The New Aristocracy (article)

[DWill]

I was reading the section in Sapiens subtitled "There Is No Justice in History" and thought of this May Atlantic article. Yuval Noah Harari tells us that imagined social orders, even those that purport to be about equality, always have ways of sorting people into categories which control access to privileges such as the best education and employment. The U. S. has traditionally been regarded as having a system that enables people to move up the ladder, but recent research supports a different conclusion. The U. S. now trails a number of other advanced nations in social/economic mobility. The author of the article, Matthew Stewart, goes into that topic on the way to making his overall point that the top 9.9% of earners constitute a powerful class that, pursuing opportunities for its children, effectively excludes the rest from doing a lot better. The 0.1% above the 9.9 have a huge amount of wealth, the kind that "can buy elections," but it is numerically small and not as influential as people think, according to Stewart. With the 9.9, we're talking about folks with a few million in the bank. Together, this groups accounts for more than twice the wealth of the 0.1% and bottom 90% combined.

It's a provocative piece that I'm withholding judgment on because of lack of deep knowledge of the relevant issues. Would be interested in hearing what others think. But no pressure, Harry Marks.

https://www.theatlantic.com/magazine/ar ... cy/559130/

[Harry Marks]

Thanks for bringing that to my attention. I have a book on my shelf, a gift from my loving family, called "The Vanishing Middle Class" by Peter Temin, a distinguished economist perhaps just short of Nobel level quality and achievement. I have not read it. Partly because I read all the stuff at the Atlantic and NY Times and Economist level on this stuff that I can get my hands on.

Anyway, enough disclaimer. I will take a shot at it. It's a good article, rich in facts, perspective, and mythology. It puts some things on the table for discussion that should be there but mainly haven't. But it also falls short on several grounds.

A few of the points that it makes that are crucial:
- being in the 10 percent can make a huge difference in your opportunities
- a lot of the concentration is geographical as well as by selectivity of colleges
- assortative mating is responsible for much of the inelasticity of intergenerational mobility

The biggest missing aspect is the increase in meritocratic sorting that is behind the trend. And globalization is driving a hefty share of that.

Note first the geographic concentration of "real estate geniuses" who have made money in the housing market. Boston, New York, San Francisco and L.A. are the big gainers. One could add Seattle, Denver, Dallas, Washington D.C. and maybe a few other places. What these 4 have in common is that they are centers of the cutting edge industries that dominate that Market Cap criterion, along with banking and entertainment. General Electric and Boeing, golden children of yesterday, are being shoved aside by the big 5, two of which, Facebook and Netflix, were nowhere 10 years ago. [Edit to add: I don't think Netflix is in the top 5. Amazon, Google, Facebook, Apple and Microsoft should all be ahead of Netflix still. Apologies.]

The New Tech companies don't just dominate the U.S. economy, they dominate the world. They earn much of the money on services that pays for probably a quarter of our big deficit on goods so irritating to Dear Leader (capital inflows pay for the rest - but let's be honest, that follows the opportunities as much as the deficit spending. If you had to bet on any other economy, is there one you would find more attractive? Maybe Taiwan or Israel or Australia? American technical dominance explains the huge capital inflows.) With the accelerated globalization that came in the 90s, the income available to top corporations expanded dramatically, and they can hire the best of the best and gather a flock of supporting companies around them.

Piketty showed that increases in housing values account for the dominant share of the growth in wealth inequality over the last 30 years. The people who can afford to move into Boston or the Bay Area are the ones with high six figure incomes, because housing there is so scarce. The same thing has happened with the dominant megalopolises of Europe.

And income inequality? Again, the dominant force has been returns to advanced degrees, especially in sciences and business, combined with couples who marry others with advanced degrees. My wife and I both have Ph.D.'s. Plenty of wealth is going to "entrepreneurs" (including the leeches in private equity) but what is surprising is how much more of the gains such risk-taking accounts for than in generations before 1980. Returns to financial capital used to go mainly to "coupon clippers" who inherited wealth. Now it goes to people who work 70 hour weeks and can't leave their phones alone on vacation. Supply-side economics didn't generate that entrepreneurial surge, but it did reward it.

If the pace of innovation slows, as it appears to be doing, some of the concentration of earning will disperse over the "provinces". In a more stable business environment, face-to-face contact is less vital, and people can work from home, or work in amenity-rich places that are still off the beaten path, like Raleigh-Durham and Boise. But we should recognize that the system has been doing what it is supposed to be doing, which is generate income. Tha fact that it hasn't generated nearly as much for working classes is not a nefarious plot or a result of vicious wall-building.

