What’s to be done with the dumb?

Society seems split into two camps on the matter of intelligence. Side A believes that everyone is secretly smart, but for a variety of reasons (bad teachers, TV, racism, sexism, etc) their true intelligence isn’t showing. Side B believes that some people really are stupid, because they are bad people, and they therefore deserve to suffer.

Out in reality, however, there are plenty of good, decent people who, through no fault of their own, are not smart.

I’m not making my usual jest wherein I claim that about 75% people are morons. I am speaking of the bottom 40% or so of people who have no particular talents or aptitudes of use in the modern economy. For any job that isn’t pure manual labor, they will almost always be competing with candidates who are smarter, quicker, or better credentialed than they are. Life itself will constantly present them with confusing or impenetrable choices–and it will only get worse as they age.

The agricultural economy–which we lived in until 7 decades ago, more or less–could accommodate plenty of people of modest intellects so long as they were hard-working and honest. A family with a dull son or daughter could, if everyone liked each other, still find a way for them to contribute, and would help keep them warm and comfortable in turn.

When you own your own business, be it a farm or otherwise, you can employ a relative or two. When you are employed by someone else, you don’t have that option. Back in the early 1800s, about 80% of people were essentially self-employed or worked on family farms. Today, about 80% of people are employees, working for someone else.

Agriculture is now largely mechanized, and most of the other low-IQ jobs, whether in stores or factories, are headed the same direction. Self-driving cars may soon replace most of the demand for cabbies and truckers, while check-out kiosks automate retail sales. I wouldn’t be surprised to see whole restaurants that are essentially giant vending machines with tables, soon.

The hopeful version of this story says that for every job automated, a new one is created. The invention of the tractor and combine didn’t put people out of work; the freed-up agricultural workers moved to the city and started doing manufacturing jobs. Without automation in the countryside we couldn’t have had so many factories because there would have been no one to work them. Modern automation therefore won’t put people out of jobs, long-term, so much as enable them to work new jobs.

The less hopeful point of view says that we are quickly automating all of the jobs that dumb people can do, and that the new economy requires significantly more intelligence than the old. So, yes, there are new jobs–but dumb people can’t do them.

If the pessimistic view is correct, what options do we have? People are uncomfortable with just letting folks starve to death. We already have Welfare. This seems suboptimal, and people worry that many of those who receive it aren’t virtuously dumb, but crafty and lazy. Makework jobs are another option. If not awful, they can let people feel productive and like they’ve earned their income, but of course they can be awful, and someone else has to make sure the fake job doesn’t result in any real damage. (If they could work unsupervised, they wouldn’t need fake jobs.) Our economy already has a lot of fake jobs, created to make it look like we’re all busy adults doing important things and prevent the poor from burning down civilization.

People have been floating UBI (universal basic income) as another solution. Basically, all of the benefits of welfare without all of the complicated paperwork or the nagging feeling that some lazy bum is getting a better deal than you because everyone gets the exact same deal.

UBI would ideally be offset via an increase in sales taxes (since the money is initially likely to go directly to consumption) to avoid hyperinflation. This is where we get into “modern monetary theory,” which basically says (I think) that it doesn’t really matter whether the gov’t taxes and then spends or spends and then taxes so long as the numbers balance in the end. Of course, this is Yang’s big presidential idea. I think it’s a fascinating idea (I’ve been tossing it around but haven’t had a whole lot to say about it for about fifteen years) and would love to see the independent nation of California or Boston try it out first.

UBI doesn’t exactly solve the problem of the dumb–who still need help from other people to not get scammed by Nigerian princes–but it could simplify and thus streamline our current system, which is really quite unwieldy.

Thoughts?

Gay marriage didn’t win; traditional marriage lost

From the evolutionist point of view, the point of marriage is the production of children.

Let’s quickly analogize to food. Humans have a tremendous variety of customs, habits, traditions, and taboos surrounding foods. Foods enjoyed in one culture, like pork, crickets, and dog, are regarded as disgusting, immoral, or forbidden in another. Cheese is, at heart, rotten vomit–the enzyme used to make cheese coagulate is actually extracted from a calf’s stomach lining–and yet the average American eats it eagerly.

Food can remind you of your childhood, the best day of your life, the worst day of your life. It can comfort the sick and the mourning, and it accompanies our biggest celebrations of life.

