Showing posts with label gilded age. Show all posts
Showing posts with label gilded age. Show all posts

Thursday, September 16, 2021

Men Without Women


This short story has it all -- genetic genealogy, ultra high net worth physics quant banker, stripper, cop, marriage, family, New Yorker writer. It's fiction, but based on real characters and stories. 

There is an audio version, read by the author, at the link.
Satellites by Rebecca Curtis (The New Yorker July 5, 2021) 
My husband and Tony were anxiety-ridden workaholics who’d focussed, from a young age, on earning cash. Tony wanted enough for a good life; Conor, enough to feel safe. They were fifty-six years old, though Conor looked forty-five and Tony thirty-five. They were meticulous, but owing to oversights they’d each had five kids by four women. They were two nerds from New Hampshire. ... 
His ancestors, he told me, had founded America. He’d started working at age twelve, as a farmhand, and eventually acquired a Ph.D. in quantum physics from Harvard, then served for decades as the “head quant” at a world-renowned investment bank. But he wasn’t smart enough to be skeptical when go-go dancers said, Don’t worry, I’m on the pill. ... 
After high school, Tony turned down a scholarship to the University of New Hampshire. He wanted to work. He did active duty in the Marines for eight years, then served in the Air National Guard for twenty while working as a cop. Now he collected his police pension and, for fun, drove a delivery truck. 
... 
Conor smiled. By the way, he said, had Tony ever done 23andMe or Ancestry.com? 
Tony squinted. Ancestry. Sinead bought them kits for his birthday. Why? 
Conor peered up at Jupiter, approaching Saturn for the great conjunction, and the murky dimmer stars. I studied shuttered restaurants. A few bars had created outdoor dining rooms and were busy; the 7-Eleven was dark, but the ever-glowing “Fortune Teller!” sign on the adjacent cottage was lit. 
No reason, Conor said. Had Tony, he asked, opted into his family DNA tree, to see his matches who’d already done Ancestry? Or elected to receive text alerts whenever some new supposed relative signed on? 
Tony walked swiftly. Nah, he said. He’d done Ancestry to make Sinead happy. He shrugged. She’d made their accounts, he said. She probably opted him in; he wasn’t sure. 
When we got home, Tony’s phone had twenty missed calls. 
...

Men Without Women, Ernest Hemingway 1927. "Hemingway begins to examine the themes that would occupy his later works: the casualties of war, the often uneasy relationship between men and women, ..."


Rebecca Curtis interview
In “Satellites,” your story in the Fiction Issue, a woman and her husband, a retired banker, host the husband’s friend at their Jersey-shore mansion. The woman is a frustrated writer, and, to inspire her, her husband, Conor, asks the friend, Tony, a retired police officer, to tell her cop stories. How would you describe the woman’s views of these two men? 
The narrator is awed by how smart Tony and her husband are, and by how hard they work. She’s impressed that they’ve read so much and educated themselves about so many diverse topics while performing demanding and often unpleasant jobs, and by the fact that they’re two of the most generous, kind people she knows. She appreciates that they’ve maintained lifelong friendships, something that she wishes she’d done herself. She doesn’t agree with all their political ideas. Earlier in her life, she believed that, one, bankers cared about money but not about art, literature, world hunger, etc.; and, two, that anyone who supported Trumpish policies (or who voted for anyone like Trump) must be an ignorant jerk. Meeting her husband (and Tony) punctured those beliefs. 
The narrator views herself as the proverbial grasshopper: someone—possibly frivolous, vapid, and solipsistic—who wants to enjoy her life, sing, dance, make “art,” while working various hip-but-not-very-remunerative jobs to pay rent, never truly planning for winter. Tony and Conor are ants: anxious, alert to the dangers the world can pose, doing difficult (and sneered-upon) jobs diligently so they’ll be protected when scarcity comes. The narrator aspires to be more ant-like while remaining a grasshopper. 
Tony and Conor are, in some ways, obsessed with genetics and lineage—they discuss Ancestry.com and bloodlines—but their own families (they each have five children by four women) are somewhat of a disappointment, or even an afterthought, to them. Can you say a little about that tension? 
Conor and Tony suffer because—in several cases—they don’t have the ability to see their children. In the case of divorce, a time-sharing agreement may be in place, but, if the mother has principal custody and won’t permit the father’s visits, what can the father do? Possession sometimes is nine-tenths of the law. Hiring lawyers and going to court to try to force a mother who won’t honor custody agreements to do so requires copious energy, oodles of spare time, and a small fortune. Conor and Tony care deeply about their children, but they’ve lost control—in some cases, of seeing their kids, and, in others, of influencing them. They may feel powerless.

Saturday, June 22, 2019

Silicon Oligarchs: Winner Take All?


Joel Kotkin is a Presidential Fellow in Urban Futures at Chapman University and Executive Director for the Center for Opportunity Urbanism.
What Do the Oligarchs Have in Mind for Us?