Consider the difference in stress and the ability to handle stress between the characters in Hillbilly Elegy and the 10 percenters in the essay. First, it is definitely real, and it definitely affects chances in life. But some of it is genetic. The system rewards discipline, hard work, intelligence fostered by parents reading to their kids and teaching them numbers and alphabet at a young age, so that school is always downhill rather than uphill for those kids, confidence and a relaxed approach. Some of that is cultural, some is positional, but some is also genetic. Those who were lucky to have the genes that the current economic environment rewards are likely to have kids whose genes do well in school.

I would argue that the degree of sorting, and the limitations on mobility, are created as much by the opportunity society as by any social exclusion. The lucky "beautiful people" pass on their skills. (There is a clinking false note in the essay, when the author alleges that high achieving culture, "Tiger Moms" if you will, make everyone miserable. In fact the indications are that in the same way the 10 percent eat better and exercise more, they also manage stress better.)

But there's pretty good evidence that social exclusion also does matter. Stratified society affects who will respond to the opportunities offered. If your parents are aware that signs of careful learning, like spelling properly, will be rewarded, then you are more likely to pay attention to those lessons. If your cohort responds to you mainly by your skin color, accusing you of "acting white" if you aim for success, for example, most likely you will be influenced.

And then there's positionality. Fred Hirsch, back in the 60s, argued that there were social limits to growth because some goods cannot just be expanded to meet greater income. Instead, these things like "going to the best schools" are inherently fixed in quantity and so higher income just drives up the cost of access to them. These goods he called "positional goods."

Notice the mix of positional and expandable in the evolution of the 10 percent. These hard-working, curious and privileged families do make sure they compete on whatever criteria will get their kids into the best schools. Tutors after school, summer computer and robotics camps, high-achieving internships, they go after them all. The housing in the best neighborhoods is somewhat positional, but if you are willing to settle for good then you can have safe, attractive housing with good public schools in most of the country.

Medical care, music lessons, insurance and even enjoying the outdoors are, by contrast, pretty completely expandable (rural folks might disagree, especially about medical care).

I am worried about positionality of jobs. There is room for only so many in management at top corporate performers. And it seems to me that, through anti-competitive effects of networks as well as through limited amounts of pleasure available from luxuries (so that we don't get new types of goods and services as incomes rise, but only new methods of achieving the same rewards that were always there), we have made the returns to the top 10 percent of jobs to be nearly positional (i.e. inherently non-expandable and thus increasingly scarce).

If top jobs are not positional, then the urge to have better work-life balance could correct some of the craziness. People could choose friendlier work environments and seek some of the spiritual rewards available from greater leisure and more community involvement. But if they are, the ones who scramble for the brass ring will generally convince themselves that nothing else could be rational, and so the prophecy in the essay will be realized, that what seems rational to each individual ends up interacting perniciously with society. Like some mindlessness out of Harari's "Sapiens."

[DWill]

Thanks for bringing that to my attention. I have a book on my shelf, a gift from my loving family, called "The Vanishing Middle Class" by Peter Temin, a distinguished economist perhaps just short of Nobel level quality and achievement. I have not read it. Partly because I read all the stuff at the Atlantic and NY Times and Economist level on this stuff that I can get my hands on.

I appreciate your response. I'm interested both to understand the world better and to locate myself and my family within the whole social/economic dynamic. What happened to us and why? What explains where we've ended up? One of my obsessions is trying to separate endogenous personality factors from external factors of historical and social influence.

The biggest missing aspect is the increase in meritocratic sorting that is behind the trend. And globalization is driving a hefty share of that.

I wasn't familiar with the term "meritocratic sorting," though it probably happened to me. A Wiki article cites standardized testing as an example of meritocratic sorting.

Note first the geographic concentration of "real estate geniuses" who have made money in the housing market. Boston, New York, San Francisco and L.A. are the big gainers. One could add Seattle, Denver, Dallas, Washington D.C. and maybe a few other places. What these 4 have in common is that they are centers of the cutting edge industries that dominate that Market Cap criterion, along with banking and entertainment. General Electric and Boeing, golden children of yesterday, are being shoved aside by the big 5, two of which, Facebook and Netflix, were nowhere 10 years ago. [Edit to add: I don't think Netflix is in the top 5. Amazon, Google, Facebook, Apple and Microsoft should all be ahead of Netflix still. Apologies.]

The enormous interest in where Amazon locates its HQ2 must fit in here. And Amazon, I would think, wants to go into a leading edge area in order to be able to attract top talent. But wouldn't it be great if Bezos saw his mission as instead lifting up an area in need? Or by the brutal realities of economics is that just pure pie-in-the-sky?

