Tuesday, January 31, 2012

Greece, the United States, and How Societies Fail

Is it possible for a society to become so dysfunctional that its very existence is threatened? Greece may furnish such an example.

Lynn Stout provides us with a vision of how humans are programmed to perform as members of society in her book Cultivating Conscience: How Good Laws Make Good People. She tells us that most people are driven by conscience, or by a tendency to exhibit prosocial behavior characterized by sharing and cooperation. She examines results from behavioral psychology experiments and arrives at this conclusion:

"Unselfish prosocial behavior toward strangers, including unselfish compliance with legal and ethical rules, is triggered by social context, including especially:
1. instructions from authority
2. beliefs about others’ prosocial behavior
3. the magnitude of the benefits to others
Prosocial behavior declines, however, as the personal cost of acting prosocially increases."

For this prosocial behavior to be expressed, it is necessary for the individual to feel that he is associating with others who are also behaving unselfishly. If the individual believes others are not "playing fair" or are trying to take advantage of him, then he will be tempted not only to act selfishly himself, but perhaps also to punish those who are abusing the system.

What we have then is a virtuous cycle where unselfish behavior can breed more unselfish behavior. However, the converse is also true. If selfish actions become common, then they can initiate more selfish responses and a sort of death spiral ensues.

"Once we come to believe our fellow citizens are mostly selfish, we behave mostly selfishly our selves, in a downward spiral that destroys wealth and well-being."

"We must hope our society has not reached some tipping point where declining prosociality becomes an irreversible, self-fulfilling prophecy. Some experts predict that once a nation becomes too poor in trust and cooperation, stagnation and decline inevitably follow."

Are there societies where such a negative trend has taken place? Could the US be approaching such a tipping point?

In his book, Boomerang: Travels in the New Third World, Michael Lewis provides us with a view of Greece that suggests it is a country that may have already begun to descend in such a downward spiral.

Lewis provides us with this fundamental observation about life in Greece.

"It’s simply assumed, for instance, that anyone who is working for the government is meant to be bribed. People who go to public health clinics assume they will need to bribe doctors to actually take care of them."

And then there is the matter of taxes.

"The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions per year paid no tax at all. The problem wasn’t the law—there was a law on the books that made it a jailable offense to cheat the government out of more than 150,000 euros—but its enforcement....One reason no one is ever prosecuted—apart from the fact that prosecution would seem arbitrary, as everyone is doing it—is that the Greek courts take up to fifteen years to resolve tax cases....Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to income tax goes officially unrecorded....compared with an average of about 18 percent in the rest of Europe."

Stout emphasizes how important it is for the authorities to set a good example for the citizens. What do the Greeks get to observe? The Greek government rang up a string of years where public debt was greatly under reported. In discussing this occurrence with the current finance minister, Lewis learns this:

"....the finance minister stresses that this isn’t a simple matter of the government lying about its expenditures. ‘This wasn’t all due to misreporting,’ he says. ‘In 2009, tax collection disintegrated, because it was an election year.’
He smiles.
‘The first thing a government does in an election year is to pull the tax collectors off the streets.’
‘You’re kidding.’
Now he’s laughing at me. I’m clearly naive."

One might begin to wonder what social interactions are like, given such an environment.

"The Greek state was not just corrupt but also corrupting. Once you saw how it worked you could understand a phenomenon that otherwise made no sense at all: the difficulty the Greek people have in saying a kind word about one another. Individual Greeks are delightful: funny, warm, smart, and good company. I left two dozen interviews saying to myself, ‘What great people!’ They do not share the sentiment about one another: the hardest thing to do in Greece is to get one Greek to compliment another behind his back. No success of any kind is regarded without suspicion. Everyone is pretty sure that everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate. And this total absence of faith in one another is self-reinforcing. The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing. Lacking faith in one another, they fall back on themselves and their families."

This certainly sounds a lot like what Stout predicted as the outcome for a society that allows itself to be motivated by selfishness.

That is a rather frightening description of life in a modern state. One has to wonder what the future might hold in store for Greece and its people.

With the political rancor, the anger over the recent financial debacle, and the demonstrations expressing frustration at income inequality, one might be wise to spend a few minutes wondering if we might become Greece someday—socially, not financially. While we do not seem to be anywhere close to the state Greece is in, the trends are not healthy. Perhaps the best thing to do is remember what Stout taught us about the better angels of our nature and act accordingly.

Remember to pay your taxes—most people do, although we only hear about the ones who don’t. When arguing politics, don’t assume intellectual dishonesty on the part of your opponent; inculpable ignorance or sheer stupidity are much more satisfying explanations. With all of the politically directed cash flying around it is easy assign dishonest motives to politicians when they do strange things. In this case—especially in this case—inculpable ignorance or sheer stupidity are much more likely explanations. An occasional smile at a passing stranger wouldn’t hurt either.

So keep the faith. According to Stout, it is really, really important that you do.

Sunday, January 29, 2012

Cultivating Conscience: Crime, Punishment, and New York City

It was easy to become enamored with the thesis of Sarah Blaffer Hrdy’s book, Mothers and Others, in which she proposes that the hallmark of humanity is not strife and competition, but rather cooperation and sharing. Those latter attributes would have been necessary for survival as mankind evolved over the eons to become Homo sapiens. If cooperation and sharing were long lived survival requirements, then one would expect a lasting cultural and a genetic predisposition towards such behavior.

Lynn Stout discusses human behavior, albeit coming from a different direction, in her book Cultivating Conscience: How Good Laws Make Good People. Stout is the Paul Hastings Professor of Corporate and Securities Law at the UCLA School of Law. By "conscience," Stout refers to the tendency for individuals to exhibit "prosocial" behavior, the type of responses that Hrdy would expect of her humans. Stout claims that these aspects of human behavior are not sufficiently recognized and makers of laws and policies often make mistakes and produce counterproductive results by ignoring them.

While Hrdy uses observations of humans in their natural state—hunting and gathering—to produce her hypothesis, Stout bases her conclusions mostly on behavioral psychology and gaming experiments. This particular type of experiment is designed to determine how individuals behave when placed in a situation where they can either exhibit a sharing response or a selfish response. The games are designed to have a range of boundary conditions in order to understand the factors determinative of prosocial or selfish decisions. Stout summarizes the results of these experiments as follows.

"Unselfish prosocial behavior toward strangers, including unselfish compliance with legal and ethical rules, is triggered by social context, including especially:
1. instructions from authority
2. beliefs about others’ prosocial behavior
3. the magnitude of the benefits to others
Prosocial behavior declines, however, as the personal cost of acting prosocially increases."

And in addition:

"....each of these three variables maps onto one of three universal and well-studied traits of human nature. These three basic psychological traits are: obedience to authority; conformity to the behavior of those around us; and empathy for others."

Stout’s analysis is worthy of further treatment, but for the moment let us concentrate on the notion that social context is very important in determining the behavior of an individual. Let us note that unlawful behavior can be considered an extreme example of selfish behavior. Consequently, the incidence of criminal behavior is dependent on social context as well. If the laws passed down by the authorities are deemed to be fair and are observed to be followed by others, then most people will follow the law also. The plea contained in Stout’s book is for those who make laws and determine policy to take note of this and to follow practices that encourage prosocial behavior rather than to incentivize selfish behavior.

Let us now allow Adam Gopnik to take us a little deeper into the issue of crime in New York City. Gopnik produced an outstanding article for The New Yorker titled The Caging of America, in which he discusses many issues related to our system of justice and our habit of incarcerating enormous number of individuals, particularly those from minorities. Here the focus will be on the last part of his article where he discusses New York and its anomalously large drop in crime over the past few decades.

Gopnik reminds us that the 1960s and 70s were permeated with the fear and concern caused by a massive nationwide crime wave.

"For those too young to recall the big-city crime wave of the sixties and seventies, it may seem like mere bogeyman history. For those whose entire childhood and adolescence were set against it, it is the crucial trauma in recent American life and explains much else that happened in the same period."

But then something happened, and crime began to fall, by as much as 40% across the country. The social fixes favored by the liberals and the retributive prison sentences favored by conservatives seemed to have nothing to do with it. Gopnik turns to a book by Franklin E. Zimring, The City That Became Safe for an explanation.