Eh, I’d be happy giving him a microstate and seeing how he does running it.

We eat comfort food, holiday food, even sacrificial food. We have decadent luxuries and everyday staples. Some people, like vegans and ascetics, avoid large classes of food generally eaten by their own society for moral reasons.

People enjoy soda because it has water and calories, but some of us purposefully trick our taste buds by drinking Diet Coke, which delivers the sensation of drinking calories without the calories themselves. We enjoy the taste of calories even when we don’t need any more.

But the evolutionary purpose of eating is to get enough calories and nutrients to survive. If tomorrow we all stopped needing to eat–say, we were all hooked into a Matrix-style click-farm in which all nutrients were delivered automatically via IV–all of the symbolic and emotional content attached to food would wither away.

The extended helplessness of human infants is unique in the animal kingdom. Even elephants, who gestate for an incredible two years and become mature at 18, can stand and begin walking around shortly after birth. Baby elephants are not raised solely by their mothers, as baby rats are, but by an entire herd of related female elephants.

Elephants are remarkable animals, clever, communicative, and caring, who mourn their dead and create art:


But from the evolutionist point of view, the point of elephants’ family systems is still the production of elephant children.

Love is a wonderful, sweet, many-splendored thing, but the purpose of marriage, in all its myriad forms–polygamy, monogamy, polyandry, serial monogamy–is still the production of children.

There are a few societies where marriage as we know it is not really practiced because people depend on alternative kin networks or women can largely provide for themselves. For example, 70% of African American children are born out of wedlock; and among the avuncular Apache:

In the Southwest United States, the Apache tribe practices a form of this, where the uncle is responsible for teaching the children social values and proper behavior while inheritance and ancestry is reckoned through the mother’s family alone. (Modern day influences have somewhat but not completely erased this tradition.)

source: BBC News

Despite the long public argument over the validity of gay marriage, very few gay people actually want to get married. Gallop reports that after the Obergefell v. Hodges ruling, the percent of married gay people jumped quickly from 7.9% to 9.5%, but then leveled off, rising to only 9.6% by June 2016.

In contrast, 46% of US adults are married.

Even this number, though, is in sharp decline: in 1960, 72% of adults were married; by 2010, only 51% were.

The situation is similar throughout the Western world. Only 51% of Brits are married. In Italy, the crude marriage rate (the number of new marriages per 1,000 people), has fallen from 7.35 in 1970 to only 4.21 in 2007. Only 58.9% of Japanese are married.

Declining marriage rates across the developed world have been accompanied by declining fertility rates and rising illegitimacy rates:

Graph showing children per woman rate over the years 1960 – 2009 in USA, China, India, Germany, Russia population rates.
H/T: Share of Births to Unmarried Mothers by Race

As Wikipedia notes:

Only 2% of [Japanese] births occur outside of marriage[35] (compared to 30-60% in Europe and North America) due to social taboos, legal pressure, and financial hurdles.[32] Half of Japan’s single mothers live below the poverty line, among the highest for OECD countries.[36][37][38][39]

In other words, the Japanese welfare state, while generous, does not encourage single motherhood. Wikipedia also provides a discussion of the causes of declining Japanese marriage rates:

The annual number of marriages has dropped since the early 1970s, while divorces have shown a general upward trend.[29] …

The decline of marriage in Japan, as fewer people marry and do so later in life, is a widely cited explanation for the plummeting birth rate.[29][30][31][32] Although the total fertility rate has dropped since the 1970s (to 1.43 in 2013[33]), birth statistics for married women have remained fairly constant (at around 2.1) and most married couples have two or more children. Economic factors, such as the cost of raising a child, work-family conflicts, and insufficient housing, are the most common reasons for young mothers (under 34) to have fewer children than desired. …

Between 1990 and 2010, the percentage of 50-year-old people who had never married roughly quadrupled for men to 20.1% and doubled for women to 10.6%.[41][42] The Welfare Ministry predicts these numbers to rise to 29% of men and 19.2% of women by 2035.[43] The government’s population institute estimated in 2014 that women in their early 20s had a one-in-four chance of never marrying, and a two-in-five chance of remaining childless.[44]

Recent media coverage has sensationalized surveys from the Japan Family Planning Association and the Cabinet Office that show a declining interest in dating and sexual relationships among young people, especially among men.[44][45][46] However, changes in sexuality and fertility are more likely an outcome of the decline in family formation than its cause.[47][48] Since the usual purpose of dating in Japan is marriage, the reluctance to marry often translates to a reluctance to engage in more casual relationships.[30]

In other words, marriage is functionally about providing a supportive way of raising children. In a society where birth control does not exist, children born out of wedlock tend not to survive, and people can easily get jobs to support their families, people tended to get married and have children. In a society where people do not want children, cannot afford them, are purposefully delaying childbearing as long as possible, or have found ways to provide for them without getting married, people simply see no need for marriage.