On the side, I really don't get Tesla, how it can be worth more than GM while never turning a profit.

The New Tech companies don't just dominate the U.S. economy, they dominate the world. They earn much of the money on services that pays for probably a quarter of our big deficit on goods so irritating to Dear Leader (capital inflows pay for the rest - but let's be honest, that follows the opportunities as much as the deficit spending. If you had to bet on any other economy, is there one you would find more attractive? Maybe Taiwan or Israel or Australia? American technical dominance explains the huge capital inflows.) With the accelerated globalization that came in the 90s, the income available to top corporations expanded dramatically, and they can hire the best of the best and gather a flock of supporting companies around them.

I wonder why the irascible one refuses to acknowledge that services give us a trade surplus with the EU. His own businesses sell services, but he's stuck on commodities like coal and cars.

Piketty showed that increases in housing values account for the dominant share of the growth in wealth inequality over the last 30 years. The people who can afford to move into Boston or the Bay Area are the ones with high six figure incomes, because housing there is so scarce. The same thing has happened with the dominant megalopolises of Europe.

And no doubt helps explain the widening political divide between the large cities and the rest of the country. Clinton had a big advantage in cities of over a million people, 55% to Trump's 40% (according to citylab.com), where 66% of our wealth resides. Interestingly, though, we can't say that the election exposed an urban/rural divide, because Trump did better in the cities under a million. Is Pinketty's book one you recommend, by the way?

And income inequality? Again, the dominant force has been returns to advanced degrees, especially in sciences and business, combined with couples who marry others with advanced degrees. My wife and I both have Ph.D.'s. Plenty of wealth is going to "entrepreneurs" (including the leeches in private equity) but what is surprising is how much more of the gains such risk-taking accounts for than in generations before 1980. Returns to financial capital used to go mainly to "coupon clippers" who inherited wealth. Now it goes to people who work 70 hour weeks and can't leave their phones alone on vacation. Supply-side economics didn't generate that entrepreneurial surge, but it did reward it.

Hmm, Mitt Romney was not exactly lauded for his success at Bain. You don't like such firms, clearly. I'm simply not up on the distinctions between private equity and publicly traded companies. I'm sure it's Economics 101 stuff.

Consider the difference in stress and the ability to handle stress between the characters in Hillbilly Elegy and the 10 percenters in the essay. First, it is definitely real, and it definitely affects chances in life. But some of it is genetic. The system rewards discipline, hard work, intelligence fostered by parents reading to their kids and teaching them numbers and alphabet at a young age, so that school is always downhill rather than uphill for those kids, confidence and a relaxed approach. Some of that is cultural, some is positional, but some is also genetic. Those who were lucky to have the genes that the current economic environment rewards are likely to have kids whose genes do well in school.

I imagine the cultural and positional advantages act as boosters, whereby the middle-class kid with average intelligence is culturated to want to go to college, does go, and probably gets his foot a few rungs above the bottom of the ladder. The averagely bright kid who lacks those advantages of birth has a much worse chance of getting into career-type employment and may not have as happy a life. I believe you're right that genetic sorting always has occurred, though the environment determines which genes will be rewarded in money and prestige. Smarter people have always had the edge, but with entertainers and athletes it wasn't until fairly recently that those talents could translate to big wealth. What concerns me is the work that appears to be more and more the norm for those who aren't going to be launching into the professions. I could be way off, but bad jobs seem to be proliferating, so that low unemployment figures hide the reality that a great many workers face: jobs with no security, few or no benefits, less than full time hours, irregular schedules, and of course little chance for advancement.

I would argue that the degree of sorting, and the limitations on mobility, are created as much by the opportunity society as by any social exclusion. The lucky "beautiful people" pass on their skills. (There is a clinking false note in the essay, when the author alleges that high achieving culture, "Tiger Moms" if you will, make everyone miserable. In fact the indications are that in the same way the 10 percent eat better and exercise more, they also manage stress better.)

I think that Stewart, being in the 10 percent himself, felt licensed to criticize his peers for being driven and, let's face it, shallow seekers of social perks. When you actually encounter people of this class (and I do think we're talking about a class), you may see something quite different: an admirable use of capabilities not lacking in social consciousness. What are such people to do, practice a life of self-abnegation? I should probably reread the article, but right now it's not clear to me what Stewart thinks people like him should do to help out the rest. It's not clear to me what I should do, and clearly I have just as much obligation though a notch or two below the 10%.

And then there's positionality. Fred Hirsch, back in the 60s, argued that there were social limits to growth because some goods cannot just be expanded to meet greater income. Instead, these things like "going to the best schools" are inherently fixed in quantity and so higher income just drives up the cost of access to them. These goods he called "positional goods."

