Plus ca change

From Booth Tarkington's The Magnificent Ambersons, which I am reading (and so far enjoying) on the view that I might use it in Part 3 of my literature book (U.S. from the Civil War through World War I):

"He does anything he likes to, without any regard for what people think. Then why should he mind so furiously when the least little thing reflects upon him, or on anything or anybody connected with him?"

Eugene patted her hand. "That's one of the greatest puzzles of human vanity, dear; and I don't pretend to know the answer. In all my life, the most arrogant people that I've known have been the most sensitive. The people who have done the most in contempt of other people's opinions and who consider themselves the highest above it, have been the most furious if it went against them. Arrogant and domineering people can't stand the least, lightest, faintest breath of criticism. It just kills them."

The Beatles' Let It Be (Spectorized version)

I hadn't played the official Phil Spector version of Let It Be for probably 30 years, since I have alternate versions that I prefer (the original Get Back as compiled by Glyn Johns, plus various compilations of outtakes and alternative versions). But needing something fresh to play in the health club, I decided to save it on Spotify and give it a shot.

The Spector version is better than I remembered or expected. Although all the extra orchestration is a bit questionable, only on The Long and Winding Road does it really go beyond the pale, and that song drags enough to need something (albeit, not what Spector gave it - one can appreciate how much lighter a touch George Martin had on orchestral backing for their songs).

Let It Be has a different George Harrison solo, which I hadn't heard for the 30 years. It's well-done, but less original (more standard issue late-60s Lead Guitar Part) than what George usually played.

You can see how they try to cover up the lack of Lennon songs by including Across the Universe (well worth it, but from 1968), his lead vocals on Dig It, Maggie Mae, and of course the delightful retread of One After 909. He hadn't written (or at least completed writing) anything suitable apart from I Dig a Pony and Don't Let Me Down - which Spector disliked, so relegated to Side B of a single.  There's an outtake where John slags himself for not having anything good on hand for them to play.

The album remains the Beatles' only failure to convert material on hand into an entirely suitable finished product. But over the 40+ years since, they've done their fans and themselves a disservice by not releasing (a) an expanded version of the movie that shows more of the tensions (c'mon, it's old news by now), plus (b) a box set of the sessions - say, one CD for Let It Be plus other official releases from the sessions, one for the Glyn Johns versions of Get Back, and two more for outtakes. There's enough good  (if often rough and unpolished) extra material from the sessions to support, say, two 50 or 60-minute extra disks, one from Twickenham and one from the Apple sessions.  McCartney's Let It Be Naked (with a ridiculously short, inadequate, and unlistenable "bonus" disk) was worse than nothing as it apparently supplanted doing the reissue properly.

Or they could just put everything from the sessions on iTunes and let people make their own compilations.

Okay, I guess that's enough Beatles nerding for now.

Simple border adjustment example

Given all the talk (and confusion) about how border adjustment in a properly designed destination-based corporate tax would work, I thought a really simple example might help.  BTW, I myself find this unintuitive - my brain tends to reject it, so every time I think about it after a long time away, I have to work it out again for myself.  But anyway, here goes.

Say a U.S. company sells imported Scottish wool sweaters for $100.  To keep things simple, no profit - the company simply buys them from a Scottish firm for $100 (and has no other expenses).  Suppose the dollar and the Euro are in exact parity, so the Scottish firm gets €100.

Since the U.S. company has no profit, it doesn't have income tax liability.  (Again, this is just to keep things simple.)  But now Congress enacts a 20% destination-based corporate tax (DBCT). So amounts paid for imports are no longer deductible.

Now the U.S. company is going to have to pay $20 of tax upon selling the Scottish sweater for $100 to a U.S. consumer.  So it is only willing to pay the Scottish firm $80.

No dice, so far as the Scottish firm is concerned, if it is selling as many sweaters as it likes on world markets for $100 = €100 and the dollar remains in parity with the Euro.  But if the dollar appreciates against the Euro so that $80 = €100, everyone''s happy and it all works just as before.

