Semi-Daily Journal

Question for the real economists out there:

I often hear that the labour share of GNP is remarkably constant. Yet a few paragraphs above the quoted section of this article, Mr. K says "In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation."

So what's going on? Is "labour share of GNP" different from "wage and salary income"? Or is the constancy only valid over long time periods, not short fluctuations, or what?

Don't corporate profits have to come first out of a recession, and then comes the hiring and wage increases?
Also, what's the proposed solution to this problem?

Prof. DeLong and other economists -- Can you explain the basis for Paul Krugman's assertions regarding the large numbers of discouraged and marginal workers?

Another web site points out that the Dept. Of Labor formally measures "discouraged workers" and "marginal workers"
http://poorandstupid.com/2003_12_28_chronArchive.asp#107291258443223094
The official DOL figures show only small, normal amounts of discouraged and marginal workers, which appears to differ from Prof. Krugman's statements.

Is the DOL's definition of "discouraged workers" different from Krugman's "people [who] have given up looking for work"? Is the DOL's definition of "marginal worker" different from Krugman's? Are there other counts of marginal and discouraged workers?

Krugman is not alone. I have seen other Bush critics also state that there are unusually many discouraged and marginal workers. I hope that Prof. DeLong or some other expert can identify the source the belief.

David,
"Poor and Stupid" isn't usually credible when it comes to economic matters, and particularly not when the context is a Paul Krugman column.

David,

Check the Prof DeLong's posting about two items down - the one about good unemployment news. There is about 60 comments covering the subject there. You will find a good discussion there with 60 comments from bright people.

Here is a link to the government's statistics. Note that U-9 is 9.7%, that is counting the part-time workers that want full time, and those who would look for jobs if they believed there was a job to find. That number is comparable to European unemployment statistics.

Tom: even broadly measured employee compensation has recently been declining as a share of national income. Your statement might be the labor share HAD been remarkably constant.

Dave -- thanks for the info. Your post is missing the link to statistics on part-time workers that want full time, and those who would look for jobs if they believed there was a job to find. Can you supply the link?

Do you know how the U-9 figure of 9.7% today compares with what it was when we were coming recessions in the past?

The whole "ownership society" thing brings up a question I have. I think that there's a sly political deception involved.

Suppose a 45-year-old guy has a paid-up $100,000 home and a $50,000 / year job with an OK pension plan, is paying into Social Security, and has two kids 6 and 8 whom he plans to send to the public schools, which are pretty good where he lives. (This is a fairly concrete example based on Portland Oregon).

Suppose he also has $30,000 on the stock market. My observation is that a guy like that will tend to vote low-tax Republican because he thinks of himself as a successful investor. Yet, as I described him, the bulk of his assets and income are job-related, government-related or neighborhood related. If his employer starts getting hard-nosed or his neighborhood abd its schools deteriorates, he has more at stake there than in the stock market.

Part of his conservative thinking comes not only from his investments, of course, but from his belief that what is good for his employer (good business climate, low taxes) is good for him. But that's not always true, especially in an anti-labor leagl and political environment, or during a period of low nemployment. (Pension theft is the major example.) Likewise, cuts in social security benefits may hurt him more than low taxes would help him.

It seems to me that there should be some rules of thumb worked-out so that a guy like this can calculate the various weights of the various factors of his own personal well-being -- NOT the general welfare, or the overall welfare of workers, but his own welfare as a unit. (I'm assuming that he considers his childrens' well-being as being his own, though). The fact that there probably is no such metric is, to me, a pretty good example of the bias of the economics profession. It looks doable to me.

My hypothesis is that small investors vastly overestimate the value of their small investments. Stocks and bonds have a sort of glamor because they're over and above the home, job, and family that everyone has.

Another way of formulating the question: how much would a guy like that have to have on the market for it to be worth more than everything else he has (allowing him to send his kids to good private schools). My guess is that the number is between $500,000 and a million, but that's a pure and completely ignaorant guess. So $30,000 is really nothing.

Several previous attempts to raise this question elsewhere have fallen flat, incidentally, for reasons I do not understand.

David - even using Luskin's series, discouraged workers are rising, which does seem unusual for a "boom".

Mr. Dean should be able to come up with a better idea of what "ownership society" might be all about -- in terms of (a) distribution of income and (b) distribution of wealth, especially in the context of distribution of empowerement over investment decisions.. that would mean:

- higher taxes
- expanded social safety net
- expanded higher education coverage
- expanded institutional investment
- expanded direct democracy, starting with corporate governance

all on top of market economy and free enterprise mechanisms.

Dave-with-two-dots, most European countries (as far as I know) use the ILO definition of unemployment:
http://www.hamburg.emb-japan.go.jp/infojp/wussten/dilo.html

This does not count "discouraged workers" or part-time workers as unemployed. The current ILO unemployment table is here:
http://www.oecd.org/dataoecd/41/13/18595359.pdf

It shows fairly similar numbers to the U-3 numbers for the US.

Zizka,

Self-described Republicans make up roughly 35% of the voting public, with self-described Democrats making up another roughly 35%. In the extreme, we can expect that this 70% of the voting public will change its mind. However, in normal years, we first need to know whether the person you have in mind is willing to be swayed by less than catastrophic changes in economic circumstances. We hear that voters vote their pocket books, but in fact, swing voters vote swings in their pocket books. The rest have either already aligned their votes with their pocket books (poor, old, teachers vote Dem, payers of high marginal taxes vote Rep), or are not voting their pocket books (single or non-economic issue voters).

That said, yeah, there is a bit of evidence that people don't understand how their own futures will be affected by economic policies. Many people think they will be somehow hit by inheritance tax, when almost nobody will. Many think that small farmer and businesses are routinely liquidated to pay inheritance tax when there is no evidence of such a thing happening.

There is also little evidence that people consider granular economic issues when voting. Bush passed more than one tax cut over the objections of the majority, and has generally gotten bad grades on economic management. However, with the unwanted tax policies in place, and no evidence that Bush has done much for the long-term health of the economy, he is not getting some of the highest approvals of his handling of the economy since he came to office, apparently because growth has suddenly strengthened.

In the end, I am not so sure we treat economics raitonally at the polls, in which case, no amount of laying out of the facts is likely to make much difference. When I'm worried about my paycheck, I will tend to think the world is full of back-biters and syndicators, that my car is due to quit any day, that my health is on the verge of going and that my football team is going to have a bad season. My poor brainstem can't fire up happy feelings about one set of circumstances and unhappy ones about another at every turn. My higher brain has limited lattitude in turning abstractions into voting preferences, given what is going on next door in the brainstem.

I just can't imagine that Dean's going to have any success selling his higher tax, less free trade, as the economy improves this coming year.
While you make some general comments Bulent the details of those policies are what worry me.

Katherine -- I'm talking about people who became loyal and even fanatical Republicans because their $30,000 made them think they were "investors", when they really still were workers, and because they came to believe that Republicans are good for investors. I'm not only talking about swing voters, and I'm not talking about election-to-election fluctuations.

Your response seemed curiously unresponsive. I was really talking about why I think that Bush's "investor society" ploy might be effective, how I think that it's basically fraudulent, and how economists could analyze the situation to make the fraudulence clear (assuming that I am right in my guess).

I've known many working-class people who fit approximately the description I gave. They voted their tiny investment -- as opposed to their job, their pension, their social security, their neighborhood, or their family.

Luskin's got a point on "discouraged" workers, but not on "marginally employed". On discouraged workers, it looks to me as if they're following their normal cyclical pattern, so the word "unusually" is wrong. Krugman is probably here referring to the known gap between what unemployment "ought" to be given the level of employment and what it is; but to say that this is because of discouraged workers (rather than, say, under-reporting of the self-employed) is going well beyond the data.

On "marginal" workers, though, Luskin is being stupid for the sake of it. It's clear from context that Krugman can't be talking about the BLS category of "marginally attached to the labour force", because that describes people who don't have a job and haven't been looking for one in the last four weeks. Since Krugman explicitly says in the sentence in question "many of those who have jobs, Luskin's being an ass by putting up the chart of marginally attached workers. It is clear from context that by "marginally employed", Krugman is referring to individuals who have a part time job but want a full time one.