Notice the mix of positional and expandable in the evolution of the 10 percent. These hard-working, curious and privileged families do make sure they compete on whatever criteria will get their kids into the best schools. Tutors after school, summer computer and robotics camps, high-achieving internships, they go after them all. The housing in the best neighborhoods is somewhat positional, but if you are willing to settle for good then you can have safe, attractive housing with good public schools in most of the country.

Medical care, music lessons, insurance and even enjoying the outdoors are, by contrast, pretty completely expandable (rural folks might disagree, especially about medical care).

And many might disagree about the expandability of medical insurance! I do think it's a great pity that high school kids stress out about getting into the "best" school, and that their parents have so much riding on the prestige level of the choice. A lot of the quality they think they're getting is imaginary. In reality, there is an embarrassment of riches in American higher education, such that State U is likely more than adequate for whatever Julio or Lucinda want to aim for.

I am worried about positionality of jobs. There is room for only so many in management at top corporate performers. And it seems to me that, through anti-competitive effects of networks as well as through limited amounts of pleasure available from luxuries (so that we don't get new types of goods and services as incomes rise, but only new methods of achieving the same rewards that were always there), we have made the returns to the top 10 percent of jobs to be nearly positional (i.e. inherently non-expandable and thus increasingly scarce).

I'm not sure I care, personally, about people not being able to be millionaires, even though a million in net worth isn't what it used to be. We can also, somehow, become more sane in our desire for wealth. I don't want to stop people from becoming millionaires either, though. It would help if fear didn't drive us so much, fear of health catastrophe especially, but also fear of the retirement safety net tearing apart.

If top jobs are not positional, then the urge to have better work-life balance could correct some of the craziness. People could choose friendlier work environments and seek some of the spiritual rewards available from greater leisure and more community involvement. But if they are, the ones who scramble for the brass ring will generally convince themselves that nothing else could be rational, and so the prophecy in the essay will be realized, that what seems rational to each individual ends up interacting perniciously with society. Like some mindlessness out of Harari's "Sapiens."

And that is a nifty summary of the message of the article. Thanks again for your views.

[Harry Marks]

I'm interested both to understand the world better and to locate myself and my family within the whole social/economic dynamic. What happened to us and why? What explains where we've ended up? One of my obsessions is trying to separate endogenous personality factors from external factors of historical and social influence.

I find it helpful to think in terms of dynamical systems, like turbulence around the bow of a boat. The interactions are so complex that regular math is not helpful, but some useful analysis still gets done with more vague concepts such as "stretching and folding" that describe how the interactions can shift in patterns, including sometimes shifting dramatically based on small differences in conditions.

The Harvard Study, following hundreds of individuals over a lifetime, found that sort of pattern. Sometimes a person would spend a decade or more in the doldrums then take off, or a quite successful person would fall apart in their personal life, etc. Basically my takeaway is that you have to discern your own story, and it often gets determined by "what happens to you while you are making other plans."

I wasn't familiar with the term "meritocratic sorting," though it probably happened to me. A Wiki article cites standardized testing as an example of meritocratic sorting.

College admissions is a standard example of sorting, and they try to make it more or less meritocratic. But hiring decisions follow a similar logic. You try to get the best-suited person to the job, but that can be hard to pin down. Extroverts have something like a 15% better chance of landing an attractive job, i.e. higher pay, etc. Standardized tests are far from ideal, and if you are someone whose strengths are poorly captured by them, then the reliance on them looks suspiciously arbitrary.

The best thing to be said for meritocratic sorting is that it is better than, say, a lottery, which is completely arbitrary. Yet entry into the U.S. for eventual citizenship has been based on a lottery for many years now, because the point was to treat people equally, rather than to "hire" the most "qualified" immigrants. Some say there is no justice in history, but that was a small counterexample.

The enormous interest in where Amazon locates its HQ2 must fit in here. And Amazon, I would think, wants to go into a leading edge area in order to be able to attract top talent. But wouldn't it be great if Bezos saw his mission as instead lifting up an area in need? Or by the brutal realities of economics is that just pure pie-in-the-sky?

Pretty much pie in the sky. However, I would not put it past Bezos to be working on an innovative approach to "headquarters" business. He could choose places like Cleveland, Baltimore or St. Louis in order to get low-cost workers, even of the skilled variety. (That may sound funny relative to getting grads from Stanford or even U. Washington, but 3M has its pick of high-powered chemists because people raised in Minnesota often want to stay there.) If the most critical decisions continue to be made face-to-face, there still could be a lot of product engineering and other HQ work done at a distance, with electronic connections.

