What Determines Political Opinion?

The conceit of this blog is that my arguments are so compelling and my writing of such spectacular quality that the scales shall inevitably fall from my former comrades' eyes and they'll all become Republican Trump supporters.

Of course that almost never happens. People rarely change their political opinions because of argument, spectacular or otherwise.

So what determines people's political opinions? There are several points of view.

The first may be called Marxian. It maintains that politics derives from economics, and a person's political opinions will roughly follow their economic status. In the narrowly Marxist sense this reduces to bourgeois, petty-bourgeois, and proletarian sympathies. As this blog has relentlessly pointed out, that taxonomy no longer fits the modern world very well.

The larger Marxian premise is alive and well, however. It's shows up in simple-minded form in the MSM as blue-collar voters elected Trump. A more sophisticated, Marxian perspective is proposed by Joel Kotkin, author of the recently released The New Class Conflict (which I have not yet read). It is summarized in an important article here.

In Kotkin's view, US society exists in four classes: the Oligarchy, the Clerisy, the Yeomanry, and the Serfs. The oligarchs are the top 0.1% of our society--roughly equivalent to the bourgeoisie. The clerisy are "made up of academics, the media and well-paid professionals — represent[ing] some 15 percent of the American workforce." The yeomanry represent "small business and property owners." I'd suggest it constitutes most Americans with a positive net worth. Bringing up the rear are the serfs--people who are too poor to accumulate any wealth at all, or who have smothered themselves  debt that they'll never be able to pay off.

That all sounds very clear, and it has considerable explanatory power. But it falls apart when I try to apply it to myself, my family, friends and colleagues. Am I a member of the clerisy? After all, I retired as a professor at full rank, making me an academic in good standing. But I retired from Two-Bit State College--not Harvard. How far down in the academic pecking order can one get and still be a cleric in good standing?

Unlike most of my colleagues, I retired on a 401K rather than with a state pension. That means I have a lot more money than they do--if I can't rise to clerical status I'm definitely a yeoman. My retired colleagues, while they have much less money, do get a state pension--which politically isn't much different from a welfare check. Are they clerics, yeomen, or serfs? (Or are retired folks declassed altogether, as a traditional Marxist might maintain?)

And so on. It all dissolves into ambiguity. And none of this predicts my vote or that of anybody in my family. Maybe we're just special--but I don't think so.

A second explanation for political opinion is that it is a personality trait. A leading exponent of this model is Arnold Kling, author of The Three Languages of Politics. My review (here) briefly summarizes the thesis:

Kling suggests that there are three political ideologies in America, which he roughly labels as Progressive, Conservative and Libertarian. These three groups use different languages--that Kling calls heuristics--and from this he derives a three-axis model. Progressives organize ideas around an oppressor/oppressed axis. Hence they are primarily interested in social justice, and in righting historical wrongs. Conservatives think in terms of a civilization/barbarism axis. Accordingly they emphasize stable institutions (church, family, law), and tend to resist sudden changes. Finally, Libertarians orient according to a freedom/coercion axis. They're worried about big government, too much taxation, gun control, and too much environmental regulation.

How one aligns along the three axes (I'm halfway between the conservative and libertarian) is personality trait. Given that the adult personality is roughly 50% genetic and 50% random chance, a person's political opinions are substantially inherited and in any case unchangeable in adulthood--at least in terms of basic priors as summarized by the three-axes model.

This, of course, contradicts Kotkin's Marxian view--neither clerics nor yeomen share a common set of personality genes. It also means that political conversation is mostly a waste of time--we'll always be talking past each other no matter what we do.

The third model is group affiliation. A core human desire is to be part of a group, to have a reliable set of kin and friends who will stand with each other through thick and thin. People thus go to great lengths to demonstrate their allegiance to the group. Religious practice is a common example. The devout parishioner visibly demonstrates his loyalty to the group, proving that he can be trusted no matter what.

Some groups demand not a religious faith, but rather a shared set of political principles. The academy is an obvious example. To be a member in good standing of the academic club you have to hold reliably Progressive opinions. It doesn't matter what your genotype is, nor is any randomness in your background a factor. Absent vocal progressivism your chances at getting an academic job, much less acquiring funding and tenure, shrink dramatically. Accordingly academics are ostentatiously Woke and aggressively Green.

A lot of this is self-selection. People who aren't Woke or Green often shy away from academic careers. Though some of my colleagues are nowhere near as committed to those principles in private as they are in public. In many cases they're just not interested in politics at all and only go through the PC motions. Others (like me) are actual Conservatives, and mostly we just keep our mouths shut.

Nevertheless, group affiliation explains why the academy is so relentlessly Leftist. To a lesser degree the same is true of school teachers and civil servants. On the other side, some religions also impose a political dogma on their adherents--they will often be Conservative.

The fourth and last possible determinant of political opinion is identity politics. It maintains that people of a given ethnicity share common genes, culture and/or experiences, and thus will share common politics. The Progressive version of this story has become cartoonish, but I have succumbed to it myself. Since reading Albion's Seed, I have been seeing Yankee, Quaker, and Scots-Irish influences everywhere. (See my review of Colin Woodard's book here.)

While Progressives say they subscribe to Identity politics, what they really mean is a form of group affiliation. The latter easily explains why academics vote 90% for Democrats. African-Americans also vote overwhelmingly Democratic. Progressives claim this is because of their unique genetic/cultural heritage, i.e., their identity. Though it is a stretch to think that African-Americans are so uniform in genotype and culture. Of course they're not, but voting Democratic has become a cultural touchstone--you're not genuinely African-American if you can't toe the line.

