Income Inequality vs. Economic Growth

This is largely just to keep track of this post from Krugman if I want to find it again.

One common viewpoint on the economy is that the rich spend less than the non-rich, so the more income inequality we have, the weaker our aggregate demand will be. This would help explain why our 2 depressions of the last century have occurred when inequality was high. And it was one of the first thoughts I had around explaining why our economy does noticeably better under democratic presidents than republican ones.

But as Krugman points out in the link above, that idea is hard to square with the correlation of private savings rates and inequality in the past. Here's a graph of our private savings rates over the past few decades:



Income inequality began rising some time in the 70s, with a temporary halt in that trend in part of the 90s. But the savings rate trend is basically the opposite; when inequality was increasing, savings has mostly gone down (therefore private spending went up). I think this pretty much discredits the theory that income inequality leads to lower demand and higher unemployment. There could be some explanation of how it can still be true, but I think it's best to go with the simplest thing that the evidence suggests unless we have a REALLY good reason to suspect otherwise.

Working vs. Volunteering

I think, as tools for altruism, work (compared to volunteering) is very underrated. Our main criteria for judging the "goodness" of a deed should be its impact; if you can choose between saving 1 life or 2 lives, generally saving 2 lives is better. But we have preconceived notions that cloud that judgment when comparing "work" and "volunteering". We generally look down on "workaholics", but it may be that, if you decide to devote a couple of hours of your free time per week toward a good cause, it would be best to just spend that time at your job.

That may seem counter-intuitive at first, but consider the hypothetical person "Bob". At Bob's job, he makes pills that cure cancer. It takes him an hour to make a single pill. He has decided he wants to be a better person, so he considers spending an hour a week volunteering for a good cause. In his area, he could clean dishes at a soup kitchen or organize donated canned foods. Clearly, he would do the most good by spending that hour making another pill that will cure someone's cancer. He shouldn't believe there's something special about "volunteering" in and of itself that would make it more virtuous than curing someone's cancer.

Nobody's job is quite as good for the world as "Bob's" (I don't think?). But in general, people tend to forget that your job does good for society. The fact that someone is willing to pay you for what you do shows that it's valuable. And most of your necessities, entertainment, and luxuries come through the time someone else puts in at their job. It's good to volunteer at a place that gives canned food to hungry families. But it's also good to be the farmer or manufacturer that are just as (if not more) essential in making that happen. It would be sad for them to feel like what they are doing isn't important just because we don't value the impact of working the way we value the impact of volunteering.

Another overlooked aspect is, in addition to judging the impact of what you are doing, you have to consider how effectively you would do it. And we are usually relatively good at what we do for a living. Plus, the fact that we already spend a lot of time at our job can make it such that it's more clear how to spend an extra hour in an efficient way. I imagine many charities have a hard time figuring out how to put people who only volunteer for an hour every now and then to good use. I know my first hour of work after a vacation is not very productive.

A common objection to the idea of "altruistic over-working" is probably that you can benefit financially from working an extra hour. First, for many on a salary, that's not necessarily the case, though it may lead to better raises/bonuses in the future. But making money does not cancel whatever impact is done by the work itself (think of hypothetical Bob making cancer-curing pills). Additionally, having more money gives you even more opportunities for altruism by putting that money toward a good cause. And even if you just spend the money on something for yourself, one person's spending is another person's income. Self-sacrificing deeds are definitely admirable, but that doesn't mean we should look down on win-win situations.

I'm not suggesting volunteering is not good, and there are definitely many cases where a person does more good from volunteering than working. It just depends on your job, your talents, and your volunteering opportunities. But... if you want to spend some of your free time doing some good for the world, deciding which activity to choose should largely be based on what you expect to have the most positive impact. For some people that will be their job, and hopefully that doesn't get missed when thinking about the options just because it doesn't "sound" as good at first glance.

Don't limit the charitable tax deduction

When the debate was still going on about which deficit reduction deal we should pass in place of the fiscal cliff, one of the common ideas was capping tax deductions, where tax deductions across the board are blocked at a certain dollar amount. This was something that had support of both some Republicans and some Democrats.

The fiscal cliff deal we ended up getting did something like that - it reinstated "PEP and Pease" on high income earners. And for the next deficit deal around the coming sequestration and debt ceiling fiasco, a hard cap on deductions is likely to come up again as an option.