The usual wisdom is that the slight edge in quality that you get from, say, locating in the SF Bay area translates into a big profit advantage, but Bezos may be betting he can get more performance for less cost by hiring "ordinary" tech workers and linking them better. He has already brought at least 3 revolutions to retailing, and I would not rule out such an ambitious plan.

On the side, I really don't get Tesla, how it can be worth more than GM while never turning a profit.

The price of a stock should be the discounted value of expected future profits. That's what you "own" with a share of a company. (The discount rate is higher if the variance of profit expectations around a given mean is larger. Essentially the greater downside risk hurts more than the better upside helps.) I used to boggle students' minds with the case of Amazon, which turned no profit at all for its first 10 years or so, and yet was valued highly by the market. Bezos had a good business plan - he plowed the gross profits back into investing in software and infrastructure to keep Amazon growing very fast. So net profit was negative. Yet now that the plans have come to fruition, his profits are enormous. We should be worried that he doesn't have enough projects to put all those current profits back into - tech gains are leveling off. Or maybe we should be glad, because tech gains are eating everyone's lunch. An issue to worry about.

Presumably Tesla is a similar case. Certainly they have had some "breakthroughs" already in battery tech, and the insiders may be betting that Musk can "do a Bezos." I don't know that much about Tesla, but I do know that we are headed for electric vehicles and there is a lot of money to be made off of solving the technical problems of making them convenient enough to catch on. The amount Toyota made by creating mass market hybrids first was pretty substantial.

I wonder why the irascible one refuses to acknowledge that services give us a trade surplus with the EU. His own businesses sell services, but he's stuck on commodities like coal and cars.

I was in government back in the good old days, the 90s, when politicians took substantive issues seriously. 45 has gotten all the way to the White House by treating it like a reality TV show. Why would he change now? The real irony is that the few things he does have actual beliefs about are the ones on which he is most wrong. The coming train wreck is not going to be pretty. Stock up on canned goods and build a fallout shelter in your backyard.

Interestingly, though, we can't say that the election exposed an urban/rural divide, because Trump did better in the cities under a million.

Fair enough, but it would be interesting to look at whether any of them were cities with significant growth in their economic base, like Boise or ? (Without doing a Wikipedia search, I couldn't think of any other small cities likely to be doing well economically. A telling situation.) My uncle said it was an election between the future and the past, and the past won.

Is Pinketty's book one you recommend, by the way?

Not really. I have dipped into it a bit and found it as boring and technical as people said. So I just quote the reviewers.

I'm simply not up on the distinctions between private equity and publicly traded companies. I'm sure it's Economics 101 stuff.

More like Finance 301. Publicly traded companies have to disclose their financial results, and if the share values fall they are vulnerable to outsiders buying up the shares in a takeover bid. What Kohlberg, Kravis and Roberts did in the 80s was show that such companies could be "taken private" (with a Leveraged Buyout) to avoid the vulnerabilities and publicity. (Leverage refers to the fact that banks or bondholders lend the money for much of the share purchases, so that the "principals" such as Bain or KKR only need to have ownership capital of 10 percent or so of the cost of the buyout.) The Emmy-winning movie "Barbarians at the Gates" (written by MASH's Larry Gelbart) was the first to reflect the drama of such LBO events.

Usually they succeeded by breaking up conglomerates and selling the parts for more than the original company was worth. This was possible partly because conglomerates had been created for bad reasons, and partly because of "buyer's curse" in which the highest bid in an auction goes to the one with the most exaggerated expectations for the result. But after the DotCom bust, Bain and KKR began to make more money by buying companies with heavy unmet obligations to their unions, like unfunded pension obligations, and then holding a gun to the union's head to get out from under them. The gun was bankruptcy.

They rode two waves with that trend: (1) competition from abroad was sucking the profit out of American manufacturing, which was almost the only part of the economy in which unions had ever made substantial wage gains (the main exception was the service industries organized by the Teamsters); and (2) general returns to investment capital were low (and have remained low ever since!) so that many pension funds were well below the forecasted levels based on previous behavior of returns.

I imagine the cultural and positional advantages act as boosters, whereby the middle-class kid with average intelligence is culturated to want to go to college, does go, and probably gets his foot a few rungs above the bottom of the ladder. The averagely bright kid who lacks those advantages of birth has a much worse chance of getting into career-type employment and may not have as happy a life. I believe you're right that genetic sorting always has occurred, though the environment determines which genes will be rewarded in money and prestige. Smarter people have always had the edge, but with entertainers and athletes it wasn't until fairly recently that those talents could translate to big wealth.

