Did Fox News Torpedo the Republican Party?

July 3rd, 2009

Occasionally I get an idea for an entry that I put on hold because of a series I am working on.  After the 2008 election one of my immediate reflections that I put on hold was that corporate media, particularly the types such as Rush Limbaugh and Fox News, sunk the Republican Party.  This is a point worth mentioning even now.

I know this sounds odd.  Limbaugh has made no secret he supports the Republican Party.  Fox News is a little more subtle, actually claiming to be fair and balanced, but they are managed by a former political operative for the Republican Party and owned by a neoconservative.  There is no one paying attention to the empirical evidence that actually thinks Fox News exists to be fair and balanced.

Fair and balanced or not, Fox News is entertaining and popular, as is Rush Limbaugh.  As they entertain they persuade, which has become a problem for the Republican Party.  Our two-party system seldom has been accused of producing wisdom.  As political parties they must have access to wealth and vested interests in order to succeed.  Because of this they are not prone to self-regulation, adjusting flawed beliefs for any reason except to get a few more votes or dollars.  They must rely on other controls to “keep them honest.”

For example, an opposition party is supposed to provide opposition, thus exposing the weaknesses in the ruling party’s platform.  The case for invading Iraq had plenty of weaknesses, but they all seemed to escape the “opposition” party’s attention.  This was due in part to the unpopularity of opposing the war cries, made unpopular thanks to uncritical championing of these cries by Fox News.  Even now they are championing the notion that invading Iraq turned out to be one of Bush II’s successful actions.  In regards to our foreign policy the first line of homeostatic defense to keeping a political system in balance was removed.

The second line of defense for keeping balance is internal strife.  If the ruling party gets too large this should cause them to fragment into somewhat contentious factions.  This certainly happened to the Democrats fifteen years ago, but in the new millennium the Republicans seemed to be avoiding this problem.  Oh, there were fiscal conservatives complaining about Bush II not being the least bit fiscally conservative, but they were marginalized to an extent that probably made Democrats from the early nineties consumed with envy.  One of the fiscal conservatives, former Treasury Secretary Paul O’Neill, even was investigated for treason.  Now there’s a ruling party that knows how to induce conformity!

Once again, Republicans were assisted in this mission of squelching internal dissent by the likes of Fox News and Rush Limbaugh.  Limbaugh entertains by being critical of Democrats 24/7 (at least through 2008).  Fox News entertains by having liberal positions be overmatched and drowned out by conservative counterparts.  Both are heavy on the opinions and light on the evidence.  With this backdrop the rank and file was perceived to be conforming to Bush II policy even as there were some critics of importance.

With such immunity provided to a ruling party by the fourth estate, now run by corporate media, there remains one last defense to keep a political system in balance:  corruption.  If all forms of opposition to a ruling party are removed they will tend to abuse their power.  Abusing power rubs the citizens of a democracy the wrong way and they react by “throwing the bums out.”  Even without their image tarnished by the abuse of power a dominant ruling party has the vulnerability of no one else to blame when things go wrong.

Had Fox News and Rush Limbaugh been more critical of their own, when criticism was more than overdue, the Republicans might be in better shape now.  They might have self-regulated in response to pressures from the fourth estate before they were so soundly defeated.  Even now you will not discover what Bush II and Republicans might have done wrong from Fox News and Rush Limbaugh.  They now work hard at exposing any weaknesses in the current administration which, of course, should have been their function all along, regardless of the party in control.

Mt. Rotwand, Germany

July 1st, 2009

One approach to getting back in touch with our human nature is to get back in touch with nature.  From all the wilderness backpacking I’ve done I have many nature photos which I will share on a periodic basis.  There is one problem in that most of my photography came before the digital age and I need to digitize my library.  I’ll start sharing some recent, digital photos, though they are not from the backpacking expeditions, and go back in time.  In 2007 my family visited the family of Sarina Kreplin, our German “daughter” that we hosted through an AFS program.  They live in a town about an hour south of Munich.  One of our activities was hiking in the German foothills to the Austrian alps.  These photos are from the Mt. Tauberstein/Mt. Rotwand area.