...This tiny sliver of humanity, with their relatively small cadre of financiers, engineers, data scientists, and marketers, now control the exploitation of our personal data, what Alibaba founder, Jack Ma calls the “electricity of the 21st century.” Their “super platforms,” as one analyst noted, “now operate as “digital gatekeepers” lording over “e-monopsonies” that control enormous parts of the economy. Their growing power, notes a recent World Bank Study, is built on “natural monopolies” that adhere to web-based business, and have served to further widen class divides not only in the United States but around the world.

The rulers of the Valley and its Puget Sound doppelganger now account for eight of the 20 wealthiest people on the planet. Seventy percent of the 56 billionaires under 40 live in the state of California, with 12 in San Francisco alone. In 2017, the tech industry, mostly in California, produced 11 new billionaires. The Bay Area has more billionaires on the Forbes 400 list than any metro region other than New York and more millionaires per capita than any other large metropolis.

For an industry once known for competition, the level of concentration is remarkable. Google controls nearly 90 percent of search advertising, Facebook almost 80 percent of mobile social traffic, and Amazon about 75 percent of US e-book sales, and, perhaps most importantly, nearly 40 percent of the world’s “cloud business.” Together, Google and Apple control more than 95 percent of operating software for mobile devices, while Microsoft still accounts for more than 80 percent of the software that runs personal computers around the world.

The wealth generated by these near-monopolies funds the tech oligarchy’s drive to monopolize existing industries such as entertainment, education, and retail, as well as those of the future, such as autonomous cars, drones, space exploration, and most critically, artificial intelligence. Unless checked, they will have accumulated the power to bring about what could best be seen as a “post-human” future, in which society is dominated by artificial intelligence and those who control it.

What Do the Oligarchs Want?

The oligarchs are creating a “a scientific caste system,” not dissimilar to that outlined in Aldous Huxley’s dystopian 1932 novel, Brave New World. Unlike the former masters of the industrial age, they have little use for the labor of middle- and working-class people—they need only their data. Virtually all their human resource emphasis relies on cultivating and retaining a relative handful of tech-savvy operators. “Software,” Bill Gates told Forbes in 2005, “is an IQ business. Microsoft must win the IQ war, or we won’t have a future.”

Perhaps the best insight into the mentality of the tech oligarchy comes from an admirer, researcher Greg Ferenstein, who interviewed 147 digital company founders. The emerging tech world has little place for upward mobility, he found, except for those in the charmed circle at the top of the tech infrastructure; the middle and working classes become, as in feudal times, increasingly marginal.

This reflects their perception of how society will evolve. Ferenstein notes that most oligarchs believe “an increasingly greater share of economic wealth will be generated by a smaller slice of very talented or original people. Everyone else will increasingly subsist on some combination of part-time entrepreneurial ‘gig work’ and government aid.” Such part-time work has been growing rapidly, accounting for roughly 20 percent of the workforce in the US and Europe, and is expected to grow substantially, adds McKinsey. ...

Tuesday, April 30, 2019

Dialogs


In a high corner office, overlooking Cambridge and the Harvard campus.
How big a role is deep learning playing right now in building genomic predictors?

So far, not a big one. Other ML methods perform roughly on par with DL. The additive component of variance is largest, and we have compressed sensing theorems showing near-optimal performance for capturing it. There are nonlinear effects, and eventually DL will likely be useful for learning multi-loci features. But at the moment everything is limited by statistical power, and nonlinear features are even harder to detect than additive ones. ...

The bottom line is that with enough statistical power predictors will capture the expected heritability for most traits. Are people in your field ready for this?

Some are, but for others it will be very difficult.
Conference on AI and Genomics / Precision Medicine (Boston).
I enjoyed your talk. I work for [leading AgBio company], but my PhD is in Applied Math. We've been computing Net Merit for bulls using SNPs for a long time. The human genetics people have been lagging...

Caught up now, though. And first derivative (sample size growth rate) is much larger...

Yes. It's funny because sperm is priced by Net Merit and when we or USDA revise models some farmers or breeders get very angry because the value of their bull can change a lot!
A Harvard Square restaurant.
I last saw Roman at the Fellows spring dinner, many years ago. I was back from Yale to see friends. He was drinking, with serious intent. He told me about working with Wilson at Cornell. He also told me an old story about Jeffrey and the Higgs mechanism. Jeffrey almost had it, soon after his work on the Goldstone boson. But Sidney talked him out of it -- something to the effect of "if you can only make sense of it in unitary gauge, it must be an artifact" ... Afterwards, at MIT they would say When push comes to shove, Sidney is wrong. ...

Genomics is in the details now. Lots of work to be done, but conceptually it's clear what to do. I wouldn't say that about AGI. There are still important conceptual breakthroughs that need to be made.
The Dunster House courtyard, overlooking the Charles.
We used to live here, can you let us in to look around?

