Stagnating Median Income: Not That Bad?

Many, including myself, have been really bothered by this:


This trend is often the primary concern among progressives. We've had a lot of economic growth over the last few decades, but since the 70's the median income has hardly budged. When people complain about income inequality in the U.S., the idea that worries them the most is usually that all the economic growth is unfairly going to the top, while the average worker gains nothing. In fact, I got the above graph from the wikipedia page on income inequality in the U.S., and the subtitle of that image is "The benefits of increased productivity over the last 35 years have not gone to the middle class".

However, I recently saw something that really confused me about this:


Even though the median income only increased 3% from 1980-2005, the median income for all demographics actually increased much more than that. How is that possible? It turns out this is just a case where we don't intuitively understand mathematics very well. Steve Landsburg explains a hypothetical situation that makes this more clear:

Imagine a farmer with a few 100-pound goats and a bunch of 1000-pound cows. His median animal weighs 1000 pounds. A few years later, he’s acquired a whole lot more goats, all of which have grown to 200 pounds, while his cows have all grown to 2000. Now his median animal weighs 200 pounds.

A very silly person could point out to this farmer that his median animal seems to be a lot scrawnier these days.The farmer might well reply that both his goats and his cows seem to be doing just fine, at least relative to where they were.

That’s exactly what’s happened with median incomes. Each demographic group has progressed, but at the same time, there’s been a great influx of lower income groups — women and nonwhites — into the workforce. This creates the illusion that nobody’s progressing when in fact everybody’s progressing.

This makes sense. Median incomes started stagnating - and income inequality started rising - around 1970. That was around the time it started becoming culturally accepted for women to have careers. And it was soon after the Immigration and Nationality Act of 1965 which allowed much more immigration into our country.

Surely there are other factors as well; reality is complicated. But unless this data is just wrong, there's far less reason to be concerned with the issue of our median wages and income inequality than most progressives realize. When I first started spending time trying to really understand politics around 4 years ago, this issue quickly shot to the top of my priorities. But now, when you combine the data above with this and this, it has really fallen toward the bottom of my list.

We are gaining, not losing, freedom

It gets annoying to constantly see the complaints from some people that, nowadays, our "liberties" are being "infringed upon" compared to "the good old days" of America. That's most clearly not true for anyone who is not a WASP straight male. But even beyond that, David Frum wrote something a couple of months ago that surprised me:

In 1962, the government regulated the price and route of every airplane, every freight train, every truck and every merchant ship in the United States. The government regulated the price of natural gas. It regulated the interest on every checking account and the commission on every purchase or sale of stock. Owning a gold bar was a serious crime that could be prosecuted under the Trading with the Enemy Act. The top rate of income tax was 91%.
It was illegal to own a telephone. Phones had to be rented from the giant government-regulated monopoly that controlled all telecommunications in the United States. All young men were subject to the military draft and could escape only if they entered a government-approved graduate course of study. The great concern of students of American society -- of liberals such as David Riesman, of conservatives such as Russell Kirk and of radicals such as Dwight Macdonald -- was the country's stultifying, crushing conformity.
Even if you look only at the experiences of white heterosexual men, the United States of 2012 is a freer country in almost every way than the United States of 1962.

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?