Who the hell is Katherine?

"I was really talking about why I think that Bush's "investor society" ploy might be effective, how I think that it's basically fraudulent, and how economists could analyze the situation to make the fraudulence clear"

As an investor I invest capital. I would therefore want capital friendly policies that would benefit my capital. While we can all agree on the long term issues that the Bush administration policy's will creat I'm not convinced that coming in and raising the taxes on capital (as Dean advocates) would be what would be termed "investor" friendly.

dsquared, excellent points. When Krugman mentions "those who say they have jobs [but] seem to be only marginally employed" he surely isn't referring to what the DOL calls "marginally attached" workers. Krugman may be referring to part-time workers who would like full-time work, as shown on line U-6 here http://www.bls.gov/news.release/empsit.t12.htm

The next question is whether this figure is high by historical standards, as Krugman implies. The cited table only goes back a year.

But if you meant me, Zizka, then the reason I seem unresponsive is because I disagree with your premise. I think people say things that seem on the surface to offer logical explanations for their voting behavior, but the reasons offered have little or nothing to do with their actual voting preferences. This is not to say people are dumb. They aren't. It's just that cognitive dissonance sets in pretty frequently, leading us to trump up explanations for cherished behavior so that we don't have to examine that behavior closely.

Voting behavior, I think, is more emotional and so less driven by likely policy outcomes, than is often assumed. That is why wrapping oneself in the flag, saying family this and family that, calling a tax policy with no relation to job creation at all a jobs package, can be effective. Such pure emotional appeals work at their own level without much risk that contradiction by the facts will do real damage.

Judis and Teixeira note that people who think at a fairly complex level for a living tend to vote for Democrats. That's true even youngish white males. These people are an exception to my rule - unless there is just a great deal of emotional satisfaction for them in being offered policy-analysis sorts of political positions. Think back to the days when the Democratic base was fairly reliable - unions, minorities, teachers, the poor, traditional southerners. Back then, a very smart, Ivy-League educated son of the rich could lure them in hitting the same old themes they had always heard. Clinton, for all his fascination with the facts, knew enough about getting people's blood rushing to be extremely popular. He was the "first black president" even though he abandoned a good many of the policies that traditionally were thought to favor minorities - I think because he know how to stroke his audience.

That's why my response, or Katherine's response, or whatever, seemed unresponsive. I don't think your question gets us anywhere. People are smart enough to know the right answer, when they want to know it.

K -- sorry I called you Katherine. Slip of the brain. Thinking of someone else, I think.

1. William -- I was not talking about Dean's plan or anything like it. I was talking about how many voters think that they're middle class (because of small investments), but aren't.

2. K. -- to me the voters who think that they're middle class, but aren't, and who therefore vote Republican, are a significant demographic in American voting. In my moderatel;y small sample of acquaintances I know of several, all of whom are evry ordinary people.

3. I'm not really talking about "voting behavior" but party identification. And also a Bush strategy which was part of the topic of this thread, and why I expect it to be effective, though fraudulent.

4. I was asking for more specific help on this question from people who know more than I do on the topic, of whom I think you are probably one.

5. Some people are smart enough to know the right answer, some not.

One reason we have an economics profession is so that they will know **more** than other people, such as myself and the people I'm talking about, whom I know personally. And possible share their knowledge with them.

6. I'm not talking about whether Bush's policies are good ones. I'm talking about why people make mistakes in their voting because they wrongly think that they're middle-class, when they're not. As I understand, you think that this factor isn't even worth talking about.

K. -- frankly, the voters you describe sound pretty dumb to me. I suppose that makes me an elite snob.

Stop being Oppositional to Bush (“This is wrong...”) and be Inclusive, but Better (This ain’t bad, but let’s do it this way...”).

Seems unlikely that people with the hope of feeling better will vote against an incumbent, no matter how he quietly dispossesses them of opportunity. An economic boom is a sigh of relief for an election year! I think it might be easier for the Democrats to say the recovery was coming anyway, as all business cycles return, but it was DELAYED by a misdirective tax cut, and might’ve started a year or two earlier by priming consumer demand, instead. In this, the Democrats appear to have almost all economists on their side. It’s no WONDER the thing’s now rocketing: demand had been depressed most unnaturally.

In this delay, Bush has once again displayed enormous ineptitude, and hurt lots of people.

Delayed recovery + Budget deficit + Iraqi misplanning + Downer cow policy + Etc. = SHORTSIGHTEDNESS WE CANNOT AFFORD

William:

On the matter of "higher taxes"; all Howard Dean has to do is to advocate a return to "reasonable taxation", i.e., get rid of Bush tax cuts, and I think that's what Governor Dean is proposing.

Of course, Mr. Dean should put up front what he plans to have the Federal Government do with the revenues from that "reasonable" tax scheme.

I think he already has a good plan for health care coverage.

Regarding higher education, I'm sure all would remember or appreciate how much America gained from the so called GI Bill. This time round, it could be a higher education loan facility available to any one who wants it to enroll at accredited higher ed institutions.

I'll get to the other two items (institutional investment and corporate governance /direct democracy) later on.

Poli. Econ. exam questions (bonus points): (1) Try to resolve the gapening distribution of income while dancing gingerly ‘round the concentration of ownership. (2) Imagine how the opposition’s brains are bollixed when you introduce “ownership for everybody” !

bulent, re: taxation and politics, in my view you have a very unrepresentative rational and policy-centric method for understanding how voters make choices. This is a problem for economists, too - the frequent irrationality of actors in the system.

K Harris is completely right - by and large only Democrats vote on policy nuances. Regular people don't want their taxes raised, and don't have much patience to sift through long explanations and evidence - that's why people like me pull their hair out over Dean's (and Gephardt's) tax positioning.

The policy wonk idealistic Dems (supporting Dean in this cycle) think they can just present rational arguments and win people over. It doesn't work that way. This is a non-cerebral culture of image and self interest that likes its explanations fast and simple. Cognitive dissonance is a key factor as well - hence the value of upbeat optimism in national candidates. Which matches our national myths of perpetual righteousness. (*Disclaimer to avoid Republican flames* for the record - this is a fabulous country - but one that makes mistakes, too.)

Zizka, it's the same thing that makes people gamble, and even the genuinuely rich get caught up in it, somtimes--that's how they lost so much money when the recent bubble collapsed. People in the USA usually believe they are higher in the income hierarchy than they in fact are.

I was a bit disappointed with the Krugman column of that Tuesday, really.

1. Low end sales vs. high end sales (Wal-Mart vs. Sharper Image). Krugman claims that this indicates that this shows widening inequality. I think that, empirically, he's right, but one might ask the question, "isn't Wal-Mart a sales place for inferior goods? Could this just indicate that rising income caught low-end retailers off guard as they switched to higher end stores?"

2. Corporate profits are rising while wages/salaries are not... well, aren't corporate profits ALWAYS more cyclically variable than wages/salaries?

I think that the most illuminating part of the column was on the ownership statistics, really, and the sillyness (or, rather, disingenuousness) of Bush's ownership society plans, but that was only about 1/3 of the column, IIRC.

Randolph Fritz -- thanks. So what do we do about it?

Deep Background -- like K. Harris, you missed the point. I was talking about people who identify as Republicans because they think they're middle class when they're not. I was not talking about election trends or policy proposals. I wasn't saying "What little gimmick should we throw in the direction of these pseudo-middle-class people in order to get their vote". I was asking how we could convince them that they're not really Republicans.

It seems to me that this is a real problem, and that realizing that it is would be a first step toward doing something about it. The consensus here seems to be that it's an imaginary problem, wouldn't really make any difference anyway, and besides that, nothing can be done because voters are irrational.