I remember it all -- the long meals, the tutors, the students, the concerts in the library. Yo Yo Ma and Owen playing together.

A special time, at least for us. But long vanished except in memory.

Wheeler used to say that the past only exists as memory records.

Not very covariant! Why not a single four-manifold that exists all at once?
The Ritz-Carlton.
Flying private is like crack. Once you do it, you can't go back...
It's not like that. They never give you a number. They just tell you that the field house is undergoing a renovation and there's a naming opportunity. Then your kid is on the right list. They've been doing this for a hundred years...

Card had to do the analysis that way. Harvard was paying him...

I went to the session on VC for newbies. Now I realize "valuation" is just BS... Now you see how it really works...

Then Bobby says "What's an LP? I wanna be an LP because you gotta keep them happy."

Let me guess, you want a dataset with a million genomes and FICO scores?

I've helped US companies come to China for 20+ years. At first it was rough. Now if I'm back in the states for a while and return, Shenzhen seems like the Future. The dynamism is here.

To most of Eurasia it just looks like two competing hegemons. Both systems have their pluses and minuses, but it's not an existential problem...

Sure, Huawei is a big threat because they won't put in backdoors for the NSA. Who was tapping Merkel's cellphone? It was us...

Humans are just smart enough to create an AGI, but perhaps not smart enough to create a safe one.

Maybe we should make humans smarter first, so there is a better chance that our successors will look fondly on us. Genetically engineered super-geniuses might have a better chance at implementing Asimov's Laws of Robotics.  

Thursday, January 21, 2016

American and Chinese Oligarchies



Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens

Martin Gilens and Benjamin I. Page

Each of four theoretical traditions in the study of American politics—which can be characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism—offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented.

A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues.

Multivariate analysis indicates that economic elites and organised groups representing business interests have substantial independent impacts on US government policy, while average citizens and mass-based interest groups have little or no independent influence.
From the paper:
... When a majority of citizens disagrees with economic elites and/or with organised interests, they generally lose. Moreover, because of the strong status quo bias built into the US political system, even when fairly large majorities of Americans favour policy change, they generally do not get it.

... Americans do enjoy many features central to democratic governance, such as regular elections, freedom of speech and association and a widespread (if still contested) franchise. But we believe that if policymaking is dominated by powerful business organisations and a small number of affluent Americans, then America's claims to being a democratic society are seriously threatened.




Interview with Gilens:
Let's talk about the study. If you had 30 seconds to sum up the main conclusion of your study for the average person, how would you do so?

I'd say that contrary to what decades of political science research might lead you to believe, ordinary citizens have virtually no influence over what their government does in the United States. And economic elites and interest groups, especially those representing business, have a substantial degree of influence. Government policy-making over the last few decades reflects the preferences of those groups -- of economic elites and of organized interests.

You say the United States is more like a system of "Economic Elite Domination" and "Biased Pluralism" as opposed to a majoritarian democracy. What do those terms mean? Is that not just a scholarly way of saying it's closer to oligarchy than democracy if not literally an oligarchy?

People mean different things by the term oligarchy. One reason why I shy away from it is it brings to mind this image of a very small number of very wealthy people who are pulling strings behind the scenes to determine what government does. And I think it's more complicated than that. It's not only Sheldon Adelson or the Koch brothers or Bill Gates or George Soros who are shaping government policy-making. So that's my concern with what at least many people would understand oligarchy to mean. What "Economic Elite Domination" and "Biased Pluralism" mean is that rather than average citizens of moderate means having an important role in determining policy, ability to shape outcomes is restricted to people at the top of the income distribution and to organized groups that represent primarily -- although not exclusively -- business.
See also Fukuyama and Zhang on the China Model, and Daniel Bell's The China Model: political meritocracy and limits of democracy.

Wednesday, April 22, 2015

Earnings by educational attainment 1990-2013


This graphic is from today's NYTimes: Why American Workers Without Much Education Are Being Hammered.

Aside from the human capital (education) point the figure makes, I'm a bit puzzled by the following: real per-capita GDP is probably up at least ~50% (e.g., ~2% x 23 years) over the 1990-2013 period. Where did those gains go? Into the pockets of a small invisible group that doesn't show up in the graph (note use of medians, not averages)? It seems that everyone except the members of this small group were "hammered" over the last two decades ...

Note added (with better data): This source has 2013 GDP at $16 trillion versus $9 trillion in 1990 (both figures in 2009 dollars). Total US population went up 26% (316 million from 249 million). The percentage of the population with college degrees went from about 20% to 30%. It still appears to me that much of GDP increase during the period did not go to workers or ordinary people.

If you annualize any of the real income changes in the graph over 23 years, the change is small -- less than 1% per year. Yet real GDP grew at about 3% per year on average during the period. The graph below (from this 2007 post) might shed some light on the mystery (even the top quintile saw little income appreciation):


More here.