Rotwandhaus and trails They have a system of hostels in the mountains similar to the AMC huts in the White Mountains here.  This is a view of Rotwandhaus from Mt. Rotwand, elevation 1844 meters.

Rotwandhaus backdrop This is the backdrop of mountains south, towards Austria.

DSC_0112

Both cows and sheep were common sights, as these wild, subalpine areas are treated somewhat as a commons.

Misinformation Principle #2

June 30th, 2009

A week ago I posted the first misinformation principle that is listed on my Systems out of Balance bookmark.  The second principle is one of the two most important.  We are misinformed about how we are misinformed.

If you are a Democrat, do you believe what those misguided Republicans are saying?  If you are a Republican, do you believe what those misguided Democrats are saying?  No?  I thought so.  We are not likely to be misinformed by people or groups we do not trust.  If you are a Democrat you are probably being misinformed the most by the Democratic party.  If you are a Republican you are probably being misinformed the most by the Republican party.  If you fancy yourself a libertarian you are probably being misinformed the most by “free market libertarian” think tanks.

It’s probably not a hard sell these days to suggest we are being misinformed by political parties.  Keep in mind that political parties are really a type of special interest group, as are think tanks.  The same reason why we need to be skeptical about political parties apply to all special interest groups.  They gain your trust by selling something we all believe is in the public interest, rather than their own special interest.  Many think tanks are selling liberty these days, but in the process they misinform us as to the distinction between natural rights and State entitlements.  Many patriotic interest groups are selling the love of country, but they misinform us as to the differences between idol worship and the true love for the people and places of our communities.

Most special interest groups probably believe what they peddle.  That is why the correct term is misinformation, and not disinformation.  Since they are part of humanity part of what they peddle is indeed in the public interest.  Yet they exist first and foremost to promote their own special interests, cherry-picking information along the way and sometimes even distorting the information.  The ends justify the means for folks and groups urgent about their own special interests.  They may even be aware of the misinformation but they are only doing what is best for us, in grand authoritarian fashion.

This rule of being most skeptical about groups you most trust does not apply the same way to personal acquaintances.  Making this important distinction draws in another misinformation principle, but I’ll save that for later.

Misinformation on Escalating Costs

June 27th, 2009

(Started on 6/27.   Update added below on 6/28)

As I was writing Systems out of Balance I tried to keep abreast of the misinformation being used to persuade us to continue with laissez faire policies.  The enhancement of liberty and wealth were the most dominant types of misinformation when I started.  Laissez faire economists twisted the meaning of free in virtually all its uses, while also providing constant reminders that a “rising tide lifts all boats.”

While I did my research and writing a new type of misinformation surfaced, or at least started to dominate the media enough to finally reach my attention.  The writing was on the wall that the economy was heading south.  I wish I could claim that my Essays 3 and 7, first written in 2006, were unique in forecasting the destabilization to come, but in truth many already were warning of the looming problems.  To the extent that laissez faire economists and puppet libertarians knew that trouble was on the horizon they started to generate misinformation about how we were turning socialist.  Sometimes you could hear the same news talk host or pundit declare that 96% of economic indicators were positive, while complaining about all the naysayers, then just a few weeks later start complaining about how socialist we have become.  This scampering by the laissez faire camp as they started to realize what would happen next was part comedy, part tragedy.

We have not trended towards socialism since the seventies, as plenty of empirical evidence already provided on here confirms.  The government has been commanding the economy for sure, but we have trended towards command capitalism rather than socialism, something quite easy to empirically demonstrate at this point.

Only recently have I become aware of a new misinformation focus by our favorite Puppet Libertarians and the Powell Cabal (metaphorically speaking).  It’s hard for even these folks to ignore the escalation of essential and expensive items in the middle class budget at this point, so of course they have been working out what self-serving misinformation will be their response.  Don’t you know that escalating costs have been due primarily to the escalating costs of goods and services only, inflated by government subsidy and other intrusions into markets?  It’s all the fault of socialist government mucking things up for business corporations.  I won’t deny the problems of government subsidies and intrusions, but this laissez faire misinformation claim warrants a closer look in the near future.