That picture of the various stories going on matches mine pretty well. The key phrase for me is "may not have as happy a life." We all know that one can be a billionaire and be clueless about how to ever really enjoy their life, while one can also sail through near-poverty with low material expectations but great family time and friendships, and have a wonderful life. The key issue about the stratification that the author focused on is that if you choose a life of low expectations you may be imposing that on your children.

What concerns me is the work that appears to be more and more the norm for those who aren't going to be launching into the professions. I could be way off, but bad jobs seem to be proliferating, so that low unemployment figures hide the reality that a great many workers face: jobs with no security, few or no benefits, less than full time hours, irregular schedules, and of course little chance for advancement.

I think that is spot on. And for so many of them, there is no concept that the Marines or Yale Law might be an option that could take them to a happier life. I do see some who manage to break into interesting work like adventure kayaking or renovating Victorian mansions, but mostly the run of the mill is not an enticing prospect.

I think that Stewart, being in the 10 percent himself, felt licensed to criticize his peers for being driven and, let's face it, shallow seekers of social perks. When you actually encounter people of this class (and I do think we're talking about a class), you may see something quite different: an admirable use of capabilities not lacking in social consciousness. What are such people to do, practice a life of self-abnegation? I should probably reread the article, but right now it's not clear to me what Stewart thinks people like him should do to help out the rest. It's not clear to me what I should do, and clearly I have just as much obligation though a notch or two below the 10%.

I am convinced that this is the next big issue for religion. Frankly a little self-abnegation goes a long way. Giving 3 percent of your income is enough to put in perspective your ability to live without the latest gadget and the hottest fad. But leaving self-abnegation aside, in some sense anyone who takes life seriously is in quest to know "what I should do." And the journey is our home. The quest to find something that clicks, that contributes in a way that feels right, is the quest for meaning in community.

It might be leading a literature group in prison for one person and gathering for quilting for another. It might be passing on a tradition of bluegrass banjo or organizing groups to inventory the wildlife in their suburb. The point is not to sacrifice, the point is to contribute.

I do think it's a great pity that high school kids stress out about getting into the "best" school, and that their parents have so much riding on the prestige level of the choice. A lot of the quality they think they're getting is imaginary. In reality, there is an embarrassment of riches in American higher education, such that State U is likely more than adequate for whatever Julio or Lucinda want to aim for.

We were very clear with our sons that the main advantage of the Ivy League schools is not what it says about you, but who you meet. We know this because we are friends with lots of Ivy Leaguers. They were both extremely happy with (expensive) liberal arts colleges instead. You are right about State U, but you should be aware that things run at a slower pace because the average student has less background and lower ambitions. Basically you try to take the more advanced classes as soon as you can, because that is where the interesting (and valuable) stuff is found. And the advising and career center help sucks.

I'm not sure I care, personally, about people not being able to be millionaires, even though a million in net worth isn't what it used to be. We can also, somehow, become more sane in our desire for wealth. I don't want to stop people from becoming millionaires either, though. It would help if fear didn't drive us so much, fear of health catastrophe especially, but also fear of the retirement safety net tearing apart.

Well, that's the basic appeal of social democracy, as practiced by Sweden and preached by Bernie Sanders. Let some people earn fantastic wealth if that's their thing, and even celebrate them for it, but also make sure the society functions on confidence and mastery rather than on fear and conflict, by putting a good social safety net in place.

[Robert Tulip]

Superb thread. I have been flat out for the last week and now have a breather. Managed to read the article at The Atlantic and highly recommend it as an astute analysis of American sociology.

The stratification of societies on a 1:10:90 basis seems to be a ratio that works a bit like the Redfield ratio in ocean biochemistry, measuring the remarkably stable proportions of carbon, nitrogen and phosphorus. Plato argued for the 1:10:90 ratio in The Republic, saying the ideal state is ruled by elite aristocrats, philosopher kings, served by a 10% professional class, leaving the 90% to fend for themselves while the ideal king is meant to be a Jesus Christ figure, putting the interests of the least of the world as most important.

Then George Orwell speculated about a similar social division in his classic dystopia Nineteen Eighty Four, with Big Brother managing the Inner Party, the policy elite, serviced by the 10% Outer Party of functionaries, while the great unwashed, the proles, subsisted on lottery dreams that somehow no one ever won. Big Brother could alter history, decreeing that Oceania had always been at war with Eastasia.

It reminds me of the classic American sociology book, Thorstein Veblen’s Theory of the Leisure Class. Stewart’s depiction of America in his Atlantic article is riven with ambiguity, which a reading of Veblen helps to explain with his theories of conspicuous consumption, and perception of “people as irrational, economic agents who pursue social status and the prestige inherent to a place in society (class and economic stratum) with little regard to their own happiness.”

