Start-ups and Safety Nets

October 30, 2011
Posted by Jay Livingston
Cross-posted at Sociological Images.

Is socialized medicine the road to serfdom, a snare that will sap people of their independence?  Or is it liberating?

James Wimberly had a great post yesterday at The Reality Based Community (here), and I’m neither too proud nor too ethical to steal his data and summarize his idea.

George W. Bush did not really say, “The problem with the French is that they have no word for entrepreneur.”  But that statement does fit with the American tendency to view our country as the land of entrepreneurship (literally “enterprise”).  America is, after all, the land of opportunity, where anyone can become rich.  And the way to get rich is to be an independent, risk-taking entrepreneur and start your own business.  That’s what we do here in the US, and we do it better than most.  At least that’s what we think.

But look at this chart showing the rate of start-ups per working-age population.

The US ranks 23rd.  That doesn’t quite square with all those photo-ops where the president (Obama, Bush, Clinton – they all do it) goes to some small successful company out in the heartland.  What is it about these other countries that makes for more risk-taking?

Wimberly has an answer: the safety net.  He makes the point with an analogy – his own photos of kids on a rope-walk – a single rope hung between two platforms in what looks like the Brazilian rain forest.  (It’s really just a replanted hillside, formerly the site of a favela). The kids have safety devices – hard hats, a safety harness, guide-ropes to hold on to.  Without these, only a few of the most f oolhardy would try a Philippe Petit walk.  But the safety devices allow lots of kids to take a risk they would otherwise avoid. 

The same logic applies to small business.

How many Americans are locked into jobs they hate by the fear of losing health benefits? No Dane ever has to worry about losing her right to medical care by quitting her job to go it alone

Safety devices cost money, but they pay off.  On the rope-walk, you can see the reward in the expression on the kids’ faces when they reach the other platform.  In the national data, you see it in the those start-ups.

The countries with significantly higher startup rates than the USA are those with stronger, more comprehensive, and more centralised social safety nets, along with correspondingly higher taxation.

See Wimberly’s entire post – with the photos, footnotes, and comments – for a fuller explanation.

The Use of Bad Words (Two F**king Links)

October 29, 2011
Posted by Jay Livingston

I’m not a huge fan of curse words, though I know some people swear by them.  Repeat them, and they quickly lose whatever effect they might have had,* and then what do you use for emphasis or surprise.

There are exceptions, like Ian Frazier’s “Cursing Mommy” (here  for example).   And then there’s Colin Nissan’s recent essay  in McSweeny’s on decorative gourds for autumn.  I laughed out loud when I read it.  Then I went back and mentally removed the curse words, and it was just not funny.  Try it.

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* Sometimes draining the word of its impact is the goal of such repetition, as when David Bradley (you mean you haven’t read The Chaneysville Incident?) teaches Huckleberry Finn to high school students.

“One of the first things I do is I make everybody say it out loud about six or seven times,” Bradley said.
“The N-word?” Pitts [the “60 Minutes” inteviewer] asked.
“Yeah, ‘nigger.’ Get over it,” Bradley replied, laughing. “You know. Now let's talk about the book.”

Words and Pictures

October 27, 2011
Posted by Jay Livingston
Cross-posted at Sociological Images

Newspapers report facts – thing that actually happened.  They run photos of things that actually happened.  They don’t make stuff up.  But they do choose which facts to report, and they do choose which photos to run.    Usually the two are congruent. 

But not always.  Wonkette ran this photo of a page from the Washington Post. 

Wonkette and other sites have contrasted the photo with this video of a cop deliberately firing a tear gas canister at close range directly at a group of demonstrators who had come to aid of someone who had been hit in the head with a tear gas canister.

But what’s also noteworthy is the contrast between the photo (nice cop, nice kitty, nothing violent happening here) and the Post’s own lede:   “Police fired tear gas and beanbags. . . .”

You’re the Boss?

October 26, 2011
Posted by Jay Livingston

Why do people work?  More specifically, why do some people work more and others less?

N. Gregory Mankiw has an idea, which he shared with us in Sunday’s New York Times.

Here are two facts about the French economy. First, gross domestic product per capita in France is 29 percent less than it is in the United States, in large part because the French work many fewer hours over their lifetimes than Americans do. Second, the French are taxed more than Americans. In 2009, taxes were 24 percent of G.D.P. in the United States but 42 percent in France.

Economists debate whether higher taxation in France and other European nations is the cause of the reduced work effort and incomes there. Perhaps it is something else entirely — a certain joie de vivre that escapes the nose-to-the-grindstone American culture.

The French spend about 15% less time, on average, in paid work each day (251 minutes to our 289).  (OECD summary and spreadsheet here).  Over a lifetime, as Mankiw says, those 38 minutes a day add up to many fewer hours over the course of a lifetime. (I’m not sure why lifetime hours is the appropriate measure when GDP is computed as an annual figure.  Whatever.)

Mankiw is an economist, a very successful economist – best-selling textbook, head of Bush II’s Council of Economic Advisers, currently Mitt Romney’s chief economic adviser.  So he takes the economist’s view of motivation: how much people work depends on how much money they can make.  (Mankiw throws in that bit about culture, but I doubt he puts much stock in it and that what he thinks work is really all about is making money and keeping it, i.e., income and taxes.) 

Mankiw seems to assume that the decision of how much to work rests entirely with the worker.  That’s certainly true for Mankiw himself (see my earlier post on Mankiw’s work decisions here ).  But many of us workers don’t have that kind of autonomy.  So to get another view of sources of input into this decision of how much to work, I turned to the economic observations of Eddie Cochran:

Every time I call my baby, and try to get a date
My boss says, “No dice son, you gotta work late.”

Yes Gregory, there are bosses.  Even in our American “nose-to-the-grindstone” culture, people say, “I have to work late tonight.”  Have you ever heard anyone say, “I’m going to work late tonight because I want to make more money – especially now that my income tax has been reduced by two percentage points”?  No doubt, there are people like that.  But most of the hours in the French and US data are accounted for by people whose hours are determined by external forces.* 

That French employee doesn’t just decide all by himself, “I think I’ll spend an extra hour at lunch today and give up an hour’s wage.”  How much we work is economic and maybe a little cultural.  It’s also a matter of politics.  There are contracts and laws that are the outcome of organized efforts – by unions and political parties – to limit how much employers can demand of employees.   Those laws that affect how much people work may be shaped by culture – shared ideas about work and life.  It’s less clear that they are shaped by taxes.

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* In the last two years, many people in the US are working shorter hours than they were before 2008.  Some have reduced their work hours to zero.  I doubt that this reduction  reflects an increased joie de vivre.

It seems incredible to me that a guy as smart as Mankiw can ignore those external constraints on people, assuming instead that workers make these decisions as free and independent individuals, unfettered by institutions, calculating their individual benefits and costs.  But now I’m reminded of Fabio Rojas’s post of nearly five years ago, “What Economists Should Learn From Sociology.”  Number two on Fabio’s list was “Social networks/social structure matters. Simple idea but few economists sit around and model the effects of social structure.”