(Updated 6/28/09)

Actually, if laissez faire economists now acknowledge the escalating costs of goods they are reversing one of their misinformation campaigns from the nineties.  The Boskin Commission was formed in the nineties to explain why the Consumer Price Index might be overestimating inflation.  Mind you, the CPI lagged behind things such as housing and health costs, but the Boskin Commission came up with a bunch of reasons why the CPI might be preventing us from realizing just how well our economy worked at keeping costs down.  To have laissez faire sympathizers now acknowledge the opposite problem almost warms a middle class heart.

The point of their sudden conversion is to lay the blame at socialist government.  Yet government intervention and subsidy is at best a partner in crime, not the major reason that the most essential but expensive items are escalating in relation to median incomes.  The only time the laissez faire camp brings the financial sector into their finger pointing is with the synergy between government and lending institutions, with Fannie Mae and Freddie Mac the prime whipping boys.

The financial sector extends way beyond these lending institutions; insurance, realty, and Wall Street have contributed to the fast growth of the financial sector in relation to our overall productivity since the seventies.  Health costs and net dividends both track well with the growth in the financial sector during this same time span, yet the laissez faire camp wants us to believe the root cause for escalating health costs lies in the escalation of health care.  I guess they forgot all those reasons their own Boskin Commission once provided, when poverty was our main economic issue, for why goods and services don’t inflate as much as we might think from progress and new technologies.

Laissez faire apologists also seem not to understand that escalating health care costs, without the insurance component, contribute to both the numerator and denominator in a ratio of health costs to productivity of goods and services.  The fact that health costs track more closely with the financial sector than with GDP, plus the fact that private health insurance corporations exist to make a profit tacked on to health care, would seem to indict private health insurance over health care as the main culprit in escalating the ratio of health costs to income.

Similar arguments can be made about realty.  Yes, people build bigger and better homes, but most people buy already existing homes.  Until the recent crash a house could be flipped for a tidy profit with little productivity having been added.  Land can be subdivided to “earn” lots more capital with virtually no productivity.  What is going on in the financial sector is precisely the root cause for the inflation and destabilization.  Fannie Mae and Freddie Mac are a part of this problem for sure; but they are not the only lending institutions that form the problem, nor are lending institutions the only part of the financial sector that is the problem.

That’s not what you will be hearing from puppet libertarians and think tank blogs, though, so brace yourself for the new wave of misinformation that is coming.

Middle Class Culture

June 25th, 2009

What we believe and how we behave forms middle class culture.  Over the course of my lifetime we have become a culture more engaged by interest groups than by our communities.  To thrive in the setting of community you have to be willing to harmonize diverse beliefs and behaviors.  To thrive with an interest group you have to idolize their mission or beliefs at the expense of any alternatives.

Our transition to an interest group culture has a variety of effects.  We are more likely to be ideologues, ignoring any experiences that might temper what we believe.  We are more likely to worship idols, from rock stars to economic icons.  We are more likely to be conventional in our thinking, conforming to ideologies and idols rather than independently attempting to induce meaning from our own experiences.

Too many of us believe that more stuff and more privacy is what makes us independent, rather than the independent diversity of labor, adaptability of thought and stability of belonging that evolved in us for natural survival.  Goading us on this path are “libertarian” think tanks and “patriotic” interest groups.  We heed their calls towards materialism, individualism and/or nationalism, rather than focus on the people and places of our community.  Wealth, power and dogmatic elites make appeals to our vanity, cynicism and apprehensions to persuade us of the need to believe the same things they believe and support their behaviors.

These are the cultural issues that guide our political decision-making and our economic resource distribution.

Of course, you can also get occasional comments from this forum on American Idol.  No, the irony of that does not escape me.

Misinformation Principle #1

June 23rd, 2009

Available from the Products and Services feature (right hand side of page) is a bookmark in pdf form that states 10 principles of misinformation.  The first one relates to a topic recently discussed, that we are misinformed on what is natural or normative.