"One thing he teaches us is how little we know. The forty per cent drop across the continent—indeed, there was a decline throughout the Western world— took place for reasons that are as mysterious in suburban Ottawa as they are in the South Bronx. Zimring shows that the usual explanations—including demographic shifts—simply can’t account for what must be accounted for. This makes the international decline look slightly eerie: blackbirds drop from the sky, plagues slacken and end, and there seems no absolute reason that societies leap from one state to another over time. Trends and fashions and fads and pure contingencies happen in other parts of our social existence; it may be that there are fashions and cycles in criminal behavior, too, for reasons that are just as arbitrary."

New York City sticks out as an exception. Crime there did not fall 40%—it fell 80%. Zimring believes he has an explanation for this extra 40%. It was not so much the vaunted "broken windows" approach, rather instead:

"....small acts of social engineering, designed simply to stop crimes from happening, helped stop crime. In the nineties, the N.Y.P.D. began to control crime not by fighting minor crimes in safe places but by putting lots of cops in places where lots of crimes happened—‘hot-spot policing.’ The cops also began an aggressive, controversial program of ‘stop and frisk’—‘designed to catch the sharks, not the dolphins,’ as Jack Maple, one of its originators, described it—that involved what’s called pejoratively ‘profiling.’ This was not so much racial, since in any given neighborhood all the suspects were likely to be of the same race or color, as social, involving the thousand small clues that policemen recognized already. Minority communities, Zimring emphasizes, paid a disproportionate price in kids stopped and frisked, and detained, but they also earned a disproportionate gain in crime reduced."

"Small acts of social engineering" is just another way of saying that changes were made in the social context in which decisions about behavior were being made.

Gopnik then provides a passage with which Lynn Stout would surely concur.

"And, in a virtuous cycle, the decreased prevalence of crime fuels a decrease in the prevalence of crime. When your friends are no longer doing street robberies, you’re less likely to do them. Zimring said, in a recent interview, ‘Remember, nobody ever made a living mugging. There’s no minimum wage in violent crime.’ In a sense, he argues, it’s recreational, part of a life style: ‘Crime is a routine behavior; it’s a thing people do when they get used to doing it.’ And therein lies its essential fragility. Crime ends as a result of ‘cyclical forces operating on situational and contingent things rather than from finding deeply motivated essential linkages.’ Conservatives don’t like this view because it shows that being tough doesn’t help; liberals don’t like it because apparently being nice doesn’t help, either. Curbing crime does not depend on reversing social pathologies or alleviating social grievances; it depends on erecting small, annoying barriers to entry."

This sequence of findings is tremendously uplifting. Hrdy tells us that mankind evolved, by necessity, into a cooperative beast capable of sharing with others. Stout explains how in spite of the best efforts of some to convince us that our actions are driven by selfish motives, science has concluded that we still retain that innate prosocial behavior, and we will persist in that behavior unless provoked to do otherwise. And Gopnik provides us with an example where dreadful social problems seem to have been cured by minor tweaks to the social environment. Gopnik gets caught up in the moment and issues this statement:

"But one thing is sure: social epidemics, of crime or of punishment, can be cured more quickly than we might hope with simpler and more superficial mechanisms than we imagine. Throwing a Band-Aid over a bad wound is actually a decent strategy, if the Band-Aid helps the wound to heal itself."

Let us share the optimism and enjoy the moment—at least for now.

Saturday, January 28, 2012

Total Tax Burdens: Why We Need a More Progressive Income Tax

It is natural for the country to turn to its wealthiest citizens when it is in need of increased revenue. Numerous explanations can be heard for why this might not be a good idea. The most current response being propagated is that the wealthy are already paying more than their share. This theme has been reinforced by an inflated estimate of how many people pay no federal income tax. It is implied that having no income tax levied is equivalent to paying no tax at all. An article posted by the Citizens for Tax Justice, All Americans Pay Taxes, explains that there are more taxes levied than just federal income tax. These would include payroll, property, sales, excise, and estate taxes. When all federal, state, and local taxes are summed, it is found that these other taxes are significant, and that they are regressive in nature, falling most heavily on the lower income groups. This chart summarizes the results.

This data was compiled using a model that averaged over all the state and local variations, and apparently assumed standard federal tax rates applied. A number of interesting facts emerge. When federal income tax is excluded, the lowest quintile pays a tax rate 50% higher than that imposed on the top 1% of incomes. The lowest quintile by income actually sees a tax of 16% that it is responsible for. That is a rather heavy burden considering the meager incomes involved. Perhaps of most interest is the recognition that when total taxes are tallied in this manner, the tax burden as a fraction of income is nearly constant as one moves toward the higher income groups.

From this perspective, the notion that the highest income earners have the highest tax burden is just not true. In fact, one might conclude that we have more nearly stumbled into a "flat tax" situation. Perhaps the most interesting perspective, given the jargon of the day, is the realization that the 99% has a tax burden of 28.6% of income, while for the top 1% it screams all the way up to 30.8%.

Given these numbers, one can certainly make the case for extracting a few more dollars out of the top income groups with a more progressive federal income tax.

Thursday, January 26, 2012

Who Does and Who Doesn’t Pay Taxes

The claim that 50% of the US population pays no income taxes has been around the block several times by now. As with most politically-charged comments it has a grain of truth, but its intention is to mislead. The goal is to establish the myth that the wealthy are already paying taxes at such a high rate that it would be unfair to raise their taxes. Chuck Marr and Brian Highsmith provide a nice summary of reality in an article posted on the Center on Budget and Policy Priorities (CBPP) site: Misconceptions and Realities About Who Pays Taxes.

The following chart indicates that the past few years were anomalous in terms of tax rates.

"In a typical year, roughly 35-40 percent of households have no net federal income liability; in 2007, the figure was 37.9 percent. In 2009, however, two factors combined to cause a large, temporary spike in the share of Americans with no net federal income tax liability — the recession, which reduced many people’s incomes, and several temporary tax cuts that have now expired. The 51 percent figure reflects these temporary factors."

One should note that those included in the group with no income tax liability are students, the disabled, seniors living on social security, and wage earners whose incomes are pathetically low.

The claim that no income taxes are being paid is meant to imply that no federal taxes of any kind are being paid. That is just not true. Anyone who works or buys gasoline, for example, is paying federal taxes. The following chart captures the majority of these other types of federal taxes.

State and local taxes are not insignificant and they tend to be regressive. The following chart averages over the 50 states.

The authors provide this enlightening summary:

"Considering all taxes — federal, state, and local — the bottom 20 percent of households paid an average of just over 16 percent of their incomes in taxes (12.3 percent in state and local taxes plus 3.9 percent in federal taxes) in 2009. The next 20 percent paid about 21 percent of income in taxes, on average."

"In fact, when all taxes are considered, the share of taxes that each fifth of households pays is similar to its share of the nation’s total income. The tax system as a whole is only mildly progressive."

The tax system as a whole is only mildly progressive! I had never seen taxes, in their entirety, broken out in this manner. Thanks to the authors and CBPP for this burst of illumination.

Wednesday, January 25, 2012

On the Future of Capitalism: The State as Shareholder?

In a recent article, Return on Investment and Competition: Outmoded Economic Incentives?, we reported on an article by Christopher Meyer and Julia Kirby, Runaway Capitalism, that appeared in the Harvard Business Review. Those authors presented a view of classical capitalism and its traditional incentives as being overcome by events. They argued that capitalism, if it were to survive and flourish, must become motivated by broader societal goals rather than just the profit of any individual enterprise. They also argued that the model for the capitalism of the future would emerge from the developing countries that are growing rapidly and have the need and opportunity to experiment with economic approaches. As if in reply to that suggestion, The Economist produced an extended report on what it referred to as "state capitalism:" The Visible Hand. The report focuses on the developing countries of China, Russia, and Brazil which have all developed forms of state capitalism.

The report will eventually take the traditional stance that private companies will always perform better than firms with a degree of state control, but it does issue this statement:

"But the report will also argue that state capitalism is the most formidable foe that liberal capitalism has faced so far."

The state-run enterprises of today have little resemblance to those of earlier periods.

"The crisis of liberal capitalism has been rendered more serious by the rise of a potent alternative: state capitalism, which tries to meld the powers of the state with the powers of capitalism. It depends on government to pick winners and promote economic growth. But it also uses capitalist tools such as listing state-owned companies on the stockmarket and embracing globalisation. Elements of state capitalism have been seen in the past, for example in the rise of Japan in the 1950s and even of Germany in the 1870s, but never before has it operated on such a scale and with such sophisticated tools."

