What's an income worth?

What's an income worth?

They say a dollar is worth what you can get for it. I went searching the internet this morning for a graph of median US income 1900 -- 2008 and couldn't find one, probably because that's like panning for gold without a pan -- I am sure our economics whizzes at Angry Bear or Economist's View would know right where to find this data.

But perhaps, because of changing circumstances, comparing constant dollar income from the beginning to the end of the century is a moot exercise, measuring something that doesn't translate in a meaningful way.

There was a time when dollars were much bigger in terms of what they could buy. Around the turn of the century, the blue plate special, a cheap restaurant meal, was described as "a square for two bits" -- twenty-five cents for a plate with typically one meat, two veg and a potato or other starchy serving. Today, the price for the same thing in a bare-bones diner would not be less than ten times that amount, but usually closer to twenty times the price.

Well, inflation. Yes, but tracking the proportion of this number to income, to the alternative cost of food elsewhere, comparing the luxury value of a diner meal versus a home-cooked chop, and the time available to the humble worker to get home and cook that chop -- so many factors come into judging the actual cost of the meal, that it might not be possible to say if the meal is more or less expensive in a dollar sense.

But if the value is alloted in tau (t), we arrive at a value that will be consistent over centuries. Individual human effort and attention is pretty constant, and time is fixed.

Abandoning the blue plate special to its gelid fate, let's look at what a single wage-earner's tau could support, 100 years ago.

I lifted the following comment of mine from Echidne of the Snakes, here, where another commenter begins:

Most of these houses originally had live-in servants on the 3rd floor and a relative or 3 in addition to parents and children.

And I replied:

[I found it] interesting to read a book from around the time of the US Civil War (by Scottish author George MacDonald) which remarks that the main character, a child, is "all alone in the house", and then find out a page later that there's a cook in the kitchen, a housemaid in the scullery, and a nanny upstairs. "Alone", indeed.

And a mile from my home is a run-down set of apartments (circa 1910) that were intended for young gentlemen just setting out in the world, with a bedroom, living/dining room, screened porch, bathroom and kitchen, and back beyond the kitchen, another bedroom for the young gentleman's manservant!

What this tells me is that, only 100 years ago, a single employed person, even a young man in his first job, made enough money to support one other person, or in the case of the household with the child who was "alone", six people of whom only one was a wage earner.

It's little literary details like this that show me how very far the ratio of remuneration to labour has fallen, in terms of what you can do with it. Can you imagine how much an employed husband would have to earn these days, to support a household of his wife, child, and three other adults?

Meanwhile, the people who used to be the house-servants are still at the same or a lower rate of pay, but without the room and board of the 1900s. Want fries with that?

Noni

~would quite like a housemaid or ghillie~

I will return to this double comparison -- a young unmarried worker then and now, and an older established worker (a bank manager, I think he was) with a wife and child, then and now -- to examine the movement of tau in the households. Clearly, in 1900 the available tau in a usual household was much greater for a given employment income. What this tells me is that no matter what the constant dollars might say, employment income today is less -- perhaps 1/4 to 1/8 -- of what it was at the turn of the other century.

Story and Stuff

Like flour and leaven, the weaving together of "story" and "stuff" makes our economic world possible.

In my last essay I determined that something I am calling "story" is one of the major elements binding together all of human society. One aspect of this is what the Greeks called rhetoric, or what we might call advertising or preaching or history or even language. (Math, less so – despite its greater abstraction, it is less amenable to taffy-pulling into new shapes.)

Story is simply the human imposition of patterned abstraction on the world. You could say that “story” is everything that isn’t “stuff”.

Stuff stays what it is despite our preferences or attempts to disregard it. The ancients said the elements which underlay all creation included Air, Fire, Water and Earth, and in many ways that idea can help us to understand stuff. A radio broadcast is story – the fluctuating electromagnetic waves (Fire) that bear it through the air, is stuff. The waves are still waves if they impinge on a deer or a raindrop – the pattern of language, however effective, loses that effect if the recipient is not appropriate.

