Links from the Weekend.

So.

  1. Socialism, the goal of the American left is not what it is cracked up to be. (HT)
  2. Also on the left, an odd remark. Let’s see, Picketty recently wrote a book offering that investment trumps salary. The left loved it, but seems to fail to notice that SS is salary, not investment, based. Odd that.
  3. Economics for our times.
  4. An Advertising suggestion.
  5. Apparently the right defends Charlie Hebdo, the left does less so. This is strange for a very left wing satirical mag, the actual publication it is unclear why anyone would buy a copy for any reason with attitudes like this.
  6. And the American left, trying to distance themselves from freedom of expression, succeeds.
  7. Legal PED? Tylenol?
  8. On military service.
  9. Here’s a stupid idea fronted by Mr Obama.
  10. Here is a less stupid idea that Mr Obama might have said, but didn’t.
  11. Hmm. So which study is more worthless this one or this one? Kinda seems a wash to me.

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13 comments

  1. Boonton says:

    Actually the right too has expressed reservations about elevating Charlie Hebdo. You’ll note for example Ross Douthat, First Things and Bill Donohue.

    I’m not clear what was up with the magazine, perhaps it has something to do with French culture which has a long history of anti-clericalism and profane cartoons?

  2. Boonton says:

    #2 Actually Social Security is roughly analgous to an annuity, which would be investment income rather than salary.

    I’m not sure how your comment connects, though. Picketty’s argument is that if r>g (returns on investment is larger than overall economic growth), capital becomes more powerful than salaries. Which makes sense since GDP can be calculated by adding up all spending or by adding all income. Income either ends up going to workers (salaries, wages, etc.) or capital (interest, rent, dividends etc.). Since the whole is equal to the sum of its parts of one part is growing faster than the whole the other must be growing slower.

    So how would proposals to cut Social Security by the Republicans play into that? Well Big Capital trumps little capital. Social Security checks can be seen as a type of capital but bond holders are much more powerful capital so their interests would presumably sway.

  3. Boonton says:

    #9 Actually the more you look at it the better the idea seems.

  4. Mark says:

    Boonton,
    Trust a liberal to think a stupid idea is “better” the more you look at it. Let’s see, community colleges have low costs now and suffer from a significant fraction of students who are just marking time, those kids who didn’t learn in HS are spending a few years on mom’s dime drinking and partying but “going to school” to avoid working. Making school free will increase the proportion of them. Motivated students, as you probably well know on inspection, almost certainly can get the low costs for community college now. But “free school” makes for a good sound bite and assuages liberal guilt at the taxpayers expense, which is why you think it’s a good idea I suppose.

  5. Mark says:

    Boonton,
    That’s not right.

    Actually Social Security is roughly analgous to an annuity, which would be investment income rather than salary.

    SS is like an annuity if you attend the Bernie Madoff school of investment methodology. Actual insurance companies offering annuities invest the money contributed and not just pay out annuity returns from annuity contributions. The salary of contributers pays those collecting with SS. This is not market/capital based but salary based. A 401K (akin to GOP market based SS proposals) on the other hand is investment of your money in market, the returns from which pay your later retirement.

    The point is SS is salary based, GOP SS replacements (like 401K or actual real life annuities) are market/capital based.

  6. Boonton says:

    Your distinction makes no sense. Clearly your 401K is also salary based since it is coming from your salary. You seem to be saying that an annuity like setup like Social Security depends upon other people’s salaries. So what? If you buy a company like Ally Financial in your 401K, your returns depend upon people paying back auto loans from their salaries. If you buy a utility your returns depend upon people paying their electric bills from their salaries.

    Actual insurance companies offering annuities invest the money contributed and not just pay out annuity returns from annuity contributions

    Usually but this isn’t important. The annuity company has a binding contract with you, in exchange for your payment today they agree to make payments to you for as long as you remain alive. How they get the money to pay you isn’t really important from a legal point of view and there’s no requirement that this be an insurance company….insurance companies offer annuities because it’s the mirror image of a life insurance policy (there all the small payments go from you to them with one big payment to you….or your heirs).

    The difference here is between ‘defined contribution’ versus ‘defined benefit’. 401K’s are a DC system, you put money in and what comes out depends upon what you put in and what you got to happen. DB systems provide you with a defined benefit coming out.

