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Wall Street

Is Obama Bad For Business?

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Mitt Romney, former governor of Massachusetts,...
Democrat?

I saw an interesting interview of Mitt Romney by CNN’s Wolf Blitzer the other day. Wolf asked Romney a rather interesting question about business. This is a question I have also wondered about, but lacking Wolf’s access, I have never been able to properly ask. Here is the general question: given that the Dow Jones is way up from when Obama took office and given that big business are doing amazingly well, how can it be claimed that Obama is bad for  or against business?

After all, one stock criticism of Obama made by many Republicans is that he is anti-business or, at the very least, not good for business. If this were true, one would expect that business would be doing very badly and this, at least for the big players, is far from true.

Romney made the obvious reply: Obama is good for Wall Street but he is bad for small businesses. There is also, obviously enough, the fact that unemployment is still a rather serious problem. As might be imagined, there is a certain irony in a very wealthy Republican calling a Democrat to task for apparently siding with big business at the expense of the little guy.

Since the general attack that Obama is bad for business won’t fly, a key question is whether or not Obama is to blame (at least in part) for the plight of small business and employment in America.

One way that he might be blamed is that the bailout helped the big guys who might have otherwise perished-thus, perhaps, opening up the business ecosystem for many small business. It could also be argued that the way Obama handled matters has encouraged lenders to not lend to people wanting to start or maintain small businesses. It might also be argued that Obama has done little or nothing to stop the domination of big business in the market nor address the tendency to send jobs overseas. In short, Obama could perhaps be criticized for continuing the business as usual policies that predate his administration as well as for handing big finance vast sums of cash. That is, the “anti-business” Obama could be taken to task for being “big business Obama.”

This would certainly be an interesting narrative. Hearing Romney talk about this, I began to wonder if Romney and other Republicans would actually take up an anti-Wall Street narrative and adopt a narrative in which they spoke of defending the small businesses and the working folks. Seeing Republicans sounding like Democrats would certainly be interesting.

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Who Represents the Group?

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OAKLAND, CA - OCTOBER 26: A man kneels during...
Image by Getty Images via @daylife

Protestors, or at least people characterized as protestors, engaged in acts of vandalism and violence in Oakland. These incidents took place after a peaceful protest in the same city. Not surprisingly, the non-violent protestors disavowed these destructive actions.

Not surprisingly, people who are critical of the occupier movement might be inclined to point to the incidents in Oakland and take them as evidence that the movement itself is radical and violent. This sort of “reasoning” is, obviously enough, the same sort used when certain critics of the Tea Party drew the conclusion that the movement was racist because some individuals in the Tea Party engaged in racist behavior. It is also the same “reasoning” used to condemn all Christians or Muslims based on the actions of a very few.

To infer that an entire movement or group has a certain characteristic (such as being violent or prone to terrorism) based on the actions of a few would generally involve committing the fallacy of hasty generalization. It can also be seen as the fallacy of suppressed evidence in that evidence contrary to the claim is simply ignored. For example, to condemn the occupier movement as violent based on the actions of those few in Oakland would be to ignore the fact that the vast majority of protestors and protests have been peaceful (at least on the part of the protestors).

It might be objected that a group can be held accountable for the misdeeds of its members even when those misdeeds are committed by a few and even when these misdeeds go against the general views of the group. For example, if an employee engages in sexual harassment while on the job, the company can be held accountable for these actions. Likewise if an  official engages in misdeeds while acting in her official capacity, the organization can be held accountable. Thus, it could be argued, the occupier movement is accountable for the violent actions taken in Oakland and these actions can be held against them and perhaps taken as defining the movement as violent and destructive.

In reply, the occupier movement is not, as of yet, a unified movement  with an official leadership and official set of positions and goals. As such, treating it as an organization with a chain of command and a chain of responsibility that extends throughout the movement would be rather problematic. To use an analogy, sports fans sometimes go on violent rampages after events. While the actions of the violent fans should be condemned, the peaceful fans are not accountable for those actions. After all, while the fans are connected by their being fans of a specific team this is not enough to form a basis for accountability. So, if some fans of a team set fire to cars, this does not make all the fans of that team responsible. Also, if people unassociated with the fans decide to jump into action and destroy things, it would be even more absurd to claim that the peaceful fans are accountable for their actions. As such, to condemn the rather vague occupation movement as a whole based on what happened in Oakland would be both unfair and unreasonable.