But supporting this, when charitable deductions are not excluded, seems like a blatant example of what I talked about in my post on "the biggest flaw in the Democratic party". Democrats are concerned about poverty and inequality, and want the government to help with it. But the worst cases of poverty, by far, are in third world countries, not America. That is what many charities are addressing. And limiting the tax deduction for charitable giving reduces charitable giving, both by reducing incentives and by leaving those who give with less to give.

I understand raising taxes on the wealthy so we don't have to cut programs for the poor as much. But taxing charitable donations seems like a really self-defeating means towards that end.

10 Best Songs of 2012

Usually I only get a little bit of new music each year, and usually the "new" music I get actually was released a few years ago. But this year was a big exception; I found a lot of truly new music that I really liked. So here are my top 10 songs of the year (and yes, by "best" i just mean best at being what I personally like). The rules I used are: only one song per artist, must have been on a 2012 album, and due to bias I can't list my own music :). Going from 10th favorite to most favorite:

10. St. Vincent - Grot

The background vocals throughout this song are what make it so great to me. This is really heavy without being "metal". The lyrics are cheesy but for some reason are better that way. It's a song you imagine playing while making a sacrifice to Satan - but with a smile on your face.

9. Death Grips - Lil Boy

The only hip-hop song on my list. I like when musicians get outside their comfort zone, and the drummer for this group was one I already liked from math/noise rock bands Hella and El Grupo Nuevo, so it's really cool to hear him making something completely different. But the main reason I really like them is the rapper - the tone of his voice sounds angry and insane... in a good way.

8. Regina Spektor - Small Town Moon

I still prefer her earlier music, but Regina is one of my favorite singers ever. English is her 2nd language (she moved to NY from the Soviet Union when she was really young), and I think that's part of the trick of what makes her so unique. She's American enough to be as comfortable with our language as anyone else, but because she learned English differently than everyone else, she thinks about word usage, accents, etc. differently. There's so much subtle detail and quirkiness in what she does with her voice that is so addictive to me. Case in point: "But everyday begee-IEIns the saAaAaAaAaAaAaAame."

7. Exitmusic - The Night

I'm really bad at understanding what music people will like. This song is from this band's debut album, and I would have guessed they'd get way more popular over the year (their official music video for this song doesn't even have 40k views?). It's a fairly basic and catchy song but with really great textures in the sounds.

6. Animal Collective - Honeycomb

Animal Collective is at their best when they sound like a group of eccentric, off-balanced, drugged out geniuses trying to make the music for a weird children's show. Kind of like the equivalent of Dr. Seuss for music.

5. Cloudkicker - LA After Rain

I want to be him. I bought a guitar pedal because it's one that he uses. I bought Superior Drummer to manually program drum beats because it's what he uses. Like me, he's a bedroom musician - he just makes music on his home computer and puts it online for free. He doesn't ever play shows, and he's not trying to do this as anything more than a hobby. Except unlike pretty much any other musician like that, he's making some of the best instrumental music out there. The guitar tone in this whole album is just perfect, and the last 2 minutes of this song always gives me goosebumps. For some reason, this album is especially good to listen to while driving.

4. Drop Electric - Empire Trashed

The way this song evolves from something very minimal to something very explosive is pretty much everything that is best about post-rock in 5 minutes. And I'm particularly excited about this band because this is just from a self-released 4-track "sampler platter". They've now been signed to a record label, and I can't wait to hear what they do next.

3. The Mars Volta - In Absentia

Through college my taste in music got really really narrow - I was mostly only listening to 5 bands. Then I listened to The Mars Volta's first album, and it pretty much changed and expanded my musical tastes ever since. Their album this year wasn't my favorite from them, but I really liked how it surprised me. Over the years I have listened to them so much, that even though they try to experiment a lot and change their sound, I felt like I had them "figured out". But this album was not at all what I was expecting; I really like how the guitars have become such a minor role in this album.

2. Kishi Bashi - Bright Whites

I said this earlier about Exitmusic, but it REALLY applies to Kishi Bashi - I don't know how he didn't take over the world this year. I just don't understand how anyone could not like this song. When I first heard it, I figured it'd be something that would be stuck in my head for a bit but get boring fairly quickly. But instead, the more I listen to it, the deeper it digs into my brain. And it's maybe the happiest sounding song ever.

