Who’s Freaking Out?

In Friday’s New York Times, Charles R. Morris concludes his op-ed, “Freakoutonomics,” with the following thought:

If one counts only the size of houses and cars, and the numbers of electronic gadgets stuffed into rec rooms, Americans are probably better off than ever before. But as the 1870’s suggest, economic well-being doesn’t come just from piling up toys. An economy has psychological or, if you will, spiritual, dimensions. A conviction of fairness, a feeling of not being totally on one’s own, a sense of reasonable stability and predictability are all essential components of good economic performance. When they were missing in the 1870’s, in the midst of a boom, the populace was brought to the brink of revolt.

Well, all right. How about if we count lifespan? Number of people suffering from near-constant bacterial infections? Portion of the population with adequate nutrition? Average height? This is all of a piece with big cars, big houses, and shiny geegaws in the rec rooms. Yeah, if one counts all this stuff—all the women that didn’t die in childbirth, all the people not crippled from polio, etc.—we’re probably better off. Just maybe.

Morris is right that there is a psychological or spiritual dimension to the economy. But its rather absurd to imply that the populace is now a slow-burning fuse ready to explode if we don’t suddenly veer toward Morris’s politics.

Pundits seizing upon the happiness data often make try to make hay of the fact that average happiness hasn’t risen with income over the last half-century. The trend in average happiness is flat as Kansas. But then the point cuts both ways: judging from that data, we’re exactly as happy as our grandparents in the communitarian, “Leave It to Beaver,” bowling league, 1950s Golden Age.

Earlier in his column, Morris writes that in the days of the rapacious “Robber Barons,” “the yawning gap between the very rich and everybody else fanned resentments.” Morris then mentions that our present gap is just about as yawning, and so, it is implied, we had better brace ourselves for the inevitable resentment, and a populace “at the brink of revolt.” The proletariat may yet rise!

It’s a thought, isn’t it? Maybe someone has even tried to find out whether it is true!

In their fascinating paper, “Inequality and Happiness: Are Americans and Europeans Different?” Alberto Alesina and Rafael Di Tella of Harvard and Robert McCulloch of Imperial College London measured the effect of income inequality on average self-reported happiness. (Here is the downloadable full paper [pdf].) Does inequality breed ill-feelings? It depends. It turns out that inequality has no significant effect on average reported happiness in the U.S., but it does in Europe. Why?

First, Americans believe that our system affords a high degree of income mobility, so people at the bottom see themselves as having the chance to rise. Therefore income gaps, even yawning ones, breed little resentment. (Indeed, a bigger gap implies a bigger payoff for making it big time.) In Europe, on the other hand, folks see it as harder to move up and down the income ladder, so inequality chafes among the poor. Additionally, ideology matters. The authors write, “There is evidence of inequality generated unhappiness in the US only for a sub-group of rich leftists.” That’s it: rich leftists.

Now, I have no idea whether Charles Morris is a “rich leftist,” or what, but Alesina, Di Tella, and Maculloch’s finding is wonderfully illuminating. NYT editorials generally are not written by people at the bottom of the income distribution, but by people ranging from the middle to the top. Rich leftists, aggravated for ideological reasons by inequality, might assume that the aggravation can only be so much worse for those deprived of condos with a Park view. However, they’d be wrong; there is no detectable aggravation further down the distribution. Whatever you think the opiate of the proletariat is, well, it’s working. So the idea that inequality is breeding widespread discontent–driving Americans toward the brink of revolt, even–is probably little more than a grossly fallacious generalization from an unrepresentative sample.

Freakoutonomics, indeed.


When Going Gets Tough, Public Schools Get Private

School choice opponents love to declare that “unlike private schools, public schools have to teach everyone.” Well it turns out that that’s not really true. As Dan Keating and V. Dion Haynes expose in today’s Washington Post, when kids’ disabilities get too tough, the D.C. Public Schools turn to private institutions, where disabled students can finally get the specialized attention they need.

This doesn’t just happen in Washington, though. According to the National Association of Private Special Education Centers, almost every state in the union has disabled children attending private institutions at public expense. Unfortunately, at least in the nation’s capital, the public schools tend to greatly understate what they are doing, either as a result of bureaucratic dysfunction, as Keating and Haynes suggest, or simply because no one likes getting caught in a lie.