The line from Veblen that seems to echo in Stewart is that high-status people practice economically unproductive occupations, whilst low-status people practice economically productive occupations. I question that thinking, in view of its links to the Marxist labour theory of value. Hayek provided a rebuttal with his observation that elites provide the dynamism that generates innovation, with technological progress pioneered by the wealthy.

This question of productivity seems to underpin Stewart’s ambiguity about the merits of the ten percent. The functionaries of the outer party maintain the system, which as Stewart acknowledges has delivered wealth and living standards and freedom that in so many respects are greater than anything in the past. So the idea that aspirational people deserve criticism seems dubious.

Stewart is cynical about the American Dream, in my view overly so. While it is true that barriers to entry are immense, the reality is that poor people who sacrifice everything for material success can achieve upward social mobility, if not for themselves then often for their children. But such sacrifice brings social isolation, often perceived fatalistically as not worth it.

The ominous drumbeat under all this dystopic vision is the trends toward conflict and collapse. Just as Coolidge delivered tax cuts for the rich in 1926, the current situation is brittle. The clash is between the Democrats as representing the 10% and the Republicans as representing the 0.1% (or the 1%). This is a high stakes game, but there is a sense that Trump is a purgative, flushing out the toxins in the system through his own unreflective lack of awareness of the toxic risks of his beliefs, while also disrupting some untested assumptions and creating reactive popular awareness of the seriousness of politics.

The challenge seems to be to mobilise an explicit alignment of interests between the 10% and the 90%, with the view that good policy led by the deep state can be presented as in the national interest. The best thing to come of the Trump years may be a recognition in the deep state of the need for dialogue, humility and popular legitimacy. The weakness of those values was probably the main reason I have a perverse liking for Trump. He has successfully sold a competing narrative, but the scale of irrationality and venality in the political process may yet give him a second term.

[Harry Marks]

Plato argued for the 1:10:90 ratio in The Republic, saying the ideal state is ruled by elite aristocrats, philosopher kings, served by a 10% professional class, leaving the 90% to fend for themselves

Then George Orwell speculated about a similar social division in his classic dystopia Nineteen Eighty Four, with Big Brother managing the Inner Party, the policy elite, serviced by the 10% Outer Party of functionaries, while the great unwashed, the proles, subsisted on lottery dreams that somehow no one ever won.

Just as Coolidge delivered tax cuts for the rich in 1926, the current situation is brittle. The clash is between the Democrats as representing the 10% and the Republicans as representing the 0.1% (or the 1%).

Orwell put an astute speech in the mouth of O'Brien, the inner party bigwig who has taken an interest in Winston Smith for his odd degree of attachment to reality. O'Brien says that history is all about the middle class (best read as the 10%) trying to supplant the upper class. The party intends to make sure nothing supplants them.

Your comparison of a professional Democrat party with a moneyed elite Republican party is of course an overgeneralization, but the most recent election certainly pushed an already-existing fragmentation further along those lines. Yet it has been a long time since the professionals took seriously any revolutionary program of confiscation. Rather the rich seem to imagine such a program on the part of Democrats, IMO projecting their own drive to dominance onto the academics, judges and journalists. Ideas like regulating business for the common good, and sharing the burden of a just society, seem to be treated by many of the 1 percent as an attack on "their" power. Very strange.

Veblen helps to explain with his theories of conspicuous consumption, and perception of “people as irrational, economic agents who pursue social status and the prestige inherent to a place in society (class and economic stratum) with little regard to their own happiness.”

the reality is that poor people who sacrifice everything for material success can achieve upward social mobility, if not for themselves then often for their children. But such sacrifice brings social isolation, often perceived fatalistically as not worth it.

I don't sense that, say, black Americans who get academic or professional jobs feel terrible social isolation. There does seem to be some sense of a gulf between them and the street, but they are happy to have middle class lives and they generally go to church, have close friends and try to provide a positive role model.

I am more worried about social isolation among the 1 percenters. Most of their peers act as though government is taking aim at them personally, caught up in a myopic view of the world in which their sense of self-worth is tied inextricably to their material success, friendship is mostly fake and even when it is genuine is mostly instrumental (read up on how Trump treated Cohen, for example, his fixer) and they simply cannot imagine life not tied closely to their many millions so that meaning is completely overwhelmed by calculation. Tougher for a camel to go through the eye of a needle than for them to find a sense of meaning.