1. Sigur Ros - Ekki Mukk

I have a theory that there are 3 types of people:
1. People who are obsessed with Sigur Ros.
2. People who haven't listened to them enough to develop that obsession.
3. People who have no soul.
As someone who makes music, I often can't help but mentally dissect any music I hear into its separate parts and think about each piece in some critical manner. But that just doesn't happen with so much of Sigur Ros's music - it's like they just make one big piece of organic something that just fits perfectly together and you don't even think about HOW they did it. And it doesn't sound like something that could be made by human beings. Nobody else could make a song that is this long and this slow that seems to take up just an instant of time.
And I also hear shades of Sigur Ros in many of my other favorite songs of the year. It's in the big guitar sounds at the end of Exitmusic's song. It's in the vocals and build-up/release of energy in Drop Electric. It's in some of the ebow usage from Cloudkicker (not in the particular song above though). And Kishi Bashi's album has a very similar feeling to Jonsi's solo album Go.
Anyway, if you think you have a soul but aren't obsessed with Sigur Ros, go spend some time listening to them.

Biggest Flaw in the Democratic Party?

This is a problem that I often wonder about, but I don't know what the right answer to it is...

A big (main?) principle of the Democratic Party is to tax the rich to provide more help to the poor in our country, mostly for 2 reasons:
1. Utilitarianism: the poor can benefit more from an extra dollar than someone who is already rich. So it is viewed as an overall good thing to set up society such that the rich may not be able to afford as many vacations, but in return more people are able to have access to health care and education.
2. Fairness: your success in life isn't just a matter of hard work. Those who are born into wealthy families are much more likely to become wealthy themselves: access to better education, a safer environment to grow up in, less stress and therefore easier to do well in school, family connections in business, etc. So redistributing some degree of wealth is seen as making up for natural unfairness.

Obviously, Democrats would laugh at a proposed policy to raise taxes on those making over $250k just to give more to people who make $100k-250k. If the goal is to reduce the suffering of poverty and ease the worst cases of unfairness, obviously we should focus on those who actually need the most help.

With that in mind, how do the poor in America compare to third world countries? On a global scale, wanting to tax the upper classes of America to give more to the lower classes of America is a lot like the ridiculous case of welfare for people making $100k. From the utilitarian perspective, helping end malaria in third world countries does more good-per-dollar-spent than making sure every American has comprehensive health insurance. And when it comes to fairness: someone born in a poor part of America can complain that they didn't get a fair shot at success, but not compared to someone born in the Congo.

Democrats often accuse Republicans of failing to have a global perspective. But if your political philosophy is largely based around alleviating poverty/inequality, and your solution is to focus on increasing the social safety net of one of the richest countries in the world.... what would you call that?

How The GOP Could Win My Vote

After the election, one of the popular topics is what the GOP needs to do to gain more voters. Within the Republican party, here's some of the opinions from George Will, Charles Krauthammer, and David Frum. Probably the most common idea is a more open immigration policy to win more of the Hispanic vote (even Hannity has said he's now "evolving" on that issue).

Our political parties are always changing in some ways. The one-dimensional scale of "left vs. right" is a huge over-simplification of reality, so there are plenty of options for policy changes without switching sides on that spectrum. So, as a current Democratic voter, here are policies the GOP could adopt that can remain consistent with conservative philosophy and probably win my vote:

1. Market monetarism. In my mind, the weak economy is clearly a case of low demand, and the fact that inflation remained low after our monetary and fiscal stimulus should count as proof of that. Unfortunately, most Republicans don't seem to agree that's the problem. Democrats do, and they mostly support Keynesian fiscal policies as the cure. But market monetarism is another potential cure for the same problem. It seems to be gaining a lot of support lately among economists and wonks, but not really any politicians yet. I don't know if market monetarist policies will work, but I'd be willing to vote for finding out.

2. Carbon taxes. Climate change is another area where I wish our political parties could agree on the same problem and move on to arguing solutions. Climatologists virtually all agree that global warming is real and that humans are involved. The conservative approach to this problem, which I think would be best, is carbon taxes. Basically, come to some agreement on the long-term costs to the environment from burning fossil fuels, and add a consumption tax of that amount to them. Then the free market would have the right financial incentives to pursue a path toward cleaner and more efficient energy with the right balance. To stay true to conservative philosophy, the revenue gained from that tax could all be used to reduce our taxes on income. And with a broad approach like this, we could also end all the targeted government regulations in this area like energy requirements for cars or light bulbs.

3. Consumption taxes. Conservative states generally prefer consumption taxes over income taxes. And most economists agree that is more economically efficient. So it doesn't seem like much of a stretch for Republicans to support a national VAT of some level, and they could use all the revenue to lower taxes on income (though it wouldn't hurt to use some of it for deficit reduction either). On this and the above issue though, I would want something to be done to avoid it becoming too regressive though.