This chart provides an illustration of the strength of the state-assisted corporations.

"State capitalism is on the march, overflowing with cash and emboldened by the crisis in the West. State companies make up 80% of the value of the stockmarket in China, 62% in Russia and 38% in Brazil..... They accounted for one-third of the emerging world’s foreign direct investment between 2003 and 2010 and an even higher proportion of its most spectacular acquisitions, as well as a growing proportion of the very largest firms: three Chinese state-owned companies rank among the world’s ten biggest companies by revenue, against only two European ones.... Add the exploits of sovereign-wealth funds to the ledger, and it begins to look as if liberal capitalism is in wholesale retreat...."

Governments have demonstrated increasing sophistication in their interactions with industry. They have learned to back off trying to manage the smaller sectors of their economies and focus on large, strategically important areas and corporations. In most instances they have been content to become minor shareholders. This allows them to have influence, but to share influence with private investors. It places business in the hands of a cadre of professional managers who are both financially and politically adept. A corporation with its state as an investor has numerous advantages in terms of raising capital, tuning regulations, and interacting with the international community. This model, at present at least, has momentum, and has the aura of sustainability.

"This "axis of state capitalism" is gaining an ideological edge as the emerging world goes from strength to strength, America pulls in its horns, Europe implodes and the G20 takes over from the G7. Politicians across the region feel sure they have a formula that can combine economic dynamism with order, taking in the best of capitalism (those sleek modern corporations and clever wealth funds) without unleashing the havoc that devastated Russia in the 1990s and threatened to consume America in 2007-08. Proponents of this ideology revere Lee Kuan Yew as a founding father, see America as a wounded giant and dismiss Europe as self-indulgent and lazy. But they also admire Silicon Valley and Google, MIT and General Electric, Harvard Business School and McKinsey."

The authors of this article fear that this state-supported and state-directed model will provide incentives that will ultimately be detrimental to the international economy and to the states themselves. They provide some obvious criticisms:

"But state capitalism nevertheless suffers from deep flaws. How can the state regulate the companies that it also runs? How can it stop itself from throwing good money after bad? How can it remain innovative when innovation requires the freedom to experiment?’

The article concludes with this curious remark.

"But state capitalism’s biggest failure is to do with liberty. By turning companies into organs of the government, state capitalism simultaneously concentrates power and corrupts it. It introduces commercial criteria into political decisions and political decisions into commercial ones. And it removes an essential layer of scrutiny from central government. Robert Lowe, one of the great Victorian architects of the modern business corporation, described businesses as ‘little republics’ that operate as checks and balances on the power of the big republic of government. When the little republics and the big republic are one and the same, liberty is fatally weakened."

Those of you who had been worrying that government has not been doing enough to protect citizens from the predations of corporations will no doubt be surprised to learn that it is corporations—and the bigger the better—who are tasked with protecting us from the predations of government. All of those lobbyists are really patriots doing their duty as super-citizens.

The arguments presented against state capitalism seem tinged with quite a bit of wishful thinking. They really consist of two themes. Firstly, if it didn’t work before, then it won’t work now. Secondly, I don’t like it; that is not the way we do things; let’s hope it fails.

Traditional capitalists should be concerned. A subtle and efficient melding of economic and political interests can be a powerful mechanism for acquiring whatever it is that a country desires. While it can be misused, it is not clear that state capitalism is any more threatening than any of the other –isms we have endured throughout recent history. There is also no reason why the construct cannot produce efficient, powerful, and sustainable economic enterprises. And there is a bit of irony in seeing our proud captains of industry whining because others are not "playing fair."

Let us return to the starting point with the complaint by Meyer and Kirby that capitalism was in a runaway condition because of a failure to follow metrics that included the broader good of society. Having corporations led by individuals who have dual allegiances—to the good of the corporation and to the good of the state—seems a very interesting experiment.

Stay tuned: "the times they are a changin’"

Tuesday, January 24, 2012

Return on Equity and Competition: Outmoded Economic Incentives?

Christopher Meyer and Julia Kirby provide an interesting perspective on modern capitalism in an article in the Harvard Business Review. They contribute the provocative title, Runaway Capitalism, and this lede:

"When the wrong measures of success drive decisions, strengths can mutate into serious liabilities. Just look at the peacock."

The authors use the peacock as an example of a species that can commit "biological suicide" when demands of natural selection and sexual selection become misaligned. The analogy with capitalism is that incentives can develop that appear to be rewarding, but in the long term are detrimental to the health of the system. The false incentives noted are the metric of return on equity (ROE) and the concept of competition between economic units.

The focus on ROE emerged from the industrial revolution where the accumulation of scarce capital had to be efficiently allocated to the massive factories required for large-scale production.

"Investors, playing the role of peahens and determining which enterprises would continue to the next generation, needed a proxy variable with which to quickly and objectively size up their options for financial mates, and ROE filled the bill very well. Thus was born the feedback loop that to this day drives the mania for managing quarterly earnings to meet investor expectations."

The incentive to maximize ROE is compared to the peacock’s tail: it works up to a point, but when the tail becomes excessive, it threatens the life of the species. The peacock is in a runaway condition where its survival depends on human intervention. The authors consider capitalism to be in a similar runaway situation. While a big tail will ensure the individual peacock will enjoy a mate, the species as a whole is suffering. The focus on a corporation’s bottom line, to the exclusion of all else, is similarly a system-wide danger to the health of the species.

The authors claim that the health of society—and the business community—requires the adoption of a broader-based metric. They contribute this somewhat revolutionary remark in discussing the early emergence of ROE:

"This doesn’t mean that ROE was the point of business—the overall objective of commerce in society was then, like now, to better people’s welfare."

The authors’ bottom line is that businesses’ incentives must be switched to a broader metric that is consistent with the health (survival) of the species as a whole. The runaway focus on individual ROE can lead to the same population crash that biological species endure when poorly incentivized. Corporations can only thrive, long term, when they are imbedded in healthy societies. They can no longer separate their individual goals from those of society.

The authors go on to describe the notion that competition is a means of creating innovation as a fundamentally flawed premise.

"....vitality comes from innovation. And what gives rise to innovation? If you think the answer is "competition"—full stop—you are part of capitalism’s second dangerous runaway."

Capitalism creates wealth, and wealthy companies abhor competition. What they desire is a stable environment in which they can control their future.

"In the U.S. economy today, the curious effect of advocating ‘free markets’—free that is from regulation—is to strengthen the ability of companies that already possess market power to pursue even more of it....no firm actually wants to compete. Individually, all firms seek a so-called sustainable advantage, which is to say the kind of relief from competitive pressure that allows for ample margins, innovation on their own schedule...."

Since one firm is not allowed to dominate, major industries tend to be dominated by a few firms that will look a lot alike and end up with a non-threatening stability.

"....in our competition-obsessed business culture, the way to defend an oligopoly is to spend money to deter entry by new competitors. Innovation only suffers as a result. In classic runaway fashion, mistaking competition for a reliable proxy for vitality leads to choices that undercut that vitality."

For the authors, the answer is in focusing on collaboration as a source of innovation and thus vitality.

"As industry after industry becomes concentrated to the point of oligopoly, fixating on the preservation of competition loses its meaning. It also leads to a failure to notice—and to cultivate and preserve—an equally rich source of innovation in our newly connected world: collaboration."

Encouragingly, the authors point to instances where major corporations are beginning to loosen their hold on proprietary property as a means of hastening and improving product development.

The authors conclude that the world has changed and the manner in which capitalism is organized must change also. Rather than try to predict a path forward, they point to emerging economies where growth is large and there is more opportunity and more motivation to try new approaches.

"The importance of the emerging economies for capitalism, then, turns out not to be that they are a source of lower-cost labor for global firms, or even that they are exciting markets in which those forms can grow revenues. It is that they will reveal what kind of economy is suitable for an information technology world."

If the emerging economies are going to provide guidance on how to proceed, it is interesting to note that they seem to be leaning heavily towards greater state participation in business. There will be more on that soon.