    In a DC system, if your money brought Enron stock that is your problem. In a DB system it is the problem of the administrator of the plan but legally isn’t your problem. Either DC or DB systems may be gov’t or private based and both have pros and cons. The biggest con of a DC plan is the danger that you will live a long time and exhaust whatever nest egg you built up. DB has the reverse problem, that you will die early so you’ll only enjoy a tiny bit of your benefit.

  7. Boonton says:

    Note also you can swap between the two systems. You can take your 401K and use it to buy an annuity thereby creating a DB type benefit. Likewise you can take a stream of payments (say from a lawsuit settlement) and sell it to a finance company in exchange for a lump sum thereby turning a DB benefit into a DC type one (I don’t think you can legally sell your social security benefit, but you can probably get close to it by taking out a loan for a large amount and then use your social security checks to make the payments).

  8. Boonton says:

    In terms of ‘partying’ I think you’re confusing 4 year schools with 2 year ones. Most people who go to 2 year schools juggling part time or even full time jobs. If you want to party, go be a freshman at a 4 year school where you live there full time and all your major living expenses, even food, are provided for leaving you with little to do but kill time with large numbers of 18-24 yr olds. You’re right many were average or below in high school, most people are average or below.

    Community schools do, though, offer what I think are these advantages.

    * They tend to offer more serious vocational programs than 4 year schools while not being insanely expensive like private vocational school.

    * They let kids try out college without making lifetime bankruptcy the price if it doesn’t quite work.

    * They are usually much better integrated into the local job markets.

    * They offer serious competition to 4 year schools. In my class there were several people who left County College for Harvard, getting a 4 year ivy league degree for the price of just two years.

    * They tend to be more innovative than 4 year schools. Community colleges were the first to try out telecourses, online courses, integrating courwork around full time work etc.

    * It is a logical place to expand public school. Free public education to 12th grade has been the standard for over 100 years now, while we’ve been told endlessly our educational needs have grown larger since then.

    * “Kids who didn’t learn anything in high school” is an overblown problem. Almost all kids do learn a bit at least in HS and those who are seriously not about school simply do not go to College of any type (or will go for only a single course or two). Community Colleges have done very well for kids who for whatever reason did not do well in High School but are open to learning.

    * Probably our largest problem is not the elite level but the middle level in the US, that goes for whether you’re talking about income or education. Getting a degree in Physics from MIT has probably never been as good, ditto for Harvard Medical or Law. The middle, though, is where most jobs are. For every doctor the economy needs, several nurses and several more medical techs are needed. Community Colleges are ideal for this purpose and beefing them up would probably let more 4 year schools concentrate on 4 year types of students.

    * Taxpayer funding is almost neutral for the college level. Student loans are a profit making enterprise for the taxpayer, in fact even loans that go into default still end up making net profits on average for the taxpayer

  9. Mark says:

    Boonton,

    In terms of ‘partying’ I think you’re confusing 4 year schools with 2 year ones.

    Nope. I wasn’t.

    * They let kids try out college without making lifetime bankruptcy the price if it doesn’t quite work.

    Ah … the party crowd identified.

    That being said, I agree that CC is a good idea. My kids balked at it and are I’m footing the bill for 4 years at a state school for 2 kids.

    It is a logical place to expand public school. Free public education to 12th grade has been the standard for over 100 years now, while we’ve been told endlessly our educational needs have grown larger since then.

    Hmm. A good argument against free public schools if I ever heard one. Unfortunately the lack of commitment to education by so many in K-12 is probably directly related to the “it’s free” aspect.

    Apparently you haven’t learned that free things are often not highly valued on account of their being free. Tis true, alas.

  10. Mark says:

    Boonton,
    Yer not making sense. Look SS is not based on the market. If you use your salary to purchase securities, that is indeed capital.

    OK. You bring two phrases “DB”, “DC”. OK, but you realize that is a false distinction in part. There are retirement plans based on markets (insurance annuity) and SS (ponzi scheme/Madoff school of investment) one of these is market backed, the other is not. That is important to Picketty. Not, alas, you. Typically (in real life) a “DC” system will have a far higher average return on investment, while a DB scheme is limited because the backer has to take an actuarial calculation on market expectancy (if it’s not the government, which as noted earlier should be constitutionally prohibited from engaging in anything where actuarial calculations and votes mix). What you don’t realize is that (or my guess is actually do realize but that realization is inconvenient to your argument) is that a purchased annuity will pay in full. If you outlive the payment plan, then your heirs inherit. If you don’t, the payment’s stop.