If the movement becomes organized and develops a clear leadership, identity and so on, then it would be reasonable to start considering the movement to be an organization that could be held accountable for the actions of its legitimate members. However, until that happens the responsibility must remain on an individual level. As such, the people who did the damage in Oakland are accountable but the general occupier movement cannot have these incidents laid at its collective doorstep.

Also, even if the movement does become organized to the point that it makes sense to speak of group accountability, this still does not entail that the movement would be accountable for the actions of every person who claims to be a member of the movement or who claims to be acting on behalf of the group.  This, of course, raises the question of the extent to which even an organized group is accountable for its members. One intuitive guide is that the accountability of the group is relative to the authority the group has over the individuals. For example, my track club has no meaningful authority over me and hence the other members have no accountability in regards to my actions. In contrast, my university has considerable authority over my work life and hence can be held accountable should I, for example, sexually harass a student or co-worker. In the case of a political and social movement like the occupiers, it seems unlikely that the movement would ever have a great deal of authority over its members and this would serve to limit the collective responsibility of the movement. Naturally, the same would apply to other political movements with a similar lack of authority (such as some of the Tea Party groups). This lack of substantial collective responsibility does not entail that individuals are not accountable for their actions-far from it.

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Negativity Bias

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Karl Pribram and colleagues have presented evi...
Hard wired for negativity.

While scientists have only fairly recently gotten around to studying cogitative biases, philosophers have been teaching about them for centuries-typically in the form of various logical errors. However, it is good that the scientific attention to these biases is serving to attract additional attention to them.

Everyone of us is, of course, loaded down with all sorts of cognitive biases. Some scientists even claim that such biases are hard wired into the brain, thus making them part of our actual anatomy and physiology. If so, it would seem to suggest that people might be more or less biased based on the specifics of their hard-wiring. This would help explain some of the variation in people when it comes to being able to reason well.

While we all suffer from cognitive biases (and other biases) we do have the capacity to resist and even overcome such biases and reason in a more objective manner. As this takes effort and training (as well as the will to want to think critically) it is not very common for folks to try to overcome these biases. Hence, bad reasoning tends to dominate.

One standard bias is known as negativity bias. While some people are more prone to focus on the negative than others, apparently we all have an inbuilt tendency to give more weight to negative information relative to positive information. This would help to account for the fact that people tend to consider a single misdeed to outweigh a large number of good deeds.

Of course, people do also have other biases that can lead them to weigh the positive more than the negative. For example, people tend to ignore or downplay negative aspects of people, causes, and things they like and weigh the positive more heavily. This often involves embracing inconsistency by applying different standards relative to what one likes or dislikes (see, for example, how Fox News and MSNBC evaluate various political matters).

Interestingly, this bias seems to occur at neurological level. The brain actually has more neural activity when it is reacting to negative information than when reacting to positive information. Assuming these results apply generally, we are actually hard-wired for negativity.

The defense against this involves being aware of this bias and exhibiting even greater caution in assessing negative information-especially when it involves negative information about something we do not like. For example, folks who dislike the Tea Party will weigh negative information about them more heavily than positive evidence and will tend to make little effort to determine whether the evidence has been properly assessed. The same holds true for folks who dislike the Occupy Wall Street movement and its spin-offs. They will take any negative evidence as being quite significant and ignore or undervalue positive evidence.

This bias does help explain a great deal about how people see political events and assess them.

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Money & Motivation

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Wall Street Sign. Author: Ramy Majouji
Image via Wikipedia

I’ve been involved in various informal discussions about the Occupy Wall Street movement and one point that I have heard raised on several occasions is that we need to have an economic system in which some people have far greater income and wealth than others. Folks often add that this also means that the government should not raise taxes on the wealthy. The gist of the reasoning seems to be that without the potential to make such money and acquire such wealth (and keep it), people will not have any motivation to work, create businesses, innovate, invent and so on.