Sunday, January 22, 2012

Grandmothers, Menopause, and the Survival of Our Species

Sarah Blaffer Hrdy, in her book Mothers and Others: The Evolutionary Origins of Mutual Understanding, provides this chart which indicates the paths nature took in arriving at our species, Homo sapiens. 

Evolutionary anthropologists tell us that the human-vectored branch broke off from the chimpanzee line about 6 million years ago, thus the timescale in the chart. There were many false starts—more than are included here—and most species variations failed. Homo sapiens eventually propagated from the African branch of Homo erectus that originated about 2 million years ago. This branch managed to exist for well over a million years and eventually spawned, about 200,000 years ago, the even larger-brained Homo sapiens that was capable not only of surviving, but of thriving. Our species is thought to have emerged from Africa 50-100,000 years ago as it spread across the earth.

Hrdy provides an answer to the question of why this line survived while so many others did not. She suggests that the answer is not to be found in looking at known human history and trying to project human attributes back in time, nor is it to be found in studying the other great ape species. While those exercises can be useful, the most edifying pursuit is the evaluation of the human populations that most closely resemble those from eons ago in Africa: hunter-gatherer societies.

The Africa of long ago would have been a difficult environment in which to survive. Food would have been scarce and periods of feast and famine would have been the norm. Our ancient ancestors could have only survived as small bands that developed the tendencies to cooperate and share. Evolutionary pressures would then have favored such attributes. These intentions could be expressed audibly and with hand signals, but this would also be the beginnings of the capability to express and interpret subtle changes in facial expression as means of determining emotion and intent.

Hrdy suggests the most critical development was that of cooperative breeding. This term refers to the ability of the mother to have assistance from others (alloparents) in caring for infants. This meant that the mother could spend more time gathering food while assuming others would protect and nurture her helpless infant. This arrangement also meant that the mother could breed more often, rather than having to wait until her child could be trusted to survive her absence. These are important differences between humans and the other great apes.

For cooperative breeding to be enhanced by natural selection there must be feedback to improve survival probability. The most direct evolutionary pressure would be derived from the survival of the infant itself. The infants who would live to maturity would tend to be those who could elicit nurturing responses from others. Hrdy refers to human babies as "sensory traps." In many species there has developed an innate interest in the newborns. This can involve hormonal responses driven just by the nearness to an infant. This is important for defining potential caretakers, but the infant must also play an active role. It is necessary for the infant to make itself an object worthy of the nurturing response of others. Hrdy tells us that it would have been critical for infants to learn how to read the intent and emotions of others besides its mother if it were to encourage others to care for it. We have all been face to face with a human infant and have spent long periods of time staring into its face trying to figure out what was going on behind those eyes. Meanwhile the infant is staring back at our face trying to figure out what it can learn from looking at us. Learning to smile and imitate the facial expressions of others has always been an effective way to generate affectionate responses from a potential care giver. In earlier times it might have been necessary for survival. The need to interpret the intent of others would continue to grow in importance as the child matured.

Studies of the existing hunter-gatherer societies support Hrdy’s picture. Many exhibit gift-giving tendencies that are designed to promote as many social ties as possible can be viewed as a remnant of the ancient need for cooperation and sharing. Such societies are very flexible in terms of "family" organization, with a matrilocal orientation being the most efficient because it provided related females as potential care givers. Mothers would begin to breed as soon as they became capable. There is no innate response that tells them how to care for an infant. That is a response that must be learned. Where better to learn it than from female relatives?

The recent realization by anthropologists that hunter-gatherer women quite frequently gave birth in the vicinity of their own mothers, provided they were still living, has led to greater interest in the role of grandmothers. Human females are almost unique in the animal kingdom in that they live long lives after they can no longer bear children. Anthropologists have discovered that in all sorts of societies infant survival is always greatly enhanced if the mother’s parent, the child’s grandmother, is available for nurturing.

A "grandmother hypothesis" has emerged. Grandmothers enhance the survival of their daughters’ children, therefore it is valuable to have grandmothers who live long enough to be around to contribute. This selects long-lived females as an evolutionary outcome. It also suggests that it is important that these grandmothers not be burdened by children of their own if they are to be available to assist others, selecting the characteristic of relatively early menopause in these long-lived women as an additional attribute.

Our species survived where so many others faded away. Perhaps grandmothers were the difference makers. Perhaps mature women around the world, as they pass through periods of hormonal assault, can take some comfort in the notion that they are replaying a role that was critical to the survival of the species.

Thursday, January 19, 2012

On the Lack of a Progressive Agenda

Francis Fukuyama produced an excellent article for Foreign Affairs titled The Future of History. His chosen subtitle is more revealing as to the content: Can Liberal Democracy Survive the Decline of the Middle Class? Fukuyama points out that with the growth of income inequality and the recession caused by the abuses of the current economic regime, the intellectual and populist energy seems to be coming from the libertarian right, instead of from the liberal left. He sees a similar trend in Europe where the left seems on the defensive against a resurgent right.

The great debate between the far right and the far left dissipated after the war when the growing middle class deflated the contentions of both extremes. A convergence of economic and social trends has led to a hollowing out of that middle class, and is disrupting the basis of the socio-economic bargain that has been in place for the past half century.

"....the relative size of the working class stopped growing and actually began to decline, particularly in the second half of the twentieth century, when services began to displace manufacturing in what were labeled ‘postindustrial’ economies. Finally, a new group of poor or disadvantaged people emerged below the industrial working class -- a heterogeneous mixture of racial and ethnic minorities, recent immigrants, and socially excluded groups, such as women, gays, and the disabled. As a result of these changes, in most industrialized societies, the old working class has become just another domestic interest group, one using the political power of trade unions to protect the hard-won gains of an earlier era."

Fukuyama sees these social and economic changes as being tremendously important. In his view, society is in need of a new approach to governance. He says the left has been largely absent from serious debate as it has focused on reminiscing about returning to the better times of the past rather than confronting the future.

"....the deeper reason a broad-based populist left has failed to materialize is an intellectual one. It has been several decades since anyone on the left has been able to articulate, first, a coherent analysis of what happens to the structure of advanced societies as they undergo economic change and, second, a realistic agenda that has any hope of protecting a middle-class society."

Fukuyama suggests the basis for a viable liberal philosophy.

"Politically, the new ideology would need to reassert the supremacy of democratic politics over economics and legitimate anew government as an expression of the public interest. But the agenda it put forward to protect middle-class life could not simply rely on the existing mechanisms of the welfare state. The ideology would need to somehow redesign the public sector, freeing it from its dependence on existing stakeholders and using new, technology-empowered approaches to delivering services. It would have to argue forthrightly for more redistribution and present a realistic route to ending interest groups’ domination of politics."

Progressives should pay heed to Fukuyama’s advice. While it is arguable about how much of past ideals are applicable to the future, it is not arguable that the left lacks a defined agenda with a set of goals and a viable path to attaining those goals.

The left has publications and media outlets, but much of what emanates from them seems to be focused on recreating the past. Yes it would be good if the rules weren’t rigged against forming employee unions, but would more unionization really solve the broad problem of income inequality? Yes it would be good if some of the outsourced jobs could be brought back home, but would that do more than raise prices a bit and create some minimum wage jobs? How does that address inequality?

Fukuyama, correctly, tells us that we have a current society and a current economy and those must be the starting points for wherever we wish to go. The world and humanity have changed considerably since the 60s. It is not possible to go backward to recreate that era.

What created the great prosperity and the social progress that emerged in the middle of the past century was the sense of community that grew out of the general suffering exacted by the Great Depression and World War II. People remembered the hardships and it became a moral imperative to ensure that they would not return.

Moral arguments are no longer as compelling as they once were. Most people are rather comfortable, and are more concerned with protecting what they have. The administration tried to sell healthcare legislation based on the moral issue of providing coverage to 40 million people who lacked it. No one cared. It was barely passed under the banner of "it won’t hurt anybody."

If one is to construct a progressive agenda, one must begin with economics, because it is the economy that must fund the path to whatever goals one wishes to set. The economy cannot be considered a kitty to be raided in order to redistribute wealth. Redistribution is a vital goal, but it has to be performed in the context of improving the economy or fixing some aspect that will lead to future problems—such as ever growing income inequality.