In Systems out of Balance I report on a version of the Travelers Dilemma game that a cultural anthropologist played with his college students and with Mayans that he studied.  This game involved the decision of how to split unearned money (much like stock).  Students steeped in economics tended to choose a lopsided split of 99:1, thinking their partners should rationally accept free money no matter how small.  However, these splits were rejected by the partners out of some quaint notion of fairness and consequently no one got anything.  Other students not enlightened by economic dogma tended to split the capital 50:50.  Mayans tended to split the capital 49:51, giving their partners a slight advantage.  Those primitive cultures truly are ignorant, aren’t they?  However, the offers of the Mayans and the unenlightened Americans were, of course, accepted by their partners and these people were better off than those steeped in economics.

Can experiments such as the Travelers Dilemma be viewed as truly natural?  No, but they are connected more to what is natural than beliefs thought up in armchairs from the Enlightenment to the present.  Since the Enlightenment we have been fed a steady diet of our inherent natures and what is natural that has been steadily flawed.  Elites are the ones most likely to believe this misinformation, and they are the most likely to spread it.  Yet the middle class places a gullible trust in what experts and authoritarians tell us.  Couple this with a tendency to become what people perceive you to be, and the misinformation on what is natural becomes self-fulfilling.  Yes, we are a greedy culture, including the middle class, all the more pity that we become this in spite, not because, of our inherent nature.

A Guide for Persuading Empiricists

June 21st, 2009

As I look back on my last entry, and on a recent flurry of comments, I realize how I’ve been diverted from my objectives of how I wanted to transition this web site.  It will take some time, but I will be working on getting forums set up where people can post anonymously, thus removing whatever obligation I might have felt for somehow addressing anonymous comments left on this main page.  Yet I do hope to encourage empiricism on the forums page, and I promised that this entry would provide tips for how to persuade an empiricist.

One might accuse me of hypocritically playing the scholar by the way I seemingly gush over John Stuart Mill’s description of liberty in my book, Systems out of Balance.  One might think I hold him in the same reverence that the Cato Institute idolizes Milton Friedman, or the Mises Institute idolizes Ludwig von Mises.  Yet I also criticize Mill in the book for his paternalism towards particular races, not a typical manifestation of idol worship that you might find from libertarian think tanks.  I also triangulated his views on liberty with other experiences, as an empiricist would be inclined to do.

Before I read On Liberty I already had read The Wisdom of Crowds by James Surowiecki.  Surowiecki’s work was embedded more in economics than politics, I do not know if he is aware of how closely his thesis resembles Mill’s, but his presentation included very convincing empirical evidence that could be applied concurrently to the ingredients for either collecting wisdom or nurturing liberty.  Surowiecki’s work may not have attracted my attention to begin with, had I not done my own research into wisdom, based on experiential learning in a setting where natural rights thrived.  Ultimately, my homage to Mill is based on my own extensive experiences in distinguishing between liberties founded on natural rights from those that only can be provided by an indulgent government.  This is the essence of empiricism, the primacy of experience over belief or “infallible axioms” as the foundation of knowledge.

I mentioned once on The Middle Class Forum that I watched a presentation on Milton Friedman by Edward Glaeser, a laissez faire economist who does occasional work for The Heritage Foundation, though this particular presentation was at another think tank, The American Enterprise Institute.  Two oft-quoted gems came up.  Here is one of them:

“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.”

Where is the empirical evidence to support this statement?  I would not accept something even stated by Einstein (or Mill), just as Einstein himself did not automatically accept Newtonian mechanics (and Newton may have been an even greater genius than Einstein), without the empirical evidence in support.  That is the most obvious requirement to persuade empiricists.  For example, most dictatorships that have been imposed over the last century resulted at least in part by some form of foreign intervention (often ours), which would make Friedman’s rather dogmatic proclamation tough to prove even if true.  Furthermore, the longest lasting “governments” that ever existed were democracies indeed, the type of grassroots democracy practiced by early foragers and agrarians that lasted thousands of years for some of the cultures not discovered until the twentieth century.  There evidently exists an imprecision of meaning here that is typical of pronouncements such as Friedman’s.