    If you buy a utility your returns depend upon people paying their electric bills from their salaries.

    Yes, and if you buy IBM stock you depend on them still making computers. If you buy any stock, you are depending on people in general continuing to work, to live, to eat, to be born, and to die.

    Backing up, the point is that going along with Picketty “conservative” retirement plans involve getting people to invest (capital) … ’cause that grows. Democratic plans tend to involve people depending more on the state.

  11. Boonton says:

    If you use your salary to buy securities, that is indeed capital.

    However what exactly is a security? It is a piece of paper (or digital file) that says you are entitled to something.

    An annuity would be a security that entitles you to a stream of payments. The problem of how to get the money to make those payments is a problem for the guy on the other end. He may be a bank, an insurance company, a finance company, a utility, a government (Federal, State, local) or even a government enterprise (for example, a bond backed by toll receipts on a bridge).

    An equity type of security (like a stock), does not entitle you to payments but it does entitle you to a share of ownership of something. If Apple gets liquidated after all its debts are paid you are entitled to a share of what, if anything, is left if you are a shareholder.) Since that rarely happens, there’s only two other ways to get money out of a stock. One is for the company to issue dividends to shareholders out of their profits. The other is to sell your share to someone else who wants to buy it for more money.

    Neither of those are ‘DC’ or ‘DB’. They are both two sides of the same coin. The first is generally more secure since you know exactly what you will get and when you will get it (barring something catastrophic like bankruptcy). The second is very risky since you are legally entitled to nothing but there is no limit to your potential upside.

    ‘DC’ and ‘DB’ are simply different ways to structure your retirement. DB is either Social Security or a pension fund. The fund manager has to figure out how to get the money to pay the benefits and he may do so with any combination of stocks or annuities (bonds are a type of annuity). ‘DC’ the structure is determined by you and while there’s no limit on your potential upside, there’s no limit on your downside either.

    markets (insurance annuity) and SS (ponzi scheme/Madoff school of investment

    Throwing a bunch of names at something is not an argument. Social Security is based on the Fed. gov’ts ability to tax future earnings. That’s about as secure a source of funds as you can get (in the future I don’t know if Apple or Amazon will be around as companies so buying them today and holding them for 30 years is risky, but people are likely to still work somewhere so funds are pretty much guaranteed to flow into Social Security barring the end of the world, the destruction of the US, or humanity achieving a singularity type event).

    Typically (in real life) a “DC” system will have a far higher average return on investment,

    Actually 401K’s have a real problem with exhausting…people empty them out long before they die. Social Security benefits flow to your last breath.

    Yes, and if you buy IBM stock you depend on them still making computers. If you buy any stock, you are depending on people in general continuing to work, to live, to eat, to be born, and to die.

    Errr no, over a decade ago lots of people brought Enron stock and depended on Enron making money. Today that stock is worthless yet people never stopped working, living, eating, being born and dying.

  12. Mark says:

    Boonton,

    However what exactly is a security? It is a piece of paper (or digital file) that says you are entitled to something.

    Your cash is paper. Doesn’t make it worthless.

    The problem of how to get the money to make those payments is a problem for the guy on the other end.

    Yes. And the point being made is that there is a difference if the backing is based on salary or market capitalization. You haven’t exactly cottoned to that yet.

    Throwing a bunch of names at something is not an argument.

    Again. I repeat. The difference is salary vs capital.

    Errr no, over a decade ago lots of people brought Enron stock and depended on Enron making money

    I hadn’t realized that the entire stock market vanished because Enron crashed. My wife says we have a lot in the market. I better tell her stocks don’t exist anymore because Enron failed.

  13. Boonton says:

    Something that doesn’t really make sense here, your attempt to connect this to Picketty. Whether you are saving in a retirement fund or contributing to a pension that then invests, both such vehicles are salary based. Unless you’re exceptionally lucky, your 401K is primarily driven by your contributions.

    “investment trumps salary” is relevant between those who live off investment income, ‘coupon clippers’ to use an older term.

    Yes. And the point being made is that there is a difference if the backing is based on salary or market capitalization. You haven’t exactly cottoned to that yet.

    This doesn’t really make any sense at all.

    I hadn’t realized that the entire stock market vanished because Enron crashed

    You don’t buy the entire stock market, you buy stocks and the fact of that investment rides on the fate of those particular stocks. The rest of the world, of course, will continue no matter what happens to you.