Peter Frase

As a social scientist, it is my job to come up with complicated explanations for social phenomena. And indeed, every interesting thing (along with many boring ones) is "overdetermined" by many causes, as Althusser would have said. But at all times, I keep one simple hypothesis in the back of my head. It's like the WD-40 or Duct Tape of social science hypotheses: it almost always comes in handy, and a surprising amount of the time it's the only thing you need:

• H1: Income inequality explains everything.

Take, for example, professional sports teams. They tend to lose money. Yet whenever one comes up for sale, there are many would-be buyers, and the value of sports teams has skyrocketed over the past few decades. But why has the increase in team value been so rapid, and so out of proportion to revenues? The answer, of course, is income inequality. Austan Goolsbee explains:

SO owning a sports team gives budding billionaires local stardom and a big return — no wonder that they are lining up to buy these teams. The only question that remains, I suppose, is why the vanity value of teams keeps climbing. You might have thought that this value would be about the same whenever there’s a sale, so that the capital gain wouldn’t be such a big component. But because ever-richer guys are bidding against one another, there has been persistent inflation in team values.

Since sports teams are essentially a vanity purchase for the ultra-rich, their price is determined by the amount of money available to the very richest people in our society. Recent years have been very kind to the top .001%, hence the rapid appreciation in the value of sports franchises.

When I was a kid, my mother had file folder labeled "deeply dumb". It was for things that went beyond ordinary, thoughtless dumbness, to reach a transcendent, awe-inspiring level of dumbness. Think motivational speakers, holistic medicine, or the men's movement.

Recently I came across some of the deepest dumbness I've seen in a while. The story begins with the July 13th edition of the Wall Street Journal, which contained an editorial purporting to ratify the existence of the Laffer curve. The Laffer curve refers to the idea that the government's tax income follows a parabola: past a certain point, raising taxes will actually decrease revenue, because people will undertake less economic activity. It's a right-wing theory that nobody who isn't a conservative ideologue takes seriously, but never mind that right now. The important thing is that the editorial contained this now-immortal graph:

It should be immediately obvious that something's wrong here. But if you contemplate the graph for a while, you'll discover that there is a wealth of dumbness concealed here, a complexity of idiocy that is not apparent at first glance. It took some of the blogosphere's best minds the better part of two days to fully comprehend the depth and richness of the stupidity contained in this one image. Here is a partial reconstruction of events:

• July 13th, 12:06 AM. Mark Thoma discovers the editorial, observes that the curve does not remotely fit the data. Produces a more plausible graph, in which the line is straight and slopes upward.
• July 13th, 9:47 AM. Brad DeLong reposts Thoma's post. This one really launched the graph into blog fame. DeLong dubs it the "most dishonest WSJ editorial ever."
• July 13th, 12:25 PM. Mark Kleiman links to DeLong and Thoma. He notes that the Y-axis of the graph does not show revenues (as a laffer curve diagram normally does), but revenues as a percentage of GDP. This means that the curve must rise from 0 to 100% rather than curving down: at a 100% tax rate, by definition revenues will be 100% of GDP (Unless GDP is zero, in which case it is undefined.
• July 13th, 1:41 PM. Matthew Yglesias pronounces this "worst editorial ever".
• July 13th, 1:50 PM. Kevin Drum arrives on the scene. Notes that the steep slope of the right side of the curve implies that, if you increased Norway's corporate tax rates just 4 points, to 33 percent, revenue would fall to zero.
• July 13th, 3:03 PM. Cosmic Variance adds that the curve implies that, at tax rates above 33 percent, government revenue is actually negative.
• July 13th, 3:57 PM. Max Sawicky applies actual statistical methods to the points on the plot, gets results that look more or less like Mark Thoma's off the cuff "reality based" drawing, whether you include the outliers or not.
• July 14th, 4:35 AM. Kieran Healy take's Max's lead, uses the whole kerfuffle to make a serious social scientific point. Questions the wisdom of calling Norway an "outlier". This eventually leads to bizarre and hilarious smackdown between Healy and Megan McArdle.
• July 14th, 1:07 PM. Hilzoy at Obsidian Wings takes a new approach, realizing that the absurdity of the original curve licenses every conceivable alternative curve that could be drawn over the data. Hilarity ensues, including a proposal for unlimited government revenue and a lolcat which is actually funny. A commenter rediscovers Mark Kleiman's neglected point that the mis-specification of the Y-axis invalidates the whole exercise from the beginning.
• July 15th, 1:09 PM. Coming back around for a final pass, DeLong gets off a crack at Megan McArdle before noting that Norway is plotted in the wrong place. If oil excise taxes are accounted for correctly, then it is not an outlier at all--it falls into the same linear pattern as all the other points.