Proving Friedman’s thesis would have to be more clear on the terms being used, an important requirement for persuading an empiricist.  Neither Friedman, nor the Cato Institute, nor their “libertarian” disciples have a very discriminating view of liberty.  There is a difference in a liberty that corresponds to a natural right from one that corresponds to a government indulgence, and the latter can be used to subjugate the former.

Democracy can vary on a continuum of paternalistic top-down to consensual or federated grassroots forms.  The latter would focus on natural rights such as independent thought, the former on government indulgences such as property.  Our democracy is paternalistic, and has grown increasingly so since about 1798.  There have been occasional corrections, such as overturning the Alien and Sedition Acts or limiting the number of presidential terms, but on the balance we have a more entrenched form of top-down party democracy now than we ever had.  To persuade me of Friedman’s claim I would be most interested in the empirical evidence from the grassroots or federated democracies, which would not include ours.  Those democracies do exist over the course of history and prehistory; I suggest “libertarians” in general do some further research in this matter to get a better feel for both liberty and democracy.

The other gem that came up at that AEI presentation was Friedman’s four categories of spending.  Rather than list them here I refer you to how they were used for a discussion topic at the Library of Economics and Liberty, an interest group with the typical “free market libertarian” agenda.  Please do visit that link and scroll down to glance at the discussion.  There is indeed some discussion, not everyone shares the same opinion, but they all accept Friedman’s categories of spending uncritically.  Consequently, all the opinions are of a deductive nature, cherry-picking a factoid or a reason here and there to reinforce fixed beliefs, without an empirical understanding for why Friedman’s categories of spending should reveal humans to be so naturally selfish.  I find particularly amusing the post from the person who would worship Friedman as a god.  Scholasticism at its finest!

I feel like the person needing to point out that the emperor has no clothes on.  There has been no empirical evidence offered, by Friedman or his disciples, that these four categories of selfish spending are natural human responses.  They would not be my responses, nor the responses of most middle class people I have experienced in my neighborhood.  They would not be the response of the nomadic groups of backpackers I studied.  One survey of such revealed that, out of five self-esteem constructs, family and social self-esteem increased the most.  That is the kind of enhancement you will get when you snatch someone out of American culture and into nomadic culture.

You would not find empirical verification for the selfish instincts among the altruistic foragers or agrarians that lived in small social bands.  Of course, this is according to cultural anthropologists who actually have experienced these early cultures; for “libertarians” such experiences do not weigh heavily against the unexperienced beliefs of an idol like Friedman.  I do not doubt that Friedman’s categories of spending are culturally induced responses now to be typically expected, but that implies problems with the top-down  structuring of social systems, not problems of human nature or the middle class.

Obviously, an empiricist has to rely on the experiences of others, but there are standards of validity and reliability to apply.  I find the Statistical Abstracts and the NIPA tables to be more valid and reliable than many alternatives for relating the economic experiences of this country.  Certainly they are more valid and reliable than data compiled by almost every think tank with an agenda, as deductive and scholarly as some of those entries may be.  Think tanks can, at times, conduct highly objective research with the appearance of validity and reliability as found in the NIPA tables.  However, objectivity does not translate automatically to experiential or experimental validity/reliability.  This is a finer point of empiricism that escapes such scholars as Milton Friedman.

Think tanks and their blogs have a specific agenda: to reinforce a particular dogma they were created to support.  This does not mean that everything that comes out of them is wrong.  It does mean that everything they deduce from fixed beliefs is suspect.  They are like the university system that existed before the Enlightenment.  They may trap the unsuspecting into thinking they are empirical, but invariably their arguments take the form of the discussion I linked for Friedman’s categories of spending.  There are folks who cherry-pick their way through think tank sponsored books, articles, reports and blogs, deducing which tidbits of information fit their fixed beliefs better than the alternatives, then echoing these tidbits in a manner to make corporate media proud.