Congresswoman Ayanna Pressley recently put it very well. She said "we don't need Black faces that don't wanna be a Black voice." She's not playing identity politics, but rather trying to enforce group affiliation.

It won't work. Unlike academics, Blacks are not self-selected. They were born into an ethnic culture. That culture is much more heterogeneous than Ms. Pressley will have us believe. I think the days when Democrats can simply take the African-American vote for granted are coming to an end.

None of these models are mutually exclusive, and all of them describe some aspects of reality. Surely people respond to economic stimuli. For example, teachers vote to pass school budgets. But to suggest that blue collar workers voted for Trump for economic reasons stretches credulity. For that phenomenon group affiliation is a better predictor. Likewise, identity politics might have some merit--there really are many Americans of Scots-Irish descent, and they often vote similarly. But to think they'll vote as a solid block is to overstate the case.

While I'll give much credit to all of these models, I still think they're incomplete. It's a quaint thought, but I do believe people have free will. Its remit is pretty small, but it's still there. It means that ornery, unpredictable, thoughtful people still can change their minds independently of money, genes, or culture.

So there is reason for me to write my blog after all.

Further Reading:

• Heather Bradford on Abortion
• Against The Current Celebrates 200 Issues
• Henry Giroux Defends the Faculty Guild

Why New York Is Different

Joel Kotkin and his colleagues over at New Geography have invested many millions of pixels making the case that the suburbs are not dead. Their argument is solid: the so-called back to the city movement is very small scale, Millennials show every sign of wanting to live in single-family, detached houses, and the most thriving locations are suburban-like places, such as Houston, Dallas, or Oklahoma City. New technology looks to strengthen the suburban trend, as telecommuting and driverless cars reduce the pain and expense of commuting.

I totally agree with New Geography on the general trend. The effort to force people into higher density housing is doomed to fail. More mass transit is mostly a waste of money (the Second Avenue subway line being a rare exception). But within that larger trend, there are eddies and countercurrents that flow backwards. The larger movement to the suburbs notwithstanding, there are a handful of cities that will do very well as traditional cities. They are the obvious suspects: San Francisco, Boston, Washington, possibly Chicago. Maybe a few more.

And within that handful, New York City will excel. Unlike as is sometimes implied over at New Geography, New York is a lot more than just a "luxury city." Instead, it has a unique niche in both America and the world that no other city can fill. 

My argument has three parts: The beginning of New York in the 17th Century, the people who live in New York today, and the uniquely incredible value New York adds to the economy.

The Dutch founded New York in 1624. Unlike the British, French, and Spanish, the Dutch had no desire to extract resources from the land. Not for them was taming the wilderness, mining for gold, or raising cattle. Unlike other colonists, the Dutch settled accounts with the Indians as quickly as possible, in legend buying Manhattan for $24. A few of their number got as far up the Hudson as Albany, but beyond that, early Dutch influence on American settlement was negligible.

Unlike any other colony in the Americas, New York was founded from Day One as a commercial center. Think of it as a 17th Century version of Hong Kong. Lower Manhattan--even in 1624--was a shipping, trading, and financial center. It was never a farming or manufacturing town.

That legacy holds to the present day. Colin Woodard has published a now famous map showing the eleven nations of North America. By far the smallest geographically, but unmistakably distinctive, is New Netherlands, a region that doesn't even include all of New York's modern suburbs. How can this be? The Dutch lost their colony to the Brits in 1664--they were only there for 40 years. A negligible fraction of New York's current residents are descended from those original Dutch settlers. And yet that crucial heritage persists.

Today New York is known for having the largest Jewish population outside of Israel. Most of these people came over through Ellis Island, along with a much larger number of other immigrants from other places. Those other folks didn't stick around long--the Swedes headed for Minnesota, the Irish moved to Chicago, and so on. The Jews stayed in New York, and not just because they're lazy. The Jews have been a commercial people since Medieval times, and it made sense for them to settle in a place founded on commerce. The Dutch had built them a congenial home.

The other prominent commercial class in the US are the overseas Chinese. These settled first in California, where today they are disproportionately dominant in Silicon Valley. But by far the largest Chinese community in the Americas is in New York--initially along East Canal Street. Today there are multiple Chinatowns throughout the metropolitan area, nine in the City alone. They deal in everything from rags to restaurants. The formerly slum-like Lower East Side is now a suburb of Chinatown, full of back-office businesses, run by an increasingly wealthy population.

Jews and Chinese--these are Peter Stuyvesant's descendants. They compete with each other. The diamond trade has long been a Jewish business, but recently Chinese traders are gaining market share.

Other cities have ethnic commercial classes. I've mentioned the Chinese in Silicon Valley. Hollywood's studio moguls tend to be Jewish. Mormons play that role in thriving Salt Lake City. But as far as I know, New York is the only city in the country (and likely the world) that has two, large immigrant communities that both bring substantial commercial expertise. Of course there are Jews and Chinese in places like Los Angeles and Houston, but the numbers are vastly smaller, both in absolute terms and as a fraction of the population. Indeed, it is surprising how few Chinese live in Los Angeles.

So why are these ethnic communities so valuable to the cities in which they settle? In particular, the Jews bring an attribute uniquely relevant to Mr. Kotkin's thesis. Observant Jews are not allowed to drive or take the bus to synagogue on the Sabbath--they have to walk. That means they all have to live within walking distance of each other. This enforced close living, augmented by shared religious practice and intermarriage, breeds trust and very high levels of social capital. Trust is a marketable commodity--people will do business with banks where the employees are trustworthy.