Now let's add the export case.  A U.S. firm was making cotton sweaters for $100 and selling them for $100, both at home and to EU firms. But now, under the 20% DBCT, it's going to exclude from "income" the amount that it gets from foreign purchasers, while still expensing the $100 that it spends. Now it only needs $80 from EU purchasers, rather than $100, to break even as it was before. And again this happens without any change if the dollar appreciates against the Euro so that $80 = €100.

Now, how does the currency shift happen?  Ay, there's the rub, as they say, but now that supply and demand have changed as described above things should at some point get there, at least in the simple story. (Real world institutions and complications may have a huge interim effect, however.) Or to put it differently, there won't be a stable equilibrium until they get there, and until that moment shifts in supply and demand at the old exchange rate will be pushing in that direction. But how and when it gets there is actually, in my view, potentially quite disruptive in ways we might not like.

One last point about all this. The appreciation of the dollar against the Euro (etc.) would reduce the dollar value of Americans' foreign asset holdings, and increase the Euro (etc.) value of foreigners' U.S. asset holdings.  As Alan Viard has noted:

“The wealth transfers could be quite large. Assume, for simplicity, that foreigners hold $10 trillion of American assets and that Americans hold the same amount of foreign assets. Adding a border adjustment to a 20 percent (tax-inclusive) VAT would increase foreigners’ wealth by $2 trillion and reduce Americans’ wealth by $2 trillion. Because cross-border holdings are balanced in this example, the border adjustment would not change the present discounted value of federal revenue, but it would cause $2 trillion of that revenue to be collected from Americans rather than from foreigners.”

What is more: “Because the United States is a net debtor country, the border adjustment would actually cause a net loss to the U.S. Treasury ... and foreign investors’ gains would exceed American investors’ losses.”

Tariffs and border adjustments

Yesterday the Trump transition team said it wanted a 5% tariff on all imports, today it's up to 10%. Who knows, maybe by tomorrow it will be 15% or 20%.

Supposedly this would happen either by executive order or else as part of corporate tax reform.

Any guesses out there regarding whether other countries would retaliate against U.S. goods? Not my field, but I suspect this could be a really major body blow to the U.S. and world economies. If it tanks things sufficiently, Trump may conclude he needs to do something really big to distract voters from the mess. War? Use nuclear weapons abroad? Why not?

Meanwhile, talk continues about the possibility of enacting a destination-based corporate tax, which CNBC says (using a simple example) could "boost the taxes on a sweater from $1.75 to $17."

Among the experts who has been addressing the border adjustment issue is Alan Viard at AEI, who notes that, while exchange rate changes (appreciation of the dollar) would over time wash out the impact on cross-border trade, how fast it would happen is debatable. "Logically, it should be a quick, or immediate adjustment, but economists are not good at predicting speed."  Plus, as he's noted elsewhere in relation to the issue of adopting a VAT (which likewise taxes imports but not exports), there can be (a) temporary discouragement of trade as institutions adjust, (b) a giant transitional giveaway of revenues from U.S. taxpayers to foreign persons, and (c) adverse effects on trade in particular sectors.

Most bizarre of all is the suggestion above, from the article on linking the tariff to tax reform, that Trump wants to do the destination-based corporate tax PLUS a 10% tariff.

He's like a child playing with tinker toys that have bombs attached on the underside.

Latest developments in my literature book

I've managed to finish Part 2 of my literature book (now entitled "Literature and the Rise of Toxic Inequality") before the break.

Part 1 (England and France During the Age of Revolution) has chapters on Austen's Pride and Prejudice, Stendhal's The Red and the Black, and Balzac's Pere Goriot. Part 2 (England from the 1840s Through World War I) has chapters on Dickens's A Christmas Carol, Trollope's The Way We Live Now, and Forster's Howards End. Each part opens and closes with short intro and then summary sections that knit the three works together and find overall themes or trajectories, related to that of the book as a whole.