Whatever the reason, for public schools the truth hurts.

New at Cato Unbound: Richard Florida on the Future of Work

Today, in the hot-off-the-WordPress new edition of Cato Unbound, Richard Florida writes about “The Future of the American Workforce in the Global Creative Economy.”

Bestselling author of Rise of the Creative Class, Florida argues that the old industrial era has given way to a new creative era. Science and technology, art and design, and culture and entertainment have superceded natural resources and industrial infrastructure as the key to economic success. Talent is now the key factor of production and winners in global economic competition will be those who can best deploy and attract it. However, the creative economy is a source of increasing inequality both within and between nations. Florida argues that the key to bridging the gap between the creative and service sectors is to harness the creativity of service sector workers to make their jobs both higher-paying and more satisfying.

Florida’s essay is just the beginning of what promises to be an eye-opening conversation about “The Future of Work.” Big-thinkers Robin Hanson, Ed Leamer, and Frank Levy will reply in the days to come. As always, bloggers are encouraged to join the fray and respond to Cato Unbound essayists on their home turf; we’ll excerpt and reprint some of the best of the blogosphere.

The FDA and Your Dinner Plate

Two years ago, Time asked me to write one half of a short point-counterpoint on the obesity debate for a special issue of the magazine entirely devoted to how government should intervene to prevent the fattening of America.

My job was to defend the notion of personal responsibility (my meager 350 words were the only such defense the entire issue). I remember squabbling with one of the magazine’s editors over one contention I made in the article – that it was only a matter of time before public health activists and the federal government would attempt to regulate the portion sizes of food served in restaurants. Seemed like a logical prediction of where things were headed. The editor accused me of hyperbole, and nixed the prediction from the piece.

Last week, this story hit the wires:

Those heaping portions at restaurants – and doggie bags for the leftovers – may be a thing of the past, if health officials get their way.

The government is trying to enlist the nation’s eateries in the fight against obesity.

The report, funded by the Food and Drug Administration, lays out ways to help people manage their intake of calories from the growing number of meals prepared away from home, including at the nation’s nearly 900,000 restaurants and other establishments that serve food. One of the first things on the list: cutting portion sizes.

“We must take a serious look at the impact these foods are having on our waistlines,” said Penelope Royall, director of the health promotion office at the Department of Health and Human Services.

The recommendations are voluntary.

For now.

Afghan Drug War Follies

The Associated Press reports that 16 Afghan soldiers have just graduated from a new program at Fort Bliss that trained them to fly helicopters in drug eradication campaigns. They will now return to their homeland, the world’s top opium producer.

Washington’s increasing pressure on the government of Afghan President Hamid Karzai to wage a vigorous war on drugs is the latest installment in a prohibitionist strategy that has failed for decades. The international drug war is a terrible policy wherever it is tried, but it is an especially unwise venture in Afghanistan. As a recent Cato Institute policy study notes, the drug trade accounts for more than a third of that country’s economic output. Regional warlords who originally backed the Taliban and Al Qaeda but switched their allegiance to the Karzai government derive much of their revenue from the opium trade. Even more important, hundreds of thousands of Afghan farmers base their livelihood on drug crops. They will not look kindly on the Karzai government if it tries to drive their families into destitution.

U.S. policymakers need to keep their priorities straight. Our overriding objective in Afghanistan should be to eliminate the remaining Taliban and Al Qaeda forces. The drug war undermines that objective and may drive otherwise friendly Afghans into the arms of our enemies. There is a troubling correlation between the upsurge of violence in Afghanistan in recent months and the intensification of drug-eradication efforts during that same period. Indeed, the upsurge has been greatest in the main drug-producing provinces.

Even those Americans who remain wedded to a prohibitionist policy as a general principle ought to realize that an exception needs to be made in Afghanistan. Otherwise, the Taliban-Al Qaeda insurgency will grow, and we will replicate the Iraq debacle in that country, too.

A Jobs Program for Lawyers

Earlier this week, Rep. Phil English (R-Pa.) introduced some of the most cynical trade legislation in recent memory. Simply put, English’s bill and a Doha Round agreement are mutually exclusive. 

English calls for significantly lowering the already laughably lax evidentiary thresholds (described by Brink Lindsey and me here, here, here, here, here, here, here, and here) required to impose antidumping, countervailing duty, and safeguard protection. The legislation collides head on with the practical requirement of the Doha negotiating mandate that those rules be tightened, not loosened.