This is something I would like to change with the forums to be offered here.  I’ll give up my quixotic quest to remove anonymity on the forum pages, but I hope it does not regress into the think tank style of discussion.  To encourage empiricism, from those that either want to support or refute my own views, here is a guide for persuading other empiricists:

Be precise in your meaning of terms.

Address what is natural or normative in regards to your claims.

Present empirical evidence of greater validity and/or reliability than previously available to the empiricist you wish to convince.

Triangulate your empirical evidence with other empirical evidence when possible.

Use inductive reasoning guided by the evidence, rather than deduce the meaning of evidence according to permanently held beliefs.

Now back to our regular transitional programming here on The Middle Class Forum.

A Farewell to Mr. Illuminati

June 20th, 2009

My comment policy dictates that people leave their name and town of residence for their comments to be posted.  The anonymity of the Internet is not a good thing in my view, fueling the movement away from community that is occurring in this country.  Admittedly this may be a quixotic battle on my part, the Internet was not meant to establish traditional communal bonds, but on the main page of The Middle Class Forum I will continue this battle nonetheless.

However, there is a new forums feature (imagine that) being offered that will accomplish two things when it reaches its potential.  It provides anonymity to posters that this page will not, and it will phase me out of the discussions.  The phase out may be a long, gradual process, but it needs to occur so that I spend more time researching and writing future books than spending much time on initial posts or responses on a web log.

The new forum feature may be just the answer for a person I have referenced as the Illuminati guy.  He is an anonymous poster whose initial posts were quite witty and clever.  My policy prevented me from approving them as comments, but I cut and pasted to approve and respond to them.  When he kept commenting anonymously I declared I would stop responding because I would only be playing the role of enabler to his anonymity.  Then I recently broke that resolution, sort of, with my post about the vitality curve.  After that post the flood gates opened and there were three more comments from Mr. Illuminati, all anonymous and therefore not approved.

Just reading the comments requires a taxing consumption of time as I try to infer some empirical evidence behind them.  Initially, I thought his motive was entertainment and read them as such without worrying about the lack of supporting evidence.  Lately, it appears he wants to be taken seriously, but his comments continue to be scholarly rather than empirical.  I now am puzzled as to why he continues to comment anonymously.  If he hopes to persuade me personally he should have learned by now he needs to do so empirically.  If he is hoping I will relent and allow his comments to be read anonymously by all, that is not going to happen on the main page.

If the latter is his goal then the new forums page may be just the ticket for him.  I will administer the usual controls on flaming,  and continue to encourage empiricism as basis for information, yet a person can be anonymous and scholarly on these forums and survive, perhaps even thrive.  If he really does hope to persuade me personally, I’m afraid he will have to do so on these new forums as I will soon be designating his comments as spam.  As a conciliatory gesture, my next post will feature some of his recent comments to provide some tips as to how he or anyone might persuade me empirically, rather than with a scholarly, think tank type of approach that lacks experiential/experimental evidence.

As an empiricist, the only belief I hold sacred is that no beliefs can be held sacred.  They all must be potentially amendable by experience or experiment, no matter how strong the current conviction with which they might be held.  Scholars are not bound (or liberated) by this approach to knowledge.  For this reason I doubt anything as flimsy as empirical evidence will be persuasive to Mr. Illuminati, but if he stoops to the same empirical standards he might be able to persuade me.

I believe Mr. Illuminati may be a smart guy, and for that reason he is already suspicious as to how open I really am to amending my views.  Fair enough, there is truth to this.  I am well-steeped in middle class experiences from the neighborhood where I always have lived and how I lived my life.  I am well-steeped in the natural experience of traveling with small nomadic bands of people, having backpacked thousands of miles on journeys up to seven months with cohesive groups of other long-distance backpackers.  I also have conducted research on these nomadic bands, and have corrobrated these experiences with the works of cultural anthropologists who studied the “real thing.”  Consequently, it would take some very thorough presentation of alternative middle class and/or natural experiences or experiments that would change the beliefs I formed based on my own experiences.  If a person has not had these experiences on his/her own, nor can point to a researcher who actually has, he/she is not likely to succeed.  Still, I pledge that a person could succeed in amending my beliefs on the middle class and/or what is natural about being human with sufficient empirical evidence.  Some tips on how to do so comes next.