“Marriage” ceases to mean what it once did, reserved for old-fashioned romantics and the few lucky enough to afford it.

Mass acceptance of gay marriage did change how people think of marriage, but it’s downstream from what the massive, societal-wide decrease in child-bearing and increase in illegitimacy have done to our ideas about marriage.

Entropy, Life, and Welfare (pt. 3/3)

Communism works so well, soldiers had to push Fidel Castro's hearse because the Cuban government couldn't find a working truck
Communism works so well, soldiers had to push Fidel Castro’s hearse because the Cuban government couldn’t find a working truck

This is Part Three of a series on how incentives affect the distribution of energy/resources throughout a society and the destructive effects of social systems like communism. (Part One and Part Two are here)

But before we criticize these programs too much, let’s understand where they came from:

The Industrial Revolution, which began around 1760 in Britain, created mass economic and social dislocation as millions of workers were forced off their farms and flooded into the cities.

Communism: the world's single biggest source of murder in the 20th century
Communism: the world’s single biggest source of murder in the 20th century

The booms and busts of the unregulated (and regulated) industrial economy caused sudden, unpredictable unemployment and, without a social safety net of some kind, starvation. This suffering unleashed Marxism, which soon transformed into an anti-capitalist, anti-Western ideology and tore across the planet, demolishing regimes and killing millions of people.

Reason.com attributes 94 million deaths to communism. The Black Book of Communism places the total between 85 and 100 million people. Historian on the Warpath totals almost 150 million people killed or murdered by communist governments, not including war deaths. (Wikipedia estimates that WWII killed, between battle deaths in Europe and the Pacific, disease, starvation, and genocide, 50-80 million people–and there were communists involved in WWII, also.)

cdchqnbumaaj5sjThe US and Europe, while not explicitly communist, have adopted many of socialism’s suggestions: Social Security, Welfare, Medicaid, etc., many in direct response to the Great Depression.

These solutions are, at best, a stop-gap measures to deal with the massive changes new technologies are still causing. Remember, humans were hunter-gatherers for 190,000 years. We had a long time to get used to being hunter gatherers. 10,000 years ago, a few of us started farming, and developed whole new cultures. A mere 200 years ago, the Industrial Revolution began spreading through Europe. Today, the “post industrial information economy” (or “robot economy,” as I call it,) is upon us, and we have barely even begun to adapt.

We are in an age that is–out of our 200,000 years of existence–entirely novel and the speed of change is increasing. We have not yet figured out how to cope, how to structure society for the long-term so that we don’t accidentally break it.

We have gotten very good, however, at creative accounting to make it look like we are producing more than we are.

ceumwjhviaiaquiBy the mid-1950s, the Industrial Revolution had brought levels of prosperity never before seen in human history to the US (and soon to Europe, Japan, Korea, etc.) But since the ’70s, things seem to have gone off-track.

People fault outsourcing and trade for the death of the great American job market, but technical progress and automation also deserve much of the blame. As the Daily Caller reports:

McDonald’s has announced plans to roll out automated kiosks and mobile pay options at all of its U.S. locations, raising questions about the future of its 1.5 million employees in the country and around the globe.

Roughly 500 restaurants in Florida, New York and California now have the automated ordering stations, and restaurants in Chicago, Boston, San Francisco, Seattle and Washington, D.C., will be outfitted in 2017, according to CNNMoney.

The locations that are seeing the first automated kiosks closely correlate with the fight for a $15 minimum wage. Gov. Andrew Cuomo signed into law a new $15 minimum wage for New York state in 2016, and the University of California has proposed to pay its low-wage employees $15.

