|Intro. Survey summary: over 500 filled out the survey. ITunes; listening: car, home. Favorites: Munger. About one third from outside U.S. Diverse backgrounds. 90,000 downloads per month.
|Inequality, mobility in economic system. "Capitalism requires someone at the bottom to do the menial task"--system requires poor people to do the unpleasant jobs. Implication is that if the poor got rich and didn't want to do those jobs any more, capitalism would collapse. Widely held view. Is the claim reasonable on economic grounds? Do poor people sustain the prosperity of the rich? Is an underclass necessary? Is the system designed to keep poor people poor? What would happen if the poor got richer--would that be good or bad for the rich? Similar questions with the wealth of nations: do wealthy nations oppress the poor ones? In colonial times the rich nations took the poor nations' resources; today they take the poor nations' labor. According to this view we need to keep these nations poor because otherwise our system of living will take a hit. Domestic variation on this theme: Wal-mart pays low wages. Another variation: top few percent of income distribution keep all the productivity for themselves and don't share it with others. Implicit in all these claims is the idea that the economic pie is zero-sum: your slice comes at the expense of my slice. To get ahead, you have to push people down. Sam Walton, Bill Gates: their wealth obviously comes from other people. Implication is that if they hadn't existed, everyone else would have more money. Other implicit claim: someone is in charge--the rich, the top 1%, the richest nations, the World Bank--they decide. But rewards are fundamentally emergent, result of individual choices, not top-down.
|Editorial writer once explained to Roberts that the top 1% are keeping all the gains for themselves. Roberts asked: How have they managed to do that? Response: Well, we just haven't figured that out yet. They've weakened the power of labor unions is one argument. But unions have been weakening in the U.S. not since the 1970s--which some have argued was the high-water mark of the U.S. economy (misreading of data)--or they point to Reagan and the air traffic controllers' strike. Problem with both arguments is that labor unions' high water mark was the 1950s, falling steadily since then. More likely that ability of unions to unionize the service jobs that have grown is small. Productivity changes. Is that good or bad? People who think that the economy is being controlled have to have an argument about how that's happening. Unions; minimum wage--only a small group of people, less than 3%, earn minimum wage, never important part of the economy.
|Zero-sum game argument. First, top 1% are not the same people: LeBron James, Sergei Brin have vaulted into the top 1% because they provided something people liked. Top 1% have larger share of the pie because of their providing more. Education is a route to prosperity; no one stops people from innovating, coming up with ideas like Google. P.J. O'Rourke: Wealth is not a pizza. One person's success makes other people richer, not just in a monetary sense but in full sense of the word. Complaints that Gates and Walton have to be charitable, have to give something back implies they took their wealth. But they got wealthy by providing. People gave money to them but got something in return. Wealth is not fixed pie; one person's share does not mean others get less. You'd be happier in 2008 with a smaller share of the total pie relative to 1908 because the pie is so much bigger. Getting a large share doesn't mean you've pushed others down.
|Claim: Our well-being depends on the suffering of others who are at the bottom, who are willing to do horrible things that I'm not willing to do--cutting our lawn, painting our houses--and similarly as a nation. In this view the goal of life is to get one of the good jobs, basketball player, corporate lawyer. In this view, jobs are like boxes, bar-codes for salaries by job. In conspiratorial view, we have to make sure there are people who will be desperate enough to take these jobs. Marxist variation. America wants to have the good-paying jobs, designing the software, not just retailing it. Late 1980s Frontline documentary: Japan was getting the jobs designing Nintendo and the U.S. was getting stuck with the customer service part, the low-paying jobs; conspiratorial view, Japan was conspiring to do this. Ironically, ten years later, people were worried that the U.S. was losing all the customer service jobs to India; outsourcing. Ross Perot: It's better to make computer chips than potato chips. Alternative view: The jobs that are available depend on the people who are interested in them and their skill levels. Your salary depends not on the box you are in but in the skills you bring to the job. Which jobs are done depend on the skills of the people in them. If Haiti decided the road to wealth was to start a pharmaceutical industry, they probably wouldn't be successful. Similarly, Russ can't just decide to be a highly-paid basketball player because at his height and jumping skills he wouldn't succeed. China under Mao, everyone was going to have a steel foundry in his backyard, but if you are bad at making steel it would be inefficient; made China very poor.