I'm now ready to start Part 3 (The United States Between the Civil War and World War I, or perhaps just pre-World War I). I'm planning 3 chapters, the second and third of which will be Dreiser (The Financier and/or The Titan) and Wharton (The House of Mirth). While I do plan to take a true break between semesters, I've thought I could read and cogitate a bit on this part, which leads to the question of what book from earlier in the era I should put first.

My first choice was Horatio Alger's aptly-named Ragged Dick (despite recognizing what a comedown it would be in terms of literary quality from everything else on the list so far).  But my gawd is it thin. There are a few interesting points here - e.g., these really aren't the Horatio Alger myth as we think of it but something different (handsome boy uses older male benefactors to find modest success), but this point has already been well written about, plus is tangential to the themes I have in mind in this project. There are a few other interesting aspects to think about - e.g., hatred of rich boys who are described as effeminate, the role of villains, intense self-consciousness about putting on airs and acting "aristocratic," looks plus honesty plus "pluck" are the keys to success as distinct from intelligence or hard work - but I'm still not feeling it at the moment.

Two other possibilities are Howells' The Rise of Silas Lapham and Twain/Warner's The Gilded Age. But I've never read either, so I don't start out with the feeling that either or both might feel right. I'll probably read them over the break.

A more out-of-the-box idea is urban/office life from 3 shorter works that straddle the Civil War: Poe's The Business Man (1840), Melville's Bartleby The Scrivener (1853), and then Alger's Ragged Dick (which is from 1867). But only if I can make it all fit together, which actually strikes me at the moment, perhaps unreasonably, as not entirely impossible. It would certainly be a change of pace, possibly a good thing in terms of sustaining the overall scheme.

Any other suggestions out there?

UPDATE: Based on suggestions plus my own looking around, I may add Booth Tarkington's The Magnificent Ambersons, if it passes the test when I read it. Will also consider Twain/Warner The Gilded Age. Plus, Silas Lapham still in play.  Poe / Melville / Alger will probably just show up in the Intro to Part 3, where I think they can help set the stage re. a couple of central themes.

Upcoming NYU Tax Policy Colloquium

Starting a month from tomorrow, Rosanne Altshuler and I will be co-hosting the 22nd(!) NYU Tax Policy Colloquium. Here is our schedule for the semester. All sessions meet from 4 to 5:50 pm in Vanderbilt 208 at NYU Law School.

1.  Monday, January 23 – Lily Batchelder, NYU Law School. “Accounting for Behavioral Biases in Business Tax Reform: The Case of Expensing.”

2.  Monday, January 30 – Mark Gergen, Berkeley Law School.  “How to Tax Global Capital.”

3.  Monday, February 6 – Alan Auerbach, Berkeley Economics Department. “U.S. Inequality, Fiscal Progressivity, and Work Disincentives: An Intragenerational Accounting.”

4.  Monday, February 13 – Allison Christians, McGill Law School.  “Human Rights at the Borders of Tax Sovereignty”

5.  Tuesday, February 21 – Jason Oh, UCLA Law School. "Are the Rich Responsible for Progressive Marginal Rates?"

6.  Monday, February 27 – Stephen Shay, Harvard Law School. “’A Better Way’ Tax Reform: Theory and Practice.”

7.  Monday, March 6 – Scott Dyreng, Duke Business School. “Trade-offs in the Repatriation of Foreign Earnings.”

8.  Monday, March 20 – Daniel Hemel, University of Chicago Law School.  "Federalism as a Safeguard of Progressive Taxation."  

9.  Monday, March 27 – Leonard Burman, Urban Institute.  “Is U.S. Corporate Income Double-Taxed?”

10.  Monday, April 3 – Kathleen Delaney Thomas, University of North Carolina Law School.  “Taxing the Gig Economy.”

11.  Monday, April 10 – Julie Cullen, UC San Diego Department of Economics. “Political Alignment and Tax Evasion.”

12.  Monday, April 17 – Miranda Perry Fleischer, University of San Diego Law School.  “The Libertarian Case for a Universal Basic Income.”

13.  Monday, April 24 – Joel Slemrod, University of Michigan Business School.  “Taxing Hidden Wealth: The Consequences of U.S. Enforcement Initiatives on Evasive Foreign Accounts.”

