03/16/2014 The Unequal Answers to Inequality

 

Style Model	Mid Blend
Sector Model	XLU	3.28%
Large Portfolio	Date	Return	Days
ABX	4/11/2013	-12.91%	339
NEM	9/30/2013	-5.04%	167
JOY	11/18/2013	-1.22%	118
TM	2/3/2014	-5.23%	41
RS	2/10/2014	0.06%	34
CSCO	2/12/2014	-5.99%	32
CBI	2/20/2014	2.18%	24
BT	2/24/2014	-5.60%	20
BHP	3/3/2014	-5.12%	13
DUK	3/10/2014	0.91%	6
(Since 5/31/2011)
S&P	Annualized	11.89%
Sector Model	Annualized	25.92%
Large Portfolio	Annualized	26.51%

 

Rotation: selling BT; buying HFC in the Oil-Integ Industry

I’m reposting a video about monkeys and inequality, because inequality is all the rage again.

We can thank the President for raising the debate.  Paul Ryan has picked it up as well, with the usual race baiting being hurled against him.

The methods of argument on the right and the left are clumsy, but the subject is a real one:

Inequality Exists.

And it’s not just young being poor and old being rich.  This isn’t just a life cycle event.  Yes, the young ARE poorer than the old (which is as it should be, since the old have to save for retirement).  But there are plenty of old people who have nothing, and plenty of young people who have a lot.

Even those young folks who give all their inheritance away and pay their own way through college (like Mitt Romney), still manage to duplicate the wealth of their parents.

Is it genetic?

Perhaps.  Genes certainly play a role in our lives.  I can blame my fat stomach on bad genes if I want.  But I don’t HAVE to be overweight.  I CAN be thinner.

So it’s not just genes.

What about upbringing?

Well, our environment does play a role too.

All of these are perennial arguments. 

Regardless of which theory you favor, the fact remains that people who were born into poverty are far less likely to climb out of it than people who were born rich.  They get crappier food, with less quality family time, worse schools, less chance for advanced degrees, and no “connections” to rich kids who might help them get a good job opportunity in the future.

It’s not their fault they were born poor.

It is also true that wealth creates its own opportunities, and allows the greater ability to sustain risk without having your entire livelihood threatened.

Inequality is, then, an OBJECTIVE problem.  That is, inequality creates more inequality.

To make matters worse, it is also a SUBJECTIVE problem.  That is, if everyone were equally rich or everyone equally poor, they wouldn’t mind so much.  If you had a median income in a poorer country you would have greater peace of mind than if you had a low income in a rich country – EVEN THOUGH OBJECTIVELY YOU WOULD BE BETTER OFF IN THE RICH COUNTRY.

That is, the poor in rich countries are OBJECTIVELY better off than the middle class in poor countries, but they are SUBJECTIVELY less satisfied about it.

So, although conservatives are correct that the poor in a rich country are better off, the liberals are correct that the poor in rich countries aren’t happy about it.

And conservatives will say, “so what?”  So what if you aren’t HAPPY about the land of opportunity?  Don’t you HAVE more opportunities here than you would in a poor country?

Yes.

You have more opportunities here than in a poor country.

But something in human nature still makes us miss some of those opportunities.  Because even though ANYONE can become rich from scratch, the fact remains that MOST people don’t.

And that brings me to the point.

Conservatives will argue that the first monkey is no better or worse off.  If the second monkey gets a grape or a piece of coal, the first monkey STILL gets a cucumber, right?

Wrong.

Look at that video again.  The monkey does NOT get a cucumber, because he throws it away.

Now think of the inner cities.  Not only do people have less, but they end up tearing down what little they have.  The “cultural” problem that Paul Ryan complains about isn’t the cause of poverty, but an effect of it.

Oh, sure, it’s the cause of MORE poverty.  But it isn’t the sole cause of it.  Inequality creates a negative feedback loop where the monkey (or human) who gets a worse deal ends up throwing what little he has away.

It is precisely this feedback loop that leaves each side of the argument hanging with only half of the solution.  And until they come together to face the problem in a balanced way, we’ll never make any progress toward a better answer.

A pox on both their houses.

Paul Ryan, Barack Obama – try listening to each other for a change.

Tim