Monday, March 30, 2015

The rich (and powerful) are different

Discussions at the meeting I just attended are off the record, so I have nothing to report. But I will link to some previous posts of relevance:

Creators and Rulers

How the World Works

Educational background of US elites

A word cloud produced from the collective bios would feature: Harvard, Stanford, Goldman Sachs, Rhodes, Marshall, Venture, Private Equity, Acquired, IPO, Technology, Energy, SEALs, Family Office, White House, Society of Fellows, ...

My wife looked at the book of bios and concluded "You don't stand out."  8-/

See also Status-Income Disequilibrium.

Tuesday, February 17, 2015

CBO Against Piketty?


This report using CBO  (Congressional Budget Office) data claims that income inequality did not widen during the Great Recession (table above compares 2007 to 2011). After government transfer payments (taxes, entitlements, etc.) are taken into account, one finds that low income groups were cushioned, while high earners saw significant declines in income.
... The CBO on the other hand defines income broadly as resources consumed by households, whether through cash payments or services rendered without payments.2 Its definition of market income includes employer payments on workers (Social Security, Medicare, medical insurance, and retirement) and capital gains. On top of market income, CBO next adds all public cash assistance and in-kind benefits from social insurance and government assistance programs to arrive at “before-tax income.” Finally, the CBO’s last step is to subtract all federal taxes including personal income taxes, Social Security payments, excise taxes and corporate income taxes to arrive at “after-tax income” or what other government series call disposable income.3 ...


CONCLUSION: It is now widely held that inequality increased dramatically in the decades prior to 2007. For example, Piketty and Saez’s research shows that 91 percent of economic growth between 1979 and 2007 went to the wealthiest 10 percent. But when comparing the CBO’s more comprehensive definition of income (including employer benefits, Social Security, Medicare, and other government benefits), 47 percent of growth of after-tax income went to the richest 10 percent.14

Consequently, both methodologies reveal a real income inequality problem.15 But this paper once again shows that the IRS data give a misleading impression of what has happened with income inequality (not growing as fast in the period from 1979 to 2007 and decreasing, not increasing in the years after 2007). While many on the left were unhappy with the first ITIF paper and my earlier work criticizing Piketty and Saez, it is less clear how they will react to this paper.16 On the one hand, the paper argues that inequality doesn’t always rise and that it didn’t since the onset of the Great Recession. On the other hand, it argues for the efficacy of robust income-support and growth policies and ultimately provides a refutation to a critique that Republicans have made of President Obama.

Almost no increase in US Gini coefficient since 1979 once transfer payments are accounted for:



Is it possible that nameless government employees at CBO have done a better job on this problem than the acclaimed economists Piketty and Saez? (What kind of serious statistical researcher uses Excel?!?)

See also Piketty on Capital and Piketty's Capital.

Monday, September 22, 2014

Piketty on Capital


Piketty on EconTalk (podcast) -- a lively discussion between Russ Roberts and guest Thomas Piketty. See earlier post here.
Piketty: ... to summarize very quickly our conclusion, we feel that the theory of marginal productivity is a bit naive, I think for this top part of the labor market. That is to say when a manager manages to get a pay increase from $1 million a year to $10 million a year, according to the textbook based on marginal productivity, this should be due to the fact that his marginal contribution to the output of his company has risen from 1 to 10. Now it seems a bit naive. It could be that in practice individual marginal productivities are very hard to observe and monitor, especially in a large corporation. And there is clearly strong incentives for top managers to try to get as much as they can.

... Now, when the top tax rate is 82%, now of course you always want to be paid $1 million more, but on the margin when you get a pay increase of $1 million, 82% is going to go straight to the Treasury, so your incentive to bargain very aggressively and put the right people in the right compensation committee are going to be not so strong. And also your shareholders, your subordinates, maybe will tend to tell you, look, this is very costly. Whereas when the top tax rate goes down to 20, 30% or even 40%, so you keep 2/3rds or 60% of the extra $1 million for you, then the incentives are very, very different. Now, this model seems to explain part of what we observe in the data. In particular, it's very difficult to see any improvement in the performance of managers who are getting $10 million instead of $1 million. When we put together a data base with all the publicly traded companies in North America, Europe, Japan, trying to compare in the companies that are paying their managers $10 million instead of $1 million, it's very difficult to see in the data any extra performance.

... But let me make clear that I love capital accumulation and I certainly don't want to reduce capital accumulation. The problem is the concentration. So let me make very clear that inequality in itself is of course not a problem. Inequality can actually be useful for growth. Up to a point. The problem is when inequality of wealth and concentration of wealth gets too extreme, it is not useful any more for growth. And it can even become bad, because it leads to high perpetuation of inequality over time, so it can reduce social mobility. And it can also be bad for the working or for the democratic institutions. So where is the tipping point--when is it that inequality becomes excessive? Well, I'm sorry to tell you that I don't have a formula for that.