Deep Background:

Well, in that case, Howard Dean should say:

Ladies and Gentlemen! You are so right!? Of course we should not be raising taxes. What is good old borrowing for any way? We shall go forth borrowing and borrow! But let us be aware who is going to pay that debt? Our children will. Without reasonable taxation, we would be spending THEIR money. Therefore let us at least use their money to prepare a better world for them. This, then is my program:.....

And then he should describe a program that would win the election!

Let the subsequent Governments / generations worry about deficit and borrowing.

Zizka --

I suspect that the number of "middle-class" people who vote Republican because they identify themselves as investors is very very small. There's little (or maybe no) evidence that Americans in general believe Republicans do a better job of running the economy. And I believe every poll has shown that most Americans would have rather the surplus be used for something other than tax cuts (especially of the Bush sort).

That doesn't mean, though, that anti-tax sentiment isn't widespread in America, but I don't think that has much to do with people thinking of themselves as investors and more to do with a sense that government does not deliver the goods or that it delivers them to the wrong people. The Republicans have been very careful, for the most part, not to threaten the quintessential middle-class government programs: the housing tax deduction, Social Security, and Medicare. And even if the long-term consequences of Bush's policies is that the latter two will come under threat, I'm not sure we can reasonably expect even rational people to vote on the basis of what may come to pass. You also suggest that Republican regimes are bad for labor and that they have something to do with neighborhoods deteriorating. I think the former is probably true, but again I'm not sure people would reasonably believe that their employers were getting hardnosed because a Republican was in the White House. And the connection between Republican policies and neighborhood deterioration seems even vaguer.

In any case, I think the reasons "middle-class" people vote Republican are, for the most part, the reasons everyone cites: social, cultural, and military. To the extent that the Democrats are identified as the party that supports welfare, is anti- or at least non-religious, is soft on crime, and weak on defense, it will have a hard time winning over a certain sector of the working-class population, for whom these issues are more important than economic ones (maybe because they don't fully understand economic ones). I don't think that's irrational: there's no obvious reason why economic matters are inherently more real or psychologically important than these other issues.

David: Thank you for the compliment... I think! As Will Rogers famously said, "I don't BELONG to an organized party. I'm a Democrat."

If the recovery picks up and stays strong, the Democrats would be foolish to argue against Bush based on the continuing unemployment number, even though it may stay high for a long time. In fact given the length of the campaign, this argument cannot remain. It should be easy for Republicans to point to job-growth numbers, explaining that the backlog of jobless who weren't looking before, are now keeping the unemployment rate high.

If on the other hand the economy stutters for a quarter or so, the Democratic strategists may be misled into making a weak recovery into a campaign issue. This is a real danger. "Never underestimate the ability of the Dems to shoot themselves in the foot." (Somebody else, I forget who.)

One thing the Dems have going for them this season: the candidate is nominated early, and it's going to be a longer campaign. Stronger, slightly more compicated arguments may be strategized (vide Zizka, above).

That would be "complicated"...

K Harris and Zizka

A fine exchange indeed. The topic is awfully important and I do hope you will both go on at length in future. I am thinking.

harold (many posts back)
-- thanks.

PK will be right!Why?Too difficult to explain but I would only like to add one thing:"He spots an important economic issue coming down the pike months or years before anyone else. Then he constructs a little model of it, which offers some new and unexpected insight. Soon the issue reaches general attention, and Krugman's model is waiting for other economists to catch up. Their reaction is generally a mixture of admiration and irritation(=jealousy?). The model is wonderfully clear and simple. But it leaves out so much, and relies on so many special assumptions including specific functional forms, that they don't think it could possibly do justice to the complexity of the issue. Armies of well-trained economists go to work on it, and extend and generalize it to the point where it would get some respect from rigorous theorists. In this process they do contribute some new ideas and find some new results. But, as a rule, they find something else. Krugman's special structure was so well chosen that most of its essential insights survive all the extension and generalization. His special assumptions go to the heart of the problem, like a narrow and sharp stiletto. By contrast the followers' work often resembles thoracic surgery, involving much clumsy breaking of ribs; sometimes it proves to be no more than an autopsy of the issue."(Dixit),ergo he knows what a globalized economy means and why Dow "reache(d)s" peaks during the boom of the "New Economy =?" within the "Old Economy =?".
Go, go Brad go!

Not to whack the closest drum but surely there is a relationship between: "Corporate profits are rising while wages/salaries are not."

and the increasing outcountrysourcing of US jobs? Or perhaps the tooth fairy forgot to add to our pay packets?

cm

Again, most interesting. The posts on this thread will keep me thinking for quite a while. Thanks, all.

don camillo

This is a beginning. The model from which Paul Krugman is working will gradually be filled out, with all sorts of twists especially since the problems we perceive are long term and will play out so gradually. Also, we have never been an aging society before. The aging of America must be carefully attented to in thinking through the effects of income and wealth divergence that increasingly squeezes the middle class. Also, I can not imagine how this middle class squeeze will play out politically.

Julian: I don't think of the Sharper Image as selling top quality products, just expensive products that the Japanese name brands will sell cheaper and better within 12 months. The SI sells expensive novelties, ie Krugman's point: lots of disposable income for people who can spend it on trinkets, essentially, while ordinary people are not increasing their spending at the place where they buy most of their stuff, Wallmart.

"Also, we have never been an aging society before. The aging of America must be carefully attented to in thinking through the effects of income and wealth divergence that increasingly squeezes the middle class. Also, I can not imagine how this middle class squeeze will play out politically."

I think nobody has a good understanding of all of that yet, although the concern is reaching public awareness. When soon (within 10+ years) a large portion of the experienced work force approaches or reaches retirement age (whether they will financially be in a position to retire or not), things will become really "interesting". In which way is hard to fathom though.

I suspect (and fear) one thing that will show then is how much the education systems in the "first world" have been neglected -- in terms of volume, not necessarily quality --, an effect that has so far been masked (?) by "old school" people still working, massive importation of foreign labor, and offshore outsourcing.

One plausible argument that I have heard is that the rapid and large-scale economic progress of the last century is largely due to bringing a solid level of education to the largest part of the population, and making higher education accessible to more people on a merit basis (e.g. by grant programs, to allow less affluent but talented people to enhance their effectiveness in contributing to the society -- this is what education is about in the big picture).

Today there is an increasing trend for colleges and universities to have to rely on industry funding -- the bargain element they have to offer being what amounts to the effective outsourcing of industrial research to universities. An increasing portion of research is "applied", not "basic".

To an extent that's a win-win situation, but the reason I cite this here is that (I believe) it is not voluntary on the part of universities, but forced by cutbacks in state funding and driven by the necessity to maintain certain staffing levels, and undoubtedly some crowding-out of "free" research is taking place. Also college libraries have to rely more on third-party grants, which may have some effect on what selection of literature is purchased.

A postscriptum to my previous post:

If my interpretation of the term "gilded age" is correct (late middle ages?), we knew what came after that -- the Dark Ages, which among other things were characterized by a low level of education in the "masses", rulership of ideologues (although at the time they were not called such), and as a consequence huge economic and social instability.

Which is not to say that it will happen again (back then the level and breadth of availability of science and technology was also pretty low, and there was no known reference point of a democratic society). Just a thought.

"I agree with you that most Americans want lower taxes. They also want more government services."

We recognize societal responsibilities. We realize that those responsibilities are suboptimally served via reliance solely on the coercive power of the state.

There are alternatives!

Put another way - we want more of those services that have been traditionally provided through government. We'd like to explore more diverse provision methods.

"Stop being Oppositional to Bush (“This is wrong...”) and be Inclusive, but Better (This ain’t bad, but let’s do it this way...”)."

Now you're getting somewhere. How often does Bush mention Dems at all? Why do Dems give him so much attention?

"Judis and Teixeira note that people who think at a fairly complex level for a living tend to vote for Democrats."

This sort of statement, while perhaps true (not even close in most of the areas in which I have lived, though it is feasible in the aggregate), does way more to alienate those whom Dems might win over than it does to add any light to the situation. Al's eye rolls were not helpful!