Where does economics come into this simplistic duality? Well for one thing, all economies must be built on stuff. Despite what the monetarists claimed, especially in the giddy 80s and 90s, there is not and cannot be such a thing as an “information economy”. As Dorothy L. Sayers said in 1933, "... There's yeast in bread, but you can't make bread with yeast alone. Truth in advertising," announced Lord Peter sententiously, "is like leaven, which a woman hid in three measures of meal. It provides a suitable quantity of gas, with which to blow out a mass of crude representation into a form that the public can swallow.”

Without the yeast of story, all we are left with is a “crude mass” of stuff. I have made bread without yeast by accident, and though it would sustain life if one were lost in a cave, it’s not the kind of thing you would build a culture on. Stuff is sufficient for life and for an economy of a sort, but woefully inadequate for even the most limited sort of cultural achievement. It is the two together, in correct proportions, which enable us to achieve the marvels of our species.

I knew some time along here I would need to start drawing diagrams. Here is the first, the old economic cycle model, with a few doodles.



It shows a team of producers, with some product flowing from them, passing through middlemen and shippers, and finally arriving at the customers. This is nice, but not sufficiently accurate.

The real situation is probably more like this:



The customers are mostly producers, the flow is not linear but in a network, and the potential for unintended consequences seems to approach a mathematical certainty. On the minus side, this looks ridiculously complex – on the plus side, it is the reality, not the pretty but unreal DC circuit of buyer and seller.

To pin down and quantify the bottlenecks of this webwork is not an impossibility, I am sure. I bet calculus will come in here somewhere. But after the work is done, I expect to see a model that will let us see how to bring all the interconnecting rings into relationship in order to yield a more stable, more compassionate, fairer and incidentally far richer society.

Coming Saturday, the next installment -- "Story and Stuff"

If money is imaginary (as most people would agree if pushed to the edge of argument) then where does its power come from? And when it loses power, how did that happen?

... stay tuned.

Until then, here is my buddy "Cookie" exploring the sculptured lake shore, one of the last kindly days we are likely to have this year.

--NM

Added Today -- Cumulative Glossary

Until I can assemble a proper glossary, I will keep adding terms and definitions to this: http://tea-analysis.blogspot.com/2008/10/cumulative-glossary.html

Your comments and suggestions are welcome.

Seven Deadly Sins

The Hazard of Induced Acedia in Supply Side Economics
First published on Monday, April 09, 2007 on the Angry Bear economics blog.

=====================

Every journalist, I suppose, has a list of questions they dream of asking some famous person, preferably on live network TV.

My personal daydream at the moment is to stand up and ask President Bush whether he can name the seven deadly sins.

I suppose he would wiggle out of it, look blank, or get a witty comeback courtesy of his walky- talky backpack. But in a daydream like this, it is more the response of the listeners than that of the patsy which matters. In this scenario, the listeners would blink and realize that not only does the emperor have no clothes, but he has no clues. Then a national discussion would arise, driving Justin and Britney off the airwaves. Well, I did say it was a daydream.

This brings us to the one of the seven deadly sins which is called "acedia". Acedia is a Latin word, from Greek akedia, literally meaning "absence of caring".

A great deal of the triumph of corporatism in recent decades has to do with the entrenchment of acedia in western thought, and its wilful spread by authorities who may or may not believe in it. Why deadly?" Because as a result of buying into acedia, ordinary people lose the ability to defend themselves from the pressures of the supply side market.

It shows up in public language, in legal rulings, and in the concerns to which public institutions and pervasive spokespersons grant or do not grant validity. Sun Tzu famously said the best way to win a war is to remove the enemy's will to resist. Acedia is what you have left when that will to resist is removed.

I used to argue with a pleasant, large and kindly co-worker who was a business writer and who had thoroughly bought into the business model. He had heard all my arguments from others, and heard them again from me with, I must say, remarkable patience.

A catalogue of the disasters of pollution, social collapse, slave labour, and the dozens of other worries of typical "left-leaning" citizens, did nothing to ruffle his condescending smile. He really, truly didn't care. He told me often, in response to my diatribes, that he expected to die, and that would be it, and any problems in the living world were his children's problems. The Chinese economic model? "Why should you care what happens to some Chinese guy?" he asked me curiously. Their policies were making the Chinese GDP rise rapidly, and damn the pandas. Everything will die, so what does it matter?