... In the United States right now, the bottom 50% of the population own about 2% of national wealth. And the next 40% own about 20, 22% of national wealth. And this group, the middle 40%, the people who are not in the bottom 50% and who are not in the top 10%, they used to own 25-30% of national wealth. And this has been going down in recent decades, as shown by a recent study by Saez and Zucman and now is closer to 20, 22%. Now, how much should it be? I don't know. I don't know. But the view that we need the middle class share to go down and down and down and that this is not a problem as long as you have positive growth, I think is excessive. You know, I think, of course we need entrepreneurs. I'm not saying, look, if it was perfect equality the bottom 50% should own 50% and the next 40% should own 40. I am not saying that we should have this at all. I'm just saying that when you have 2% for the bottom 50 and 22 for the next 40, you know, the view that we cannot do better than that [[ because ]] you won't have entrepreneurs any more, you won't have growth any more, is very ideological.

... I am actually a lot more optimistic than what some people seem to believe. I'm very sorry some people feel depressed after they read my book because after all this is not the way I wrote it. In fact, I think there are lots of reasons to be optimistic. For instance, one good news coming from the book is that we've never been as rich in terms of net wealth than we are today in developed countries. And we talk all the time about our public debt, but in fact our private wealth as a fraction of GDP has increased a lot more than our public debt as a fraction of GDP, so our national wealth, the sum of private and public wealth, is actually higher than it has ever been. So our countries are rich. It is our governments that are poor, which is a problem; but it raises issues of organization and institution but that can be addressed.

Saturday, April 05, 2014

Measuring Wealth Inequality



Recent increases in wealth inequality mainly due to top 0.01%, not top 1%? See this article (The Atlantic) and also here.

The method used to obtain these results is not without uncertainties. From these slides by Saez and Zucman. (Using flows to estimate accumulations.)
We develop a new technique to estimate the distribution of wealth

We capitalize income tax returns

Use IRS data on individual dividends, interest, rents...
Compute rates of return by asset class (Flow of Funds / NIPA)
Combine income and rates of return to obtain wealth

The capitalization method works for foundations
For which we observe both income and wealth
See also Inside the 1 percent:
Net worth distribution within the population of top wealth holders (assets > $2M; about top 1% of adult population): having $10M puts you in the 90th percentile (so, top 0.1% of total population) and $50M puts you in the 99th percentile (top 0.01% of total population).

Wednesday, March 26, 2014

Piketty's Capital


One of the jarring figures in Piketty's book Capital in the Twenty-first Century shows the population fraction over time that inherited more money than the average laborer earns in a lifetime. This fraction is larger than I expected -- roughly 5-10 percent in France.

Piketty's grande idée is very simple: if returns to capital r exceed GDP growth g, and if ownership of capital is concentrated, then runaway inequality will result. He argues that throughout most of history, r > g. His solution: redistribution via a wealth tax. (Don't most countries already have inheritance taxes? Perhaps they just need to be tightened up.)

See also The Normaliens.
New Yorker: ... Piketty, who teaches at the Paris School of Economics, has spent nearly two decades studying inequality. In 1993, at the age of twenty-two, he moved to the United States to teach at M.I.T. A graduate of the élite École Normale Supérieure, he had recently completed his doctorate, a dense mathematical exploration of the theory behind tax policies. Plenty of bright young European scholars move across the Atlantic, of course, and many of them end up staying. Piketty was not to be one of them. “It was the first time I had set foot in the United States,” he recalls in the introduction, “and it felt good to have my work recognized so quickly. Here was a country that knew how to attract immigrants when it wanted to! Yet I also realized quite soon that I wanted to return to France and Europe, which I did when I was twenty-five. Since then, I have not left Paris, except for a few brief trips.”

... much of the economics that Piketty encountered at M.I.T. seemed arid and pointless. “I did not find the work of U.S. economists entirely convincing,” he writes. “To be sure, they were all very intelligent, and I still have many friends from that period of my life. But something strange happened: I was only too aware of the fact that I knew nothing at all about the world’s economic problems.”

... Eventually, Piketty says, we could see the reëmergence of a world familiar to nineteenth-century Europeans; he cites the novels of Austen and Balzac. In this “patrimonial society,” a small group of wealthy rentiers lives lavishly on the fruits of its inherited wealth, and the rest struggle to keep up. For the United States, in particular, this would be a cruel and ironic fate. “The egalitarian pioneer ideal has faded into oblivion,” Piketty writes, “and the New World may be on the verge of becoming the Old Europe of the twenty-first century’s globalized economy.”