There is an obvious trade-off between robots and employees: where wages are low enough, there is little incentive to invest capital in developing and purchasing robots. Where wages are high, there is more incentive to build robots.

labor_forceThe Robot Economy will continue to replace low-skilled, low-wage jobs blue collar workers and young people used to do. No longer will teenagers get summer jobs at McDonald’s. Many if not most of these workers are simply extraneous in the modern economy and cannot be “retrained” to do more information-dependent work. The expansion of the Welfare State, education (also paid for with tax dollars,) and make-work administrative positions can keep these displaced workers fed and maybe even “employed” for the foreseeable future, but they are not a long-term solution, and it is obvious that people in such degraded positions, unable to work, often lose the will to keep going.

picture-30But people do not appreciate the recommendation that they should just fuck off and die already. That’s how you get communist revolutions in the first place.

Mass immigration of unskilled labor into a market already shrinking due to automation / technological progress is a terrible idea. This is Basic Econ 101: Supply and Demand. If the supply of labor keeps increasing while the demand for labor keeps decreasing, the cost of labor (wages) will plummet. Likewise, corporations quite explicitly state that they want immigrants–including illegal ones–because they can pay them less.

In an economy with more demand than supply for labor, labor can organize (unions) and advocate in behalf of its common interests, demanding a higher share of profits, health insurance, pensions, cigarette breaks, etc. When the supply of labor outstrips demand, labor cannot advocate on its own behalf, because any uppity worker can simply be replaced by some desperate, unemployed person willing to work for less and not make a fuss.

gr2009012802033Note two professions in the US that are essentially protected by union-like organizations: doctors and lawyers. Both professions require years of expensive training at exclusive schools and high scores on difficult tests. Lawyers must also be members of their local Bar Associations, and doctors must endure residency. These requirements keep out the majority of people who would like to join these professions, and ensure high salaries for most who do.

While Residency sounds abjectly awful, the situation for doctors in Britain and Ireland sounds much worse. Slate Star Codex goes into great detail about the problems:

Many of the junior doctors I worked with in Ireland were working a hundred hours a week. It’s hard to describe what working 100 hours a week is like. Saying “it means you work from 7 AM to 9 PM every day including weekends” doesn’t really cut it. Imagine the hobbies you enjoy and the people you love. Now imagine you can’t spend time on any of them, because you are being yelled at as people die all around you for fourteen hours a day, and when you get home you have just enough time to eat dinner, brush your teeth, possibly pay a bill or two, and curl up in a ball before you have to go do it all again, and your next day off is in two weeks.

And this is the best case scenario, where everything is spaced out nice and even. The junior doctors I knew frequently worked thirty-six hour shifts at a time (the European Court of Human Rights has since declined to fine Ireland for this illegal practice). …

The psychological consequences are predictable: after one year, 55% of junior doctors describe themselves as burned out, 30% meet criteria for moderate depression, and 12% report considering suicide.

A lot of American junior doctors are able to bear this by reminding themselves that it’s only temporary. The worst part, internship, is only one year; junior doctorness as a whole only lasts three or four. After that you become a full doctor and a free agent – probably still pretty stressed, but at least making a lot of money and enjoying a modicum of control over your life.

In Britain, this consolation is denied most junior doctors. Everyone works for the government, and the government has a strict hierarchy of ranks, only the top of which – “consultant” – has anything like the freedom and salary that most American doctors enjoy. It can take ten to twenty years for junior doctors in Britain to become consultants, and some never do.

I don’t know about you, but I really don’t want my doctor to be suicidal.

Now, you may notice that Scott doesn’t live in Ireland anymore, and similarly, many British doctors to take their credentials and move abroad as quickly as possible. The British medical system would be forced to reform if not for the influx of foreign doctors willing to put up with hell in exchange for not living in the third world.

From the outside, many of these systems, from underfunded pensions to British medicine, look just fine. Indeed, an underfunded pension will operate just fine until the day it runs out of money. Until that day, everyone who clams the pension is in deep trouble looks like Chicken Little, running around claiming that the sky is falling.

There’s a saying in finance: The market can stay irrational longer than you can stay solvent.

BTW, the entire state of California is in deep trouble, from budget problems to insane property tax laws. They already consume far more water than they receive, (and are set for massive forest fires,) but vote for increased population via immigration with Mexico. California’s economy is being propped up by–among other things–masses of cash flowing into Silicon Valley. This is Dot.Com Bubble 2.0, and like the first, it will pop–the only question is when. As Reuters reported last February:

LinkedIn Corp’s (LNKD.N) shares closed down 43.6 percent on Friday, wiping out nearly $11 billion of market value, after the social network for professionals shocked Wall Street with a revenue forecast that fell far short of expectations. …

As of Thursday, LinkedIn shares were trading at 50 times forward 12-month earnings, making it one of the most expensive stocks in the tech sector.