Building a majority is about finding what we have in common, not what divides us.

cm,

"If my interpretation of the term "gilded age" is correct (late middle ages?), we knew what came after that -- the Dark Ages, which among other things were characterized by a low level of education in the "masses", rulership of ideologues (although at the time they were not called such), and as a consequence huge economic and social instability."

The Gilded Age refers to the late 19th century - another period of dramatic highs and lows and growing inequality in American history. (BTW, there is some buzz around the net that the "growing inequality" meme goes away if one corrects for rising immigration levels. Any good refutation out there?)

And the Middle Ages (circa 10th-14th centuries, give or take a couple) came after the Dark, which followed the collapse of the Roman Empire.

But then again, I don't tend to vote Democratic (though I have and will again some day), so what do I know?

;-)

"I could never divide myself from any man upon the difference of an opinion, or be angry with his judgment for not agreeing with me in that, from which perhaps in a few days I should dissent myself."

- Sir Thomas Browne

"And the Middle Ages (circa 10th-14th centuries, give or take a couple) came after the Dark, which followed the collapse of the Roman Empire."

Oops, that's embarassing, and I stand corrected. I was referring to the period around 1500, when Europe saw significant unrest before the Renaissance. What is called dark ages with the height of the Inquisition and all indeed took place before that.

However, layman historian that I am, the point (or rather conjecture) I wanted to make is that all declines of relatively developed societies were partially related to the suppression of education (enlightenment?) and progressive thought by the ideologically motivated ruling elites. There were of course other factors at work as well. On the other hand ascents of scientific and technological development were often related to "liberal" rulerships (liberal in the sense that progressive thought and research was encouraged or at least tolerated) like Frederick the Great in Prussia, or Czar Peter I in Russia.

It was meant as a side note on my point about the education systems.

What do you think?

Here is a well rounded assessment, from knowledge@wharton, of the state of affairs in higher ed and its relations with industry and government -- not too good:

"... examples of how colleges and universities are compromising their mission. Higher ed is selling out, the critics say, arguing that unless the incipient corporatization of the university is stopped, the moral fiber of higher education in the U.S. will be destroyed."

The link may lead to a registration page (I am not sure) but I think it is worth the trouble.

http://knowledge.wharton.upenn.edu/index.cfm?fa=viewArticle&id=915

A statement about Gilded Age:

"Historians coined the term "Gilded Age" in an effort to illustrate the outwardly showy, but inwardly corrupt nature of American society during the industrialization of the late 1800's."

Link:

http://www.oswego.org/staff/tcaswell/wq/gildedage/student.htm

"Historians coined the term "Gilded Age" in an effort to illustrate the outwardly showy, but inwardly corrupt nature of American society during the industrialization of the late 1800's."

Thanks. While I understood the literal meaning of the word "gilded", I looked it up on my favorite dictionary website regardless, and it brought up the correction "Guilded Age" (which is probably wrong). That created the association of the medieval guilds, and I was led to believe it denotes the pre-1500 period of the middle ages where many areas in central Europe flourished. Should have used Google instead and saved myself the embarrassment.

A second statement about Gilded Age:

"REACTION - SOLUTION:

The Gilded Age was a period of immense change in the United States. All of the abuses and problems of the time generated many different reactions- most directed at reform. Slowly, government regulations began to reign in the abuses of big business. At the same time, social reformers actively sought to correct the problems evident in American cities."

Link: http://www.oswego.org/staff/tcaswell/wq/gildedage/segment.htm#reactions

Reform is a long term matter, an extended marathon. I recall reading in National Geography how the Republican succession of mayors and city councils in -- I think it was Chicago, but I'm not sure -- over an extended period of time corrupted the city management process from A- to - Z and yet they were in a position to take for granted being relected; how it took a decade for the Democrats to muster will and energy and finally take over the city management; and how it took them two decades to do the cleaning job of reforms. And this was well after the Gilded Age, with I think 1960s being the time when Democracts began to wake up.

That's the kind of perspective the Democrats need to look at these matters. How they can sell it to general public is of course a different story.

You don't run out of solutions in democracy.

From "[colleges] selling out":

"There is no mention anywhere in the book of the fact that on many campuses, upwards of half of all undergraduate teaching is now done not by fulltime faculty but by undertrained, underpaid graduate students and by a poorly paid and often uninsured corps of part-time, non-tenurable faculty ..."

I know this from the situation in German universities. While lectures are not held by TA's, most post-lecture exercise sessions are. Often times the TA's are doctorates who at the same time have to work on their dissertation, "support" their professor's research activities, and write papers to get publications. As post-doc research assistants (not sure what the proper title is) they are kept on short contracts that have to be renewed every few years, which creates a lot of anxiety.

Regarding the commercialization of research, I tend to believe that Europe is still behind in scale. Research-for-money is there, but not in overwhelming volume.

It is a double-edged sword -- for one thing, it gives researchers and students some insight into real industrial problems so that they can cast a glimpse outside the ivory tower and can build credentials and contacts for subsequent employment opportunities, and it gives some much-needed revenue to the college treasury, but it also crowds out other research, and allows companies to hire fewer R&D engineers, as subcontracting a college is cheaper. (Unless you lowball so much that they tell you (politely) to buzz off. But let's not get into lengthy anecdotes.)

All I can say is that I have seen the dynamic I describe in several people I know. People who think that they're middle class when they're not. I think that Bush's "ownership society" is directed exactly to these people, and that it will be very effective, and that Democrats should figure out a response but probably won't.

What I'm talking about is party identification and NOT the year-to-year choices of swing voters. This seems to be a hard point to get across. I'm talking about people who identify as Republicans because they misunderstand their place in the world -- because they think that their small nest egg puts them into the owner class.

I think that the obsession with polling results and swing voters of the political pros has made it difficult for Democrats to understand what I'm trying to say. People who identify as Republicans for the reasons I give vote Republican because they're Republicans. I don't claim that this is the sole or even the primary reason why we have working-class Republicans, but I think that it is a real factor, and it is exactly this dynamic which is behind the "ownership society" slogan which has been trotted out just now.

A rational technical explanation of how these people are in error won't, in itself, change anything, but it would be a nice thing to have around. I am aware that voters don't vote based on sophisticated social science analyses, but there are people who vote Republican because they think they're middle class when they're not, and because (whatever the reality) they believe that the Republican party is better for the middle class.

Frankly I do seem quite a bit of denial in the responses, but a few people seem interested, so I'm going to give myself a .125 batting average on my four attempts to raise this question. Better than .000.

Tom Slee at the top of this page uses the word "real economist" -- me too now calls upon "real economists" and present to them something that occurred to me last night in "analog form" in my cerebral circuits and that I will now try to put in "digital form" :

1- OLD BUSINESS: Through -- I guess -- the equilibrium process in the markets, profits on existing technologies and lines of business tend towards zero.

2- NEW BUSINESS: Meanwhile, new technologies and lines of business emerge, through innovation, operating with high margins of profits.

Taxes speed up the process of driving down to zero the profits in OLD BUSINESS and speed up the contraction of OLD BUSINESS, pushing it more quickly towards the point of termination of their life cycles.

Taxes don't have that effect on NEW BUSINESS because they operate on high profit margins.

If public policy keeps high taxes together with social spending, you get (a) NEW BUSINESS expanding with OLD BUSINESS phasing out and (b) democratization of the fruits of NEW BUSINESS -- e.g., better education and health care for more people. The society makes a leap in further modernization.

If public policy lowers the taxes with military (non-social) spending, you get (a)OLD business continuing to attract capital thereby slowing down growth of NEW BUSINESS and (b) turn the clock backwards on democratization, modernization. If you on top of that do the military spending through borrowing, you further extend these impacts in time and serve your main purpose: Elongating the life cycle of OLD BUSINESS.

It is really warfare between NEW CAPITALISTS and OLD CAPITALISTS, not a "class warfare".

A better educated and healthy population serves the interests of the NEW CAPITALISTS better. OLD CAPITALISTS don't care, they just want their privileges to last a bit longer.