But he didn't not care about everything, only some things. When it came to tax rates, government controls on business, and the interference of human rights and environmental issues with the development of industry, he could wax quite wroth.

The danger of buying into acedia is that when one's own desires and priorities are disparaged, they become quaint and expendable factors, as unimportant as choosing green over brown when buying a shirt — even in areas of compelling human significance.

All economy, all of it, is based on human choice and the allocation of human energy and attention. There are physical limits to the energy and capacity for attention of any individual, so beyond a certain point, extraordinary pressures must be put in place to persuade people to allocate more and more attention and energy toward the desires of industries, which after all exist and survive only because of the participation of human beings..

This is the essence of supply-side economics, and induced acedia makes the process a great deal easier.

Well, I can hear some of our readers asking, "So what if people's choices are subverted and bent to the service of the economy? Isn't a lively economy good for us?"

Maybe. Sometimes. But busier is not necessarily better. As a child learning to swim, I had to be taught that the most efficient swimming caused the least froth. A frothy economy is only good for the very few who can ride the foam.

The GDP is not a measure of genuine wellbeing, but only of froth. Take one hypothetical example: if we cut our sugar industry by 95%, and as a result cut our insulin industry by 98% and the health care industry by 20%, there would be a huge net loss to the GDP and an enormous benefit to our shared prosperity.

When someone sets aside what you really value, and tells you to substitute other values, sometimes they are reliable teachers whose advice will benefit you. Other times, they serve their own desires instead of yours. Alertness to this distinction can serve us well.

***
The seven are: Luxuria (extravagance, later lust), Gula (gluttony), Avaritia (greed), Acedia (sloth), Ira (wrath), Invidia (envy), and Superbia (pride).

Remembrance and anticipation

Another element to add to the TEA model mix has to do with how people look backward to evaluate the past, forward to plan the future, and outward to try to understand it all. I am calling this element “story”.

What does “story” include? Hope and fear, imagination, belief, hypotheses and theories, histories and science -- no matter what we shove in this category, this element is going to be one of the most important in the whole TEA theory.

Human beings know very little from their own experience. At any one moment in time, I know the current temperature and lighting levels, what people and animals are nearby, whether I am hungry or full, in pain or in comfort, and not a lot else.

Almost everything that we say we know or believe about the world is either something experienced in the past, or taught to us secondhand through education, other people's experiences as recounted by them or conveyed to us by the media, or the larger structures of understanding which we have been taught, and which might be called "storyline".

It is not possible to underestimate how important it is to remember this. Maps are needful, but the map is not the land.

There is an old Sufi story about a wealthy man who goes on a journey away from home.

As he is returning, a couple of days from home, he rests along the road. Another fellow, poor but clever, also arrives that evening. The wealthy man asks the poor man, "How are things in my home town?"

The poor man knows nothing about this wealthy man or his home town, but hoping for a share of the wealthy man's picnic supper which sits before him in lavish variety, the poor man tells him that all is well, the city is in peace and prosperity.

"Good," says the wealthy man, and goes on with his supper.

Angry at this miserliness, the poor man decides to continue on towards town in the cool of the night. He meets up again with the same wealthy man the following evening at the next resting place. It becomes obvious that the wealthy man doesn't remember him in the least, because again he asks, "Do you know how things are in my hometown?" The poor man shakes his head in sorrow and says, "I am so sorry to tell you the bad news. Things would be just fine if your barn hadn't caught fire and burned."

"My barn?" cried the wealthy man in shock.

"But the barn is nothing, really," said the poor man. "It was when the fire spread to your house that the real trouble began."

"My house!" cried the wealthy man.

"But of course to a wealthy man like you, a house is nothing at all. You could have it rebuilt in no time, I am sure. The real sadness is that your wife and children were in the house asleep, and they have all perished too."

And having said that, the poor man went to his sleeping place, leaving the wealthy man to rush off toward town without bothering to gather his things together. The wealthy men wept all night as he traveled, but the poor man feasted and then slept soundly.

