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Doing harm to somebody might be plesurable in itself and well worth the cost... Ot least seen as necessary.
It has been the stuff of litterature, theater,plays, front page tabloids and country songs for the last 50 centuries at least...

Or take the existence of feudal aristocracy, caste societies, etc etc. Maybe if I freed your children, they'd cure the plague, but they might outdo my children, and that is right out.

Jacques: "Doing harm to somebody might be plesurable in itself and well worth the cost... Ot least seen as necessary.
It has been the stuff of litterature, theater,plays, front page tabloids and country songs for the last 50 centuries at least..."

Yep, but. Newspapers report cars that crash, but never report cars that don't crash. The truth about the population is almost always the exact opposite of the truth about that sample of the population the newspapers tell us about. Headline: "John Smith murdered nobody today!" The very fact that something is reported in newspapers tells us it's rare.

When I go to the supermarket and buy something, that's not newsworthy. If I said "I'm not going to buy any apples, because that would make the seller of apples better off", that is newsworthy. The reporter would ask me what I've got against the apple seller.

Yes, but some people's behaviours are more consequential than others, and those people appear more often in the newspaper. Worse, many of the things they do don't appear in the newspapers.

Your faith in the prevalence of non-malevolent utilitarian optimization is...a very modern view of things, and belied by most of history. I would say that in our day to day interactions with people-like-us, and abstract-people-far-away-with-whom-we-have-little-to-do, it's true. Any time where direct or indirect power relations are involved, it becomes more complicated. We are blessed to live in societies with large middle classes; it has made us vulnerable, because we don't have a social defense against people whose utility function includes damage to and suppression of others.

Include people who pepper spray students at California universities.

Mandos has a real point Nick. Business can be that pathological. I once worked for a company that took a year long strike. There as a bonus system in place which brought the marginal wages up to livable standard ($32K/year, that's what it takes to get a small house in rural Ontario). The workers struck to move the bonus system into regular pay. They weren't asking for a large increase.

The company instead took a year-long strike, used replacement workers and strikebreakers and then fired the entire union and decertified (this is legal in Ontario).

The management when I was there had a strong trend of trying to exert power, for instance they initiated a new bonus system based on "busniess performance and management's approval" which meant the owner's good graces. The owners acted like "Big Men".

They suffered a year-long strike and didn't get alter pay conditions either way but the owners wanted the union out, come hell or high water and they got it out.

Give management/owners a chance to decertify or break a union and watch the malevolent utility come right to the fore.

Or how about the regular stream of commentators who decry government-sector defined benefit pensions? Sometimes they can't even bother to get it right. For the Public Service of Canada, the required length of service for a full pension is 35 years, not 30 years. Freedom 55 in the Public Service is not really going to happen unless you get bought out prematurely. Further the vesting period is 5 years. If you leave before then you get a return of contributions and no return.

Now this is still a great deal but let's not pretend there aren't some downsides. It is not a "30 years and gone" deal.

And instead of asking for improved pension provision for all wage earners, especially the disaster that is private-sector pension provision they want public sector pensions reduced. DB or DC, the actual value of pension provision in the private sector is nowwhere near where it needs to be to provide at least a 60% replacement rate with CPP (~35% net of CPP). That's what people overlook when they look at their own retirement arrangements.

BTW could Frances, Livio or Mike start a thread on the Pooled Registered Pension Plan proposal? I would love to contribute to that thread; I feel it is really the last kick at the can for voluntary employer-provided pensions.

Nick Rowe: "The truth about the population is almost always the exact opposite of the truth about that sample of the population the newspapers tell us about."

Case in point: "Class warfare" in the U. S. The media have it backwards. Warren Buffett has it right.

I guess this is as good a place for this as any. It is based on two of Nick Rowe's stories.

Arnold and Baxter each produce something the other wants and sells it for $100, a price the other would be willing to pay, but cannot afford. They are representative of the economy as a whole, which is in a slump. This is a bit artificial, but they can communicate only via auction. They cannot negotiate a swap. Each sees the other's asking price, but neither makes a bid. Besides, neither would be willing to drop their prices, for whatever reasons.

Scenario #1: Chuck Norris, the central banker, lends each $100, and they each buy the other's product. They are pleasantly surprised that they can pay Chuck Norris back, at the cost of some interest.

Scenario #2: Chuck Norris gives them each $100, and they each buy the other's product. They are quite pleased, because they got what they wanted, and they do not have to pay Chuck back the $100.

Scenario #3: Chuck Norris announces that he will bring about inflation of 5%, hell or high water, and everybody believes him. The next year Arnold and Baxter each have earned 5% more, but their costs are 5% more, and they have raised their prices to $105. They are essentially where they were at the start.

Comments?

1. This post by Brad Delong seems relevant to this discussion of the pathological rich:

http://delong.typepad.com/sdj/2009/11/zomfg-wtf-95-third-quarter-productivity-growth-number.html

2. Google the phrase "corporate psychopaths".

3. Isn't it the case that evidence from experimental economics games show that people punish others whose behaviour they don't like, even if it's against their self-interest. Why would it be controversial to suggest people might punish those they don't like? Racism is irrational, but still occurs. Why not classism?

4. Google the phrase "culture war". Who gains when government punishes single mums?

5. Look at behaviour across the world right now - savers are lauded, borrowers demeaned, even though you can't have one without the other, and savers are surely more responsible for making bad loans.