14.  Monday, May 1 – Richard Vann, University of Sydney Law School.  "International tax post-BEPS: Is the corporate tax really all that bad?”

A destination-based corporate tax?

Lynlee Browning unsurprisingly does a nice job summarizing the current debate over the possibility of enacting a destination-based corporate tax (DBCT).  One point that could be added, however, is that, if they enacted it, there would be NO reason of international competitiveness to keep the rate as low as they have it, w0%.

Keep in mind, a (DBCT) is a consumption tax.  So, leaving aside a lot of important design details, in some ways it's like having a better-designed retail sales tax.

Only the ignorant and the disingenuous (but both groups are legion in Washington) would assert that, say, a comprehensive and decently enforced 40% retail sales tax would raise "competitiveness" issues in re. attracting global investment to the United States.

If the DBCT is indeed enacted, it would certainly serve a lot of folks right (but also raise rate-change transition issues that David Bradford identified) if first (a) the Republicans were drummed out of office for gutting Obamacare, Medicaid, Medicare, and Social Security, and then (b) Democrats different from those we now know raised the DBCT rate to 40 or 50 percent (with accompanying measures addressing both high-end and low-end inequality).

Apple EU state aid case, latest developments

Today the European Commission finally released a redacted version of its decision in the Apple EU state aid case.  (The delay reflected stripping out confidential business info, etc., that had been cited in the full official decision.)  I haven't had a chance to read it yet but will be doing so shortly and will then offer here any comments that I might have.  At a first glance, it's certainly in the ballpark of what I had expected.

Also today, Ireland published a short statement explaining its grounds for disagreeing with the EC verdict.

The main legal issue Ireland raises (apart from predictable boilerplate and disagreements about proper EC review scope, etc.) that will likely be at the heart of the ultimate ECJ decision is that of undue “selectivity.”   There’s really no dispute that Ireland (a) was selectively favorable to Apple as compared to domestic companies, but (b) was not selectively favorable to Apple as compared to other multinationals.  Thus, while I am not an expert on EU law, that is the nub of the legal issue.  Is generally treating inbound multinationals more favorably than other companies improper selectivity – or would impermissible selectivity require, say, favoring Apple but not Google, Starbucks, Amazon, etc.?

Of course, I don’t know enough about EU institutions to have a view as to whether this will be decided based on legal argumentation or someone’s policy judgments, which presumably would be responding (one way or another) to the current strains that the EU is feeling given nationalist sentiments all around.

Video of my TV appearance on Brian Lehrer's POTUS 2016

The video is available here.  I enjoyed this show, which is definitely more highbrow than a lot of the more mass-marketed TV content. I first appear on-screen about 4:50 in, and then I start speaking at about 7 minutes in.

Tax base design and holiday greetings

A holiday email that I got from a Washington budget expert with whom I am on friendly terms read in part: "May your revenues exceed your outlays in the year ahead."

I responded: "I see that you are taking a cash-flow rather than a Haig-Simons perspective here!  Otherwise, you would have said: 'May the present value of your expected future net receipts increase in the year ahead.'"

TV appearance tonight

Tonight, at 7:30 pm EST, I'll be appearing on a CUNY-TV show, POTUS 2016, hosted by Brian Lehrer, along with economists James K. Galbraith and James Bessen.  We'll be discussing the significance to U.S. employment of globalization, technological change, and (in my bailiwick) international tax policy.  Topics such as the Trump Carrier deal may also come up.

UPDATE: CUNY-TV may not be widely available through cable services, but I am told the show will be accessible online tomorrow (Dec. 15) via http://www.cuny.tv/ .

FURTHER UPDATE: Hopefully online soon.  Teaser here.

Good news about the weather

After today, we are 3.3% done with Adjusted Winter (my term for the on average coldest 91-day stretch of the year). Only 88 days until Adjusted Spring (starting on March 11).

