Many economists are very generous people, but part of the mutilitarian moral philosophy of the discipline is to normalize or even laud homo economicus.  Homo economicus is the model citizen of economics: a greedy sociopath who only cares about maximizing his own mutility.  This is how economic models generally assume that people behave because it is simpler to model than more complex, realistic human characters.  But because we constantly think it, therefore we have become comfortable with it as a norm.

For example, today at a free seminar I am attending, the presenter said that we are free to use all of the work he has posted on his website.  “I’m an idiot,” he said, “It’s free.”  And he repeated that assertion the second day too.  But he isn’t an idiot for giving his work away for free.  All academics give away most of their creative work for free, but only economists denigrate themselves for doing public service for free.

In contrast, he also said, “You’re going to love this,”  and he went on to tell how an economist from the University of Texas gets 7 cents from each copy of Excel sold because of writing a “simple algorithm” in it called Solver.  But only an economist would love the guy who got rich off of every person who has bought Microsoft Office or Excel (most of whom have never even installed the optional Solver module) and call generosity idiotic.

Yglesias theorizes that the obsession about government deficits among elite Americans is motivated more by a hate of our big entitlement programs, Social Security and Medicare, than by anything else.  That is why elites have not changed their focus on deficits despite the rapid evaporation of the deficits.  As he says:

Social Security and Medicare are about the least efficient programs possible.  It would be much more efficient for people to just die when they stop working rather than retire.  That would be a tremendous boost for GDP/capita and economic efficiency. I sometimes ask my economics students if more retirement would be a good or bad for America and many of them think that more retirement is bad for us because they have internalized mutilitarian ethics of economics.

Words like “efficiency” sound good to young college students, and retirement is far from their immediate concerns.  So, to get past the mental walls of jaded youth, I go on to say that it would be even more efficient to eat people when they can no longer work which was the secret of the movie Soylent Green.  In a futuristic totalitarian society, unproductive people were ground up into high-protein food called ‘soylent green’ that was extremely popular because quality food was scarce due to overpopulation.  That is the logic of mutilitarian economics which worships The Economy using GDP. I often joke about this in class.

Retired people only dilute GDP per capita.  Economics could be more ethical if we measured The Economy using median consumption.  That would include old people too and more old people would boost the statistic.  It is possible that too much retirement could start dragging down median consumption, and then we could start thinking about how desirable that tradeoff is, but it is always much less of a tradeoff than there is between retirement and mutilitarianism.   Of course, the elites care more about growing GDP because they control an extra-large portion of GDP.  The rest of us should be more concerned about the average American.  That is the median.  And the median American really, really wants to look forward to a nice, long retirement.

The economics blogosphere recently lit up with responses to Fed Chairman Ben Bernanke’s commencement address at Princeton.  Bernanke noted the fallacy that a meritocracy always has merit and/or is fair.  Meritocracy means rule by the people with the greatest ability (merit).  This idea was revolutionary in 17th-century Europe because it contradicted the longstanding ancient regime doctrine that God intended for power to be transmitted through family lineages rather than by ability.  It is certainly fairer that power go to whoever has great ability and puts in great effort.  But Bernanke points out that a meritocracy is not much fairer than a hereditary aristocracy because in both systems, it is the luck of what family you are born into that determines if you will rule.

meritocracies may be fairer and more efficient than some alternatives. But fair in an absolute sense? Think about it. A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate–these are the folks who reap the largest rewards.

Bernanke goes on to argue that a meritocracy can only be a good system if the leaders act with a noblesse oblige to help the less fortunate.

The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others. As the Gospel of Luke says (and I am sure my rabbi will forgive me for quoting the New Testament in a good cause): “From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded.”

British sociologist Michael Young who coined the word ‘meritocracy’ seemed to agree recently.  He went so far as to suggest that the word be eliminated because Young now thinks meritocracy has little merit because it isn’t really fair even if it is efficient.   A true meritocracy would be great for mutilitarians who worship efficiency, but Bernanke pointed out that it does not serve the rest of society well unless the goal of the elite leaders is not to keep as many of the goods for themselves, but to serve the rest of society.

But how would you measure if a meritocracy is serving the rest of society?  The simplest statistic is to track median consumption.  Bernanke’s goal is laudable, but it remains vague and nebulous without a way to measure progress towards it and medianism gives a way forward.

Labor’s declining share of the national income is related to the declining median income because most people make almost all of their income from working (labor) whereas only the very wealthy make most of their income from owning capital.  When the share of income going to labor declines because the share going to the owners of capital rises, that is naturally going to reduce the median income (and potentially hurt about 90% of Americans).