Robert Reich made a stab at constructing a new economy consistent with progressive goals. It was based on the assumption that the economy was inevitably weakened by increasing inequality because income distribution was becoming so skewed the majority could not create sufficient demand to support growth except through borrowing. By creating a more equal distribution through a more progressive tax system, a massive extension of the Earned Income Tax Credit, and a number of other initiatives, Reich argued that the economy and society would be in a stronger position and all would benefit. Reich had some very good ideas, but did anything come out of his exercise?

Much of the discussion on the left consists of people of like mind reaffirming their existing views—or criticizing their progressive-minded president for accepting small practical gains instead of failing on great ideological leaps forward. If a progressive agenda is to take hold it must be argued nationwide. It must be compelling enough to attract the attention of those who are truly independent in their voting preferences. It must be able to convince non-progressives that there is something for them to gain by embracing it, or something to lose by rejecting it. Most of all it will take time. One does not change political beliefs overnight.

Progressive goals must be placed in an economic context and they must be argued with those of differing views. They must be argued long, and they must be argued loud enough that people take notice. Progressives need a few champions to credibly convey their message. Perhaps Elizabeth Warren’s entry into politics is a first step. Perhaps Paul Krugman will wish to become involved. Why not have the cable networks stage economic debates instead of the insipid political ones that we have had to endure.

Fukuyama shares with progressives the fear that we are on an unsustainable course. If the progressives can’t get their act together and initiate changes—who else will?


FRANCIS FUKUYAMA is a Senior Fellow at the Center on Democracy, Development, and the Rule of Law at Stanford University and the author, most recently, of The Origins of Political Order: From Prehuman Times to the French Revolution.

Tuesday, January 17, 2012

Adam Smith’s Fear of "the Corruption of Our Moral Sentiments"

One of the most puzzling and disturbing aspects of the contentious run-up to the passage of the healthcare legislation was the strategy that the administration was forced to utilize. They initially began with a moral argument for legislation that would provide coverage to tens of millions who had none. This approach went nowhere. Eventually the argument became one best described as "what’s in it for me?" Have we become so self-absorbed as a society that 40 million people without healthcare insurance means nothing to us?

Tony Judt addressed the state of society in a wonderfully perceptive article in the New York Review of Books: What is Living and What is Dead in Social Democracy. We discussed his thoughts in Tony Judt on the Future of Social Democracy. In rereading Judt’s article I was struck by a passage that I had not thought much about previously. Judt was discussing the welfare reform legislation enacted under Clinton and describing it as a massive regression that discarded much of what progressive democracy had strived to attain.

"Why do so few of us condemn such "reforms"—enacted under a Democratic president? Why are we so unmoved by the stigma attaching to their victims? Far from questioning this reversion to the practices of early industrial capitalism, we have adapted all too well and in consensual silence—in revealing contrast to an earlier generation. But then, as Tolstoy reminds us, there are ‘no conditions of life to which a man cannot get accustomed, especially if he sees them accepted by everyone around him’."

"This ‘disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition…is…the great and most universal cause of the corruption of our moral sentiments.’ Those are not my words. They were written by Adam Smith, who regarded the likelihood that we would come to admire wealth and despise poverty, admire success and scorn failure, as the greatest risk facing us in the commercial society whose advent he predicted. It is now upon us."

Do we "admire success and scorn failure?" Of course we do, but that is not necessarily a fundamental flaw. Do we have a "disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition?" Perhaps we do. It is the notion that we might be able to despise and neglect the poor and those in trouble that is the most disconcerting. Are these flaws in us as human beings? Are these sentiments imprinted in us by a materialistic society?

Leonard Mlodinow addresses these issues in his book The Drunkard’s Walk: How Randomness Rules Our Lives. The human subconscious hates to leave an issue unresolved. It will resort to mental contortions to explain what is merely a random fluke. Mlodinow tells us that the trappings of exceptionality, such as wealth and power, will drive us to conclude that the person possessing these attributes must in fact be exceptional in some way. Mlodinow’s thesis is that this "special" person is often one who benefited from random occurrences that provided him with opportunities that others of equal ability could not benefit from. This approach is highly reminiscent of Malcolm Gladwell’s theme in Outliers. Viewing the successful person with undue adulation is perhaps unwise, but it does not qualify as a moral failing.

Mlodinow tells us that there is a dark side to this human tendency. The flip side would be to assume that people who were poor or who were some way in trouble had somehow earned their fate.

He describes an experiment designed to elicit this type of response. A woman was selected from a group of subjects. She was to participate in an exercise requiring her to learn sequences of syllables. If she failed she would undergo a painful electric shock. She was a part of the experiment and would only pretend to be in pain, but that was not known to the other participants.

"At first, as expected, most of the observers reported being extremely upset by their peer’s unjust suffering. But as the experiment continued, their sympathy for the victim began to erode. Eventually the observers, powerless to help, instead began to denigrate the victim. The more the victim suffered, the lower their opinion of her became. As Lerner [the researcher] had predicted, the observers had a need to understand the situation in terms of cause and effect."

For Mlodinow this sort of experiment demonstrated that people do tend to conclude that others who do not succeed, or who suffer, must somehow deserve their fate. He was led to conclude:

"We unfortunately seem to be unconsciously biased against those in society who come out on the bottom."

Is there a lesson one can take away from these considerations?

The great social advances took place in times of great urgency. For Europe the time for reordering society was in the post-war years. For the US, it was during the Great Depression. These were times when almost everyone was suffering and people were moved to collaborate and set up support systems to provide aid to all citizens. We are no longer in such times. Judt tells us that our children have forgotten the dire straits their parents and grandparents experienced, and are not capable of picturing themselves in the same situation.

Perhaps we will not be able to understand the condition of the least among us until the day comes when we realize that we ourselves could suffer that same fate. Perhaps we are too comfortable right now. Perhaps that will change. What is that quote about people who forget history?

Sunday, January 15, 2012

Of Chimps and Men: Males—What Are They Good For?

Sarah Blaffer Hrdy has written a fascinating book providing a view of how humankind evolved and diverged—perhaps over a million years ago—from the other great apes: Mothers and Others: The Evolutionary Origins of Mutual Understanding

Hrdy castigates early anthropologists (mostly male) for being so easily misled by recent history and by simplistic comparisons with other apes that they derived a male-dominated evolutionary scenario. In her words, the conventional wisdom became:

"....in Darwinian circles these days the most widely invoked explanation for how humans became so hypersocial is to stress how helpful within-group cooperation is when defending against or wiping out competing groups. We are told again and again that ‘the human ability to generate in-group amity often goes hand in hand with out-group enmity’."

"....from the early days of evolutionary anthropology to today’s textbooks in evolutionary psychology, the tendency has been to devote more space to aggression and our ‘killer instincts’ or to emphasize ‘demonic’ chimpanzeelike tendencies for males to join with other males in their group to hunt neighboring groups and intimidate, beat, torture, and kill them."

That is not a pretty picture of males in action, but it is at least...manly?

Hrdy’s hypothesis was discussed in Of Chimps and Men: Mothers and Others. She proposes that the key to human evolution lies in the development of cooperative breeding practices in which infants and children were nurtured by an extended group of caregivers. This freed the mother to spend more time gathering food and allowed her to give birth again before the child matured. The latter characteristic aided the survivability of the species. This form of childcare placed social burdens on the infants and children. They had to learn to read the intentions and emotions of others and learn how to elicit nurturing responses from others than their mother. Developing this capability was necessary for the survival of human infants in a way that was not replicated in other ape species. In other words, humans evolved to be the large-brained, organized animals we are today because we first developed the social skills that allowed the nurturing of the slowly maturing, voracious beasts, we were becoming.

The nurturing found in Hrdy’s early groups had to be female centered. Having another female who could hold and provide nourishment to her hungry infant when necessary would have been a great benefit for the mother, and a lifesaver for the infant. The most efficient form of organization for these early hunter-gatherers would be matrilocal—a mother associated with her mother, and other kin.

One might be wondering about the role of the father of the infant in this scenario. Hrdy introduces us to the general role of males in nature.

"To put men in perspective....across all 5,400 or so species of mammals in the world. In the majority of them fathers do remarkably little beyond stake out territories, compete with other males, and mate with females. With outlandish auditory and visual displays which often entail specially evolved weaponry, bellowing, barking, or roaring, males engage in fierce contests to route their competitors. Then ‘slam bam thank you ma’am’ and the inseminator is off. Male caretaking is found in only a fraction of mammals. By comparison, males in the order Primates stand out as paragons of nurturing, unusual for how much protection and even direct care of young they provide."