Famously, among New York's diamond traders, million dollar deals are sealed with a handshake. So is it any wonder that the money center banks are all headquartered in New York? You can move the buildings and the computer services to North Carolina or South Dakota or wherever. But you can't move the community. Ultimately, banking is about trust, and that is something that close-knit, ethnic communities have in spades.

There are other industries where New York has a lock. The rag trade is one. Perhaps partly because Jews have to walk, New York is a densely settled, very walkable city. The women (and men) are out in public, showing off their duds. Because they're on the street, in public, going about they're daily business, fashion trends happen in New York. Accordingly, New York hosts thousands of blogs like this one. That's how people dress in New York City.

There are three fashion capitals in the world--New York, Paris, and Tokyo. New York and Paris are beautiful cities, adding a marvelous backdrop to any photo shoot. Tokyo, while not beautiful, is nevertheless glamorous. All three cities are built for walking and public transport--it's one big fashion show. Compare that to Houston, where stylish people drive around in cars with tinted windows. How can you model clothes in a car? Houston will never be a fashion center--and neither will Los Angeles, Chicago, or Sioux Falls.

A second industry is food. Yes, they grow the goods in Kansas, package it in Illinois, and eat it around the world. But where do they invent the stuff?

Tyler Cowen says that the best ethnic food is found in suburban strip malls. I think he's probably right. But that's not the food that most people eat most of the time. What most people eat is some creative combination of ethnic and comfort food, tasty and cleverly made. Few are going to eat the oddball dishes they serve at Cantonese restaurants. 

But lots of people patronize a New York fast food chain called Happy Taco. Forget Tex-Mex; think Mexiasian. Or JapoItalian. Or Peruvithai. Or whatever combinations of cuisines you can think of. People like ethnic food, but they like it modified, synthesized, palatable, and recognizable. Creating this nouvelle cuisine requires business acumen, lots of fresh ingredients, educated consumers willing to try, and a labor force with sufficient expertise. And ideally, all the restaurants are within walking distance of each other.

I've just described New York City. What you'll eat at Applebee's tomorrow, they're cooking up in New York City today.

Further Reading:

• Food Network & The New Normal
• You Can't Eat A Hipster
• Where The Customer Always Comes Last

Is Big Data A Big Problem?

There's the excellent New York Times piece by Charles Duhigg describing how Target department stores were able to identify pregnant women from their purchases, and then send them ads and coupons for future needs. Indeed, there's the funny story of the teenager's dad who angrily confronted the store manager that his daughter had received mailers for infant supplies. "She's still in high school," he complained. A few days later he called to apologize--it turned out she really was pregnant.

Only your department store knows. And your credit card company, and the fast food place, and the grocery store, and probably even your hairdresser. That, even though you've kept it a secret from everybody.

Welcome to the world of Big Data.

Target soon discovered that its sleuthing was perceived as "creepy," and it has since backed off on the hard sell. Now the infant formula ads are mixed in with flyers for lawnmowers and men's socks, to serve as a figleaf for privacy.

Joel Kotkin (here and here), in his continuing crusade against the tech industry, takes the argument to the next level. His complaint is against Google, arguably the granddaddy of Big Data. They are mining everything--web search, this blog, Gmail, the files stored in Drive, to the photos in Picasa. It is all shamelessly marketed to advertisers, so that "Google, which, in the first half of 2012, took in more advertising dollars than all U.S. magazines and newspapers combined." If a data pipsqueak like Target can use data mining so effectively, then surely Google represents a massive invasion of privacy.

Not so, argues George Gilder (during the Q/A session, here). He grew up in a pre-technology, small town where nobody had any privacy whatsoever. Further, there was no way to refute the vicious rumors, even if false. Google, he claims, is a mere piker compared to the small town gossip. He thinks privacy concerns are overrated.

Further, while companies like Target are Google's clients, Google has to be very careful not to abuse people like me. I entrust them with my Gmail and Blogger data on the condition that they're careful with the contents. One serious misstep, and they're out of business.

And that's something Mr. Kotkin doesn't understand. Far from being an impregnable monopoly ("should be regulated like utilities"), Google lives on the edge. Not only are they vulnerable to competition from Amazon, eBay, and Facebook, but also to some public-domain, Wikipedia-like start-up. Customers come and customers go. The tide can flow out very quickly. Indeed, were I to make a prediction, Google will not exist as a Fortune 500 company 30 years from now.

That said, Google's data mining is laughable. The number of clicks ads on my blog receive is a single-digit percentage of the number of visitors. And the number of clicks I make on ads delivered to me isn't even 1% of the feed.

But there is one outfit that is regulated like a utility, and that's the NSA. Mr. Kotkin, along with many of my friends in the Republican Party are in a tizzy about this--a gross violation of privacy, they claim. But it isn't--the government is just doing its job. Technology renders asymmetric warfare possible, and the threat we face from that is very real and very serious. I find the NSA's actions (at least insofar as I know about them) to be entirely reasonable. I'm a small government guy, but national defense and the protection of citizens' lives and property is a proper concern of the government. Privacy be damned.

Two things bother. First, I'm astonished that the folks in the NSA thought this could be kept secret. Of course it was going to leak out--government secrets are just sooo 20th Century. American law enforcement is going to have to do it's job in full glare of the public.

Second, Glenn Reynolds' question--how do you guarantee due process if everything is a crime?--is a good one. There are millions of laws on the books, and some suggest that the average American commits three felonies per day. That they're not prosecuted is solely at police discretion--this is not a very secure foundation for civil liberties. This--not the privacy issue--is the real problem that has to be addressed.