4. Build on, rather than end, Obamacare. Originally, conservatives fought against Medicare, but eventually gave up. Similarly, I want Republicans to give up repealing Obamacare and instead move forward and improve it. If the private insurance exchanges+mandates+subsidies end up working well (which it already does in Switzerland, Massachusetts, etc.), then we can end the employer tax incentives for providing insurance to workers and use that for individuals themselves. Republicans don't want obstacles for starting or growing a business; and that's what our current system is. Other conservative ideas I may be able to support would be reducing the requirements of what insurance must cover and making the insurance exchanges an alternative option for Medicare.

5. Open borders. The essence of a free market is that if a person wants to hire another person for a job, at a wage agreed to by both sides, to provide something that customers want to pay for, they can do so. Strict immigration laws are nothing more than "big government" intruding in the free market with arbitrary rules. It's not at all consistent with conservative economic values.

6. Marriage equality. The fact that prohibiting gay marriage creates real harm on real people should be enough to support marriage equality. But if not... homosexuality will exist whether or not gay marriage is legal. So from a socially conservative viewpoint, even if you personally disapprove of homosexuality, you can support legal gay marriage as an institutional encouragement of monogamy over promiscuity. Besides, this is coming anyway, and the GOP will have to join the future on this issue at some point. Might as well do it now. Another alternative is to just get the government out of marriage entirely and only recognize "civil unions" as a legal issue, regardless of whether the couple is gay or straight.

7. Marijuana legalization. Nobody seriously thinks the Prohibition was good policy. It attacked people's freedoms, made criminals out of ordinary people, and empowered criminal organizations. How is our war on drugs any different? This is another change that seems to be coming sooner than we previously would have guessed. And Obama is still against it. So this is an opportunity for the GOP to lead on an issue that will embarrass us in the future when we look back on it. Plus, it's consistent with the conservative philosophy of getting the government out of people's lives. And let's face it; you'll win a lot of the youth vote. This doesn't have to mean encouragement of drug use; we could put a hefty tax on it, and use the revenue to reduce taxes on work.

I could go on with things like patent reform, filibuster reform, chilling out on military spending, etc.

The Jetsons and Politics

Possibly the biggest fundamental issue dividing people politically is the question of if and how much the government should redistribute the wealth that a free market creates/allocates. On one side, you hear many people claim that redistribution is just fundamentally wrong, and a pure free market will always work best overall. On the other side, you hear many people claim that there's a fundamental right to things like health insurance, retirement, a "living wage", etc. Neither side makes sense to me, and thinking about the world of the Jetsons (and its opposite) is a good way to explain why.

First, what are the pros and cons of different sides of the redistribution scale, regardless of where you think the optimal point is?

I think most people will agree on 2 main problems with doing too much redistribution.  There's the moral problem where it just feels wrong to take too much money from those who have made it. And there's the economic problem, where it makes everyone poorer by reducing incentives to work and leaving less money for long-term investments in technology and such.

Similarly, there's 2 main reasons why people get uncomfortable with too little redistribution. Morally, we want to minimize human suffering, and some amount of redistribution does that. And economically, social safety nets can encourage risk-taking, and other services such as public education enables the potential of those who wouldn't be able to afford to do so otherwise.

Now imagine a future where technology has advanced to the point where we live like the Jetsons. Robots do everything for us that we could ever need or want. There would be no jobs other than making and maintaining those robots, and we'd only need maybe 1% of the population to do that. This would be a really weird society to be a hard-core conservative. With no redistribution, everyone would be at the mercy of the all-powerful 1% that makes/maintains the robots. It's pretty clear that in a situation like that, we might as well be mostly socialist and let everyone enjoy the things that we can easily afford to universally provide.

On the other hand, if you go far back in time, or if we have some sort of apocalyptic event that takes away all our technology, it'd be very different. If we have no real health care, what does it mean to say that health insurance is a human right? If we have hardly any technology, such that we all have to work extremely hard and struggle just to survive, it's not possible to ensure food/shelter/water for those who get too sick/disabled/old to work. And it wouldn't make sense to have unemployment insurance; you can easily find a job because there's so much that needs to be done. In that kind of society, it wouldn't make sense to be a liberal. For society to continue, we would need those who are able to produce the most to flourish. And any programs to take from the better-off to help the worse-off would be taking away money that may be spent on the technological progress that would end up benefiting everyone in the future.

Neither of those two extremes may ever happen to us. But thinking about the extremes makes it clear that there's not one right answer on redistribution that can apply to all possible scenarios. No matter where you are on the political spectrum, it makes sense for government redistribution to grow as (if?) our technology and economy grows.