Book on literature and high-end inequality

Here is the latest version of my opening chapter.  I think I've progressed towards locating the narrative arc.  Inquiries from agents or editors welcome.

Inspiration for the House Republicans' "A Better Way" tax plan?

But I don't seem to remember Bill McKay (Robert Redford in the brilliant 1972 film, The Candidate) telling California voters about the destination basis.

Identity politics vs. economic self-interest

Both Paul Krugman and Matt Yglesias have interesting recent posts about how identity politics often matters more than actual economic self-interest. Hence, for example, white Trump supporters side with someone who shares their values about fast food, even though that person is engaged in an effort to shred their retirement and safety net benefits, and angrily reject candidates who favor their economic interests but come off to them as snobby elitists (e.g., because they want to steer people towards eating fresh produce).

This is an extremely important point about politics, obviously central to the 2016 election, and something I blogged about the day before the election in re. the irony of white seniors favoring the party that wanted to take away their retirement benefits, out of anger that the other party wanted to extend such benefits to non-whites.

As I noted in the earlier post, the paradox of voting (i.e., the fact that one's probabilistic effect on the outcome is too small to justify, not just the act of voting but even bothering to find out where one's interests lie) plays a large role in this.  So does our having evolved strong tribal instincts that served gene transmission well when human society consisted of roving 150-person bands that might encounter hostiles, and that also might have internal power struggles that would determine who got scarce resources.  It doesn't work quite so well in a mass society where people's lack of focus on their own economic interests, when choosing affiliations in the highly abstract political setting, makes them ripe for cold-blooded exploitation.

I am starting to see that the battle between elites, epitomized by the 2016 election, is actually a rich theme within the confines of my literature book.  I'm currently close (I hope) to finishing a chapter, on E.M. Forster's Howards End, that is the first work on my list to raise the issue of dueling business and intellectual elites.  What one can see there is interestingly related to what prevails in the U.S. today, different in key respects yet a recognizable precursor.

There will also be aspects of this theme in, say, Bonfire of the Vanities, in the Scorsese film Wolf of Wall Street (which I'm planning to discuss in the book's last chapter before the conclusion), and also in It's a Wonderful Life, which I also may discuss (as I've decided against books-only).

New research by Raj Chetty et al on the "fading American dream"

Raj Chetty et al have just posted important new research (also summarized here) concerning what they call the "fading American dream."  Here is what I wrote about this research,  but was asked to keep offline until its public dissemination date, when I saw it discussed informally a few months back:

The research examines historical data pertaining to the following issue.  Suppose we defined the "American Dream" as positing that in each generation the kids should do better than their parents.  One might imagine the parents wanting this, and also the kids measuring how well they are doing in life by this metric, since it would capture the difference between where they started out and where they've arrived.

Chetty and his coauthors take a look at this, using a wealth of "big data," for U.S. cohorts over the twentieth century and through the present.  They look at absolute, not relative, material wellbeing.  And they define that in terms of income at age thirty.  So the last cohort they look at compares people born in 1980 to their parents, based on how the former were doing in 2010.

An interesting thing about this set-up - because it focuses purely on absolute, not relative, attainment, it could come out at 100% in a society that featured no mobility whatsoever, if we think of mobility as meaning that some multi-generational households rise while others fall.  More on that in a moment.

They find that there has been a great reduction, in recent decades, in achievement of the American Dream as thus defined.  Given how people may tend to benchmark themselves versus their parents, it surely helps to explain the sour mood (to put it mildly) in U.S. politics these days.

Chetty et al also examine the question: What sorts of changes in economic performance would cause the "American Dream" measure of upward movement in absolute terms to start looking better? Suppose we had a policy tradeoff between (a) greater absolute growth and (b) less upwardly-skewed wealth distribution? Using reasonable parameters, would focusing more on growth, or more on distribution, have a more favorable effect with regard to this measure?

If ever the set-up to a research question seemed almost pre-selected to weigh in favor of maximizing growth, rather than taking distribution into account, it is this one.  After all, with zero growth one couldn't possibly have net upward movement from mere relative shifts.  And, with high overall growth, one would think it possible to get very high levels of universal gain even if the rank order were as rigidly fixed as in a feudal society.