In a way, I can go as far as saying that the Republican policies amount to some form of treason, because Republican policies are weakening the United States, in every aspect of national vitality and survival one can imagine -- be it economic, technological, social, moral, political, and military.

All that for what? So that OLD CAPITALISTS may reign a few years more.

For a few dollars more!

.. .. ... .

That reminds of something in a very different context and historical setting:

In 1920, all the Ottoman Sultan and ruling class cared about was to keep their own comfy and privileges.

Ataturk called it "heedlessness and perversion".

And then he started a movement of national salvation.

He first organized a series of national congregations and put on record the national will, for all to know, within and without the country.

That was the point when the fate of the nation was sealed.

.. .. ..

Back to the subject:

I say it again: I think America needs a New-New Deal with a global reference.

This will become clear no later than 2008, probably in 2005 or 2006, but that of course would be too late for the 2004 window of opportunity.

Zizka: no denial from my side, I think you make a very plausible point.

One aspect of this is that probably all income earners have the perception that they are paying a lot of their income in taxes, which is probably true or at least understandable from each individual viewpoint.

Combined with a perception that they get little out of the taxes they are paying, which I'm not in a position to judge, and the propaganda about waste, embezzlement, and catering to special interests of all sorts (at least part of which is probably true), it is not surprising that there are anti-government spending sentiments.

There is also the effect of those people perceiving themselves as net payers (which is probably even true).

Well, it's a tough one. I don't have a solution to offer, other than making plausible how the tax money is spent to the benefit of society. In European countries they have relatively generous welfare programs, so people who can think at least see that there is a benefit to whoever is hit by hardship (although of course there are exaggerated suspicions of abuses), but in the US those programs are of a much smaller scale.

Bulent: new/old business

Good points, but remember that two parties are fighting each other does not mean that they do not have common enmity with others, and fight them, perhaps even combining their forces, with the one hand at each other's throat.

Also, don't blow off "old business" as old. There are many old and proven technologies, which even with incremental enhancements remain old, like steel casting, transportation, food processing, medical services (partly), many infrastructure services, etc. They have their place in the economy, an poo-pooing them as old is not fair, and will needlessly alienate people. Not everything has to be high-tech.

"In 1920, all the Ottoman Sultan and ruling class cared about was to keep their own comfy and privileges."

Well yes, power (and habit of luxury) corrupts. This reminds me of a Dilbert cartoon where Wally is appointed to some commission and announces that he will use this for his own benefit. When others point out that he is not supposed to abuse his powers, he replies: "But that is the purpose of being in power", or some such.

There was quite a bit of talk how the recent stock options expensing issue was actually a sinister plan of "old business" to level the playing field of recruiting by robbing high-tech companies of an important part of their compensation packages.

cm:

Steel casting is not supposed to be highly profitable any longer. I mean any body can do it. Besides, there are now composite materials etc and nanotech is coming up.

Transport with intelligent highways and vehicles and expanded public transport -- and less and less need for transport any way --- is a completely different animal in a completely different world. New must replace the old.

Food processing is also redefining itself.

Like capitalists replaced the feudal lords, who were the capitalists of their time, new kind of capitalists must once again replace the old kind. Allready, Bill Gates is a very different kind of capitalist than robber barons.

Democracy replaced monarchy.

Direct democracy will replace democracy.

The progress towards more equitable and more democratic society with better quality of life for more people will continue -- unless somebody triggers Apocalypse (spell?) and send us all back to the stone age, just so they could start all over again with their self serving and bullying ways.

Zizka, your point was a huge issue of debate in the UK in the 80s concerning Margaret Thatcher's ability to capture the 'C2' or skilled manual workers' votes, when their 'objective' class position ought to have led them to vote Labour. The name-URL link (scroll down to 'Working class Conservatism') gives seven different explanations, to which I would add optimism, so that even if people do correctly identify their class position, they vote according to their goals and aspirations, rather than the present day reality. Thus a political approach which seems to deny mobility is a bit of a turn-off. See also 'One Market Under God' by Thomas Frank for a rundown on all the ways Americans have been encouraged to self-identify with the markets, whatever their true participation.

Media, of course, always had a crucial influence on voter alignment.

Internet changes that a bit, perhaps significantly.

Observe Howard Dean campaign.

Some Republican types don't like internet cause they can't control it as easily as TV and press media.

Bulent: I don't disagree with your points. What I wanted to say is that some old technologies have their place, and should not be denigrated as old. For example, steel will be partially replaced, but will nevertheless remain an important material. That some industry is not highly profitable does not mean it should be given up.

Not exactly similar, but analogous concerns are true for "modern" technologies like computers, software, and computer-like, software controlled devices (cell phones, DVD players to name some ubiquitous consumer products). Product and even technology replacement cycles (commonly called "innovation") are already ridiculously short, and the deltas between them are to a large part (a) functionality enhancements and bugfixes that are delivered late because the previous generation(s) were cranked out too quick, (b) appearance enhancements (new form factors, rearranged menus and different colors in Windows -- OK, I'm exaggerating a bit), and (c) forced incompatibility with prior technology or repackaging the existing function (old wine) in different form (new bottles) to create a new upgrade cycle to a different, but not necessarily much better product base.

I'm working in the software industry, and all this is in part creating the need for my job, but I'm disagreeing with the mindset of "forcibly" replacing "old" with "new" technology, or _generally_ blowing off something as "old" just because it is around for a while.

As an example, I dare to say that today's word processing programs are probably adding little general value over what was available 10 years ago. Sure, they have been continuously honed to the effect that they are now much better, but I could write a decently layed out letter or memo 10 years ago, and today I can do exactly the same thing. Does that make those programs "old"? Well maybe, but some things fit their purpose well.

It is different of course if technology is polluting (smokestacks, CO2, acid rain, toxins, radioactivity, exhaust fumes, etc.) or inefficient (large material input, much waste product, excess heat generation), then it should be replaced.

cm:

Let me put it this way:

Gas industry tried hard to stop Thomas Edison from replacing gas lighting with electricity lighting -- they even tried sabotage.

I take sides with Edison.

And I didn't say any thing about discontinuing steel industry. All I'm saying is it is neither economic nor moral trying to keep that industry profitable at levels that would hinder progress in emerging technologies, increased productivity, and expanded welfare.

The world doesn't need steel magnets any longer, like a time came the world did not need feudal lords any longer.

That's what I mean by OLD BUSINESS/CAPITALISTS.

Hufs! Sorry! Above post signed as "cm" should have been signed "Bulent Sayin" or "bulent". (Terrible head ache since I woke up this morning!)

General:

Zizka points are valid for some percentage of Republican voters and when this percentage is added to the "Right to Lifers" and the NRA members, you have a powerful voting block. The Democrats have a way of talking about the Investor issue (not as well as Lee A.'s idea), but they are stymied on the other issues.

PK - The analysis of Mr. Krugman's ability to be ahead of the curve is interesting and probably correct. Some people can see the core problems that are not being resolved by analyzing small sets of facts as well empirical data. The remainder of the population on both sides of the argument spends their time discussing nuances that in the end don't matter. (This post is an example).

There is no doubt we are becoming an ownership society and it appears the Republican Party will have the muscle (Military) to make sure the Americans and British corporations get their cut. It will be interesting to see how much the US loses in the way of Education, Environment and Social Programs in order to achieve the corporate dream.

Lee A writes "I think it might be easier for the Democrats to say the recovery was coming anyway, as all business cycles return, but it was DELAYED by a misdirective tax cut, and might’ve started a year or two earlier by priming consumer demand, instead. In this, the Democrats appear to have almost all economists on their side."

Precisely the kind of fallacious reasoning that will make victory impossible for Democrats. A massive tax cut which put money in the hands of millions of Americans, and two-thirds of which was spent, DELAYED the economic recovery? Get real! The recession was as shallow and short-lived as it was because of so much of that tax cut being pumped back into the economy. The tax cut was the very DEFINITION of "priming consumer demand."

THAT'S what most economists agree with!