Let's recap. The editorial defended an empirically discredited theory. It plotted data points incorrectly. It drew a wholly implausible and self-serving curve over the mis-plotted data. And it specified the axes in such away that even if the Laffer curve was a reality, even if all the data points had been correct, and even if the curve they drew was a fair model of the data points, the image still would have failed to make the point it attempted to make, because the labeling of the axes was inconsistent with the argument of the Laffer curve.

It's the wisdom of crowds, people! No individual could possibly have grasped so much dumbness at once.

Wending my way through some posts on OrgTheory, I ran across an interesting post by Omar Lizardo. He summed up something that's eaten away at me for a while as I attempt to socialize myself into academia:

I propose that one important component of success in science is the ability to not be serious about the “right” things and to be serious about seemingly unimportant things. This ability is not equally distributed: some people seem unable to not be serious about serious things. Other people are almost constitutively incapable of being serious about non-serious things; they are the ones who “don’t get” the scientific game and who think that getting into a (serious) shouting match over whether Simmel’s contributions have been justifiably neglected or whether Marx’s analysis of commodity fetishism is incoherent is the weirdest spectacle on the planet. My sense is that if you are one of those latter people and you are still in grad school, if you are “too cool” to take mere ideas seriously, you probably should be thinking about another day job.

He goes on to relate this to some comments from Bourdieu about "playing seriously".

I am, assuredly, someone who can be serious about non-serious things, even (or especially) Marx's analysis of commodity fetishism. Moreover, I enjoy being such a person, I want to be such a person, and I think the capacity to play seriously is one of the highest manifestations of the human spirit. Even in its lowest forms--such as the drunken bar argument over a sports team--I love and cherish the fact that our particular species of ape is one that can invest passion and energy in the inessential. Playing seriously is what we do in the realm of freedom.

My problem is that I feel guilty about this. This comes from my background in activism and socialist politics. As long as the inequalities of a class society persist, it feels like bad faith to be serious about the non-serious when there are plenty of serious things to be serious about. I've justified this before by arguing that since I have no talent for organizing, it's better for me to put my energy into academic work, which I'm good at, and which will hopefully be politically useful at some point. But that just feels like an act of bad faith, a way to legitimate not doing something that should be morally imperative because I don't feel like it. Maybe it would be better to do anti-war organizing badly than to do academic work well.

And of course, all this hand-wringing keeps me from doing academic work too, and instead causes me to procrastinate by writing posts like this.

We live at a time when advances in technology make possible an easing of the burden of work by a reduction in working hours, and a tremendous expansion of human freedom. A moribund capitalism prevents us from realizing this potential, by turning productivity into profit instead of free time, and by trapping the creative potential of human knowledge in the form of private monopolies enforced by the state. Two pieces of data illustrate this point.

The first is this graph, which comes from a report of the President's Council of Economic Advisors (PDF):

Forget what you heard about outsourcing. The manufacturing sector in the U.S. produces eleven times as much as it did in the 1940's, but employs a far lower percentage of the population than it once did. All that increased productivity could be turned into reduced hours for all; instead it is turned into profits for a few, unemployment and uncertainty for many.

The second datum comes from a remarkable study that was reported today. An analyst at a private firm looked at American companies in order to determine where their value came from:

Cardoza said his research showed that tangible assets, like plants, equipment and inventory, represented four-fifths of the market value of U.S. companies 30 years ago. The other fifth came from intangible assets like brand name, reputation and other factors. Now, he said, the ratio has flipped, and intangibles, which he valued by subtracting tangible assets from a company's total market value, make up four-fifths of the pie, with the largest slice made up of patents, copyrighted material and other forms of intellectual property.

In other words, state-granted monopolies over knowledge, rather than the production of commodities, are now the basis of American capitalism. The money that accrues to the holders of these monopolies is what, in the economic tradition, is known as a rent. Unproductive extraction of rent was something that was associated with the landowning nobility during the transition to capitalism, and bourgeois thinkers raged against it. Now the capitalist class is the unproductive, rentier class. But who will overthrow them?

To get a sense of the case against patent and copyright law--from both a left and right perspective--see this fascinating blog, where I first spotted the link to this article.

Critics of neoliberalism, from right and left, have often remarked on the nonsensical quality of Gross Domestic Product as a measure of societal wealth. Since GDP measures everything which is paid for on the market, it cannot distinguish between positive and negative forms of economic activity. A cure for cancer becomes equivalent to cleaning up an oil spill, so long as both cost money. On the other hand, helping your neighbor carry her groceries up the stairs has no economic value, while the production of cigarettes and the treatment of lung cancer become major sources of "wealth".