But they come up with a surprising answer.  If you start with the level and pattern of GDP growth over the last three or four decades, and have a choice between either (a) ratcheting up the growth a bit, but with the same distributional pattern, and (b) evening out the distribution of gains, it turns out that (b) has significantly more favorable effects than (a) on the percentage of kids who end up out-stripping their parents.  This results from the fact, that in recent decades, nearly all of the real growth has been concentrated at the very top, with everyone else stagnating.

Who's stupid, and for that matter what's stupid (it's surprisingly hard to say)

David Frum on Twitter: “Basically the Trump administration is a giant prank on Trump voters.” For example, because Trump’s appointment for Secretary of Labor is “the most outspoken advocate of Bush-style immigration policy in [the] US business community,” and “[t]he Labor Department enforces immigration law in the workplace – the key way that immigration laws are enforced.” So the appointment puts a heavy thumb on the scales against targeting employment of illegal immigrants, despite Trump's directly opposite assurances to his voters throughout the campaign.

Meanwhile, Thomas Edsall in the NYT: Even though Trump can’t, won't, and won’t even try to, do anything about his voters’ economic complaints, they’re feeling elated about him to the degree that it may have measurable positive effects on their mental and physical health and wellbeing.  All that matters to them, at least so far, is the sense of emotional validation that comes from believing that he expressed their concerns and thereby won the election.

There is no reason why both can't be right, at least so long as the Trump voters don't figure out what is actually happening.  Ignorance is bliss. Or perhaps it's even simpler than that.  I'm genuinely glad, to this day, that the New York Mets won the 1969 and 1986 world championships.  This was independent of any sense that the Mets players were fighting for me, rather than for themselves - I just enjoyed having a rooting interest validated.

But if being conned and scammed - so far as actual policy outcomes are concerned - can leave one genuinely happier than one was before, so long as one manages to keep one's eyes tightly shut, the notion of rational self-interest in voting may need to be re-thought.

Album of the year?

Perhaps I haven't listened comprehensively enough to say, but I do check Pitchfork and Popmatters regularly, and, based on what I've taken the time at least to sample, I'd go with Mitski's Puberty 2.

Follow-up to Getting It?

A few years ago, I was thinking of writing a sequel to my novel, Getting It.  It would take place close to 30 years later (2010 or so, whereas Getting It is set in 1983), the only holdover character would be anti-hero Bill Doberman, and it most definitely would not follow the standard sequel formula of trying to do the same thing all over again.

After spending a short time on it one summer, I decided that I didn't have either the time or quite enough of an itch to do it. On the other hand, I think I did have a decent preliminary plan, albeit still only at a very general level.

While re-starting it seems as remote as ever (if not more so), here is the first part of the opening scene that I wrote in summer 2012:

Into the spartan, New-Agey corner law office of the aging but perennially hard-charging Bill Doberman, flunkies were wheeling a large video screen.  Doberman was awaiting a Skype call, regarding what he hoped would be a lucrative case from a prime new client.  Big billings would mean plenty of fresh meat for Doberman, although just carcass pickings for the rest of the partnership.  Tough luck for them, of course – but you negotiate your own bed, and then you must lie in it.

The call would be from Tom Thevis at Orkin, Miro, & Guelph, the big accounting firm, and would involve a confidential arbitration proceeding for consumer fraud.  Thevis wanted Doberman to take it over, apparently in midstream, perhaps because Doberman had recently won two similar cases for a different accounting firm while still in Washington.

The backstory was well-known.  OMG, like so many other accounting and law firms, had jumped off the deep end during the Enron era, including by selling tax shelters to well-heeled customers who ended up getting hammered by the IRS and were now quite unhappy about it.  Several OMG folk had gone to jail for tax fraud, and the firm reportedly had come close to being shut down like Arthur Andersen.  But now Phase 2, the customer lawsuits, was under way, and Thevis no doubt wanted to play hardball, as you always should when your hand is weak.