Many of these laws were passed to make some constituent group happy. They were never intended to be enforced, and in a pre-NSA age they were unenforceable. So something like Ethelbert's Law was passed because Ethelbert had some tragic thing happen to him, and therefore anybody who eats crackers while shooting pheasants is a felon. The obvious solution is to just repeal most of these laws--get rid of the nanny state--but that's probably a Utopian dream.

A more practical solution might be to render any data collected by the NSA or comparable government agencies (including, perhaps, the IRS) inadmissible as evidence. Then the gumshoes would have to put their cases together the old-fashioned way. The NSA data could, however, be used for military intelligence and actions, e.g., drone strikes, or arresting illegal combatants. (There are dangers there, too, but they are fewer.)

This issue splits both parties. I disagree with most of my Tea Party friends, such as Rand Paul or Glenn Reynolds. I'm down with Chris Christie on this one. At the same time, my Trotskyist friends, along with much of the progressive Left, agree with Rand Paul or Joel Kotkin.

It makes for strange bedfellows all around.

Further Reading:

• The Man's Out To Get You
• In Response To Blogger's Policy
• You Can't Eat A Hipster

Getting Richer While Feeling Poorer

GDP growth is below par, and unemployment is too high. Most pundits think we're at best just struggling to get a recovery started. They're wrong. Instead we're already into the greatest economic boom this country has ever seen.

The misperception derives from the fact that this recovery is different from anything that has happened in the past, and the traditional measures of economic well-being are no longer very helpful. To see the bigger picture we have to back up and consider some very basic facts. As Milton Friedman eloquently pointed out more than 50 years ago, the measure of any economy is how well the consumer does. If the consumer thrives, we're all richer than we were before. And contrary, if the consumer suffers, we're poorer.

The economy is not about workers or employment. Adding workers and paying them more raises the cost to consumers and lowers our standard of living. Consumers are best served when workers work efficiently for market rates. Nor is the economy about capital. Prices are cheapest when interest rates are zero and capital is freely abundant. Ideally, profit margins go to zero.

Marxists certainly don't understand this. They think the economy exists to benefit workers--the goal is to raise wages, featherbed work sites, and constrain efficiency. While this might make small groups of workers better off, it hurts everybody else. Because--and this is the point they miss--everybody is just another name for the consumer. All people, from the richest capitalist to the lowliest bum, is a consumer, and will be better off if prices are low.

So how's the consumer doing these days? I'm typing this on my new computer, which I purchased for $249. By a good margin it's the best computer I've ever owned. It weighs 2.4 pounds, has a six hour battery life, comes with wireless and Bluetooth, along with a built-in, hi-res color monitor. The first computer I purchased (back in 1987 or so) was an IBM-XT, and if memory serves it cost about $2,000, which adjusted for inflation comes out to $4,000 today. It weighed about 50 lbs, including the monitor, wasn't connected to anything (it'd never heard of the Internet), and didn't even have a battery. Unless you consider fluorescent green to be a color, it didn't have a color monitor.

So this consumer is doing fine. But--answer the naysayers--that's only true for the IT industry. Once you get away from computers and software, prices have not fallen that much. And worse, wages have been static since the 1970s. They say I've cherry picked the example to make my case. And a few years ago they'd have been right, but not anymore. For just as it took a generation before electricity actually changed the economy, and just as the automobile (mass produced already in the 1920s) didn't beget the interstates until the 1950s, so also computers have spent a generation as a separate phenomenon, having rather little influence on the larger economy.

But that's changing fast. We see it already in the law business. The legal workforce is being drastically reduced as more and more services are automated and computerized. Wages for new lawyers are falling fast, assuming they can find a job at all. Applications to law schools are declining, and inevitably some of them will close. This is good news--not for lawyers, and certainly not for those who bet wrong and just graduated from law school--but for consumers. Less money is spent on legal services than before, and our standard of living is commensurately higher.

Education, especially higher education, is being automated, and as a result prices are beginning to fall dramatically. Georgia Tech now offers an on-line, masters degree in computer science for under $7,000. Soon enough, most lecture classes will be delivered on-line, significantly improving the quality of the student's experience. Grading homework sets in college science classes is already completely automated. The result is the ranks of college professors will decline substantially, and the job they do will be very different from what they do today. Students (i.e., consumers) will get a better education at greatly reduced prices. The same trends are happening in K-12 education as well.

The driverless car is on the cusp of mass adoption. The primary hurdles are legal, not technical, but they are already legal in three states (Nevada, California, and Florida). Initially they will probably aid  the handicapped--blind people will be more mobile with a car that drives itself. But soon enough it goes mainstream--taxicabs won't need drivers, and the cost of a cab ride will decline by 50% or more. Indeed, in the future riding cabs may be cheaper and more convenient than owning your own car. Trucks will also go driverless--the cost of moving freight will shrink accordingly. Millions of cab drivers and truck drivers will be unemployed, along with traffic cops and parking enforcers. But the consumer (again--everybody) gets better service at cheaper prices.

There are many more examples: manufacturing, retail, medicine--all of these and more will be automated and their work forces laid off. It's terrible for workers, and long term not all that good for capital, either. But it's fantastic for the consumer, and that's the bottom line.

So today I got a new computer at a fraction of its historical price, and tomorrow the whole vast array of consumer goods will be similarly cheaper. My children and grandchildren will have a much higher standard of living than I have today. As I say, we're in the early stages of the greatest economic boom ever.

