Economics and Ethos

December 5, 2011
Posted by Jay Livingston
(Cross-posted at Sociological Images)


The equation of wealth and virtue seems to come almost naturally, at least among the wealthy.  The logic is simple: Virtue leads to success, therefore wealth is evidence of one’s virtue. Virtue, in this case, means the Protestant Ethic – hard work and a willingness to forgo or postpone pleasures.  It follows then that those who are not wealthy must have turned their back on virtue. 

David Brooks, in his Friday column (here),  applies this explanation to the wealth of nations.

Why are nations like Germany and the U.S. rich? . . . It's because many people in these countries believe in a simple moral formula: effort should lead to reward as often as possible.

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not.

The US, Germany, and the Netherlands are Brooks’s exemplars of these virtues (Brooks uses the word ethos). The bad countries, the ones whose economies are teetering on the brink, are the grasshoppers to our ant. There they were – Brooks points his finger at Greece, Italy, and Spain – fiddling and dancing the summer away, refusing to live within their means or “reinforce good values.” 

This seems accurate, doesn’t it – the dolce far niente Italians and other Mediterraneans, taking hours at midday for meals and siestas while the industrious Americans, Germans, and Dutch are working away, wolfing down a sandwich at their desks. 

Just to be sure I downloaded some OECD data  from 2007 – the last year before the big crash – on the number of hours people in different countries work. (Brooks’s three “ant” countries are red, the “grasshoppers” dark blue.)

This is puzzling.  The US is slightly above the OECD average, but workers in Greece and Italy spend more hours at work than do Americans, while the Dutch and Germans are down at the low end of the scale.  (I do not know why the OECD still gives data for West Germany as well as Germany.)

I noticed that the OECD also had a measure of “employment protection,” which is basically how hard it is to fire someone.  I figured that workers in non-virtuous countries would be highly protected.  Since it’s nearly impossible for them to be fired, they know they can slack off on the job.  By contrast, virtuous countries would foster Brook’s ethos of “effort, productivity and self-discipline”  in workers, rewarding the industrious, firing the lazy and self-indulgent.  

I wasn’t surprised that the US anchored the low end of the scale. US laws do far less than laws of other countries to protect workers.  And Greece and Spain are above the average.  But so are Germany and the Netherlands, though only slightly, while Italy is slightly below the average.  There’s really not much difference between these three.  And if you look at the array of countries, there seems to be no strong connection between job protection and how well the country is weathering the current long recession.  I’m not sure what the best measure of the overall economy is, but the OECD has composite figure made up from ten main economic indicators.*

 

The US ranks above only one of the profligate “grasshopper” countries, Spain.  Why, if the US shares the work ethos of the Netherlands and Germany, does it rank so far below them?  I just wish we had better measure of Brooks’s “ethos.”

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*  “The Labour Force Survey (MEI) dataset itself covers countries that compile labour statistics from sample household surveys on a monthly or quarterly basis. It is widely accepted that household surveys are the best source for labour market key statistics. In such surveys, information is collected from people living in households through a representative sample. Surveys are based on standard methodology and procedures used all over the world. The 10 subjects available cover labour force, employment, unemployment (including harmonised unemployment), and employees.”

Reliable Tests, Unreliable Test-takers

December 2, 2011
Posted by Jay Livingston

Great Neck is the epicenter of the cheating scandal – SATs, ACTs, fake IDs, hefty fees.  High schoolers, or their families, paid the smart ringers as much as $3600 to take the exam for them. 

The Times front page story today (here) notes that Great Neck, using the fake ID of West Egg, was the setting for The Great Gatsby, and the stories – fiction set in 1922, reality set in 2011 – are rich territory for comparison.  Success, ambition, wealth, opulence, envy.

One student

was offered cash to take the test by a more popular student. Eager to impress, and perhaps get closer to the other student’s friends, he agreed, officials said; later, he scored a 31 on the ACT under the same student’s name.

Could that name have been Tom Buchanan?