As far as working goes, that is obviously not true. Most folks know that they have no chance of having CEO level income and wealth (or even above average income and wealth) and yet they work anyway. One excellent motivation is, of course, need. True, most folks would like to have such income and wealth, but that certainly is not their primary motivation to punch the clock. To ascribe that motivation to most folks would be to also ascribe to them a seemingly unrelenting self-deception or ignorance.  In my own case, I know that I will never have vast wealth or income as a professor and yet I still continue to work. If it became a law that no one could have a personal income greater than $1 million per year (and no, I am not suggesting this), I’d still go to work. The odds are you would too. For the tiny percentage of folks who have a realistic shot at the CEO level of wealth and income, it could be reasonable to attribute to them this sort of motivation. But, they would certainly still work even if they knew that doing so would merely ensure that they could buy food and stuff.

Of course, the really wealthy do not become wealthy by punching a clock. They get that way via other means (and not just inheritance). They might create a business, invent, innovate or market some rare talent (such as acting, athletic, or singing prowess). So, one might argue, while a limit on mega-wealth might not cause people to stop working, it would surely stop people from creating businesses, innovating and so on.

However, this does not seem to be the case. After all, people invent and innovate for reasons other than money. To use the example of Steve Jobs, the folks who knew him well always claim that he was not in it for the money and the same is often said about other innovators. This does make sense-after all, they set out to innovate and it happened to make them wealthy. There are also many other examples, such as Tim Berners-Lee, of people who innovate for reasons other than becoming wealthy. As a final example, consider all the folks who develop open source software-they are clearly not doing that to become wealthy. As such, people would still create things like technology and software even if they could not, for some reason, become super wealthy doing so.

As far as creating and performing go, people obviously do those things even when they do not expect a huge financial reward. Most writers and artists do what they do for the love of what they do (or maybe out of vanity), rather than for the hope of being super wealthy. Athletes who know they will never be a Michael Jordan or Tiger Woods get out there and give it all-knowing they will never be in a commercial selling underwear or Gatorade. In my own case, I know that there is not much money to be made in running and I know that even if there was, I certainly would not be making it (I’m “all-conference” good, not “Olympic good”). Yet, I run six days a week and race as hard as I can. I know that there are thousands of people doing the same.

Now, it might be objected that people will not do these things without getting something out of it. In reply, my obvious answer is that I agree. No rational being would do something if it knew that doing so resulted in no value whatsoever. However, what counts as value is not limited merely to money. As I have argued above, people are clearly motivated by factors other than money and even when it comes to money the main motivation seems to be to have enough for a good life, rather than merely accumulating vast wealth for its own sake.

Obviously there are people who regard accumulating vast wealth as an important goal. There is, on the face of it, nothing inherently wrong with that goal or achieving it. However, when this accumulation comes at the expense of others and causes great harm (such as how some folks profited while the world economy was brought to its metaphorical knees), then there is a problem. I am fine with competition and reward based on merit. To use an obvious analogy, I think that the person who wins the race fairly and on her merits should get the biggest trophy. However, if the person “wins” via foul means and in doing so hurts the other runners, then they should be punished rather than receiving the biggest trophy. I also know that people will still do their best even when there is no trophy at all.

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Wealth

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2006-01-28 Pu money
Pu Money

WTP made the following comment:

Mike, I will ask again…If, as you assert, the amount of wealth is constant and we are all fighting over the pieces of a finite pie…There are more people alive today than ever before and they are all wealthier than those in the relative hierarchic economic layers of the past. Where did this extra wealth come from? Once we get through that perhaps we can discuss: Where does wealth come from? How is it created?

I assured him that I would answer these questions, so here it goes.

One rather important matter is what is meant by “wealth.” After all, this is a normative (value) term and tends to be a matter of considerable dispute. For example, does wealth include only physical and economic property in the strictest sense, or should it also include other things of value, such as knowledge? However, to keep it simple I will go with a fairly stock account of wealth and take it to refer to items of economic value in a fairly limited sense. As such, wealth would consist of such things as valuable natural resources (oil, gold, silver, wood, water, land, and so on), capital resources, money, and physical possessions (such as guns, cars, works of art, computers, books, and such).

The amount of wealth is not constant and I do not believe that I ever claimed it was constant. Rather, my point has been that wealth seems to be a zero-sum game. That is, at any given moment, there is a finite amount of wealth and any increase in my wealth would entail a decrease in the wealth available to or possessed by another. For example, the land I own is land others do not own, thus reducing the wealth available to others (if only by a miniscule amount).

