Tuesday, December 06, 2011

Shiller and the Awfulness of the 1%

In an opinion piece on the "Occupy Wall Street" movement, Bradley Shiller asks, "What is so awful about the top 1%?"

He paints OWS as class warfare - "us" (the 99%) versus "them" (the 1%). And then he paints the top 1% - or, admittedly, the top 0.0000013% in heroic terms that do not deserve to be subject to the abuse that OWS is heaping upon them.

Those 1 percenters are not an avaricious "them" but in reality the most entrepreneurial of "us." If we had more of them and fewer grandstanding politicians, we would all be better off.

(See: Los Angeles Times, What Is So Awful About the 1%.)

Well, actually, by definition we can't have more of "them". The top 1% will always and only be 1% of the population. You cannot add even one more of "them" unless you kick some other member out or add 99 more of "us".

However, the main point I want to make is that there is absolutely no sense to be made of this argument.

Shiller takes a hand-picked subset of a group - selected precisely because they have a quality he wants to highlight - and from that draws a general conclusion about the whole group. He includes in this list Warren Buffett, Steve Jobs, and others who are considered cultural heroes who made their billions producing products such as eBay, Google, Apple, Pixar, Facebook, and other products that have enriched our lives. He paints them as nearly divine heroes, not people to be vilified the way OWS vilifies them. And then argues that the whole 1% is made up of divine heroes who should, it seems, be worshipped rather than vilified.

In other words, he takes a small subset of the group hand-picked for having a quality he wants to highlight, and infers that this quality belongs to the whole group.

It would be just as valid for me to select ten convicted felons, now known to be innocent – hand selected precisely because they have this quality that we now know them to be innocent - and use that to argue that everybody in prison was wrongfully accused of their crime.

Nobody would fall for this argument when applied to convicted felons. In fact, anybody who tried this form of argument would be laughed out of the room. "Here is some nut who obviously left his brain in 'idle'."

But we are not to notice that Shiller's argument is no less stupid.

For what it is worth, Shiller is described in the article as, "[P]rofessor of economics at the University of Nevada-Reno and the author of 'The Economy Today.'"

When somebody uses a wholly invalid argument such as this, one of the questions that I ask is, "What is it that caused him to present such a flawed argument?" I consider it remarkable that Shiller with his background and others are so utterly blind to the obvious failings of this argument.

Two main reasons come to mind.

One possibility is that some public relations company, relying on surveys and focus groups, was able to determine that this form of argument is effective in obtaining a political end. In this case, the political end is securing the wealth of the top 1%. This research is useful and can be sold to those who have the wealth that these findings can help protect. They then sold a service (to those who have the money to pay for this service) of muddying the social debate on this issue by filling it with this muck. At that point, they identified people willing and able to get these talking points out to the public, and we end up with an article like the one above.

Another possibility is that the author has adopted a dogma - a virtually religious devotion to the divine worship of the top 1%, where his piety has blinded him to reason, at least on matters in which his religion is concerned. Any argument that serves the religion is granted credibility and preached as if true - no matter how absurd. Even if the author himself has doubts about the argument – it still serves a divine purpose. A poor argument that serves a divine purpose should still be expressed.

In practice, it is likely a combination of both. Public relations groups discover which messages will work and get those arguments to the true believers, who will then repeat them with all sincerity, never once stopping to question the soundness of those preachings. Or, if they do question its soundness, they dismiss the issue on the grounds that they are serving the cause.

For my part, the issue of the top 1% has nothing to do with the moral quality of those who have the money. If we were shipwrecked, and somebody managed to save several cases of bottled water, the claim that he should share it has nothing to do with the moral quality of the person who got the water – though I would make a moral judgment of him if he refuses to share.

As I see it, we have run up $15 trillion in debt over the past 30 years. It has to be paid back. There is a block of people saying that none of the burden of paying back this money should fall on the shoulders of the top 1%. Those obstructionists have blocked legislation and brought government to a standstill in defense of this claim that the 1% that controls 42% of the wealth (and a substantially larger percentage of the disposable wealth) shall suffer 0% of the burden.

It is also relevant to point out that, in those 30 years of running up the deficit, that same top 1% has pocketed nearly all of the benefit. Their average income has increase by $700,000 per year. The bottom 90% is, on average, getting by on $900 less per year.