Labor’s share of income has been declining since the 1970s which is also the time period that inequality has been rising, but we don’t know why labor has been in decline.  Most economists have been focusing on technological change–machines substituting for labor.  This means robots and machines working instead of people.  Since only a few rich people can own the wages of all the machines (like slave owners of the past), inequality rises.  But a recent result by Tali Kristal in one of the top journals in Sociology suggests that it is not due to technology.  It is the decline in unionization.  A summary:

It was highly unionized industries — construction, manufacturing, and transportation — that saw a large decline in labor’s share of income,” Kristal said. “By contrast, in the lightly unionized industries of trade, finance, and services, workers’ share stayed relatively constant or even increased. So, what we have is a large decrease in labor’s share of income and a significant increase in capitalists’ share in industries where unionization declined, and hardly any change in industries where unions never had much of a presence. This suggests that waning unionization, which led to the erosion of rank-and file workers’ bargaining power, was the main force behind the decline in labor’s share of national income.

So Kristal’s work suggests that it is not a rise of machines, but a decline in unionization that accounts for the decline of labor’s share of income.  Several commentators have suggested that the logical next step in this research is to look at other nations where unionization has not declined to see if they have had similar trends.  This is important work in deciphering the cause of the rise in inequality since the 1970s.  Some economists say that it is ‘poisonous‘ to think about inequality, and others have tried to deny that it is happening, but it is an important and neglected research topic and Kristal’s work is an important contribution that deserves folowup.

Today, my 14-year old played in the band for a Bluffton Memorial Day service and there was broad community attendance despite rainy weather and a last-minute change in venue.  Bluffton Ohio has strong civic engagement and this is easier in small towns but I imagine that many communities also get widespread community support of Memorial Day events to honor military service.  It was more about honoring the military than remembering the dead and seemed a bit redundant with veterans day.  Originally Memorial Day was about remembering soldiers killed in the Civil war, and later expanded to other wars, but other veterans’ deaths were remembered and I’m not sure if any soldier named in the ceremony had actually died in combat.

I expect that these kinds of events will decline as the current generation dies out because there has been a generational shift since the Vietnam war in attitudes towards military service.  Before Vietnam, military service was required of all young males in wartime due to the draft.  Of course, the draft existed during Vietnam too, but it has already begun to break down during that war.  Upper-class youth could more easily get deferments by going to college and because the baby boom produced lots of eligible soldiers, only about a quarter of Vietnam combat troops were draftees (compared to 66% during World War II).  And there were about three times as many Americans below the median income in combat in Vietnam as above the median.  Americans with connections and ambition like Dick Cheney, Mitt Romney, Joe Biden, and Bill Clinton got multiple draft deferrals and others like George W Bush were assigned to cushy National Guard placements with no danger of any combat.

According to AWOL: The Unexcused Absence of America’s Upper Classes from Military Service, the military was once a popular destination for elite families.  The draft was initiated in WWI because political leaders were worried that too many of the nation’s elites would volunteer to enlist.  “In 1956, 400 out of 750 in Princeton’s graduating class went into the military. In contrast, in 2004, 9 members of Princeton’s graduating class entered the services.”

In Bluffton, I was struck by how many community leaders had been in the military before Vietnam and how few veterans who were younger than Vietnam were community leaders involved in the Memorial Day service.  As the military becomes more and more of an institution for people below the median income, it will have fewer community leaders and there will be less organizational power to produce Memorial Day services.  There were younger community leaders there, but they were involved in the Boy Scouts or with the school.

Socioeconomic class is important.  One of the reasons that fads come and go is that upper-class people adopt new fashions to signal how cool they are.  But any fashion that can be copied by lower-class people will get less fashionable over time as the upper-class move to a new signal of their coolness to distinguish themselves from the common classes.  Freakonomics says this is the reason that baby names get fashionable.  Bertha was once a cool name for upper class babies, but it is easily copyable by lower classes and as it becomes more ‘common’ the elites move on to names that are more purely elite until Bertha becomes a purely lower-class name.  Eventually even the poor abandon it and copy names that have a more elite sound.

Similar fads determine military service.  Some societies have made military service a prerequisite for elite status.  The American South was once such a society.  But then the military was integrated and the white elites could not claim it as part of their privilege. And then the cold-war created a large standing army for the first time in American history.  It is expensive to keep a large army of elites and many were forced to work on foreign bases away from domestic elite social circles.  That further eroded the cachet of the military.   Then, we had an unpopular war that many elites considered misguided.   And finally, the end of the draft meant that fewer elites were forced to serve.  American elites decided that bribing people to enlist is more mutilitarian-efficient and drafting elites was no longer needed.  As a result, the military will be seen more and more as a kind of welfare-to work training program for lower-income families and immigrants.

The military is less of a cross-section of American society than it was during Korea and as military veterans get less representative of the nation, the gap between the military and the rest of society will widen.  If the trend continues, there won’t be as much interest in Memorial Day after the older, more elite generation of veterans passes away.  It will lose its historic significance and perhaps society will create new legends to base our future holiday traditions upon.  Easter got the bunny, Christmas got Santa, and Halloween became about cartoon-monsters and candy.  What will the new Memorial Day tradition be?  I predict it will be something to do with fire and ice.  The holiday is already morphing into an annual barbeque cook-off with ample chilled drinks.