The sum total of wealth can, obviously increase. To use an obvious example, there are far more houses now than ever before. As far as where they came from, they were obviously built by people using material resources that have presumably been around since the beginning (matter & energy after all, change form but cannot be created nor destroyed-at least on some accounts).

You are right that people alive today are, in general, more wealthy than their counterparts in the past. It is also true that poorer people today are relatively wealthier than people who would have been considered wealthy in the past. One factor in this change is that advances in technology and the rise of a consumer economy mean that people have access to far more things and, of course, there is a significant motivation to sell people said things.

In terms of where the extra wealth has come from,  giving a complete picture would require several books. However, I can briefly discuss some major causes.

First, there is the development of new technology. As noted above, one impact of this is that it provides more stuff to own (and hence more wealth relative to the past). Today, for example, I have a plethora of things my ancestors did not, such as a phone, a truck, lights, a Kindle, a modem, a router, a laptop, a flashlight, a fridge and so on. Another impact is that workers become more efficient (or can be replaced). So, instead of having to make things like a bow, spear, and clothing with great personal labor, weapons and other items can be mass produced by machinery-hence there will be more stuff for less effort, thus allowing an increase in wealth.

Second, there was the development of new financial systems which allow the “creation” of wealth by various means (some of which seem to be rather destabilizing to the general economy) such as investing, credit default swapping, junk bonds, corporate raiding and so on. A more complicated and larger economic system allows for there to be more monetary wealth-although this sometimes seems to be “creating” wealth out of nothing.

As far as where wealth itself comes from, that depends on the specific sort of wealth you are talking about.

Material wealth obviously originated in the creation/origin of the universe (that is where the stuff comes from). Once we had the earth and people, people could start acquiring material goods like land and resources. These resources can be made more valuable by the addition of labor, thus creating wealth. They can also be made more valuable by other means, such as creating scarcity and controlling pricing. These material goods can be acquired in various ways, fair and foul. The classic method is, of course, conquest.

Given that the earth is finite, the material wealth is also finite, thus creating a zero-sum game. To use an obvious example, any land I own is less land that other people can own. Everyone could, of course, be fairly well off. After all, a finite amount of wealth divided among a finite number of people could still allow for people to have a fairly robust amount of stuff. Obviously, however, this is not the sort of world we live in: very few people have most of the stuff.

Monetary wealth is obviously a social construct: we made up the financial game and the “creation” of wealth depends on the sort of game being played at any given time. For example, some folks “created” wealth by clever repackaging of toxic assets. Other people “create” wealth by working and investing their money (which is supposed to give them more money). In many ways, this is “fictional” wealth in that we are literally just making this stuff up and its value depends entirely on how far we are willing to all play make-believe. Yes, I play the game-it is a convenient way to handle exchanges in some ways. But, I always remember that it is just a game we are playing (I work, I get some paper, I hand the paper to someone and they give me an apple).

In theory, there could be an infinite amount of money (not physical currency, of course). However, simply creating more money will not actually create more wealth-it would mainly just result in inflation. As such, money is also effectively a finite resource and the more I have, the less there is available for others (in a practical sense).

Thus, wealth is effectively finite and we are in a zero sum game.

 

 

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53% & Life is Not Fair

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Perot's running mate James B. Stockdale
Image via Wikipedia

As I noted in my previous post, Erick Erickson recently started a movement in response to the Occupy Wall Street movement. The occupiers have as a slogan that they are the 99%. To counter this, Erickson hit on the idea of the 53%. This is the percentage of Americans who pay the federal income tax. His message is that complaints should cease, people should not blaming Wall Street, and people should pay their taxes.

During an interview on CNN Erickson responded to the criticisms of the Occupiers by asserting that life is not fair. He also made this point in his post:

Well, these people apparently forgot that life is not fair and are demanding the government intervene to legislate that life suddenly become fair. They are claiming to be the “99%” against the evil 1% of rich people who work on Wall Street. They are posting pictures to a website holding up their sob stories. Some are terribly tragic, but most? Boo-freakin’-hoo. Life is not, never has been, and never will be fair.