... Some people claim that the takeoff at the very top reflects the emergence of a new class of “superstars”—entrepreneurs, entertainers, sports stars, authors, and the like—who have exploited new technologies, such as the Internet, to enlarge their earnings at the expense of others in their field. If this is true, high rates of inequality may reflect a harsh and unalterable reality: outsized spoils are going to go to Roger Federer, James Patterson, and the WhatsApp guys. Piketty rejects this account. The main factor, he insists, is that major companies are giving their top executives outlandish pay packages. His research shows that “supermanagers,” rather than “superstars,” account for up to seventy per cent of the top 0.1 per cent of the income distribution. ...

... Defenders of big pay packages like to claim that senior managers earn their vast salaries by boosting their firm’s profits and stock prices. But Piketty points out how hard it is to measure the contribution (the “marginal productivity”) of any one individual in a large corporation. The compensation of top managers is typically set by committees comprising other senior executives who earn comparable amounts. “It is only reasonable to assume that people in a position to set their own salaries have a natural incentive to treat themselves generously, or at the very least to be rather optimistic in gauging their marginal productivity,” Piketty writes.

... Income from capital has always played a key role in capitalism. Piketty claims that its role is growing even larger, and that this helps explain why inequality is rising so fast. Indeed, he argues that modern capitalism has an internal law of motion that leads, not inexorably but generally, toward less equal outcomes. The law is simple. When the rate of return on capital—the annual income it generates divided by its market value—is higher than the economy’s growth rate, capital income will tend to rise faster than wages and salaries, which rarely grow faster than G.D.P.

... Piketty takes some well-aimed shots at economists who seek to obfuscate this reality. “In studying the eighteenth and nineteenth centuries it is possible to think that the evolution of prices and wages, or incomes and wealth, obeys an autonomous economic logic having little or nothing to do with the logic of politics or culture,” he writes. “When one studies the twentieth century, however, such an illusion falls apart immediately. A quick glance at the curves describing income and wealth inequality or the capital/income ratio is enough to show that politics is ubiquitous and that economic and political changes are inextricably intertwined and must be studied together.” ...
See figures here and here.

Friday, February 21, 2014

$alaries in the City

New York magazine on what people make in the Big Apple. Doctors, financiers, escorts, drivers, editors, cops, attorneys, etc. If the figures are correct for PR/Communications people, we are overpaying at the university ...
NYmag: ... It was in the spirit of this financial glasnost that we began an exhaustive survey of New York's most important professions. We studied doctors, dog walkers, bankers, baristas, headhunters, advertising honchos, prostitutes -- just about anyone who does anything in this town to make a buck. And surprisingly, most of them -- in the strictest of confidence, of course -- spilled the beans. ...

... P.R. maven Lizzie Grubman presides over a staff of 30 and says she gets 100 résumés a week from aspiring public-relations professionals. That's about all you need to know to understand why P.R. starting salaries seldom get over the $30,000 hurdle. Young P.R. people often find themselves where the action is -- but they're definitely not getting rich. "Public relations is just not a tremendous moneymaker," Grubman says. "You have to own the business to make money." Needless to say, Grubman, who's 29 years old, owns the business.

Before you set up your own shop, however, you'll want to score a few clients in an established firm. Win an account and you'll move up to be an account executive. If you're successful, you'll manage people and be a senior AE making $45,000 to $55,000. After five years, you'd start looking to be made a VP in a smaller agency or an account supervisor in a larger one. In either place, you'd bring home $75,000 to $100,000.

Some P.R. professionals end the infighting and maneuvering that come with the territory at certain agencies by going to corporations that regularly hire media specialists. Someone doing marketing communications at a big company, for a salary in the neighborhood of $60,000, has more control over the strategy. "You may still pick up the phone for the press calls," says Bill Heyman, a P.R. and corporate-communications recruiter, "but you'll also be putting together the press plan." ...

Monday, November 11, 2013

Conspicuous consumption in the new gilded age

See also Credentialism and elite performance.
NYTimes: ... A silver spoon is no longer a mark of elite status. Take the nation’s top 10 percent of households. The top 1 percent — those making more than $394,000 annually — are today’s version of Veblen’s leisure class in terms of wealth, but they are not the biggest buyers of silver flatware. Instead, households in the rest of this high-earning cohort — those making between $114,000 and just under $394,000 — take the silver prize.

... Of course, when it comes to luxuries that can’t be faked, the top 1 percent are fervent spenders. Compared with the rest of the top 10 percent, they spend twice as much on college tuitions, three times as much on private elementary and high school tuitions and three times as much on tutoring to get their children into elite institutions. [ Italics Mine ]

... Veblen would recognize a profound difference between his leisure class and today’s top 1 percent. In his time, conspicuous consumption was largely frivolous. Buying silver spoons did not change a person’s life prospects; it only signaled high social rank. A university degree, another marker of social standing, was possible only for those with plenty of leisure time.