So what's with the pundits and the statistics? Why can't they see the obvious changes described above? The problem is they're looking at the wrong thing. For there are two ways to raise our standard of living, i.e., make consumers richer. One is you can employ them as workers, pay them higher wages, and watch their standard of living go up. This is the pattern that prevailed in the 1950s and 1960s, and it's the pattern that the pundits expect to repeat today.

But there's another way consumers can get rich. Instead of giving them more money, let's instead just lower prices. Today my computer cost $249. Ten years from now I'll be buying better computers at the Dollar Store for $4.99. A college education for my grandchildren might cost $100,000, $20,000, $7,000, $699, and maybe less if they shop around. (Needless to say, I don't think those savings plans for college tuition are a very good investment.)

The historic measures of economic health are GDP growth and total employment. Neither of these have recovered as much as hoped, from which pundits infer that the economy is still struggling. But they're looking at the wrong data, and drawing the wrong conclusions.

The Fed has been printing money at a rate of over $1 trillion annually. Many folks, especially over at Zerohedge, warn that inflation--maybe even hyperinflation--is just around the corner, or has even started now. But they're wrong. If anything, the Fed is just barely keeping the deflationary wolf from the door. Because of automation, the marginal cost of production has gotten so low that prices have nowhere to go but down--despite the Fed's heroic efforts to the contrary.

Non-physical services are heading toward free. Wikipedia and Google Search are free. Education--the repackaging of public-domain information--will trend toward free. Medical care--another information-intensive business--will see prices drop toward zero. With 3D printing even traditional metal-banging industries will be able to cut costs dramatically. Look for much cheaper and better cars and airplanes in the near future.

So real prices are going down, and absent the Fed's mega-printing, nominal prices would be going down as well. GDP is a measure of all product purchased by consumers--but consumers are paying less. Therefore, GDP has to go down, and would do so dramatically except for the Fed's levitation. But this is not bad news--it just means we're getting richer faster than the economy can keep up.

Likewise, productivity is measured as output per hour worked. Historically, the initial benefits of increased productivity have accrued to capital--hence the value to the capitalist of what The Militant calls "speed-up." But no more. Today the benefits go straight to the consumer. Amazon is an excellent example--not only is it a big, automated company, it is also a zero-profit company. They are betting the store on future profitability, and in the meantime passing all the advantages of automation on to the consumer. If the value of output declines (because of lower prices), and the number of worker hours also declines (because of automation), then productivity will stagnate. Observers conflate that with recession, which it isn't.

There are some things that are unlikely to get cheaper. Food and lodging are two. Absent another great, green revolution that dramatically increases world agricultural productivity, food will continue to be expensive. Likewise, land and housing are fixed commodities for which prices cannot go down by much. Fuel will also cost approximately the same per btu, but new technology will greatly reduce the btu's needed, so the overall fuel expense will decline.

But this has a perverse effect on statistics. One common measure of well-being is the fraction of income spent on food. In a rich country (the USA) it is a low 6%. In poor Kenya people spend an average of 45% of their income on food. This is taken as proof that the US is richer than Kenya, which it is. But since food, housing and (to a lesser extent) fuel cannot decline in price as fast as everything else, then in the new normal we will spend a larger fraction of our incomes on food than before. You can already hear the wailing and gnashing of teeth--oh see how poverty is increasing, they will claim. But it's not true. Food costs relatively more not because we're getting poorer, but because everything else is getting cheaper.

Still, the naysayers will claim, you've got millions of unemployed people--all those drivers, teachers, doctors, lawyers. And in the short and medium term that's true. The typical college graduate is now ill-prepared for the marketplace. But long run, if you give consumers extra money--either by paying them more or lowering prices--they'll figure out a way to spend it. People are like that. And since gizmos will be cheap or even free, the money will get spent on personal services, i.e., things that only people can do.

People will do much less mechanical and mental work than they do today. Computers and machines can do that better and cheaper. Instead people will do emotional work--work that makes you (the consumer) feel better, flatters your ego, inspires you, makes you happy. The smiling waitress, the solicitous bellboy, the charming prostitute, the marvelous writer, the amazing juggler, the awesome musician, the skillful masseuse, the personal trainer, the charismatic teacher, the wise pastor--these are the jobs of the future.

Dog-walking and waitressing are not high-paying jobs--not the sort of work your newly minted Princeton graduate aspires to. Though we can count on smart, creative people to find ways to add value to emotional work jobs. Still, the naysayers will moan about how many people are "falling out of the middle class." The economy "can't create enough quality jobs for new graduates." Well, horsefeathers, I say. Just suck it up and enjoy the wealth.

On a typical day twenty years from now, waitress Jane buys a new computer for under $5, visits a (virtual) neurologist for $15, pays her son's monthly tuition bill for $19, and picks up a bag of groceries for $55, along with an additional $2 for the cab fare. Can she live on a minimum wage job? Hell yes!

So we'll be working harder in less fulfilling jobs at (slightly) lower pay. Yes, there will be some geeks and skilled laborers and even a few professors who beat the odds, but the majority of labor will be the emotional sort. We won't be happy as workers, though we'll get much more enjoyment as consumers. Prices will go down faster than wages, and quality will improve. Perhaps we won't enjoy as much as we should, but we will gradually, slowly, relentlessly, irreversibly be getting richer and richer and richer.

Laissez les bon temps roulez!

Further Reading:

• Joel Kotkin Hates The Tech Business
• Luddites Against Fracking
• Viva Poverty!
• The Militant Reads ZeroHedge

Joel Kotkin Hates The Tech Business

Joel Kotkin doesn't like the tech business. Just read his latest screed here.