"... it appears the Republican Party will have the muscle (Military) to make sure the Americans and British corporations get their cut. It will be interesting to see how much the US loses in the way of Education, Environment and Social Programs in order to achieve the corporate dream."

You can't sustain military might for long while all along losing on education, environment and social programs.

In particular, I am wondering how working women are faring just now and how retired women and men are faring. The sluggish wages and health care benefit cuts may be especially tough on women as heads of households. Are retirees generally comfortable with income streams or are they spending down assets especially homes to live comfortably? There is an expectation the baby boomers will move comfortably to retirement, but I wonder and worry if there has been enough saving.

Bulent writes "Some Republican types don't like internet cause they can't control it as easily as TV and press media."

As evidenced by what? It's Democrat types who wish to regulate, regulate, regulate. If the internet is anybody's enemy, it's the Dem's, since it's literally a free market world.

Bulent (aka cm) also writes "The world doesn't need steel magnets any longer ... " Yes, it does. What it doesn't need are steel MAGNATES. There's a big difference.

Zizka --

As I said earlier, I'm not sure I agree there are enough "working-class investor Republicans" to worry about. But assuming that there are, I think one reason why no one has come up with the numbers you're looking is just the complexity of the calculations involved. You have to measure not just the relative importance of each individual component of a person's assets, income, and liabilities or potential liabilities (the cost of private school if the public schools become terrible, college costs, health care costs, etc.) but also, far more trickily, the relative impact of Republican and Democratic policies on the value of each individual component.

It seems like what you're looking for is something along the lines of (for your hypothetical Oregon person):

Republican policies boost the value of your investments 5% a year (all percentages are relative to what the other party's policies would do) and they

cut your taxes 15% (worth $X) and they

cut corporate taxes 10%, giving your company more money to pay you with (worth $X) and they

relax workplace regulations and allow companies to keep unions out, which holds down costs for them and prices for you (worth $X), but they also

relax workplace regulations and allow companies to keep unions out, which holds down your wages (worth $X), and

make it 10% more likely that your kids' public-school education will be bad (worth $X to you)

15% more likely that your employer will increase your co-pay (worth $X)

5% more likely that you'll get fired (worth $X)

50% more likely to limit federal assistance to college students (worth $X) and

make the environment 10% worse (again, than it would be if the Dems were in power) (worth $X)

and increase by 20% the chance that your Social Security benefits will be cut (worth $X)

Then you'd also, most important, want to know which party was best for home values, since that's most Americans' most valuable asset.

I think you're right that calculating something like this is doable, but I'm not sure that anyone would be too comfortable vouching for its accuracy, because there are so many a priori assumptions that have to be built into it. On the other hand, I'm not sure that the calculation would be any less accurate than the one that the people you're talking about seem to be making.

As someone else suggested, I do think the question of mobility and identification is a crucial one in explaining voter preference, at least in the U.S. I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the "investor class," identified up, not down. Jennifer Hochschild's books "What's Fair?" and "Facing Up to the American Dream" are quite striking on this point. And Alberto Alesina, Rafael di Tella, and Robert MacCulloch's paper on the different relationship between inequality and happiness in the U.S. and Europe: www.nber.org/digest/aug01/w8198.html also seems relevant. So the challenge of getting American voters not to think of themselves as middle-class runs deeper than just explaining how small the value of their investments really is.

fron an article in the Wall Street Journal yesterday

(When it comes to taxes, Mr. Dean thinks really big. In raw numbers, the Dean tax proposal would raise taxes on 109 million Americans by roughly $1.5 trillion over the next 10 years. This comes out to a Dean tax of about $15,440 for every family of four in the U.S. over the next decade. The Dean tax rule of thumb is that if you are in the middle class, he would roughly double your federal income tax payments.
Mr. Dean responds to these charges by countering that his plan will help restore prosperity and produce higher incomes and more jobs. But how exactly? His tax plan would be the equivalent of hitting small businessmen, who create about 70% of the jobs, over the head with a two-by-four. The highest tax rate under the Dean plan rises from 35% to 39.6%. Add on top of this perhaps the most insidious feature of the Dean tax. For the first time ever, he would eliminate the cap on payroll taxes. Henceforth, all income of more than $87,000 a year would pay a 15% payroll tax. This means the Dean tax plan raises the small-business tax rate from 38% to 55%. If you are a self-employed worker with an income of $125,000 a year, which in high-cost-of-living states like California and New York is hardly rich, Howard Dean wants to raise your taxes more than $8,000. That will create jobs? )

"Bulent (aka cm) also writes "The world doesn't need steel magnets any longer ... " Yes, it does. What it doesn't need are steel MAGNATES. There's a big difference."

LOL! Hey, thanks for causing me laugh! Believe me I needed it. If it is not clear, English is second lang to me but that of course is no excuse for confusing "magnet" with "magnate". (I'm at the same time not sure if there is any such thing as "steel magnet" -- magnet is supposed to be soft iron, as far as I can recall from physcis courses.)

And I am re-phrasing my comment on Republicans not liking internet, as follows :

"I have a hunch that some Republicans....."

And I'd say at least one Democrat named Howard Dean certainly doesn't seem to take internet for enemy.

Lison:

I really do think that Mr. Dean should put up front his program for government spending, then get to talk to financing, and leave some flexibility there, that is, vis-a-vis tax versus borrowing. He should concentrate on operations he proposes, and discuss means of financing them later.

By all means he should critisize tax cut-budget-deficit-military spending- borrowing combination of Bush administration, at every opportunity. But he should not move from there to putting up front higher taxes first. That would be like putting the carte in front of the horses.

Discuss spending program first, financing alternatives later.

Mr. Surowiecki writes "As someone else suggested, I do think the question of mobility and identification is a crucial one in explaining voter preference, at least in the U.S. I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the "investor class," identified up, not down."

Exactly right. Despite the vicious class envy of the "hate the rich" crowd, a significant percentage of the working class don't buy into that nonsense because they expect to join the rich someday ... and many of them will do so. People aren't nailed down within income groups. They move through them (mostly upwardly) as they age, become educated, find better jobs paying more money. Higher economic aspirations are natural, since people see them all around them, and see that they achieve results.

In addition, there are many non-economic reasons why many in the working class identify with conservative principles. Here's two:

1. They have pride in their country and want it to not only be a great power, but to act like one.

2. They have children, and find the amount of what they consider to be trash in the mass media to be disturbing, and the defense of that trash by civil libertarian types (almost always from the left) to be even more disturbing.

There is no chance there will be a significant federal tax increase in the coming 2 years, no matter who is President. Congress will not allow a tax increase, there is no public call form an increase. The issue may emerge in a few years, but now the issue is moot. If anything there will be a federal tax decrease this year.

Mr. Surowiecki writes "As someone else suggested, I do think the question of mobility and identification is a crucial one in explaining voter preference, at least in the U.S. I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the "investor class," identified up, not down."

Exactly right. Despite the vicious class envy of the "hate the rich" crowd, a significant percentage of the working class don't buy into that nonsense because they expect to join the rich someday ... and many of them will do so. People aren't nailed down within income groups. They move through them (mostly upwardly) as they age, become educated, find better jobs paying more money. Higher economic aspirations are natural, since people see them all around them, and see that they achieve results.

In addition, there are many non-economic reasons why many in the working class identify with conservative principles. Here's two:

1. They have pride in their country and want it to not only be a great power, but to act like one.

2. They have children, and find the amount of what they consider to be trash in the mass media to be disturbing, and the defense of that trash by civil libertarian types (almost always from the left) to be even more disturbing.

Michael Brown

Why ruin a fine thread of discussion with such foolish harshness? There is no need for harshness, besides making foolishly extreme remarks.

I apologize for the double postings. I'm only hitting the Post button once. Does it post if I hit Preview, too?

Thanks, Bulent, for seeing the humor in my comment. You took it exactly as it was intended.

And Anne is right. No Federal tax increases any time soon.

>there are many non-economic reasons why many in the working class identify with conservative principles<

I think part of the reason the working class identifies with their betters is that they are pathetic. Sorry for the harsh language, but it needs to be said. Anecdotal example: one Repub that I know, who by income is working class, no assets, no retirement savings, etc, is a golfer who has persistent fantasies of how Bush would be a great golfing buddy. As if!!