Twitter Inc (TWTR.N) trades at 29.5 times forward earnings, Facebook Inc (FB.O) at 33.8 times and Alphabet Inc (GOOGL.O) at 20.9 times.

Even after the selloff, LinkedIn’s shares may still be overvalued, according to Thomson Reuters StarMine data.

LinkedIn should be trading at $71.79, a 30 percent discount to the stock’s Friday’s low, according to StarMine’s Intrinsic Valuation model, which takes analysts’ five-year estimates and models the growth trajectory over a longer period.

Linked in has since been bought out by Microsoft for $26 billion. As Fortune notes, this is absolutely insane, as there is no way Microsoft can make back that much money off of LinkedIn:

Source Fortune http://fortune.com/2016/06/13/microsoft-linkedin-overpaid/
Source Fortune

“Ebitda” stands for Earnings Before Interest, Tax, Depreciation and Amortisation. There is absolutely no way that LinkedIn, a social network that barely turns a profit, is worth more than Sun, EMC, Compaq, and Time Warner.

Shares normally trade around 20x a company’s previous year’s earnings, though right now the S & P’s P/E ratio is around 25. In 2016, LinkedIn’s P/E ratio has been around 180. (Even crazier, their ratio in 2015 was -1,220, because they lost money.)

Ever wonder where all of that money from QE is going? It’s turning into Ferraris cruising around San Francisco, and LinkedIn is not the only offender.

But these companies will not maintain fantasy valuations forever.

(While we’re at it: Why the AOL-Time Warner Merger Went so Wrong:

When the deal was announced on Jan. 10, 2000, Stephen M. Case, a co-founder of AOL, said, “This is a historic moment in which new media has truly come of age.” His counterpart at Time Warner, the philosopher chief executive Gerald M. Levin, who was fond of quoting the Bible and Camus, said the Internet had begun to “create unprecedented and instantaneous access to every form of media and to unleash immense possibilities for economic growth, human understanding and creative expression.”

The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals. Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger.)

So, that was a bit of a long diversion into the sheer artificiality of much of our economy, and how sooner or later, the Piper must be paid.

picture-5bWhen I try to talk to liberal friends about the problems of increasing automation and immigration on the incomes of the American working class, their response is that “We just need more regulation.”

In this cheerful fantasy, we can help my friend who cannot afford health insurance by requiring his employer to provide health insurance–when in reality, my friend now cannot find a job that lasts for more than a month because employers just fire him before the health insurance requirement kicks in. In fantasy land, you can protect poor people by making it harder for landlords to evict them, but in the real world, this makes it even harder for the poorest to get long-term housing because no landlord wants to take the chance of getting stuck with them. In fantasy land, immigration doesn’t hurt wages because you can just legislate a higher minimum wage, but the idea that you can legislate a wage that the market does not support is an absurdity worthy only of the USSR. In the real world, your job gets replaced with a robot.

picture-4bThis is not to say that we can’t have some form of welfare or social safety net to deal with the dislocations and difficulties of our new economy. Indeed, some form of social welfare may, in the long run, make the economic system more robust by allowing people to change jobs or weather temporary unemployment without dying. Nor does it mean that any inefficiency is going to break the system. But long-term, using legislation to create a problem and then using more legislation to prevent the market from correcting it increases inefficiency, and you are now spending resources to enforce both laws.

Just like Enron’s “creative accounting,” you cannot keep hiding losses indefinitely.

You can have open-borders capitalism with minimal welfare, in which the most skilled thrive and survive and the least skilled die out. This is more-or-less the system in Singapore (see here for a discussion of how they use personal savings accounts instead of most welfare; a discussion of poverty in Singapore; and Singapore’s migration policies.)

Or you can have a Japanese or Swedish-style welfare state, but no open borders, (because the system will collapse if you let in just anyone who wants free money [hint: everyone.])

But you cannot just smash two different systems together, heap more laws on top of them to try to prevent the market from responding, and expect it to carry on indefinitely producing the same levels of wealth and well-being as it always has.

The laws of thermodynamics are against you.

(Return to Part One and Part Two.)