Now I'm usually a fan of Mr. Kotkin, but in this I think he's gone off the deep end. Reduced to bullet points, his argument is as follows:

• They're rich ("they" being the wealthy, technology oligarchs, such as the Google guys, Steve Jobs, Jeff Bezos, etc.).
• They don't hire many Americans.
• They hire way too many Chinese.
• They don't pay taxes.
• They live in a bubble.
• They want to take over the country.
• They're out to steal your soul.

Let's take the bullet points in turn.

• They're rich.

Well, duh! But they got rich by creating great wealth. The iPhone established a whole new industry. So did Google. According to Free: The Future Of A Radical Price, Google gives 80% of it's content away for $0.00. I write this blog on Google, and I haven't paid them a dime. It is probably impossible to estimate the total value to society created by Google, but the share captured by the Page & Brin, et al., is a minuscule fraction.

• They don't hire many Americans.

Well, good, I say. Mr. Kotkin can't have it both ways. On the one hand he complains these people are too rich, and on the other hand he wants us to hire more of them. No--the fewer employees the better. Just that much more money for the rest of us (in the form of better and cheaper goods and services). What earthly purpose is there in featherbedding the technology industry?

Mr. Kotkin also opposes the H1B visa program bringing in "cheap" foreign engineers. Here he has a point, but it's not the point he wants to make. The problem is not with the foreign engineers; the problem is the visa program that renders them indentured laborers. That is what unfairly distorts the market. We need a much more open immigration system--if foreigners want to come here and work for cheap, then that's wonderful. More money for the rest of us. But for the consumer to capture the product they have to come as free individuals and not bound to a specific employer.

• They hire too many Chinese.

Mr. Kotkin should check out the data here: the manufacturing cost of an iPhone is $8 per phone. So all those zillions of Chinese workers that Mr. Kotkin so envies--they're netting less than 2% of the value of the product. This site speculates that it takes about 17 hours to assemble an iPhone--so the Chinese are paid less than $0.50/hour. Are these jobs we want to repatriate to the US? I don't think so.

• They don't pay taxes.

Again, I say good. Government in this country (and every other country) is a rat hole and not worth the money we spend on it. Cash that the tech industry holds on to will eventually either be a) returned to the consumer, or b) invested in new enterprises. Either way, any penny saved in taxes is a penny that makes us richer. If they can legally avoid paying taxes, then so much the better.

• They live in a bubble.

Mr. Kotkin worries that the tech gurus all live in a self-contained community gated off from the rest of the world. In his telling, Silicon Valley is a bubble served by fancy sex workers, private planes, maids, and luxury cars. The people who live there have lost touch with reality. So--what's the problem? Mr. Kotkin compares this with the desperate circumstances of East Bay communities nearby. Of course there's no connection--the problems of the East Bay are not in any way caused by tech geeks in Silicon Valley. This is all a reprise of the Marxist meme: we're poor because the rich people stole all the money. Are the people in South Sudan poor because Mr. Kotkin lives in a middle class house? Same argument.

• They want to take over the country.

Mr. Kotkin panics about fwd.us, a supposedly surreptitious and vile plot by the technocrats to buy influence in Washington. He cites Twitter's founder, 37-year-old Jack Dorsey, who says he wants to be mayor of New York City, despite never having lived there. I have no doubt that a bunch of very successful, wealthy, self-righteous youngsters dream of world conquest. But it won't work--witness the money they've spent on the now-imploding Obama administration. Every political action invites a reaction, and the closer the tech oligarchs get to their goal, the greater the opposition will be. Remember the phrase "what's good for General Motors is good for the country"? GM had hundreds of thousands of employees spread across the entire nation, and they still couldn't pull it off. There's no way the tech guys--living in a bubble with only a few employees and disconnected from the larger culture--are going to take over the world. Mr. Dorsey's utterly silly comment is proof of that.

• They're out to steal your soul.

Google (and others) actually make money giving away stuff for free by collecting data. They use that data to specifically target advertising to individuals. There's the famous story (apocryphal?) about a father getting ads for baby supplies from a local store before his daughter had even told him she was pregnant. Such are the wily ways of Big Data. Mr. Kotkin thinks this is a huge problem. I disagree.

There are two parts to this.

First are ads that help consumers buy things they want to buy. Amazon's recommendations are in this category--very often I find books there that interest me that I would never have encountered otherwise. I regard this as a benefit that enhances my standard of living. Google Local apparently is an effort to turn people on to area restaurants that might be good. I think this is unobjectionable.

Second are ads that try to convince you to buy something you don't want to buy. This turf still belongs to the personable salesman--hawking encyclopedias, or diet fads, or some status symbol. I don't think Big Data will be particularly effective doing this--it depends on personal interaction. Banner ads, pop-ups, animations, etc., are a proven bust. 

Mr. Kotkin may be old enough to remember The Hidden Persuaders, written at the dawn of the television age. When I was in high school everybody was talking about subliminal advertising, i.e., if Coca Cola appears for microseconds during the movie, then people will unconsciously be inspired to go out and buy a Coke. I don't think that worked very well. The fact is people learn how to game the system and will push back against buying stuff they don't want to buy. Mr. Kotkin's panic is unwarranted.

In truth, advertisers are not trying to beat the consumer. They're just trying to be more effective than other advertisers. I think that's a zero-sum game--there is no way that Big Data is going to increase the (small) fraction of income spent on involuntary purchases.

In summary, Mr. Kotkin has gotten too Marxist for me.

Further Reading:

• You Can't Eat A Hipster
• Luddites Against Fracking
• Union Man

You Can't Eat A Hipster

This post is inspired by the Kotkin - Florida debate about the extent to which the Creative Class contributes to urban welfare.