In Hrdy’s history, males developed a nurturing response, but one that was not driven strongly by the survival needs of the infant. The net result was that a variety of responses and behaviors are exhibited by males, both between species and within a species. On one extreme is the frightening habit of male infanticide—a significant cause of death in some ape species. Because mother apes lactate for many years in caring for their offspring, males, particularly from outside the immediate group, can become impatient and decide to kill the mother’s baby as the quickest means to render her fertile again. On the other end of the spectrum is a small primate species in which the father spends so much time fondling the infant that it bonds with the father rather than with the mother.

A more representative picture from apes and human hunter-gather societies might have the male hanging around the mother and new infant for a while and assist in providing food, at least initially. It then will wander off, but remain part of the group. It will remain aware of its offspring and will tend to protect the infant from harm if it can. If the mother can care for the infant without his assistance he will concentrate on his hunting and other group-specific chores. If the mother is having problems he will tend to devote more attention to nurturing responsibilities.

The human male is then left with an equivocal role, and an uncertain behavior pattern—one that is characterized by a complex genetic heritage rather than one determined by a highly selected response. Human males have genetic links to the species capable of infanticide as well as to those capable of a smothering nurturing behavior

"Some primates exhibit very high levels of direct male care, others do so only in emergencies, while still others exhibit no care at all. But the extent of this between-species variation pales when compared with the tremendous variation found within the single species Homo sapiens."

What we arrive at are human males who exhibit a variety of responses towards fathering and nurturing—from complete indifference to compulsive concern. Hrdy refers to this phenomenon as facultative fathering. Rather than the response being hard wired, men’s nurturing tendencies can be elicited by circumstance.

Hrdy reminds us that we must not forget that men also have a shared genetic heritage with the females of the species. Fathers exhibit some of the same physical responses that females undergo during pregnancy and at birth. The responses are at a lower level, but still strong enough to be correlated with changes in behavior.

"....men as well as women can be physiologically altered by exposures to babies. Prolactin, a hormone commonly associated with brooding behavior in female birds and lactation in mammals, provides a case in point. Prolactin levels in men residing in intimate association with pregnant women or new babies are significantly higher than those in other men. Other hormones linked to maternal sensitivity to infants, such as cortisol, also rise in fathers when they are in contact with pregnant mothers and subsequently with their newborns. On the other hand, testosterone levels fall."

One does not need to be a father to experience these physical responses.

"In one preliminary study....a mere 15 minute of holding an infant could produce measurable increases in a man’s circulating levels of prolactin. Furthermore, such prolactin effects are more pronounced in experienced fathers holding their second-born infant against their chest than in less experienced men, possibly because experienced fathers are presensitized. Such men also hold babies more."

Men’s nurturing responses can then, at least in some cases, be conditioned and enhanced. With all the social problems that arise from broken homes and deadbeat fathers, one has to wonder if society might not be in better shape if we encouraged teenage boys to earn extra money by babysitting, and conversely, pushed our young girls out to do some "bellowing, barking, or roaring."

Evolution has not provided men with the same socializing and nurturing instincts as women. Over the last 10-15,000 years human society has become more patriarchal and more conducive to the darker aspects of male behavior. The nurturing instincts of men may be lost entirely as they become even less associated with survival. Perhaps we can benefit by taking better advantage of the instincts that still exist. If the notion of babysitting teenage boys does not fly, Hrdy has another suggestion involving bottling the emanations of a newborn infant.

"The more responsive to infants men are, the more likely their testosterone will continue to drop with continued childcare. It makes me fantasize about bottling essence of neonate to spray about the rooms of teenage boys."

Friday, January 13, 2012

On the Future of Capitalism: Growth, Income Inequality, and Political Polarization

In a recent article, On the Future of Capitalism: Trade and Income Inequality, the inevitability of income inequality in an advanced globalized economy was discussed. It was concluded that the spread in income between the wealthy and the poor would continue to grow unless appropriate social decisions were made to limit this increase. Thus we have a picture in which a healthy economy causes deleterious social effects. Recently several articles have appeared that have suggested that the inequality produced is not only harmful for the individuals affected, but it is also harmful to the economy as a whole. The problem then is converted from a moral issue to a fundamental economic issue.

Andrew G. Berg and Jonathan D. Ostry provided and article for Foreign Affairs with the provocative title: How Inequality Damages Economies. They claim that the data indicates a correlation between income inequality and the duration of economic growth cycles.

"Some years ago, we set out to understand what sustains long periods of high growth, or ‘growth spells.’ Other economists, notably Lant Pritchett, had come to realize that countries rarely enjoy a steady economic climb. Periods of growth are often punctuated by collapses and stagnation. Moreover, spurring growth is often not the hard part; even in the poorest regions, growth takeoffs are relatively common. The hard part seems to be keeping growth spells going."

"What stood out most in our research was that growth spells were much more likely to end in regions with less-equal income distributions. The effect is large. If Latin America, for example, could bridge half of its inequality gap with East Asia, its growth spells would last twice as long as they do now. Remarkably, inequality made a big difference in our results regardless of the other variables we included or exactly how we defined growth spells, a claim that we cannot make for the other factors seen as conventional drivers of good growth performance."

The authors do not elaborate on the mechanisms by which growth might be limited, but there is a suggestion that if the only way in which the lower paid sector of the population can participate in a growth in wealth is by borrowing, then the growth process can become self limiting. Recent history would support such a conclusion.

"ANDREW G. BERG and JONATHAN D. OSTRY are, respectively, Assistant Director and Deputy Director in the Research Department of the International Monetary Fund. The views expressed here are those of the authors and should not be attributed to the IMF."

In an article in Businessweek, David J. Lynch has a related article: How Inequality Hurts the Economy. Lynch references the same study results as the previous authors, but then goes on to provide other issues to consider.

Lynch suggests that as economies develop they become more dependent on an educated workforce, but the appropriate level of training or education becomes harder to attain for those who are falling behind in terms of income.

"Today, when the quality of the workforce plays a larger role in determining who prospers, many economists—including Federal Reserve Chairman Ben S. Bernanke—now believe that equality and growth are linked. As Branko Milanovic, a World Bank economist, wrote in September: ‘Widespread education has become the secret to growth. And broadly accessible education is difficult to achieve unless a society has a relatively even income distribution’."

Lynch presents a less-often considered view that capital markets can be harmed by income inequality. While markets are the playing field of the wealthy, broad participation by the population is required in order to provide the necessary cash flow for a growing economy. A perception that markets are rigged in favor of the few can hinder this required participation.

"Inequality is not just a problem for the have-nots. Barry Ritholtz, chief executive officer of the investment research firm Fusion IQ, says millions of potential investors may conclude, as they did after the Great Depression, that the market is a rigged game for insiders. Such seismic shifts in popular sentiment can have lasting effects. The Dow Jones industrial average didn’t regain its September 1929 peak of 355.95 until 1954. ‘You’re going to lose a generation of investors,’ says Ritholtz. ’And that’s how you end up with a 25-year bear market. That’s the risk if people start to think there is no economic justice’."

Lynch then reminds us of political and social issues that can be economically disruptive.

"As rich and poor drift apart, the constituency that favors redistributive tax and spending policies grows....Ultimately, unbridled inequality threatens social stability as rich and poor nurse their mirror-image resentments."

This latter statement reminds us that we are currently in the situation where redistributive options are being ferociously argued, resulting in exactly the sort of political gridlock that can be harmful to both society and the economy. There is a famous study that relates income inequality to political polarization. An article by Nolan McCarty, Keith T. Poole, and Howard Rosenthal has the obviously relevant title: Political Polarization and Income Inequality.

These authors derive a measure of polarization that considers the divergence of congressional voting patterns as they proceed from a bipartisan pattern to a highly partisan pattern. They compare this historical trend with the growth in income inequality as represented by the Gini index. The tabulation of the Gini number is the internationally accepted approach to quantifying income inequality. It is generally represented as a number between zero and one, where zero represents uniform income, and one is a state in which a single person has all the income. The Census Bureau provides these numbers for the US, although others also provide estimates.