The reason this is really, deeply, horribly pathetic is that people sacrifice the real interests of their families, e.g. their children's health care, for this sort of delusional fantasy. The rich don't care if the kids of the working class are sick, poorly educated, etc. And if the parents, wrt their political beliefs, don't care either -- what can you say? Pathetic.

Another thing that has to be said is that the failure to stand up for your own interests, the interests of your family, your kids, your elderly parents --- this is the behavior of wimps. Americans have gotten fat and scared and wimpy. On such is built the success of the modern Republican party.

Btw, the dude I mentioned above, he has two kids, and can't afford health insurance on his minimal income as a not particularly successful realtor. But, he's a small business man, and in his fantasy life, there's a direct line between him and the Repub fat cats who 'make this country great'.

This thread is a wonder. A time when we can think with conservative and liberal in a way that I will draw on for a long while. So arguing is well, but these issues are so forming and subtle and difficult. Paul Krugman and Brad DeLong have done us quite a favor.

Remember, we have an interest in the well-being of California supermarket employees. Losing wages and benefits for these employees is a problem for us all. We need these employees to live well.

No decent hard working people are never pathetic. They are decent hard working women and men. Beyond that we can argue about interests and beliefs. We need to respect the many people who make our days more pleasing.

Michael Brown

I see the twinkle in your eye now. Hard to see twinkles on the internet. Sorry to be too tough.

Camille writes "I think part of the reason the working class identifies with their betters is that they are pathetic."

What's pathetic is believing those who have it economically better than the working class are "their betters." They're no such thing. They're just more well off at the moment. There is real income mobility in this country, and it's perfectly reasonable for working class people to expect that their situation will improve, since it happens to people all around them every day.

Your self-interest in attempting to promote class warfare is pretty obvious. But you won't get far with what is essentially a "Who are you going to believe? Me, or your own eyes?" argument.

Spotted a seagull down in the road and stopped the car. At once a rough tough bunch of construction workers saw and understood and ran into the road to stop traffic. We saved a herring gull.

Hope they vote for Democrats, but that is another matter beyond caring for the gull which relates us.

Lest my point be misunderstood, I was not making Michael's argument (no offense, Michael) about class awareness being "nonsense." I just think that in wrestling with why Americans are not fervent advocates of redistributive policies, thinking about their propensity to identify up is important. Certainly I think that propensity is one reason why talking about what government can do for the poor -- as opposed to what it can do for working people -- is and always has been a political non-starter in the U.S. And it's one reason why Clinton's combination of tough talk on welfare and his emphasis on helping people "who play by the rules" was so effective.

Also, also although other threads have worked this point over pretty well, the children of the would-be middle class are certainly healthier and better-educated (at least in terms of years in school) than their parents were, or at least that's what the numbers on life expectancy and the percentage of Americans who go to college today as opposed to thirty years ago suggest. In relative terms, these people have lost ground, but in absolute terms I think it's a different story.

Michael Brown:

Discovering that I have made a harmless mistake always makes me laugh, don't know why but that's the way I am -- guess most people are that way. So thanks again for taking the trouble and it was a nice way to let me know.

On other matters:

I do agree with you that Democrats do lose by siding with marginal issues such as gay marriage to the extent of making it a central focus of their policy. (I now brace for attacks on me but if I'm cornered, I'll get away saying "hey what do you expect I'm a stranger!") And indeed the TV is terrible, I understand, unless it is a specialist channel like PBS or Discovery, etc. (And I have never understood why a left wing person should not or could not advocate Catholic principles of marriage.)

I disagree with you on two issues:

First, easier one to state, is that a country's greatness is in getting things done without even moving the troops. So I think "acting like a great country" means that kind of posture; and it is not being trigger happy. I'm afraid you yourself subscribe to the latter meaning and therefore I will not try to convince you that you should try to spread the word.

Second, people don't identify with upper class because they have a lot of hope of joining them one day. It is true that social mobility in US goes further than it does in other countries, especially European countries, but even in US the chances are slim. And the example Camille Roy refers to is a rare case of a person having different priorities than most folks.

In general, people identify with upper classes in voting because of economic, social and psychological pressure. Their employers always talk to them about conservative values and principles and if the poor folks don't agree with their employers, they get sort of sidelined, to say the least; if they agree with them but not believe it, they feel dishonest; and so eventually they come to believe "what's good for General Motors is good for the country".

And so I think Democrats should (a) try atleast not to put down traditional family ideals, (b)develop and describe a better picture of what a great country is all about, in war and in peace; and (c) teach the people that their vote, along with their freedom of speech, is the primary manifestation of their inalienable rights as free men and women, as guaranteed by the Constitution of the United States.

"Class warfare" is a slogan of little meaning. What you must ask yourself is does it matter that 40 year old single mother of 2 can not afford health care coverage at Wal-Mart. If that is fine, then we have an argument. Health care is no problem for me, but I surely would like to see enough class warfare to get Wal-Mart to treat employees a heck of a lot better. [The Wal-Mart ads do not impress me in the least.]

Bulent Sayin

Civil rights issues always always always matter. Try to imagine from an African-American perspective the struggles we had for racial equality. The struggles are not over. If conservatives snner at civil rights, then thankfully I could not be conservative.

Surowiecki: "I think the evidence is pretty overwhelming that Americans have historically, and not just since the birth of the 'investor class' identified up, not down."

Brown: "Exactly right. Despite the vicious class envy of the 'hate the rich' crowd, a significant percentage of the working class don't buy into that nonsense because they expect to join the rich someday ... and many of them will do so."

So one reason why my original question has not been answered or even asked, is that a lot of people want it not to be asked. If ordinary, not very well-off people "identify up", that's a good thing -- **whether or not** it's rational for them to do so. Anyone who proposes that the rationality of that identification be seriously studied is a class warrior. (Code word for Communist? No, of course not. Who could ever think such a thing?)

Mr. Surowiecki's explanation that such a calculation would be too difficult doesn't work. Don't economists get extra points for doing especially difficult things? For example, take Becker's attempt to come up with an economic explanation of the family in terms of exchange of "child-services" for "parent-services". A much more difficulkt task, and his results seem ludicrous, but he's still part of the profession.

(As I've reiterated a couple of time by now, my question is not "which party is best for the investor class" but "Is it rational for certain people to believe that they are in the investor class at all?" I decribed someone who was really overwhelmingly dependent on his labor and public services paid for by taxes, but who thought of himself primarily as a property owner because of his rather small amount of property. The calculation I was asking for is "At what point is it rational for an individual to think of himself primarily as a property-owner and vote that way?")

Surowiecki doubts (by assumption, giving less evidence than I did) that the people I describe are as common as I think they are, while simultaneously saying that it's always been that way and that it's a good thing too. He actually seems to suggest that the people I know are just a handful of people I know here in Oregon, sort of a statistical glitch in my mix of acquaintances.

Brown again: "They expect to join the rich someday ... and many of them will do so." How many? Are they rational in this belief? What studies I've seen show that upward class mobility is not especially high and is decreasing.

As many have said, class war nowadays is the better-off against the worse-off, and it's pretty fierce. Historically the (non-Communist) Democratic Party has represented the worse-off. I don't see that there was anything wrong with their "class war" or similiar activities in the future. But Republicans have taken some big bites out of the natural Democratic constituencies while increasingly working for the advantage of an increasingly thin slice of the best-off people (the top 1% rather than the top 10%, as Krugman says somewhere).

I think that the ineffectiveness of the Democrats in this area is one of the reasons for their weakness. I think that the question I asked is part of understanding how that happened. I think that the resistance to even asking that question is indicative of an enormous weakness within the Democratic Party itself. (I am assuming that Harris, Surowicki, and maybe even Brown are not Republicans.)

