservatism. I agree that the Republican version of all three of these platforms has failed or no longer fits with current views (for example, Republicans and Democrats held many of the same views on social policy up until the Bush years).

I think one place Noah goes off the rails a little is when he calls Republican policy low tax, low regulation. I generally believe that the economic policy of Republicans has been much more corporatist - that it favors large institutions or powerful lobbies. He then goes on to say that "alternative policy paradigms like protectionism, socialism, and industrialism are now being openly considered." This is true, protectionism, socialism, and industrialism are being considered. The Bernie Sanders candidacy is an example of just how much traction these ideas have gained. But do we really think a world built on protectionism and industrialism is an improvement?

Yglesias: I was too hard on Mike Pence, and I'm sorry

In an article on Vox, Matthew Yglesias has a sort of apology for Mike Pence, but not in the way the title suggests. I agree with much of the article and it is very good - you should read the whole thing. One of my favorite parts:

"What now surprises me is when I come across a member of Congress who really does understand a particular issue in detail. And this sometimes does happen. Little pockets of expertise are scattered hither and yon all throughout Capitol Hill — especially when members dig in to work on idiosyncratic pieces of legislation that are off the radar of big-time partisan conflict. But on most issues, most of the time, most members of Congress are more or less blindly following talking points that they got from somewhere else and that they don’t really understand.

Members form identities as a certain kind of politician — a New Democrat or a progressive, a leadership ally or a rock-ribbed true conservative — and then they take cues from how a politician like that ought to respond to the controversy of the day, and their staff hastily assembles some stuff to say about it."

I am regularly disappointed when I listen to elected officials spout off the same garbage based off of the same dubious arguments (if they even bother trying to provide any justification at all) that I hear on talk radio. Talk radio is our intellectual hurdle for policy?! With such a high bar for public service, no wonder we have such brilliant minds running this country.

Timothy Lee: Pokémon Go is everything that is wrong with late capitalism

In a new article on Vox, Timothy Lee laments what he calls "late capitalism." From the article:

"If you were looking to have fun with some friends 50 years ago, you might have gone to a bowling alley. Maybe you would have hung out at a diner or gone to the movies.

These were all activities that involved spending a certain amount of money in the local economy. That created opportunities for adults in your town to start and run small businesses. It also meant that a teenager who wanted to find a summer job could find one waiting tables or taking tickets at the movie theater. 

You can spend money on Pokémon Go too. But the economics of the game are very different. When you spend money on items in the Pokémon Go world, it doesn’t go into the pocket of a local Pokémon entrepreneur — it goes into the pockets of the huge California- and Japan-based global companies that created Pokémon Go. 

There are, of course, some good things about this. Pokémon Go can be a much more affordable hobby than going to a bowling alley or the movies. In fact, you don’t have to spend any money on it. And the explosion of options made possible by online platforms creates real value — the average teenager has vastly more options for games to play, movies to watch, and so forth than at any time in American history."

According to Mr. Lee, Pokemon Go is hurting local economies because the money I might have spent going out to dinner with friends will now be spent on more Pokeballs (maybe some Master Balls?) to make sure I get that Charizard I find down the street. Since my money is now going to some developer in San Francisco that is majority owned by a company in Japan, I am basically committing harikiri on my community. And not only are Pokemon casting their evil spell on me as a consumer, but they are also destroying the local financial markets too! Lee again:

"In the 20th century, new industries tended to create a lot of demand for capital. It took a lot of cash to build assembly lines and movie studios, of course. But beyond that, thousands of people all over the country would go to their local banks to finance the construction of movie theaters, auto dealerships, and so forth. 

This meant that people with capital to lend could almost always find people eager to borrow it to finance new business ventures. This, in turn, made the job of America’s central bank, the Federal Reserve, relatively easy. Anytime the Fed wanted to boost growth, it could cut interest rates and get a burst of entrepreneurs starting new businesses. 

But the Pokémon Go economy is different. Nintendo and its partners obviously needed to invest some cash in hiring programmers and designers to build the game. But the sums involved here are tiny compared with the cost of building a new car assembly line. And Pokémon Go seems unlikely to produce very many opportunities for complementary local businesses. People play on their smartphones, so there’s no need for Pokémon cyber cafes. Smartphones are too cheap for smartphone repair shops to be a good business."