The authors produced this chart to compare income inequality and political polarization

The authors describe this correlation as "uncanny." They do not suggest that this polarization is representative of a class conflict between the poor and the wealthy, but rather may have been triggered by the realignment of the parties that occurred in the 70s and 80s when the moderately conservative Republican Party captured the ultraconservative wing of the Democratic Party. The two sides have become increasingly divided over economic assumptions and economic policies over the years.

The chart above has been duplicated and extended to more recent times by others and the correlation continues to hold. Even the Great Recession seems to have not changed the environment much. As this table indicates, inequality dipped slightly at the height of the crisis, but then continued its climb upward—as has political partisanship.

As we are aware, the economic tumult has been accompanied by increased political tumult—with no end in sight.

The various sources quoted provide a credible picture of unfettered capitalism providing inherent mechanisms that will ultimately limit its effectiveness.

The more one studies the collaboration between corporations and government that defines capitalism today, the more one has to conclude that the current bargain must shift to one in which government plays a more active role.

Wednesday, January 11, 2012

Population Management: Aging Societies, Total Dependencies, and Fertilities

One often hears tales of woe about the future when societies will overwhelmed by the needs of aging pensioners at a time when declining fertility will result in too small a taxpayer base to support them. Japan has a declining birth rate and about the oldest population on earth, and is usually pointed at as the country facing insurmountable problems because of these effects. It was refreshing to hear a counterargument presented by Eamonn Fingleton in the New York Times: The Myth of Japan’s Failure. He provides this observation on Japan’s population:
"Take, for instance, how Western observers have viewed Japan’s demographics. The population is getting older because of a low birthrate, a characteristic Japan shares with many of the world’s richest nations. Yet this is presented not only as a critical problem but as a policy failure. It never seems to occur to Western commentators that the Japanese both individually and collectively have chosen their demographic fate — and have good reasons for doing so."

"The story begins in the terrible winter of 1945-6, when, newly bereft of their empire, the Japanese nearly starved to death. With overseas expansion no longer an option, Japanese leaders determined as a top priority to cut the birthrate. Thereafter a culture of small families set in that has continued to the present day."

"Japan’s motivation is clear: food security. With only about one-third as much arable land per capita as China, Japan has long been the world’s largest net food importer."

The notion that a country such as Japan might have a demographic master plan is intriguing. It prompted some investigation into the issue of demographics and into what does and what doesn’t make sense.

If one makes the bold assumption that mankind will survive for many more generations in stable societies, one can expect the population distribution in a nation to reach equilibrium. The obvious equilibrium state seems to be a uniform distribution of population by age, modified only by life expectancy at old age. That seems to be what the UN expects as they project the world population out to the year 2100.  What is plotted are male populations on the left and female on the right, shown as a percentage of total population for each age group.

Compare this with Japan’s population in 2010, taken from the same UN source.

Some of the fine structure in the distribution is a residual of the war and post-war years. Japan appears to be well on its way to the equilibrium distribution with the exception of the obvious decline in birth rate. One can then expect Japan to see a number of aged retirees that will grow relative to the total population for some time.

How might one interpret this as a potential burden?

The UN 2100 distribution above can be approximated as being uniform to age 65 and then declining linearly until age 100. One usually talks about demographic burden issues in terms of dependencies—the number of non-workers compared to the number of workers. Remember that there is a cost to society to support children as well as seniors. For now we will assume that children are at least as expensive for societies as senior citizens. Traditionally, a child dependency is defined as the number aged 0-20 divided by the number between 20 and 65 and then multiplied by 100. Similarly, the dependency for the aged would consider the population over age 65. The sum of these two ratios would be the total dependency. The table below provides the UN’s dependency ratios for several countries as well as those expected for the equilibrium population.

Japan’s total dependency is quite similar to that of the US and the European countries, bar Russia. Its aged dependency is right at the equilibrium value, but it is balanced by a low child value. Its aged population share will continue to grow for some time, but it will continue to be balanced by fewer youths. One should also consider that in 1965, a time some think of as our golden age, the US had a total dependency ratio of 95, far higher than any values in the above table. This reminds us that the ability to support non-working segments of the population is a social decision, not a matter of economics.

Notice that China, with its much-derided birth-limitation policy, has a child dependency ratio similar to that of the developed countries. India seems to be continuing to follow its traditional path. Russia is the one country that manages to be short both young people and old people..

Economists shudder when they see the Japanese figures; they point to the declining number of working-age taxpayers and predict disaster. One day the economists may get something right, but it is probably not today. Japan is continuing to increase the per-capita wealth of its people with its current policy. If there is one economic trend to take heed of, it is the long-term unemployment endemic in most developed economies—8-10% for most. Fingleton gleefully points out that Japan, with its declining population, is at about half that value. The country that most nearly resembles Japan in terms of demographics is Germany, a country that is normally touted as an economic powerhouse. One should note that Germany has the lowest birth rate and the healthiest economy of the European countries listed.

There is no economic law that claims a capitalist economy is capable of providing work for every citizen. In fact, the intention of modern capitalism is to eliminate as many workers as possible in order to maximize profit. There is no limit to what automation and smart software can accomplish. There is no evil intent here—that is just the direction in which evolution is taking us. Combining this trend with a declining population—properly educated—could lead to a scenario in which per-capita wealth continues to grow. Combining this trend with a growing population—improperly educated— is a recipe for disaster.

The table below provides the UN’s fertility numbers for the same countries. The numbers relate the numbers of daughters per female who reach a fertile age. Consequently, a value of 1.0 indicates a population that just replaces itself.

Only India continues to expand its population. The USA continues to grow, but mainly from immigration. Again, Japan and Germany look most alike. For all its efforts, China still has a higher birth rate than Japan and Germany.

Societies need to put some thought into whether a declining population can be beneficial and economically feasible. Given the burdens on the climate, overuse of resources, and economic trends, fewer people might be good hedge against the future.

Let us view Japan—and Germany—as examples we might want to follow.

Monday, January 9, 2012

Russia’s "Crisis in Gender"

Kate Bolick wrote an extremely interesting article for The Atlantic titled All the Single Ladies. She discusses the evolving set of options and considerations that women encounter in the rapidly changing social environment in which they now find themselves. Some of the material covered in her article has been discussed in Women, Men, Marriage, and Society

Bolick suggests that the lack of acceptable male mates for a well-educated and well-employed female could be a "crisis in gender."

"Every so often, society experiences a "crisis in gender" (as some academics have called it) that radically transforms the social landscape."

She compares the current generation of women with that in an earlier gender crisis after the Civil War.

"Take the years after the Civil War, when America reeled from the loss of close to 620,000 men, the majority of them from the South. An article published last year in The Journal of Southern History reported that in 1860, there were 104 marriageable white men for every 100 white women; in 1870, that number dropped to 87.5. A generation of Southern women found themselves facing a "marriage squeeze." They could no longer assume that they would become wives and mothers—a terrifying prospect in an era when women relied on marriage for social acceptability and financial resources."

Clearly, the options and expectations for white women in the South were forever changed.

Bolick then goes on to mention Russia in the context of a gender crisis that originated in the massive killing of World War II. Russia and its unusual demographics have been discussed previously—most recently in Russia and Its People: A Death Spiral? The effect on Russian society from the change in gender ratio could be much greater than that attributed to the deaths in the US Civil War.

The following charts are from the UN population database. They provide a summary of the breakout of male and female populations by age group and as a percentage of the total population. Data are presented for Russia, Germany, and Japan for the years 1950 and 2010. Keep in mind the World War II came only 25 years after the bloodshed of World War I. Some of the demographic fine structure will be a result of that conflict in the cases of Russia and Germany.

The data from 1950 should be a good representation of the post-war population. There are vertical dotted lines to indicate where there is a surplus of one gender over the other. Bolick quotes war casualties as being 20 million men and 7 million women. The gender differences that resulted in the young to middle aged adult categories are enormous. In some age groups there are almost twice as women as men—potentially a much larger effect than was observed in the US after the Civil War.


The demographic hole caused by the war is obvious, but the net effect, particularly the deficit of males, is smaller in Germany than in Russia.

Japan seems to have the least perturbation from the conflict and a relatively small male deficit.

With the worst fighting occurring as the German and Russian armies moved back and forth over the Russian landscape, it is not surprising that Russia suffered the worst. This enormous loss of life and the extreme deficit in males required some action on the part of the rulers. Bolick provides this account.