6. My personal pet theory is that (some sort of) Keynesian policy is seen as the thin of a wedge - if you get Keynes, then Beveridge comes next. It's certainly in the interest of the wealthy to prevent an expansion of the welfare state.

A Different Alex: "Racism is irrational, but still occurs. Why not classism?"

My sociology prof used to like to say, "When you control for class, racism drops out."

Nick,

'a) why would targeting NGDP, as opposed to targeting inflation, or employment, have any relation to bailing out banks(Actually, Steve Randy Waldman on Interfluidity argued that targeting NGDP, as opposed to the central bank doing what it's been doing, and twiddling its thumbs, is a good thing precisely because it might mean you didn't have to bail out banks quite as much.'

I don't think CBS have masses of control over inflation or employment, either. What they can control is real long term interest rates which is what I would like them to do. Nobody has convinced me that QE wasn't responsible for some of the spikes in asset prices. (In that sense, I guess 'bailing out the banks' wasn't the right way to say it, but the right's approach to central banking seems to involve getting the stock market up).

'b) what has NGDP targeting, as opposed to targeting anything else, got to do with whether you believe in endogenous money? In fact, if the central bank targeted NGDP, the stock of money would necessarily be endogenous. It would be impossible to target NGDP and the stock of money at the same time.'

The idea is that they *cannot* control NGDP because it is largely determined by demand side factors beyond their control.

Chalk up one more for Bill's hypothesis.

I think much of Nicks and others belief in "non-malevolent utilitarian optimization" is, as Mandos said, a relatively modern thing......and it strikes me as terribly pollyannaish.

On certain levels we no doubt have learned to be more utilitarian and found that aiming for "pain for all but MORE pain for him" is a stupid strategy. The truth remains however that we were hard wired with this behavioral response in place and it often surfaces in times of extreme stress. Cooperation is the winning strategy but competition is very seductive and frequently leads to destruction.

Examples are everywhere in the business world. Remember Delta cutting their rates so low as to take massive losses on their flights for a while simply to squeeze out upstart competitors. It worked short term but long term probably hurt. I imagine Delta would do it again if they had the financial position to do so though. They are striving only for market share. Delta sees nothing wrong with them being the only air carrier in the world. Its the rest of us that need to stop them.

Additionally, this position of Nicks is indicative if an even larger view you hear pushed in so many places today. THEY (the "right", the people in power) are *just* being utilitarian, its their opponents who are politicizing everything. "Those damn leftisits who have to play politics everywhere, cant they just let effective be effective. We've figured it out for you and we have the graphs to prove it, so just shut up and accept your minority position in the political landscape."

They want to act as if there is no need for politics anymore.

Now, Nick...... I dont mean to accuse you of being a strident right winger or anything, only that some of your thinking, I believe, has been heavily influenced by this neoliberal paradigm which basically pats the left wing on the head and says " Hey, thanks for working on civil rights for women and blacks, that was a good thing, oh and thanks for paid vacations and weekends, lots of our people are happier because of that and are better employees, BUT you have got to shut up about this income inequality and socialism for the rich stuff .... thats going too far! We've earned that!!"

One last (maybe) comment on this thread.

It seems to me there are only two ways out of this mess we are in and which one you choose dpends on whether you think we are in a zero sum or non zero sum game. If you think we are in a zero sum game (which I dont) then there needs to be redistribution because the only way the other 90% can have more buying power is for THE 10% to have less. There is no way around this in zero sum dynamics. But if you think it is nonzero sum, the solutions must involve equal elevation of buying power between the 10% and 90% in nominal terms, either via fiscal measures for all or a monetary for the top and fiscal for the bottom. Monetary never reaches the bottom in a meaningful way.

I don't think the whole class warfare thing is about pushing down the other even if it hurts you. It’s more complicated than that.
For the rich people in the US that have a right wing position and broadcast on foxnews it’s about an ideology of extreme meritocracy, they believe that “job creators” are somehow the ultimate patrons and benefactors of society and are superior to the meagre wage owners. Of course in my view this is due to structural functions more than actual superiority or good will, but they don’t say that...
We do see expressions of attacking the interest of Labour from the superrich, but I think it’s about protecting their social position in society; these are people who we’re afraid of communism during the cold war. It’s also about keeping wages low and minimising labour’s bargaining power in order to maintain a growing profit margin and they do see that as being in their interest – whether they are right to think that or not – in fact they probably think that it is in the interest of labour themselves (which in some ways it is: at least in this structure of production).

It’s not black and white though... I think both sides of this debate would gain from realising that.

Gizzard: "Remember Delta cutting their rates so low as to take massive losses on their flights for a while simply to squeeze out upstart competitors."

Something that used to be against the law, remember? (OC, that law is still on the books. . . .)

There is a Canadian equivalent to Delta's behaviour, President's Choice Cola.

Loblaw, the owners of PC bought the formula of the bankrupt Royal Crown Cola, an also-ran Coke and Pepsi competitor. They of course sold it cheap per their business model. The even dared to stock it in vending machines.

Traditionally Coke and Pepsi are more expensive than house brands but still outsell them, the big names rely on a steady market share. PC ate into that market share. Coke did not like what was happening at all.

Coke, specifically the bottler in Ontario, Coca-Cola Bottling Ltd., reacted by slashing the price on brand-name Coke. They sold it below PC. For the first time in a long time Coke was cheaper than house brands. Coke said to hell with profits and went for market share. The message to PC was clear.

Coke got its market share back and then prices went back up.

Yep, bad for me, worse for you.

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