The conspicuous spending of today’s top 1 percent, by contrast, is purposeful. It affects one’s life chances. Most wealthy people work long hours, and the goal of much of their spending is to save time or make more money.

They spend heavily on education to ensure their children will have a sizable advantage in the future job market. A degree from an elite university, rather than connoting leisure time, is seen as an important career step. ...

Monday, July 22, 2013

Inside the vampire squid

NYTimes Dealbook interview with the Goldman elevator tweeter (GSElevator).
Q. Why did you start this thing?
A. Again, I wanted to amuse myself during the summer lull and while market volatility keeps capital markets transactions to a minimum. I also thought that despite the disdain out there that exists for Wall Street professionals, people still really have no idea really how bad it is — and how shallow the industry really is, and frankly, how unimpressive 98 percent of the employees are.

Q. Are you really a Goldman employee?
A. Yes. However, I cannot really elaborate on this in terms of team or location, other than to say that I am a career banker. And to preemptively clarify, I am in a front-office, revenue-producing, client-facing role. Apologies for the aggressive clarification, but it is quite pathetic to see back/middle office employees telling people (women in bars) that they are “investment bankers.” If people are at all skeptical about my employment status, it doesn’t bother me. I am doing this for my own amusement.

Q. How many of the submissions are actually yours?
A. The first few were either conversations that I have overheard directly, or that have been told to me by colleagues. Having said that, I have avoided tweets that would be too closely connected to me or any of my friend/colleagues. Once it started to get some attention, I started to receive some good submissions.

Q. Overall, what are your thoughts on your Goldman colleagues?
A. They are obsessed with working for Goldman Sachs. They seem to define themselves by their jobs/firm, as opposed to who they are as people and what their interests are.
Sample tweets:
“You can’t spell genius without a G and a S” (not said in jest)

Work hard. Eat right. Exercise. Don't drink too much. And only buy what you can afford. It's not rocket science.

#1: The Cheesecake Factory looks like a restaurant poor people think rich people might eat at. #2: Same with anything Trump.

Starbucks needs a separate line for people who have their shit together.

From my experience, most people really should have lower self-esteem.

Advice for a daughter depends almost entirely on how attractive she is.

Kids should know that Chris Paul's twin brother, Cliff, only makes $32,000 a year

As a shareholder, I have to ask... Is having a book section really the best use of Walmart shelf space?

In 50 years, no one will watch baseball. It was invented when there was absolutely nothing else to do.

Being single at 40 is perfect. Divorcées chase me. Sweet spot for 30-somethings. Rich enough to get girls in their 20s.

I don't read fiction. Unless you count an Indonesian bond offering memorandum.

Sunday, March 10, 2013

Inside the 1%

The figures below are from a recently released IRS study using 2007 data (the most recent available; note this is pre-2008 credit crisis). The study focuses on the top 1% of adults by wealth (net worth of at least $2M or so). Medians and means differ by a lot, which is explained by the distribution in the bottom figure. Click for larger images.




About 50% of the top 1% in wealth are over 60. Having $2M saved up for retirement is not nearly as unusual as, e.g., having accumulated $2M before age 50.



Net worth distribution within the population of top wealth holders (assets > $2M; about top 1% of adult population): having $10M puts you in the 90th percentile (so, top 0.1% of total population) and $50M puts you in the 99th percentile (top 0.01% of total population).




See also Real Wealth: "Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%. In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability."

Thursday, March 07, 2013

US wealth inequality

This is a great example of the visual presentation of quantitative information.



One quibble: I suspect that the top 1% individual discussed near the end has wealth equal to the average among the top 1%, which is strongly distorted by individuals at, e.g., the top 0.1% level. If they used threshold 1% wealth the result would not be as dramatic.

It's also important to note that there is a 30+ year lever arm influencing average wealth -- relatively modest disparities in annual income can, when combined with differentials in investment,  consumption, etc., result in substantial differences in accumulated average wealth.

See also Real wealth.

Friday, February 15, 2013

The City and The Street

Michael Lewis writes in the NY Review of Books.

Early 1990s, hanging out in Manhattan with some friends in the derivatives business, one of them an Oxbridge guy who had been at graduate school at Harvard: when I used the then new term "financial engineering" in conversation he burst out laughing. "Is that what they're going to call it?" he asked, incredulous. "It's just bollocks."

See also The illusion of skill.
NYBooks: ... If you had to pick a city on earth where the American investment banker did not belong, London would have been on any shortlist. In London, circa 1980, the American investment banker had going against him not just widespread commercial lassitude but the locals’ near-constant state of irony. Wherever it traveled, American high finance required an irony-free zone, in which otherwise intelligent people might take seriously inherently absurd events: young people with no experience in finance being paid fortunes to give financial advice, bankers who had never run a business orchestrating takeovers of entire industries, and so on. It was hard to see how the English, with their instinct to not take anything very seriously, could make possible such a space.