And Bush's "ownership society" plays to the kind of identification I'm talking about. It's a fraud. I think that Democrats need to figure out how to respond. I really don't think that the Democrats will find the advice of Surowiecki, Harris, and Broan very useful when they plan their response.

There is every indication that upward mobility in America is lower than we care to think and getting lower still. That is the point made by Paul Krugman and Brad DeLong's fellow professor at Berkeley. My fear is that mobility is becoming rather rapidly more difficult. American Idol works for 1 in 290 million.

Bulent writes "a country's greatness is in getting things done without even moving the troops. So I think "acting like a great country" means that kind of posture; and it is not being trigger happy."

On this point, I'd argue that there is a middle ground between those extremes, which is talking the talk, but being willing, when appropriate, to walk the walk. Anyone out there with children knows this perfectly well. Try "negotiating" with your children while doing absolutely nothing to follow through, and see what kind of child you have on your hands. Helpful? Cooperative? Not!
If you have no credibility, nothing you say matters.

Bulent continues "people don't identify with upper class because they have a lot of hope of joining them one day. It is true that social mobility in US goes further than it does in other countries, especially European countries, but even in US the chances are slim."

Actually, I totally disagree with that contention. In the US the chances of moving up the economic ladder are excellent. Millions of people do it. Virtually everyone I know (including me) was poor 30 years ago when we were in our 20s. Now none of us are. We own our own homes, cars, etc., and our income has steadily increased with time. That's what economic mobility is. And it's real.

As far as being conservative is concerned: I consider myself a conservative. But the question that needs to be asked is "Conserve what?" To me, its "We hold these truths to be self-evident: that all men are created equal; that they are endowed by their creator with certain inalienable rights; that among them are life, liberty and the pursuit of happiness."

To me, anyone who agrees with that fundamental creed is in a fundamental way conservative.

A first cut at your question of how large a stock portfolio one needs for it to be more important than the other things you listed. It would be fairly easily to construct a portfolio that would yield 2.5% in dividend payments and still grow roughly in line with the market. So the first cut at the question is that at a yield of 2.5% that you can take out of the portfolio every year a
$2 million portfolio would yield an annual income of $50,000. Under the assumption that your retirement income should be about half you current pay the guy making $50,000 in your question would want a stock portfolio of around
$1 to $ 2 million to offset his combined pension and Social security income. That assumes he takes no cqpital out of the portfolio. Doing the math to assume the portfolio has zero value when he turns 100 and gives him $25,000 to $50,000 annual income from age 65 to 100 would be a little more complicated, but it would also reduce the size of the portfolio needed.

Does this address your question?

Anne writes "There is every indication that upward mobility in America is lower than we care to think and getting lower still. That is the point made by Paul Krugman ... "

Every indication? There aren't ANY indications that's the case. Again, the question Krugman asks is "who are you going to believe? Me or your own eyes?" Anne seems to believe Krugman. From my experience, he's only been right about one issue in all the years I've followed his column. That was his column about the short-sightedness of the anti-WTO crowd, in which he argued that they weren't doing the world's poor one damn bit of good. An argument with which I totally agreed.

Maybe upward mobility has been stifled at the New York Times, and Krugman is once again (as he so frequently is) totally deceived by what he thinks he sees, but it's alive and well here in Central PA. I suspect it is elsewhere, too.

Anne writes "There is every indication that upward mobility in America is lower than we care to think and getting lower still. That is the point made by Paul Krugman ... "

Every indication? There aren't ANY indications that's the case. Again, the question Krugman asks is "who are you going to believe? Me or your own eyes?" Anne seems to believe Krugman. From my experience, he's only been right about one issue in all the years I've followed his column. That was his column about the short-sightedness of the anti-WTO crowd, in which he argued that they weren't doing the world's poor one damn bit of good. An argument with which I totally agreed.

Maybe upward mobility has been stifled at the New York Times, and Krugman is once again (as he so frequently is) totally deceived by what he thinks he sees, but it's alive and well here in Central PA. I suspect it is elsewhere, too.

Spencer -- that's the sort of thing I was thinking of.

Michael Brown just explained to us that most people earn more money after they are established in their careers than they did before they started their careers. For this I thank him.

wn just explained to us that

Michael Brown:

Obviously, deterrent force is an important element in getting things done without even moving the troops. The term "middle ground" is fine with me. It is important to remember, however, that what gets results is foreign policy and use of force is only one dimension of foreign policy, which should be used very, very sparingly and never without impecable moral justification.

Concerning the other matter, 30 years a long time, during which both conservative and liberal policies come into play and, as the economy grows and per capita income increases, many many people become better off, both conservative and liberal.

And I don't know of any liberal who would disagree with "that all men are created equal; that they are endowed by their creator with certain inalienable rights; that among them are life, liberty and the pursuit of happiness".

---
Lise:

Is the matter of gay marriage a part of civil rights issues in America? If it is, there must be a way to advocate both civil rights and traditional family values. Advocating civil rights and traditional family values should not be conflicting positions -- as I think.

Michael wrote: "There aren't ANY indications that's the case."

Actually, Michael, there are. If you'd care to actually do some research or if you had actually bothered to *read* what Krugman wrote, you might have found that out for yourself, instead of making yourself look foolish by mentioning totally irrelevant anecdotes about you and your friends.

Zizka: "Mr. Surowiecki's explanation that such a calculation would be too difficult doesn't work."

Actually Mr. S was trying to explain that the calculation would not be all that meaningful -
"so many a priori assumptions" and all that. It isn't the difficulty that's the problem.

Zizka: "The calculation I was asking for is "At what point is it rational for an individual to think of himself primarily as a property-owner and vote that way?")"

But in an earlier post by Mr. S, he explained (rather well, I thought, but it seemed to go ignored) why your entire project is silly - voters care about other things besides economic issues.

camille roy: "one Repub that I know, who by income is working class ... is a golfer ...
and can't afford health insurance."

He plays golf but "can't afford" health insurance? The reason the reason the Al Gore wing of the D party will never win a national election (okay, unless the R party drives the economy into the ground) is pretty well articulated by CR's use of the term "can't afford" instead of the term "chooses not to buy."

camille roy: "The rich don't care if the kids of the working class are sick, poorly educated, etc."

But this is obviously ... ridiculous? One thing rich people enjoy is getting even richer. Sick and poorly educated workers are not conducive to this. In the real world, you could argue (or discover, by paying attention) that the group of persons who as a class care the most about educational reform are business executives. No one prospers when the lot of the poor improves like the rich - less crime, better
workers, more corporate profits, etc. - and they're not stupid, they know it. (I'm sure there are plenty of rich people who just want to spend down their capital and ignore the future, but generalizing is silly).

Joe Mealyus

I have problems believing the decline of the dems party and rise of the reb party over the last 20-30 years is due to the problem of middle class people thinking they are wealthy. I think the problem has been much more that the Dem party has become too extreme and identified with social and political ideas that middle america reject. The first real example of the shift in middle class voters to the Reb were the Reagan Dems in the mid-west in the 1980s. Their reason for shifting to Reagan was much more that they wanted to get rid of the "welfare queens". Many, many, blue collar workers really resent paying taxes to support people they believe are taking advantage of the welfare system rather than working for a living.
How accurate the belief about "welfare queens"
is is besides the point. This may be the greatest thing than Clinton has done for the Dem party -- by reforming the welfare system he ended the Reb party ability to use this issue. Note welfare is not an issue at all in this election but in the 1980s it was a major issue even though Reagan did not do anything about welfare.

Dean says he has a plan to "reform" the tax code so that middle class people actually end up with a tax cut under his plan. But he has not spelled out any details -- probably a good thing during the primary season. The only tax change he is talking up is corporate taxes with
his argument that the corporate taxes have fallen sharply over the last 20 years.

In my mind one way the Dems need to attack the Bush tax program is to point out how it actually
makes it more difficult to have economic-social mobility because it makes "wealth" or investment income tax free. In a way the Dems have to take a strategy similiar to what the Rebs did with the "death" tax. The death tax, along with the lottery is really almost a purely voluntary tax.
The Rebs have created a completely false impression that the death tax d