Back in the day, when I was a Trotskyist in the Socialist Workers Party (SWP), there was an effort to get comrades involved in union fractions. A fraction is a group of comrades who participate as a collective in a union (or on campus) to advocate a for revolutionary socialist perspective. The model for this work was the famous union fractions of yore--communist involvement in the UAW sit-down strikes and the Minneapolis Teamsters' strike in the 1930s. The latter is engagingly recounted in Farrell Dobbs' classic book, Teamster Rebellion.

In the 1930s unions really could shut the economy down. By the late 1970s that ability was much more limited, but that didn't stop us from trying. It is that distinction--disrupting the entire economy versus a labor action against a small-time capitalist--that roughly divides basic industry from the less important stuff. Thus comrades tried to get jobs in basic industry, organized by the UAW, the United Steel Workers, the United Mine Workers, etc. They were (in those days) less interested in AFSCME or the teachers' unions.

I am reminded of this because of Joel Kotkin's emphasis on the material boys. These are the guys who drill for oil, build new manufacturing plants, or are farmers. While likely unaware of his neo-Trotskyist sympathies, Kotkin nicely echos our efforts in basic industry. Like Trotskyists, he believes value is created by the hewers of wood, the diggers of coal, and the molders of steel. Hence thriving cities are places like Dallas and Houston, Charlotte and Nashville, and Indianapolis and Oklahoma City.

Contrast this with the neo-Schumpeterian Richard Florida, who has long touted the Creative Class. These are the artists, the counter-cultural youth, gays, immigrants, eggheads, denizens of Starbucks. Creative class folks are always looking for the Next Big Thing, the idea that'll just knock your socks off. Forget those old, fuddy-duddy material boys--creative destruction is our future. Down with fracking; up with Google. In Florida's vision, the successful cities are New York, San Francisco, Boston, Seattle, and perhaps Portland or even Pittsburgh.

Left off of either list are the old rust-belt cities: Chicago, Detroit, St. Louis, Cleveland, Buffalo. Kotkin's remedy for these towns is more manufacturing. Meanwhile, Dr. Florida prescribes cool bars, nice restaurants, and walkable streets.

I guess I'm still enough of a Trotskyist to side with Mr. Kotkin on this, but not without reservations. His basic point is certainly correct: wealth comes from creating something that people want to buy, and at the core this includes food, energy, housing, clothing, transportation. The hipsters produces none of those things directly. The world will always depend on the material boys.

Trotskyists dismiss the creative class as petty bourgeois parasites, and unfortunately I sense the same tendency in Mr. Kotkin. The truth is that given real products that people want to buy, then the creative class adds substantial value on top of that. For example, the material boys grow wheat, but the creative class financial wizards create futures options and financing opportunities that ultimately make wheat much cheaper for the consumer. Trotskyists treat Wall Street as if it were a casino, but it's not--it is essential to the modern marketplace.

Likewise, one can't eat Google, but Google has made foodstuffs cheaper and more readily available. Advertising, logistics, financing, packaging and R&D are all ways that the creative class adds value. But the material boys have to be there first.

And this Mr. Florida doesn't seem to understand. His view that cities need to welcome the creative class and then everything else will follow is precisely backwards. He is absolutely correct that the creative class adds substantial value, and he is also correct that creative folks thrive in densely populated, diverse, interesting cities. But he's got the cause and effect arrow backwards. It's the material boys who create the cities which the creative class can then move in to. Without the material boys, the hipsters have nothing to work with--they're artists without a canvas.

So I think Mr. Florida's plan--for cities such as Cleveland or Detroit to build gentrified, bohemian neighborhoods in hopes the creative folks might move in--is the wrong way round. If the material boys are already there, then the hipsters will construct their own neighborhoods. Arguably that's what's happened in Portland--first came Weyerhauser, and then came the silicon forest, and after that the Pearl District turned into Florida's dream. Portland's economy has always depended on real products that people want to buy.

Similarly, no amount of artsy-fartsy decorating is going to revive the city of Detroit. Absent something like automobile manufacturing, the city is toast. Formula One races are nice, as is Greektown and the monorail, but those are at the top of the economic pyramid, not the foundation. To revive Detroit, somebody needs to start an industry building something that people want to buy. There's no other way around it.

In some respects, both Mr. Kotkin and Mr. Florida are wrong, and the error exists also in what I've said above. My Trotskyist heritage leads me to segregate the material boys from the hipsters into distinct classes. Kotkin and Florida make the same mistake. In fact, the two groups will increasingly be the same people. Additive manufacturing (3D printing), for example, will involve both kinds of skills, in a manner similar to the traditional craftsman where both design and woodworking are embodied in the same individual.

Second, manufacturing will never employ very many people, and thus cannot support big city populations. The size of the creative class is also limited by opportunities to create value--there aren't that many of them. Most people will work in the service sector, from which they will earn some share of the return from manufacturing.

And finally, it is possible for a few cities to beat the odds. New York and San Francisco both have successful hipster economies, despite no manufacturing of note. New York thrives on finance (and will continue to do so, new financial centers notwithstanding), fashion, art, and retailing. I have posted elsewhere about what I think is New York's golden opportunity for additive manufacturing, but we can all dream. It probably won't happen. Still, New York is not dying in the way Mr. Kotkin seems to indicate. Likewise, the Bay Area survives on software. Boston and Pittsburgh live on eds and meds.

But this model doesn't scale. There simply isn't a big enough market for two dozen eds & meds cities, nor can the country support more than a handful of financial centers. For everybody else but the lucky few, the material boys come first, followed by the creative class.