I am actually fairly confused from the article exactly what problem Pokemon Go and similar apps are creating. They make it easier for people without large sums of capital to work as entrepreneurs? They don't require a centralized work force or physical presence in a specific market? They allow consumers to have cheap, or even "free", entertainment so people with limited resources can now stretch those dollars further? I would think starving recent grads in Ames, Iowa are thrilled with this type of economy. As Mr. Lee points out in the article, not everybody can be a programmer in Silicon Valley, but the point of these new apps is that not everybody has to be. If I play Pokemon Go and get some free entertainment, those dollars I might have spent at a movie might instead go to buying ice cream with friends at a local restaurant after we all meet up to catch a few Pokemon. And hey, maybe we'll have a great idea for an app of our own as we're sippin' our milkshakes. We could start a weekend app development group and make our own million dollar game right here in somebody's basement on the north side of Indianapolis! It may not be California weather, but houses come cheap out here.

Mr. Lee is correct that this is different from the manufacturing-based economy of the 20th century, but I don't think that makes it worse. We will have some structural reform that might be painful, but overall, I expect people's standards of living to continue to increase. Technology is making things cheaper - I know because I am shopping for a new phone and am shocked at what I can buy for $200. $200! I can have piece of hardware in my pocket that does almost as much (and in some ways much more) as the $500 laptop I bought 4 years ago for less than half the price. That is amazing. Think of the implications for the working poor. That type of technology can connect them to nearly infinite resources through the internet, for only about 25 hours of work at minimum wage. And now they can enjoy Pokemon in their pocket too, without spending a dime!

While I think the article is mostly misguided in its analysis of the digital economy, I agree with a point at the end where he recommends policy changes:

"One [change] is to relax housing policy to allow more people to move to areas where high-tech products are made. While the average resident of Kansas City or Baltimore might not have the skills to create the next great mobile game, he or she probably could find work as a schoolteacher, nurse, or construction worker in San Francisco or New York — but only if he or she is allowed to live within commuting distance of technology workers."

I think zoning restrictions are a real problem, especially in high growth areas such as San Francisco. By restricting new housing development, municipalities prevent the market from working. I understand not allowing a developer to build a waste facility right behind a residential neighborhood, but loosening some of the housing restrictions would encourage more building, which leads to lower prices. Many of these types of protectionist policies are only serving those who already have amassed capital or a dominant market position. In the case of housing policy, it protects the wealthy that are already living in expensive neighborhoods by artificially inflating their property values. The real enemy isn't innovation, especially innovation that can provide cheap entertainment or productivity as well as more labor flexibility. So don't let anybody make you feel bad about your collection of Jiggly Puffs, and enjoy that double scoop for half the price of a movie ticket.

Emmanuel Saez: U.S. top one percent of income earners hit new high in 2015 amid strong economic growth

In a blog post over at Equitable Growth, Emmanuel Saez shows the real income growth for the top 1% versus the 99% since the recession. From the post:

"The top 1 percent income earners in the United States hit a new high last year, according to the latest data from the U.S. Internal Revenue Service. The bottom 99 percent of income earners registered the best real income growth (after factoring in inflation) in 17 years, but the top one percent did even better. The latest IRS data show that incomes for the bottom 99 percent of families grew by 3.9 percent over 2014 levels, the best annual growth rate since 1998, but incomes for those families in the top 1 percent of earners grew even faster, by 7.7 percent, over the same period."

It is important to note that this is factoring in cash income only, so transfers or taxes are not included. Income inequality continues to get a lot of attention, both in the form of "tax the rich" campaigns and a push for a $15 minimum wage. I have generally thought that a big part of the problem is due to wage stagnation in the labor market. With so much slack in the past decade, there has been very little growth in wages. As unemployment has declined and wages have increased, however, the political pressure for higher wages and increased taxes hasn't subsided. Saez and his colleague Thomas Piketty have been critical in drawing attention to income inequality. Again from the Equitable Growth post:

"Timely statistics on economic inequality are key to understanding whether and how inequality affects economic growth. Policymakers in particular need to grasp whether past efforts to raise taxes on the wealthy—in particular the higher tax rates for top U.S. income earners enacted in 2013 as part of the 2013 federal budget deal struck by Congress and the Obama Administration—are effective at slowing income inequality."