Doberman liked the atmosphere at accounting firms, which was one reason why he had never joined one.  Too many sharks spoil the broth.  Accounting firms were so much more entrepreneurial than law firms that Doberman felt a natural affinity with them.  But the problem was, as Arthur Andersen’s fate helped to show, you might have to worry too much about what was going on down the hall.  Law firms were stodgy, but if you were good at free agency you could nonetheless do quite well.  So here was Doberman, the consummate free agent, and now a newly minted New Yorker starting his second month at Bell, Ranger, and Bell, his fourth law firm – one step ahead of his currently unfolding plans to divorce his third wife.

He was just about to turn his mind back to the game plan for the Skype call when his secretary buzzed him on the intercom.  “There’s a young woman here to see you without an appointment.  She won’t tell me her name, but she says you’ll definitely want to see her.”

“Now?”

“Yes, she says now.”

“Janet, tell her I’m busy – I’m getting a call.  And besides, she really shouldn’t be coming to see me here.”

There was a moment’s pause, and Doberman thought that perhaps he’d better make sure who it was.

“This person, does she look about 25?  Long blond hair that’s pretty straight?”

“Yes.”

“Attractive?”

“Yes, that’s her.”

“Tell her I’m busy, and I really can’t see her in the office.  She shouldn’t come here.  Wait a second, don’t say that.  If she wants a place to wait, tell her about the Starbucks in the lobby.  Say I might be able to come down.  But if I can’t, I’ll call her on her cellphone when I’m done.”

“Will do, but she doesn’t look happy.”

Doberman hung up.

Someone knocked on his door.  Before he could answer, Karen Soloveitchik pushed it open and showed her face, looking severe as always.  She hesitated for just a second before entering.  In her wake was a very junior associate who looked, well, awkward, and his hair was tangled.  Okay, Karen was allowed to barge in, but why bring a kid?

“Karen, I’m about to get a Skype call, but stay.  Don’t say anything; I’ll fill you in afterwards.  And who are you?”

He couldn’t have actually said Tim Mumbles, could he?  Although he did mumble.

“Come again?’

“Tim Mungle.”

“Great. Remember, total silence, and stay on the sofa, over to the side.”'

Just then a tone from Doberman’s computer screen announced that a Skype call was incoming.  With a click, he transferred it to the big video screen.  A large-jowled face appeared.

High-end inequality colloquium, week 7

Yesterday we concluded our 7-week high-end inequality colloquium by discussing a very interesting work by Daniel Markovits, entitled "Meritocracy and Its Discontents."  The specific text we discussed, which relates to a book project, is not meant for circulation or even citation at this stage. So I will only comment briefly here on the issues that we discussed yesterday.

First, however, a quick word about the high-end inequality colloquium.  This 7-week sprint, with Robert Frank, our students, and others who became regular attendees and participants, was a great experience for me, although I don't when (or if) it will recur.  One of the things I've always enjoyed about the NYU Tax Policy Colloquium is that every week can be completely different from all the others.  It's a smorgasbord that shows how rich and varied the topics of potential interest are.  The high-end inequality colloquium, by contrast, had the advantages of focus and deepening.  We looked at common themes from a number of different but complementary angles, creating intellectual synergies and perhaps even progress for many of the participants (certainly including me).

The 7-week reading list was more focused on recent important things than on current work in progress, which might make it harder to repeat fruitfully.  Plus, in terms of my own teaching schedule, I think the Tax Policy Colloquium works better as an ongoing focus, and between that plus sabbatical and other teaching possibilities over the next few years, it seems unlikely that I, at least, would be participating in another version of this before fall 2019 (if ever).  Others at NYU or elsewhere might conceivably want to step in, which would be great, but that's outside my purview.

Returning to yesterday's session, it was the rare case where going for three hours, rather than the two that were all we had, would have been well worth it.  But because of the project's current state, I will only mention one aspect here.

There’s been a longstanding debate on whether the rise of high-end inequality over the last 3 decades, in the U.S. in particular, should mainly be viewed as inevitable or as chosen.