So it is true--you can't eat a hipster. But it is also true: Man cannot live by bread alone.

Luddites Against Fracking

I have a dream.

I have a dream that someday soon--from the Midtown skyscrapers to the Rockaway bungalows, from the brownstones to the bodegas, from the Brooklyn walk-ups to the Bronx projects--I have a dream that electricity in New York City will cost three cents per kilowatt-hour.

At 3 cents Google starts moving server farms from Washington State to Queens. Indeed, Google moves it's entire operation to Manhattan.

At 3 cents, New York City becomes the hub for additive manufacturing, otherwise known as 3D-printing. The cost of entry is cheap--just think about all the entrepreneurial energy that clever, well-connected New Yorkers can bring to that task.

At 3 cents, electric cars become viable, at least for niche applications. I'm thinking taxicabs and city buses can run off electricity--clean, quiet, cheap. Of course with Google right next door, the dawn of fully automated taxicabs is nigh. Cab fares will become much cheaper.

Mix cheap cabs, cheap electricity, cheap lighting, a fully-employed population, and just imagine what happens to Times Square. You think it's bright and cheerful now? Just you wait. Those poor folks in Las Vegas won't know what hit them. New York will again become the entertainment capital of the world.

So how do we get from today's 13 cents/kwh to 3 cents? You need three things: 1) cheap, clean fuel; 2) cold water; 3) a smart grid and infrastructure. Dallas might have cheap fuel, but it doesn't have cold water. Seattle has cold water, but it lacks fuel. Anchorage has both fuel and cold water, but it's too isolated to have a smart infrastructure. Los Angeles doesn't have squat.

New York City has it all.

The cheap fuel comes from natural gas--shale gas from Pennsylvania and (eventually) New York. Unlike coal, gas can be piped to where it's needed--no noisy, dirty, diesel trucks required.

New York has lots of cold water--it's on islands surrounded by the sea. Cold water is needed as a heat sink--thermodynamics says that the energy you get from any power plant depends on the temperature difference between the boiler and the cold temperature reservoir. A boiler by itself will not generate electricity.

The smart infrastructure is necessary to engage the highly creative, well educated, totally connected population. But more than that, it is cheapest to generate electricity near where it is used--a lot of power is lost in transmission. I foresee several dozen small power plants along New York's extensive waterfront, each connected by pipelines to a fuel source, and informed by a smart grid to dial out just the right amount of power. Today New York gets power from Quebec and Niagara, necessitating long, ugly, wasteful and expensive high tension wires over long distances. This will not be necessary in a 3 cent/kwh world.

So how do we get to my dream (or something like it) from our current reality? I admit, it will take a lot of really smart engineers working overtime to get the price down to 3 cents/kwh, but that's not the hard part. What we really need is a new crew of politicians. The so-called "public servants" we're now stuck with are all card-carrying members of the pro-poverty crowd. I'm looking at you, Mr. Obama, Mr. Cuomo, and Mr. Bloomberg.

• They think poor people are better for the environment than rich people. They're wrong.
• They prefer to tax electricity and use it to pay welfare benefits, rather than dispensing with the necessity for welfare by making electricity cheap.
• They worry more about long-term, hypothetical problems (like global warming), about which they can do nothing except purely symbolic and very expensive stuff.
• They're afraid somebody besides them might actually have some good ideas.

This blog's beat is to cover papers like The Militant and Socialist Action (SA). This post is inspired by an article in SA. It's one of those that I've read so that you don't have to, but if you're a masochist and want to follow along, here it is. I'd like to say that the ravings of a radical socialist grouplet are irrelevant to political discourse, but sadly that's not true. The points made in the SA article are only slightly more extreme than those expressed by the pro-poverty politicians.

SA has never met an environmental horror story that it doesn't believe. Fracking, per SA, pollutes well water, turns tap water into a flammable substance, creates a "chemical cocktail of radioactivity," causes something called "vibro-acoustic disease," is responsible for subsidence, which in turn leads to volatile organic compounds, and it requires sand quarrying, which leads to tailings and water pollution. Etc. That's not to mention the earthquakes. Oh, and it kills songbirds.

Much of this list is just plain nonsense, and all of it grossly exaggerates reality. Fracking is a $200 billion business today, and growing fast. We've been doing it for 20+ years. People know how to do it right. Everything in life is a tradeoff, and fracking is no exception. There are hazards, but containing and minimizing those hazards is just not that hard or expensive. Properly constructing the wellhead will minimize leaks into the ground water. Correct preparation of the fracking fluid will save money and preserve the environment. And so forth. Fracking is less dangerous or destructive than most other mining activities.. SA hopes to win the argument by making utterly incredible claims that no knowledgeable person can believe. This tactic won't be successful.

But here is the real problem: while SA hugely exaggerates the cost of fracking, they all but ignore any of the benefits. From the article, the ONLY benefit of fracking is to enrich the oil and gas companies. And apparently not even that: "Much of the investment is only on paper, with one-quarter of the reserve growth coming through mergers and acquisitions and massive share repurchases by the majors, giving the illusion of profitability. In other words, the industry is thriving on fake growth, much like the financial markets." How can something in which no real money is being invested be so disruptive of the environment? And are the gas companies really so dumb to put money down a rat hole, for no reason other than to make the Greenies mad? No--it's silly all the way round.

Of course the main beneficiaries are not the gas companies. The main beneficiaries--if I get my way--will be the eight million people living in New York City. All of those people will have cheaper electricity, better jobs, and a higher standard of living because of fracking.

Let my people go and get rich. Down with poverty.