While Erickson does not actually present a developed argument, he seems to be contending that the Occupiers are in error regarding their protest and their desire to change the economic and political system. They are in error, as he seems to see it, because they supposedly want to make things fair and this will never occur. I am not sure if he means that unfairness is a matter of necessity in the sense that fairness is a logical or practical impossibility. However, it seems to suffice to take his claim at face value, namely that life will never be fair.

Interestingly, his response to this is rather like that of the Stoics and reminds me of what James Stockdale wrote about the story of Job: life is not fair and this is something we simply must deal with.

As a runner and martial artist, I have long found Stoicism appealing. However, there is the question about whether or not Erickson is right.

To steal a bit from Thomas Hobbes, life can be divided up into two main domains: the natural world and the artificial world. The natural world consists of all the natural thinks, such as streams, rocks, planets, animals, humans and so on. The artificial world is the domain of what we humans create and includes our social and political structures, including the economy.

The natural world is clearly not fair in the sense that natural processes do not consistently bring about what people (and animals) actually deserve. The just and unjust are killed in earthquakes, the wise and the fools perish of cancer, the good drown as readily as the bad, the kind are consumed in fire as swiftly as the cruel. As I say to my students, stuff just happens and deserving has nothing to do with it (to steal a bit from Unforgiven). As far as the evidence indicates, justice and fairness are lacking in the purely natural world.

This fact does, of course, cause some thinkers to raise the problem of evil in regards to God. After all, if there is supposed to be an omniscient, omnipotent and good God, then we would expect there be to justice in the natural world. It need not be a perfect world (as Leibniz argued), but such a being should surely be up to providing a fair world. There are, of course, various replies to this problem of evil-but none of them really seem to adequately solve the problem. One stock reply is that God balances the books in the afterlife, which hardly explains why He does not get the book keeping done properly here. The most reasonable inferences from the evidence are that either God does not exist or God is lacking perfection in power, knowledge or goodness.

In regards to the natural world, I agree with Erickson-life in the natural world is clearly not fair and this will almost certainly never change. It would be the height of foolishness to protest against this. Rather, wisdom lies in trying to mitigate the situation through preparations, technology, and good decision making.

However, as noted above, we are not merely creatures of the natural world who must live in a world not of our making. We are also the creators of the artificial world-that of society, politics, economics and so on. While this domain is obviously shaped by the natural world, it is a human construct and it is within our collective power. As such, whether our institutions are fair or not seems to be a matter of choice. Since we create and sustain them, it would seem to follow that we can change unfair aspects to be more fair. To think that our creations are beyond our control and that we simply have to live under their unchanging ways is to fall victim to the fallacy of reification.

To use an obvious analogy, imagine that I ran my classes in a way comparable to our economic system. For example, while students could work hard to get good grades, the grades also could be bought or acquired in other ways (like family influence or via connections). Also, the students would have access to the class material and my time on a non-equal basis (well off and well connected students would have the most, while the poor students would have far, far less). Imagine that some students complained that it was unfair. If I replied “life is not fair”, that would be absurd. After all, the class is under my control-I could just as easily make the class fair in the sense that the grade each student receives is  primarily dependent on their effort and ability. The same could be done with our economic system. After all, it was not forged by the hand of God and dropped from the sky. Nor is it ruled by unbreakable laws of nature. True, people do like to talk as if the economic system is an entity in its own right that follows immutable laws-but this is no more true of our economic system than it is true of my classes. The rules are ours to change, be they fair or unfair. As such, to say that life is not fair is merely an expression of a problem rather than a refutation of criticism of unfairness. Naturally, it could be argued that it is right to be unfair, but that seems to be absurd.

To forestall an obvious mistaken  reply, unfairness and inequality are different things: it can be completely fair to have an unequal distribution of goods. To go back to the class analogy, it can obviously be just and fair for students to have various grades-provided that the grades are based on merit. In fact, it would be unfair for students to get the same grades regardless of effort and accomplishments. To use another obvious analogy, a race can also be fair and yet end with an unequal distribution of awards. After all, not everyone can be first-just the best runner.  People often “confuse” calls for fairness with calls for equal distribution (often as an intentional part of a straw man attack) but they are not the same thing at all.

 

 

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