In this story, the rich man got off easy. When he got home, barn and home and family were all just fine. But what the poor man told him illustrated the hazard of forgetting which is the map and which is the land.

We need story to understand the world, but as a tool, not as a truth. It is not for nothing that when a con artist is setting up his cheat, he calls it “telling the tale”.

Each human being has their own allotment of tau, and uses it as best they can. Sometimes they enrich themselves, like the poor man in the story, by using story to influence people’s use of time, effort and attention to their own benefit. Other times they can use story to bind people together into a mutually beneficial organization of great strength. To avoid the one and encourage the other ought to be the work of every concerned citizen. Too often, it isn’t even seen at all.

Pantomime horses and other economic models

It used to be said that man is the animal that laughs, or the tool making animal, or the political animal. Mark Twain said “Man is the only animal that blushes -- or needs to.” But I'm convinced that man is the animal that makes believe.

[Image - famed publicist Jim Moran with an early beer-loving horsie that traveled from bar to California bar in the 20s]

When I was a small child, just like you did I am sure, I would pretend to be a horse running around the living room, or a groundhog living in my tunnel of quilts and pillows, or a bird sitting on the edge of a branch. I think it is probably impossible to stop children from pretending to be all these things. I am certain that it would be a bad idea.

Human beings succeed not because of their physical strength or any special skill -- they are pretty helpless animals, when you come right down to it, with little in the way of armor or claws or teeth.

Human beings succeed, I believe, because of their amazing skill at imitation.

§ Part of this is imitating each other, and thus learning skills and passed down through generations by way of stories and textbooks.

§ Part of it is imitating other creatures – horsies, birds, fish, trees. Is there a child who doesn’t know what you mean when you say, “Can you be a tree now?”

§ Finally, part of this is imitating things they have never seen, or which may not even exist.

Is it useful to be such imitative fools, constantly trying on the skins of other creatures? It is essential. No human being is a match for a wildebeest, but a group of humans can gain functional equivalence to a pride of lions – stalking and driving the herd, and taking the animal down with claws at a distance (spears) and claws up close (knives). They don't look like lions, but they are functional equivalents.

Hercules wore the skin of the Nemean Lion, and it symbolized his strength, but I bet it slowed him down. Functional equivalence is achieved by copying the functional aspects of the model, not the outward appearance. Humans imitate best when they imitate the behaviour patterns of other species, and make their physical attributes into tools that do what the lion’s claws and teeth, or the cow’s complex stomachs, or the mole’s strong forelegs and digging claws achieve.

Over time, I will discuss some of these imitations as economic models – among them the Cactus model, the Scorpion model, the Meerkat model or the Hyena model. But today I will begin by discussing the Pantomime Horse.

The Halloween favorite is a costume that requires two people imitating a single animal.

Wikipedia tells us

“One actor plays the front end, including the horse's head and its front legs, in a more-or-less upright posture and with a reasonable field of view afforded by eyeholes in the horse's head. The other actor, playing the rear end of the animal, must bend at the waist so that his torso is horizontal like that of a horse, and put his arms around the waist of the first actor. He can see little, although there are normally eyeholes in the bottom part of the horse's torso to enable him to see where he is putting his feet and to enable him to breathe. Pantomime cows also usually have comically prominent udders.”

I have never been either end of a panto horse, but in addition to the ignominy of being the hinder end, it sounds like an awful lot of work, with an aching back as a reward for trotting along blindly and hoping the breathing hole is big enough.

A much more elegant version of this is the Chinese Lion Dance, which makes the impossible moves of two strong people look like the play of great cats, friends full of humour and ease.



As fun as this all is, look at the same thing done with functional equivalence – without the lion skin.

If human beings achieve great things by imitation, this doesn’t mean equality for both ends of the horse or lion. Someone brings up the rear, and that person doesn’t steer, can’t see anything, carries all the burdens, lifts the front end of the lion when the faux beast dances, and sometimes cannot breath. And to top all this off, it gets the comic insult of being the horses ass or, if female, having “comically prominent udders.” Taking turns would be the fair thing to do, I wonder how often it happens?