The inevitabilists emphasize such factors as globalization, declining communication costs that create gigantic winner-take-all markets, and skill-biased technology (taken as inherent to the current technological frontiers, even though technology in other eras was not skill-biased).

The choicists emphasize such deliberate policy moves (associated with Reagan and neoliberalism) as lowering of tax rates, deregulation, the destruction of unions, the strengthening of IP regimes, etcetera.

Suppose (as Daron Acemoglu’s work, may suggest) that skill-biased technology is itself a product of elite hyper-training that creates an exploitable resource – just as, in the late nineteenth century, the emergence of vast pools of unskilled labor drove technology in an anti-skill direction).  This might greatly undermine the ethical appeal of meritocracy, if one bases its claims (Greg Mankiw-style) on the assertion that today’s plutocrats are being justly rewarded for working hard and for being the “best” in a particular sense.

I myself don’t find Mankiw's normative stance at all compelling.  Thus, I would respond to it by asking, among other things, (a) are his beloved plutocrats producing social value commensurate with the private value they are extracting?, and (b) if and when they are, do we risk net social harm by undermining their incentives? My answers to these questions are (a) often no, and (b) yes at some point, but currently we're well short of that point.

So the question of why technology has been skill-biased recently, although important and interesting, lacks for me the predominant normative weight that Markovits is willing to contemplate its having.  Still, his book will be an important one.  I anticipate its both getting and deserving a lot of attention.

Another title change

Latest version of the title for my literature book is "Great (and Other) Books and the Rise of Toxic Meritocracy."

The parenthetical in the title reflects that some of the books I'll be discussing are definitely not great - although no less interesting for that.  E.g., Horatio Alger (Ragged Dick and/or Mark the Match Boy), Ayn Rand (either Atlas Shrugged or The Fountainhead).

Also, to be strictly accurate, not all of the works I'm discussing will be "books," or at least novels.  I'm planning to close with The Wolf of Wall Street - truly a prophetic preview of the 2016 election - and may also discuss, not only Death of a Salesman, but also It's a Wonderful Life.

At the risk of making the book too much the hostage of current events, I think the 2016 presidential election, if nothing else, gave me exactly the dramatic arc that I needed.  All clouds have a silver lining, I guess.

NYU Law School website link on high-end inequality

NYU Law School now has a link on ongoing work by members of the faculty, including me, on evaluating the issues around high-end inequality.  The link includes video of an interview I did, and there's also a link to the current draft of the opening chapter on my book in progress on literature and high-end inequality.

The book's tentative title used to be "Enviers, Rentiers, Arrivistes, and the Point-One Percent: What Literature Can Tell Us About High-End Inequality."  With an eye to being less wholly uncommercial, the link reveals that I had changed the working title to "The March to Toxic Meritocracy: Literature and the Changing Nature of High-End Inequality."  I have since tentatively changed it again to "Great Books and the Rise of Toxic Meritocracy."

Asymmetry

At the risk of belaboring the obvious, suppose that Trump had won the popular vote by 2.5 million, but that Clinton had won the Electoral College via narrow wins in several battleground states.  This alone would have produced a huge, coordinated national movement, from Republican elites plus mass rallies, demanding that the Electoral College accept the popular verdict.  (Such a campaign was actually planned by Rove in 2000, in the event that Bush won the popular vote but lost the electoral vote.)

Then suppose the Clinton campaign had opposed recounts in the close states.  At this point, the rhetorical (and possibly actual) violence would have been astounding.

This asymmetry is a puzzling but regular feature of U.S. politics.  It's not just about Trump.  Imagine the parties in office being reversed when (a) 9/11 happened (especially if the president had brushed off intelligence briefings about the threat), (b) the 2008 financial crisis arose, (c) the economy recovered 2012-2016 (Romney claimed that a smaller recovery would prove his policies were correct), or (d) Benghazi happened (note that not just 9/11 but the 1983 Beirut barracks bombing were far bigger deals, each with highly plausible theories of executive fecklessness in the run-up).