This critique is really two critiques, however, one of which has some radical implications. Merely pointing out that GDP valorizes things like environmental destruction and weaponry as forms of wealth leads to a tame (if salutary) reformism: such "public bads" should be taken off the books, or counted negatively against those good things which are produced for sale in the market. All this amounts only to a better accounting method, a better way of showing how much, and how efficiently, is being produced by the capitalist economy.

But the critique of GDP points to a deeper question: why should things be produced for money at all, regardless of whether they are good or bad? That is, do we really gain as a society when things which could be performed voluntarily and for free become paid jobs?

The standard response to this question is that, while it would certainly be nice if all production could be undertaken voluntarily rather than under the discipline of wage labor, such an anarchist utopia is totally impractical. And for many goods, this is a real and difficult problem. The same things that make production efficient--the division of labor, repetitive and tedious jobs--are the same things that make people not want to do them unless they get paid. To address this problem, we need some way of negotiating the trade-off between having more things and having more (and higher quality) free time. Of course, under the present fetishization of constant economic growth, it is impossible even to articulate such a trade-off, except in the language of consumer or worker "choice".

But let us set this set of problems aside for a moment. The tension described above is true primarily for physical goods, things like cars and shoes. But what is distinctive about the capitalism that has developed over the past few decades is the increasing preponderance, in the money economy, of commodities that are not physical objects, but intellectual property of one kind or another. Let us take a single example, from the computer software industry.

Microsoft is preparing to release the new version of Microsoft Windows, called "Vista". In the run-up to launch, the company is making every effort to persuade customers of the value of this new product. One of the most important targets of persuasian has been the European Union, which has been increasingly unhappy with Microsoft's monopoly business practices. To the end of persuading the EU to welcome Vista with open arms, Microsoft recently released this white paper. Its purpose is to outline the positive economic benefits which Microsoft Vista will supposedly bring to Europe. These, are, according to Microsoft:

• Within its first year of shipment, IDC expects Windows Vista to be installed onmmore than 100 million computers worldwide. More than 30 million computers inmthe region studied are expected to be running Windows Vista.
• In the six countries studied, Windows Vista-related employment will reach moremthan 20% of IT employment2 in its first year of shipment.
• While much of this employment will shift from Windows XP-related employment,mover 50% of the growth in IT employment will be driven by Windows Vista.
• For every euro of Microsoft revenue from Windows Vista in 2007 in the sixcountries studied, the ecosystem beyond Microsoft will reap almost 14 euro in revenues. In 2007 this ecosystem should sell over ?32 billion ($40 billion) in products and services revolving around Windows Vista.
• Within the six-country region, in 2007 over 150,000 IT companies that produce, sell, or distribute products or services running on Windows Vista will employ over 400,000 people; another 650,000 will be employed at IT using firms.

Billions of dollars in economic growth due to Vista! What wonderful news! But wait--what does this mean? One critic quickly saw through the gambit on offer:

The white paper may predict sales by the "Microsoft ecosystem" of over $40 billion in six of Europe's biggest economies, but what this figure hides is the fact that income for Microsoft and its chums is a cost for the rest of Europe. In other words, IDC's white paper is effectively touting an expense of over $40 billion as a reason why the European Commission should welcome Vista with open arms.As the paper itself mentions, half of this cost is down to the hardware. Some of these purchases would have taken place anyway; the rest represent upgrades from older hardware that cannot meet Vista's requirements. But if Vista did not exist (or, for example, if the European Commission were to block its sale for whatever reason), the old systems would not suddenly stop working: they would tick along for a few more years, gradually being replaced. The only justification for this hefty expenditure is to be able to run Vista: no Vista, no need to rustle up many extra billions on hardware upgrades outside the usual replacement cycles.

It's the same on the software side. The case for Vista itself is hardly strong. As the product's ship date has slipped, so more of its new features have been ripped out. Now it is not entirely clear what the benefit of upgrading is (apart from the evergreen "better security", of course). And without the need for hardware and software upgrades, the associated consultancy and service costs disappear too: most of Vista's $40 billion "benefit" is not only a cost, but an unnecessary one at that.

A product which imposes heavy costs on users, including accelerated hardware obsolesence, without clear benefits? Who would want such a thing? The economic growth being cited by Microsoft is evidently the kind of phony "wealth creation" cited by critics of GDP in the first sense mentioned above. But we can also ask the second question. Suppose that Vista did have discernible benefits. Certainly operating systems, generally, are useful things, and have to be upgraded sometimes. Even if Vista was a better piece of software, we might still ask: why should such a thing be made by a private company and sold for a profit? Why couldn't people just make it for free in their spare time, and then give it away?