|Jobs at a point in time: garbage collection. Lots of ways to collect garbage. Can walk along and pick it up; can have a truck; or current world in U.S. can have a really fancy truck--collector is mostly a truck driver, driving a truck with an arm that picks up the garbage can and empties it mechanically. In poorer societies there are many more people in the business of collecting garbage; more pleasant in the U.S. than elsewhere. Technology substitutes for the person. Sounds bad but it's good! Profitable to use the machine. Not inherently good for America to have lots of people picking up garbage. Perot image of computer chips vs. potato chips is of people in white suits in computer chip industry vs. image of people peeling potatoes and slicing them and putting them hot oil, emptied and put into a bag. Low skill, low technology, mostly labor, menial work. Turns out that's not how bagged potato chips get made in America: A truck full of potatoes dumps them into an enormous machine which peels them and slices them and fries them and flavors them very precisely and bags them and crates them. Almost no workers other than running the computerized machine and making sure it is working. Much more pleasant and remarkably inexpensive. Hidden jobs--designers and builders of the machine. Over time, the types of jobs that get done in a successful economy changes. Some jobs no longer exist--ice man, toting ice. The ice man's standard of living is better when that awful job is eliminated. Transition can be abrupt, challenging, difficult; but we don't need people to do that, shovel manure, etc. In 1900 40% of the American workforce was in agriculture; now 2%. Incredibly better technology. All those people were freed up to do other stuff that makes people's lives better--including theirs, farm work is dangerous and hard. Wasn't dictated top down. Didn't need low-skilled people, we don't need to keep those people down at the bottom of the ladder. We want technology to come along and eliminate those jobs. Paradox. Sounds harsh, but that's how our standard of living evolves. Year in year out, the average worker's life gets better.
|Schumpeter podcast, creative destruction. New things come along that are better, freeing up resources to do other things. In a dynamic economy like the U.S. the costs of that are relatively small, happens quickly, labor force is dynamic. People find new skills. In other economies it may not work as well. Being a waiter, relatively low-skilled--used to be a job someone would aspire to in the U.S. In most restaurants in the U.S. waiting is done by college kids, fast food none at all. Dish washers in the 1920s made a living, but it wasn't pleasant. Nothing inherently demeaning about manual labor; but it's hard. Most dishwashing in America is now done by machines. People figure out cheaper and cheaper ways to mechanize the process; at the same time dish washers are paid more, making it more rational to replace a person with a machine. No one says we have to keep people at the bottom so that we can have our dishes washed. Marxist view: if poor people escape from poverty we won't have anyone to do that. Answer: those jobs have disappeared because people got richer and because technology came along to relieve people of that hard labor. Russ's grandfather, Memphis, Great Depression, small house and yard, had a lawnmower; a push mower, not the kind available today, cast iron, very heavy, hard to push. Hired someone to cut his lawn, from the penal farm, prison with work release program, Albert, very humid conditions. Driving by you might say it's a good thing there are poor people here to do it for him or he'd have to do it himself--journalist's perspective. Really not true. Cutting a lawn in 2008 is really different than then, better technology. Lawnmower itself is motorized, even stand-up motorized mowers that someone in the business can invest in, making it a bargain. Immigrants often do this work. Their kids will often do a lot better. Have to look over time. Least pleasant jobs get eliminated or get more pleasant over time.
|We don't have an incentive for people to stay poor. Not zero-sum. Their gains as they move up do not come at our expense. China--fear that they will catch up so we will fall behind. Untrue. China has improved its standard of living is by selling us stuff they can make more cheaply than we can, which is good for both of us. China's success increases our success. Improves our lives. Inequality doesn't sustain the system. Masks what is going on. The poor help the rich by working for them, but the rich help the poor by hiring them. Way to get ahead in a market economy is to provide something of value. No conspiracy to keep the poor stuck at the bottom. No one is in charge or manipulating the system, though there is lobbying and political pressure. Individual choices, mobility, opportunity, education. Thanks to Eli Dourado and Rosie Fike for help with this podcast.