Saez starts out saying we need to do more work and get more data to understand if and how income inequality affect growth, and then finishes by asking if current policies are doing enough to slow income inequality. For Saez, then, it seems that inequality in itself is bad regardless if it affects economic growth. I tend to sympathize more with the first part of the paragraph. While I find it hard to rationalize how CEOs are realistically worth $10 million+ in annual income, I also can't rationalize why someone would pay $1,000 to go to a Taylor Swift concert. The question is whether this is a market failure that requires intervention. For Saez, that answer seems to be yes, income inequality is a failure of capitalism that needs to be remedied by the state. Some economists (e.g. Ben Bernanke, Joseph Stiglitz) argue that as income inequality increases, there is a drop in aggregate demand as concentrations of wealth among a few will spend far less than more egalitarian levels of income. It might be true that the highest income earners do not spend as high of a percentage of their wealth on goods and services as middle- and low-income earners, but that money isn't sitting under their mattress either.

While income inequality has been rising since the 1970s, this isn't the only period in modern history in which inequality has increased. Peter Lindert of UC Davis has studied the issue for a long time and published an article, originally in the Journal of Income Inequality, that suggests that income inequality also rose during the first industrial revolution. This might sound surprising as the industrial revolution is generally thought of as the event that brought millions out of poverty. While that may be true, it didn't distribute that wealth evenly. In the article, Lindert writes that inequality likely increased in the UK from the beginning of the industrial revolution up through about 1810. He suggests that inequality may even contribute to economic growth because individuals with extremely high incomes can accumulate enough capital for high-cost endeavors, such as building a manufacturing plant, that would otherwise be much more difficult. In a recent episode of EconTalk, Russ Roberts and James Bessen discussed the industrial revolution's affect on wages in the United States. One thing that surprised me was Bessen's comment that wages for many factory workers didn't increase along with the massive increase in productivity until almost 1870, a full half century after these productivity-enhancing technologies were adopted. Bessen attributes this stagnation with firm-specific knowledge that left workers with little bargaining power because the skills they acquired on the job weren't transferable to other employers. It wasn't until many of these technologies were standardized that wages began to really improve.

Based on the work of Lindert and Bessen, I wonder if our widening gap in earned income is due to some of the same forces. In many ways, the 1970s represented the start of another industrial revolution: the computer age. Just as weavers didn't see large wage increases with productivity in the 1800s until the technology matured, perhaps the same is happening now. One problem I see now compared to the first industrial revolution is the pace of change. If wage increases generally come as technology matures and then stagnates as new technologies are adopted and worker skills become much more firm specific, then the rate of change makes a huge difference. If a technology plateaus for only a decade before new technologies are adopted, that leaves a very small window for workers to cash in on their knowledge and skills to increase wages before new technologies render their experience obsolete. In the podcast, Roberts makes the argument that maybe the best skill to have is to know how to learn quickly.

There are obviously several factors that could be causing the stagnation in wages, but I think technology is one to consider. If this is a significant cause, then simply increasing taxes or the minimum wage is unlikely to help. Rather, improving education and worker retraining or removing barriers to entry for entrepreneurs or reducing regulatory burdens (which may have been put in place to protect current industry leaders) would likely be much more effective at reducing inequality. That is, of course, if income inequality is indeed something that needs to be addressed or if it is simply a symptom of where we are in our current "industrial revolution."

Hello world!

After spending an inordinate amount of time perusing other econ blogs and financial news, I thought I might jump into the fray myself. Make no mistake, this isn't Econometrica, but I hope my little corner of the internet is at least useful to someone. I've always had an interest in economics, but I work in finance. I make no claim to any certain knowledge in any subject. I also make no promises that what I think today will be what I think tomorrow. More than anything, I started this blog as a sort of journal to put down my thoughts and enhance my own understanding of economics. All are welcome to browse, and I encourage all (helpful) feedback. I'm a bit selfish in that I mostly just care if this helps me sharpen my own thoughts.