To which Microsoft might respond: without the possibility of profit, there would be no incentive to innovate, and hence no-one would write operating systems. As against the cases of shoes and cars, however, a clear counterexample exists that vitiates this argument. The existence of free and open-source software is an excellent example of a post-capitalist form of production, in which social wealth is produced outside the system of economic (monetary) value.

The fact that the things like software can
be produced for free in the "social economy" does not mean that everything can be produced this way, as some of the more exuberant proponents of the "immaterial labor" thesis would have you believe. Yet by criticizing the facile equivalency between economic activity and wealth, we can begin to move toward a real critique of capitalism. This critique, if it is to reinvigorate socialism as an idea, has to take as its starting point this observation of Marx's, from volume 3 of Capital, one of the few places where he prefigures the communist future:

The actual wealth of society, and the possibility of constantly expanding its reproduction process, therefore, do not depend upon the duration of surplus-labour, but upon its productivity and the more or less copious conditions of production under which it is performed. In fact, the realm of freedom actually begins only where labour which is determined by necessity and mundane considerations ceases; thus in the very nature of things it lies beyond the sphere of actual material production. Just as the savage must wrestle with Nature to satisfy his wants, to maintain and reproduce life, so must civilised man, and he must do so in all social formations and under all possible modes of production. With his development this realm of physical necessity expands as a result of his wants; but, at the same time, the forces of production which satisfy these wants also increase. Freedom in this field can only consist in socialised man, the associated producers, rationally regulating their interchange with Nature, bringing it under their common control, instead of being ruled by it as by the blind forces of Nature; and achieving this with the least expenditure of energy and under conditions most favourable to, and worthy of, their human nature. But it nonetheless still remains a realm of necessity. Beyond it begins that development of human energy which is an end in itself, the true realm of freedom, which, however, can blossom forth only with this realm of necessity as its basis. The shortening of the working-day is its basic prerequisite.

Now the distinction between "freedom" and "necessity" is not as clear-cut as Marx seems to imply here, and it is not coextensive with "immaterial" and "material" goods. Fine wines and Sony Playstations are material goods, but are they necessary ones? This is, ultimately, a political question, but it is not one that can be resolved in capitalism. Defining the boundary between the realm of necessity and the realm of freedom is, I would argue, the specific content of socialism as a form of society and a political process (rather than a telos, a utopia, or an end of all politics). Framing things this way explodes the false opposition between state planning and market anarchy. The aim of socialism is not to pull all economic activity under the control of the state. Rather, it is to push out as much as possible from commodity production in the market to socialized labor in the "free" sector.* Conversely, only where necessary, that is, where other ways of organizing production are not feasible, would production be pulled in to collective control by the state, workers collectives, or some other communal form.

This formulation opens a new horizon of possibility for the socialist project, a new vision of what society could be like. It also clearly rules out certain longtime "left" preoccupations as being basically anti-socialist. The Keynesian idea that we need more jobs and higher wages for everyone comes to seem dilatory, in this view: what we need instead are shorter hours and a lower cost of living. As a corollary, we need things like socialized health care and child care, which reduce individual dependence on wage-labor. Neither of these are anti-capitalist programs in themselves; yet they point away from capitalism rather, as with Keynesianism, toward an intensification of its logic.

Left untheorized, here, is imperialism, or more generally, uneven development (and by implication, racism). If too much wage-labor is the constitutive problem of European and North American societies, this cannot be said of much of the rest of the world--or even of the pockets of deprivation within the rich societies. Thus, the socialist project must entail a massive, internationalist, redistributive project along with the anti-capitalist project delineated here, if it is not to degenerate into the construction of elite islands of privilege in a global sea of misery. (In this, Hardt and Negri are right: a guaranteed income and global citizenship are the sine qua non of the left project today. Unfortunately, their naive postmodernism and reflexive anti-statism made them unable to connect this realization with a coherent political strategy.) Likewise, ecology and the reality of physical limits on human societies demand serious attention, if we are to give real content to Marx's comment about "the associated producers, rationally regulating their interchange with Nature". And last but not least, what is described here is intrinsically also a feminist project: without a critique of unpaid women's labor, reduction of paid labor just reduces itself to a patriarchal ideology of the "family wage". But consideration of these dilemmas will have to wait for another time.

[* The free sector, or the realm of freedom, would be free in a double sense: its products would be available to everyone for free, like open source software; at the same time, the laborers themselves would be "free" in the sense that they work according to their own schedules and according to their own desires, rather than at the direction of a boss. The realm of freedom is thus, pace Stallman, free as in free spech, and free as in free beer.]