Yet, our political system is still being plagued by those who say that people making $700,000 more per year should bear none of the burden of $15 trillion in debt – that we should be looking primarily at adding to the burdens of those making $900 less.

That idea deserves protesting.

Shiller actually argues as if we have no hope of finding people in the other 99% who are as heroic as the semi-divine beings he finds in the top 0.0000013%. The teachers, doctors, parents and relatives, the people who established and maintained the schools and streets, performed the research, and kept society running are not as worthy as those who pocketed the great quantities of cash. Without this assumption, it is impossible to explain how one can get from the premise that the presence of these divine entities in the top 1% implies they should have none of the burden of paying back the debt, and that it belongs squarely on the shoulders as everybody else. The other 99% does not contain the type of divine entities that would grant this immunity.

It's an absurd argument - but true believers are quite capable of finding absurd arguments to be incredibly convincing.


Anonymous said...

One argument in not taxing the top 1% more is that they produce the jobs we need. They are the ones that benefited most from the Bush tax cuts that the Republications want to make permanent. If they produce jobs so should be spared added taxes, where are those jobs? The top 1% are not producing as promised.

Alonzo Fyfe said...


The very idea that the top 1% create jobs, whereas the other 99% do not, is absurd.

The top 1% - who control 42% of the wealth - are probably creating 42% of the jobs. Those, we can expect, are jobs that serve the interests of the top 1% - which includes the public relations and political manipulations they use to get more from society and pay less.

While the other 99% are probably responsible for the other 58% of the jobs - growing food, building homes, educating their children, manufacturing dishwashers and automobiles, stocking shelves at the local retail stores.

No matter which group gets the money, they will use it to create jobs. They will create the jobs that serve their interests.

But, then, some PR firm out there has probably discovered that the nonsensical claim, "The rich create jobs" and "If you take their money you destroy jobs" are effective ways to manipulate people into acting to preserve or promote the wealth of the top 1%.

Though, as you say, they have been given a lot of money in the past three decades built on this promise, yet the jobs they promised to create seem to be missing.

That same money in the hands of the other 99% will create just as many jobs - jobs that serve the interests of the 99%, rather than the 1%.

Kristopher said...

that depends. since the rich are buying over priced luxury goods and the poor are not we could see how many jobs per dollar spent were created in the two job markets.

i imagine that over pricing something creates no jobs. while mass producing millions of cheap things requires lots of jobs

creating a diamond encrusted car would employ diamond smiths and luxery car mechanics at a specialty shop. lets say 100 people. on top of that giving themsleves a huge profit margin creates no jobs.

mass producing a cheap car for the masses will take thousands of people, and many factories, potentially throughout the world.

i would argue that with any percentage of the wealth that the rich use, would create less of a demand for jobs then the demand created by an equal percentage of wealth from the masses.

the 1% got rich beucase the 99% had money to give them for the services they created. if the 99% has no money becuase they have to shoulder a debt crises while 42% of the countries wealth opts out.... the 1% go bankrupt from lack of demand and everybody loses. which is what we are, for some reason, currently doing.

dipsobale income allows the rich to make money. remove the disposable income and the only people making money are landlords. (which is how feudalism works)

Anonymous said...

Above a certain threshold, wealth does not create jobs. You get your first million, you buy a nicer car and house. Ten million, you buy another home or two, hire people to tend the grounds, hire a chef, a chauffeur, etc. But beyond a certain point there is just not enough stuff for you to buy and you end up hoarding wealth, thus taking it out of circulation -- it's not creating jobs, it's just sitting somewhere. That's one of the genuine social problems caused by such extremes.

Alonzo Fyfe said...


Actually, above that threshold, people do not take money out of circulation. They invest it. They buy bonds (to build highways and schools), stock (to build new offices and hire employees), or save it in a bank account where the bank loans it to people who buy cars and boats or to open a small business and the like).

Anonymous said...

I question your last comment,Alonzo. The rich do invest in the stock market and they do buy bonds, but they invest in such a way as to avoid taxes. They buy tax free bonds. Unless they sell their stock at a gain they don't pay any tax on that capital gain while they own it. They use the loss of one stock to off set the gain of another. They move their money off shore to avoid taxes. It's a business to the rich yet they don't get a W-2, pay social security or treat their income as earned income. What small business wouldn't like those same tax breaks?