Yet they did. And a brand-new social type was born: the highly educated middle-class Brit who was more crassly American than any American. In the early years this new hybrid was so obviously not an indigenous species that he had a certain charm about him, like, say, kudzu in the American South at the end of the nineteenth century, or a pet Burmese python near the Florida Everglades at the end of the twentieth. But then he completely overran the place. Within a decade half the graduates of Oxford and Cambridge were trying to forget whatever they’d been taught about how to live their lives and were remaking themselves in the image of Wall Street. Monty Python was able to survive many things, but Goldman Sachs wasn’t one of them.

The introduction into British life of American ideas of finance, and success, may seem trivial alongside everything else that was happening in Great Britain at the time (Mrs. Thatcher, globalization, the growing weariness with things not working properly, an actually useful collapse of antimarket snobbery), but I don’t think it was. The new American way of financial life arrived in England and created a new set of assumptions and expectations for British elites—who, as it turned out, were dying to get their hands on a new set of assumptions and expectations. The British situation was more dramatic than the American one, because the difference between what you could make on Wall Street versus doing something useful in America, great though it was, was still a lot less than the difference between what you could make for yourself in the City of London versus doing something useful in Great Britain.

In neither place were the windfall gains to the people in finance widely understood for what they were: the upside to big risk-taking, the costs of which would be socialized, if they ever went wrong. For a long time they looked simply like fair compensation for being clever and working hard. But that’s not what they really were; and the net effect of Wall Street’s arrival in London, combined with the other things that were going on, was to get rid of the dole for the poor and replace it with a far more generous, and far more subtle, dole for the rich. The magic of the scheme was that various forms of financial manipulation appeared to the manipulators, and even to the wider public, as a form of achievement. All these kids from Oxford and Cambridge who flooded into Morgan Stanley and Goldman Sachs weren’t just handed huge piles of money. They were handed new identities: the winners of this new marketplace. They still lived in England but, because of the magnitude of their success, they were now detached from it. ...

Thursday, March 01, 2012

Struggling on $350k a year




For related posts, click the "income inequality" label below. Here's one: real wealth.

WSJ: ... Schiff says his $350,000 salary just isn’t enough. “I feel stuck,” he told Bloomberg.

He says he struggles to pay rent for their duplex in Brooklyn, as well as the summer rental in Connecticut and the $32,000 a year tuition for his daughter’s private school.

“I can’t imagine what I’m going to do,” Schiff told Bloomberg. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.”

He said that it would cost at least $1.5 million to buy even a modest apartment nearby.

“All I want is the stuff that I always thought, growing up, that successful parents had,” adding that he “didn’t want to whine.”

I called Schiff and he confirmed his quotes in the article. He said that the main point he was trying to make was that the costs of living well in New York have soared beyond the reach of even the affluent.

“Look, I know my salary of $350,000 is high,” he said. “My whole point is that education and housing in New York are now priced for the wealthy, not the garden variety wealthy. I’m not living high on the hog and going to St. Barts. I mean my summer rental is bare bones, it’s not the Hamptons. ”

He also said that 48% of his salary goes to taxes. “The taxes I pay are absurd,” he said. “Between Federal, New York state and local.”

Thursday, February 09, 2012

Wharton MBA compensation by industry

A correspondent supplied this interesting data from a 2010 survey of Wharton alumni. As expected, financiers out-earned everyone else, with hedgies at the front of the pack. The average hedgie who graduated in 2000-3 made almost 10x what his counterpart in Consumer Goods or Manufacturing or even Technology and Media made, and about 7x what those in Consulting and Professional Services made. Who are the suckers?

Total compensation seems to peak about 10-20 years after graduation.

There's more data than the two pages below, but they're enough to get the general idea.






Related posts:

US income inequality caused by financiers and tech entrepreneurs (2006)

The illusion of skill

Top 1 percent by profession

Banker pay

Financier pay: it's crazy, there's no 2nd or 3rd (2007)

A New Class War (2006)

The Haves against the Have Mores. Pity the poor doctors, lawyers and management consultants. Even the I-bankers, now that hedge fund management has become the ne plus ultra of capitalism. The only guys that the hedgies envy are the super-lucky entrepreneurs who can make their centi-million all in one pop!

As far as doctors and lawyers, I once asked a friend of mine in finance, who lives in a 3000+ sq ft apartment on the upper east side, who else lived in his building. After counting all the money guys, he let slip -- "Oh, I guess there are some doctors and lawyers as well. I don't know how they can afford it." You're so money, and you don't even know it!

Friday, October 28, 2011

The top 1 percent by profession

Notice anything funny about the trends? Source: tax data (complete tables at the link; what I display below is truncated). Click for larger versions.



Here is the share of national income by profession.




More interesting would be the top .1 percent, because secular growth in financier representation would be even more apparent.


Here are two more just for fun.










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