In introducing his legislation, English relies on the same tired, well-refuted rhetoric: “Failing to update our outdated trade laws allows foreign countries to continue robbing Americans of their jobs,” he says. Pu-lease

Granted, in Mr. English’s district of Erie, Pa., the unemployment rate of 5.1 percent is slightly higher than the downward-trending national rate of 4.6 percent (just announced today). Yet Erie’s rate is still well below the national average in each of the past four decades. 

But it’s not the jobs of his Erie constituents that English seeks to protect. Rather, it’s the jobs of Washington’s legions of underutilized trade lawyers who are the primary beneficiaries of this proposal. 

“My initiative streamlines the process for American companies seeking relief against import surges, illegal imports, and other crippling circumstances stemming form trade,” English says. “Our trade laws are essential to police our domestic market and are used only when others break the rules. Now is the time to fix the law to serve our interests, not those of predatory trading partners.”

Exactly whose interest he means by “our interests” should be clear. There’s been a lot of talk within the trade community recently about the paucity of new trade remedy cases. In fact, there has been only one U.S. antidumping initiation this entire year, and only three over the past 10 months, which is a major dropoff from the one or two per months we’ve seen for the past few years. Combine that trend with the recent “softwood lumber” truce between the United States and Canada, and you have a sudden glut of starving trade lawyers. (And Research-in-Motion thought it was out of the woods when its patent infringement suit settled!)

The reduction in trade remedy cases is attributable to a few laudable facts: 

First, the U.S. economy has been growing steadily, if not handsomely, for over four years now. Under those circumstances, it’s difficult to make the case that your industry is materially injured (one of the stubborn requirements of winning antidumping protection). 

Second, the U.S. steel industry, which accounts for the preponderance of antidumping protection, is healthier than it has ever been. 

Third, as globalization has progressed, supply chains have gone international. The once clear definition of a domestic industry has been blurred by the fact that production of a final product often takes place in multiple countries. Bringing antidumping suits has a greater downside now, as domestic petitioners are more likely to ensnare an entity in its own supply chain or related to them in some other way. 

And fourth, as the world economy has expanded, producers have many more sales opportunities around the globe than they used to. Emerging demand in previously flat markets has caused managers to rethink their sales strategies: fewer are pursuing a strategy of competing on price in the United States, while more are looking to be early entrants in developing markets.

So, since the conditions that give rise to successful antidumping petitions are scarce today, the lawyers are trying to create demand for trade remedy measures by lowering the standards. If Congressman English’s bill were to become law, they just might succeed. What will be interesting to track is the rigor with which respondent law firms (those firms that typically represent importer and foreign-producer interests) oppose this legislation. The current environment favors their clients, but the lack of legal action doesn’t pay those hefty lawyer salaries.

You Heard It Here First

The award for obvious headline of the day goes to this offering from AP:

Analysis: Iraq war ties U.S. hands on Iran

But in the article, there’s a startling admission from Kenneth Pollack of the Brookings Institution:

“The Iraq example coupled with the North Korea example probably is part of the motivation for some in Iran to get a nuclear weapon,” and do so quickly, said Ken Pollack, research director at the Brookings Institution’s Saban Center for Middle East Policy.

Iran absorbed the lessons of those other two nations that President Bush linked as a three-way “axis of evil,” Pollack said.

“We didn’t invade North Korea because they had a nuclear weapon. We did invade Iraq because they didn’t have a nuclear weapon but we thought they were trying to get one. If you’re Iran, what is the logical lesson?”

Of course, you could have gotten this analysis way back in January 2003 from my colleague Ted Carpenter, who wrote in the Los Angeles Times:

In his 2002 State of the Union address, President Bush explicitly linked both North Korea and Iran to Iraq in an “axis of evil.”

It would hardly be surprising if Pyongyang and Tehran concluded they would be next on Washington’s hit list unless they could effectively deter an attack. Yet neither country could hope to match the conventional military capabilities of a superpower.

The most reliable deterrent — maybe the only reliable deterrent — is to have nuclear weapons.

In other words, U.S. behavior may have inadvertently created a powerful incentive for nuclear weapons proliferation — the last thing Washington wanted to occur.