Speaking at a “People’s Assembly” in Washington, former Amalgamated Transit Union local 689 president Mike Golash told Occupy members his goal was to “make revolution in the United States, overthrow the capitalist system and build communism.”
The Occupy organizer added that he was “trying to learn something from the examples of the Soviet Union, Red China and Castro’s Cuba. … What can we learn from them so we can build a more successful movement to transform capitalist society?” he asked.
On a related note, Greg Mankiw links to a video of an experiment in which Capuchin Monkeys dislike inequality.
Kara Masciangelo and Jamie McAndrews write about a much older resentment of the 1%, including part of a 1765 letter to the New York Gazette:
Some Individuals of our Countrymen, by the Smiles of Providence or some other Means, are enabled to roll in their four–wheel’d Carriages, and can support the Expence of good Houses, rich Furniture, and Luxurious Living. But, is it equitable that 99, or rather 999 should suffer for the Extravagance or Grandeur of one? Especially when it is consider’d, that Men frequently owe their Wealth to the Impoverishment of their Neighbours.
I knew I should have made the trip to Chicago for this year’s American Economic Association conference. I missed all of this fun, courtesy the nerdiest protest ever conceived:
As AEA members head to lunch with colleagues in fancy downtown restaurants, Occupy the AEA will invite them to step down from their ivory and share a meal with a member of the 99% Affected by their neo-liberal economic policies instead. We will be offering them RAHM-en noodles as our treat.
Then the 99% spokespeople will deliver their personal stories of how their lives have been harmed by the economic policies of the 1%.
I’ve been trying to make some sense out of the OWS movement (which is not easy given the general incoherence of the protestors) but the primary theme to emerge from the cacophony is a resounding condemnation of income and/or wealth inequality. That’s not the only meaning behind the 1% versus 99% mantra (and it is far from their only complaint), but it seems to be the most repeated one. Let’s set aside the Marxist-undertones of class warfare for a moment.
It’s pretty clear that economists don’t know a whole lot about the so-called 1% (nor, I would wager, do the protestors although that hasn’t stopped them from suggesting remedies), as Daron Acemoglu pointed out:
Economists have, for the most part, not focused on the CEOs for two reasons. This is changing, but one reason is that most of the publicly available data sources don’t have information on CEOs. That’s because there are not that many CEOs, or multimillionaires. So when you take a sample – for example, a 1% sample of all the US households – you’re not going to get many of them. Secondly, data are top coded. You don’t actually see people’s exact earnings. You see that they are at the very top, which might be $250,000, but you don’t see if they’re making $25 million. For that reason, a lot of the labour economics literature has focused on things like, do people with college degrees earn more than high school graduates? Do postgraduates earn more? What has happened to earnings inequality among lawyers or doctors or among production workers?
It’s tough to measure productivity in general and it’s especially hard to measure for those who work on Wall Street and in corporate boardrooms; it’s even harder to link productivity to compensation for that group. Given that caveat, Tyler Cowen recently argued that CEOs are, on average, vastly underpaid:
In many of the estimations we see CEOs picking up less than one percent of the value they create for the firm, and all of the estimates of their value capture are impressively small, albeit rising over time. Never is the percentage of value capture anything close to one hundred percent. “One percent value capture” is an entirely plausible belief.
Now to salvage something useful from OWS:
If the standard economic story is right and growing inequality is fundamentally about education and human capital, then perhaps the problem is in the American educational system. In particular, I’d look to K-12, which is doing a pretty lousy job of preparing students for college. Even college students, if you believe this story, are not up to snuff. That’s a problem, of course, but it’s not a problem of Wall Street or corporate greed; it’s a problem with deep roots in the American educational system. I suspect most of the protestors would only suggest tossing more money into failing public schools rather than thinking about more significant and badly needed reforms.
If the income gap is not about human capital but rather some nefarious Washington D.C. – Wall Street collusion, then there is a serious problem. It isn’t, as the protestors suggest, a problem with capitalism per se; rather, it’s a political problem. Adam Smith himself (no poster boy for OWS) harshly condemned the same kind of behavior by the mercantilists of his day. Smith’s ideal was a system that restrained unbridled greed; he sought an ethically anchored self-interest, not rampant greed.
But to pretend, as OWS does, that greed is a characteristic only of capitalism is naïve, at best. Greed is, as the father of modern capitalism well understood, a nasty but universal human characteristic (Milton Friedman explained it to Phil Donahue here). It is certainly not absent in non-capitalist economic systems despite what idealized and highly sanitized versions of history might suggest (it’s obviously not even absent among the OWS protestors; for example, 93% believe student loans should be forgiven outright).
There is something wrong with extremes in the wealth or income distribution particularly if the profit of the “1%” is derived from privilege seeking via the political system rather than from profit-seeking via the market system. This is clearly one point the OWS crowd completely misses: there is a difference between profit-seeking and privilege seeking (or, more commonly “rent seeking”). Rent-seeking is undoubtedly a significant problem, but it is a form of political failure rather than market failure. It cries out for reform, but of a very different sort than is sought by the OWS.
Via Marginal Revolution, a Craigslist ad for a “roommate”:
$1 / 15ft² – need roommate for my occupy tent (financial district)
My step father gave me his old tent to use so I can occupy the financial district. I set up a few nights ago but the cops were able to kick me out by using a big german sheapard to scare me. I want a roommate to help set up a new camp and watch my back in case the NAzis with the GERMAN dog come back to kick me out. I also have a video camera we can share in case they harrass us.
I am clean and keep a neat tent. I shave and shower every other week, we can alternate so some one is always in the tent. My girlfriend will bring food so we don’t have to leave. $1.00 rent is due upon our agreement and is due on the first of every month. It is not refundable as your dollar symbolizes your dedication to the tent and our cause.
Greg Mankiw describes his reaction to the “Occupy” walkout on his introductory economics class in today’s New York Times. Some excerpts:
“..reaction was sadness at how poorly informed the Harvard protesters seemed to be. As with much of the Occupy movement across the country, their complaints seemed to me to be a grab bag of anti-establishment platitudes without much hard-headed analysis or clear policy prescriptions. Ironically, the topic of the lecture that the protesters chose to boycott was economic inequality, including a discussion of recent trends and their causes.
The course I teach is a broad survey of mainstream economics. It includes ideas of many greats in the field, like Adam Smith, David Ricardo, Arthur Pigou, John Maynard Keynes and Milton Friedman. The material is similar to what you’d learn at most other universities.
Yet, like most economists, I don’t view the study of economics as laden with ideology. Most of us agree with Keynes, who said: “The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions.”
That is not to say that economists understand everything. The recent financial crisis, economic downturn and meager recovery are vivid reminders that we still have much to learn. Widening economic inequality is a real and troubling phenomenon, albeit one without an obvious explanation or easy solution. A prerequisite for being a good economist is an ample dose of humility.”