"....Russia....In order to replenish the population, the state instituted an aggressive pro-natalist policy to support single mothers. Mie Nakachi, a historian at Hokkaido University, in Japan, has outlined its components: mothers were given generous subsidies and often put up in special sanatoria during pregnancy and childbirth; the state day-care system expanded to cover most children from infancy; and penalties were brandished for anyone who perpetuated the stigma against conceiving out of wedlock."

These are commonsense actions that might exist in any society. However, Russia felt a need to go further.

"In 1944, a new Family Law was passed, which essentially freed men from responsibility for illegitimate children; in effect, the state took on the role of "husband." As a result of this policy—and of the general dearth of males—men moved at will from house to house, where they were expected to do nothing and were treated like kings; a generation of children were raised without reliable fathers, and women became the "responsible" gender. This family pattern was felt for decades after the war."

This latter move may have been necessary, but it is not an example of enlightened social engineering.

Bolick points out that there are local conditions that are causing extreme gender differentials in Russia even today.

"Indeed, Siberia today is suffering such an acute "man shortage" (due in part to massive rates of alcoholism) that both men and women have lobbied the Russian parliament to legalize polygamy....In endorsing polygamy, these women, particularly those in remote rural areas without running water, may be less concerned with loneliness than with something more pragmatic: help with the chores. Caroline Humphrey, a Cambridge University anthropologist who has studied the region, said women supporters believed the legalization of polygamy would be a ‘godsend,’ giving them ‘rights to a man’s financial and physical support, legitimacy for their children, and rights to state benefits’."

Requests to legalize polygamy in Russia?

One has to conclude that if one desires to create a bizarre and dysfunctional society, Russia provides the perfect example. One begins with two catastrophic wars, a few generations of Soviet rule, an existential financial crisis, and then, with Putin, another generation of Soviet rule.

The last 100 years have been tough on Russia. Let’s wish them the best.

Saturday, January 7, 2012

Of Chimps and Men: The Distant Past, the Recent Past, and the Future

Sarah Blaffer Hrdy has proposed that the defining event in human evolution that allowed our subspecies to develop into the specimen we are today was the capability and need to be able to establish cooperative bonds with others. This may have occurred as long as a million years ago. The evolutionary focus for this capability arose in the infant-mother interaction when the need for infants to form bonds not only with their mothers, but with anyone who might provide them comfort and nourishment, became necessary for survival. The human mother-infant interaction differed from that of the other great apes in that the human mother was not capable of tending to her infant full time and also gathering the food necessary for survival. She and the infant had to depend on the assistance of others. The infants were required to develop the ability to interpret the intentions and feelings of others in order to encourage this nurturing. Humans thus evolved in a manner that facilitated cooperation, socialization, sharing, and empathy for others. It would be these attributes that guaranteed survival as a species and formed the basis for evolving into the creatures we have ultimately become. This scenario is described by Hrdy in her book Mothers and Others. Her thesis has been discussed previously in Of Chimps and Men: Mothers and Others.

Hrdy’s hypothesis is fascinating because it is completely at odds with the picture of humans and their intrinsic nature that has come to us from the study of recent human history, and from the study of the other great apes. Much of the anthropological literature has been focused on the development of social skills as a means of facilitating the male bonding needed to provide defensive or aggressive capabilities to protect or acquire resources.

Hrdy argues that the most efficient social organization for our hunter-gatherer ancestors involved females continuing to reside with their mothers and other kin after maturity, while the males would visit for breeding purposes. The fathers would then hunt mainly to provide protein-laden meat, leaving the mother with the responsibility for gathering the main components of the diet: fruit, nuts and other plant products. The mother could carry out her chores knowing that her infant would have others to care for it. The scarcity of food meant that an individual, or even a small group, would not always be able to provide sufficient nourishment for themselves. The species survived by learning to share with others in larger groups. Hunter-gatherer societies that can be studied today often participate in elaborate gift-giving rituals that are aimed at forming social bonds with as many people as possible. Hrdy muses on the current practices of exchanging gifts and cards at Christmas as perhaps a residue of that heritage.

When humans began to collect in larger groups and settle into lives of herding and farming, 10,000-15,000 years ago, the evolutionary pressures changed dramatically. As societies began to accumulate stockpiles of resources in the form of food and animals, it became necessary to organize in a manner that could provide protection for this property. This also begins the era most easily studied by anthropologists.

"Only with more reliable food sources....from horticulture or herding would higher population densities and increasingly stratified societies become possible, along with the need to protect such resources. As groups grew larger, less personalized, and more formally organized, they would also be prone to shift from occasional violent disagreements between individuals to the groupwide aggression that we mistakenly take for granted as representative of humankind’s naturally warlike state."

"....what is clear is that once local conditions promote the emergence of warlike societies, that way of life (as well as the genes of those who excel at it) will spread. Altruists eager to cooperate fare poorly in encounters with egocentric marauders."

Our past consisted of perhaps a million years of evolution driven by the need to cooperate in the care and nurturing of infants and the group as a whole. Society was generally organized around the needs of mothers and infants.

Our recent past is dominated by the internal and external interactions of large, complex societies. These assemblages became male dominated as a result of the need for males to band together to protect resources, or to steal goods from other societies. Competition and violence became common attributes. The inheritance of property came to be determined by male lineage, a change that led to the treatment of women, and their chastity, as property to be controlled by men.

Hrdy fears that these changes in evolutionary pressures may have unforeseeable consequences for the species. Given her focus, her main concern is over the diminishment in need to socialize and cooperate in order to survive.

"....a number of distinguished writers have commented on how the centrifugal pressures of modern life are diminishing our sense of community. The modern emphasis on individualism and personal independence along with consumption-oriented economies, compartmentalized living arrangements.....combine to undermine social connectedness."

Her particular concern is the mistreatment of infants that is inherent in our society today.

"All through the Pleistocene, infant survival depended on the ability of infants to maintain contact and solicit nurture from both mothers and others."

But today:

"....child survival became increasingly decoupled from the need to be in constant physical contact with another person, or surrounded by responsive, protective caretakers, in order to pull through."

Evidence is accumulating that children who grow up without this comforting feeling of attachment to "mothers and others" often develop psychological and behavioral disorders.

"In a finding that is not so surprising, developmental psychologists report that as many as 80 percent of children from populations at high risk for abuse or neglect grow up confused by or even fearful of their main caretakers, suffering from a condition known as ‘disorganized attachment.’ Far more unsettling is the finding that 15 percent of children in what are described as ‘normal, middle-class families,’ children not ostensibly at special risk, are also unable to derive comfort from or to constructively organize their emotions around a caretaker they trust; these children too exhibit symptoms of disorganized attachment."

What are the consequences of this condition?

"So far, follow-up studies of these children extend only as far as the late teens, but already we know that by the time they reach school age, children classified with disorganized attachment as infants have difficulty interpreting the feelings of others, are considerably more aggressive toward their peers, and are prone to behavior disorders."

Hrdy is quick to point out that any damage being to our children does not necessarily derive from the demise of the "nuclear family," an unnatural and recent invention, nor to the practice of working mothers placing young children in care centers. A well-run childcare center can provide the conditions an infant expects and needs. The problem is that too many parents lack access to such facilities, leaving their children in untrained or neglectful hands.

In other words, children who would not have survived in an earlier era, and have characteristics that were not chosen by natural selection, are thriving and propagating themselves. Since evolution is a random process, one cannot know where this might lead. Hrdy is particularly concerned that the precious attributes of nurturing, sharing, and empathy are no longer necessary for survival. What is not used can be quickly lost.

"If empathy and understanding develop only under particular rearing conditions, and if an ever-increasing proportion of the species fails to encounter those conditions but nevertheless survives to reproduce, it won’t matter how valuable the underpinnings for collaboration were in the past. Compassion and the quest for emotional connection will fade away as surely as sight in cave-dwelling fish."

It seems we are no longer who we once were; we don’t really understand who we currently are; and we may have no real control over whoever we might become. Women are beginning to regain control over their reproductive options. This could also take us off in some unknown new direction. If human civilization manages to survive, future anthropologists will have much to study.

As for chimps, let us hope they are allowed to flourish. Much of them is coded within us and we may need to continue studying them.
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