Maybe there’s even an unrequited love story that didn’t make the papers.

But for the statistically minded, there’s this:

Samuel Eshaghoff, a 2010 Great Neck North graduate, scored in the 2,100 range (out of 2,400) on his own SATs; he is accused of taking tests for at least 15 people over three years, and the people briefed on the inquiry said he obtained scores for them between 2,170 and 2,220 on the SAT.

Those numbers, though they might be barely remarked by most Times readers, are probably the lede in the ETS edit of the story.  The testing company might be faulted on security (“two of the people for whom [Mr. Eshagoff] is accused of taking the tests after showing a fake ID were girls”).

But fifteen takes with scores no more than 50 (of 2400) points apart – how’s that for reliability, old sport?

American Exceptionalism - The Cover Story

December 2, 2011
Posted by Jay Livingston

One of these covers is not like the others, though all are the Dec. 5 edition of Time.  (Hat tip to my colleague Sangeeta Parashar who found this image the OWS Facebook page.)

It reminded my of my third ever post to this blog in September 2006, showing covers of different editions Newsweek.

(Several other Websites and bloggers at the time – e.g., Kieran Healey at Crooked Timber  – had the same images.)

The covers illustrate one aspect of “American Exceptionalism.”  We are exceptionally uninterested in events outside our borders. Given a choice between hard news in some foreign land and lifestyle stories here in the US, gives happy young women, give us happy families, give us stories about how anxiety is good for us.

UPDATE: An off-blog comment noted that magazine covers affect mostly newsstand sales, not subscriptions.  So the comparison “is not between all Americans and all people in other parts of the world, but between those people who buy an English-language news magazine at a newsstand, airport bookstore, etc. in the U.S.  and those people in other countries who buy an English-language news magazine at a newsstand, airport bookstore, etc. in Europe, Asia, or Latin America.”

According to Wikipedia, Newsweek sells only about 40,000 newsstand copies compared with 1.5 million subscriptions.  (Both figures are substantially lower than they were a decade ago.)  The figures for Time are about double those of Newsweek, but the ratio of newsstand sales to subscriptions is about the same.

Casey Mulligan's Grapes

November 29, 2011
Posted by Jay Livingston

Bloomberg reports (here) that the November increase in hiring – 120,000 jobs – will probably not affect the unemployment rate, which will remain at 9%.

Casey Mulligan, at the New York Times Economix blog, knows why unemployment is high: the safety net.

Government assistance programs have not only supported more people but become more generous, thanks to changes in benefit rules since 2007.
Of course, most people work hard despite a generous safety net, and 140 million people are still working today. But in a labor force as big as ours, it takes only a small fraction of people who react to a generous safety net by working less to create millions of unemployed. [emphasis added]

In February 2008, the official unemployment rate was 4.8% – about 7.4 million people.  By October 2009, the rate had more than doubled to 10.1% or more than 15 million unemployed people. 
 

Mulligan assures us that that in that 20-month period, “millions” of those newly-unemployed people decided that they preferred to live off government benefits rather than work. 

I had thought that the sharp increase in unemployment was caused by the crash set off by the bursting of the housing bubble, with its inflated house prices and dubious financial schemes based on those prices. Companies were laying off workers or going out of business entirely.  People didn’t lose their desire to work, they lost their jobs.

But what do I know? Mulligan is an economist at the prestigious University of Chicago, and presumably he has insight into the life-decisions of poor people. Still, I’m a bit puzzled because the official unemployment rate counts only those people who are looking for a job. So apparently they have chosen to live off government benefits and are lying when they say they are looking for work.  I guess you just can’t trust these people who aren’t working.

Mulligan’s solution to unemployment, consistent with his view of its cause, is to cut these overly generous benefits.

I suspect that employment cannot return to pre-recession levels until safety-net generosity does, too.

He’s talking mostly about the magnanimous $330 a week unemployment check, but he may also have in mind other programs like TAFN, food stamps, and the rest. 

(more after the break – or what should be a break if this new version of Blogger is working correctly)