Harari has a good mini-essay on how people's values are determined by society and its material arrangements. The young man trying to make sense of life in medieval society would "know" that what determined his worth was the opinion others had of him, i.e. his status, while an equivalent young man in modern Western society would "know" that he was to choose his own values (as if at a smorgasbord, presumably). Maybe it was never so inescapable, but you can imagine the forces shaping people using such a framework. And the implications for the rich are not good.

The real question is whether they are much better for the 10 percent. I tend to think, miles better. Much more freedom to imagine one's own options, much more flexibility to find friendship and intimacy.

The line from Veblen that seems to echo in Stewart is that high-status people practice economically unproductive occupations, whilst low-status people practice economically productive occupations. I question that thinking, in view of its links to the Marxist labour theory of value. Hayek provided a rebuttal with his observation that elites provide the dynamism that generates innovation, with technological progress pioneered by the wealthy.

Well, Stewart's essay sips from that cup, but mostly he avoids the issue. That was my basic criticism.

I got sick of hearing how valuable "allocation of capital" was in the 80s. While there is truth to that idea, and it does add value in the system, there seemed to be no acknowledgement of the way commercial elites were simply using their power for self-enrichment with no regard to the costs they imposed on others. And now we seem to be approaching a point at which Uber-style destruction of other people's livelihoods, under the rubric of "disruption", is not finding sufficient replacement demand. It is as if we are approaching a world in which the "lump of labor" fallacy, that there is only so much productive work to be done, is no longer a fallacy. In such a world, "allocation of capital" doesn't create value, it just shuffles it around like a game of musical chairs.

The ominous drumbeat under all this dystopic vision is the trends toward conflict and collapse. Just as Coolidge delivered tax cuts for the rich in 1926, the current situation is brittle. This is a high stakes game, but there is a sense that Trump is a purgative, flushing out the toxins in the system through his own unreflective lack of awareness of the toxic risks of his beliefs, while also disrupting some untested assumptions and creating reactive popular awareness of the seriousness of politics.

His penchant for choosing toxicity has been on rare display recently. Like Nixon's spiral downward, it is likely to lead to great disruption. Between tearing children from their parent's arms, which even sobered up much of the evangelical Right, and denying the plain evidence of Russian interference, the guy appears to be passing a tipping point into Mugabe-style senility. I don't envy the sycophants trying to hold things together around him.

How brittle is the state of things? I would say not that much. (Despite my recent advice to build a fallout shelter. Truthful hyperbole, that was.) He is trying to start a major trade war, and I don't envy the corporations having to juggle around it, but in the end the numbers are not there for a disastrous impact. More serious is the Scott Pruitt-style rearguard action against the climate. But in a few short years the public will have no choice but to face reality, and maybe the geoengineers will ride to our rescue before we actually doom civilization.

I'm more worried about the damage tribalism is bringing to the political process. We could be entering a time, like that of Taft and Roosevelt, when the better angels wake up (with a hangover, admittedly) and dig in to do something about the world. Or we could continue down the road Trump (with Putin's guidance) has been trying to put us on.

The challenge seems to be to mobilise an explicit alignment of interests between the 10% and the 90%, with the view that good policy led by the deep state can be presented as in the national interest. The best thing to come of the Trump years may be a recognition in the deep state of the need for dialogue, humility and popular legitimacy. The weakness of those values was probably the main reason I have a perverse liking for Trump. He has successfully sold a competing narrative, but the scale of irrationality and venality in the political process may yet give him a second term.

Their interests are already aligned. They just need leaders who can transcend the Davos technocracy mentality of the Clintons for a can-do determination to call out the special interests and head off the Rupert Murdoch paranoia before it gets a chance to take root.

Your use of "deep state" is interesting. I would never use it that way, because it refers to a real phenomenon in Egypt and Brazil that is too scary to go around applying to "political maneuvering" or "entrenched bureaucracy." But I can tell you from being on the inside of the U.S. budgeting process (although on the fringes of the inside) that power brokers really do know they have power, and they can get just as caught up in the maneuvering as the Koch brothers get in toting up their billions. So it is true that they need to remember how to keep in touch with people outside the Beltway and practice humility and dialogue.

As to Trump selling an alternative narrative, I am sorry (sort of) to say it isn't so. Yes, the Fox narrative of conservative, plain folks victims was latched onto by Trump, and he is getting a long way down the road to making it acceptable just because it currently holds the reins of power, but there are still rocks in trade policy and medical care, not to mention budget deficits, to crash on. And he is aimed for those rocks at full speed. The truth is you can subsist on a diet of feeling you are a victim only while you don't hold power. Given the chance to actually do something, if you have zombie leadership your narrative can't help but unravel.