Invalid Vitality

June 19th, 2009

I received an anonymous comment the other day that casts some doubt as to whether a true meritocracy would benefit the middle class because of the vitality function (curve).  In essence I have addressed this already on The Middle Class Forum in a post that brought up the Pareto Principle.  The Pareto Principle theorizes that 80% of resources are concentrated within 20% of the population.  The vitality curve is the same as the Pareto curve, except with a specific implication that executives should manage their workforce accordingly.  On a broad scale this would imply that since 80% of the merit in a work force presumably comes from 20% of the workers the compensation should reflect that, which would not bode well for the middle class.

To recap, the Pareto Principle is a theory with more legs than it deserves.  There are some natural phenomenon that roughly abides by this principle, I read once the distribution of mass in sand grains on a beach as one example, but most do not.  To attribute this “natural” cause to any cultural phenomenon is spurious at best.  Ironically, the Pareto Principle was not about nature to begin with, but an observation made about the Italian economy.  Since then its adherents have cherry-picked instances where it applies as proof of its natural validity.  As a person who gets involved in various community activities I am reminded by people (apparently proud of themselves) how 20% of us volunteers do 80% of the work.  The vitality curve, as “validated” by Jack Welch in particular, is but another bit of “proof” offered in support of the Pareto Principle.

The middle class needs to be skeptical of everything, I mean everything, that comes out of the economic field.  As a whole economics has been based too much on dogma rather than theory, scholasticism rather than empiricism, deduction rather than induction.  Its champion of empiricism, Milton Friedman, was in fact one of the more dogmatic economists in the field, not above ignoring whatever valid experiences got in the way of his “theories.”  Fortunately, determining whether one thing is necessary and/or sufficient to cause something else is a straightforward test of valid experiences the middle class can employ to test our skepticism.

The vitality function supposedly validates the natural Pareto Principle because Jack Welch, former CEO of General Electric, used a management approach of greatly compensating the top 20% of employees, and firing the bottom 10%, with great success.  If there is more proof than this I am not aware of it, and seldom do economists looking to support their dogma need more than one example as proof regardless.  Yet thanks to Karl Popper’s falsification hypothesis, and the relatively simple necessary and sufficient tests for validity, we can quite easily dismiss the vitality function as valid proof that 80% of productive merit is concentrated in 20% of all work forces.

Enron used the vitality function as their management approach, causing top level employees to essentially make up stuff to enhance the appearance of producing.  Considering what ultimately happened to Enron, this indicates that the vitality function is not sufficient for getting the best results in a work force.  The Japanese got impressive productivity results using a management approach that was basically the complete opposite of Welch’s.  This indicates that the vitality function is not necessary for getting the best results in a work force.  In fact, we might conclude that Welch himself invalidates the precise curve, the precise ratio that the Pareto Principle is based on.  Admittedly I am speculating on this, but I suspect that when you consider stock options and other compensation that goes beyond wages the top 20% of the GE work force received more than 80% of the compensation.  Hey! Maybe the Italian economy initially examined by Pareto was too altruistic for our tastes.

This does not invalidate the vitality function as a cultural approach that works well for a certain type of culture.  As a natural approach for compensating the natural distribution of productivity, it’s an invalid fraud.  First of all, people naturally will work for other reasons besides greed.  I offer my career with a conservation nonprofit as one proof of that, along with the Japanese work force.  Those motivated by greed will strive to be compensated more for less productivity if they can get away with it, at the general expense of those not motivated by greed.  Second, what contributes to the value of the CEO getting a thousand times the compensation of the lowest rung worker is the extra value over productivity that is induced by trade and the government intervention of capital markets.  Be aware that capital markets function only with the blessings and oversight of governments, otherwise, the same function would amount to loan-sharking with a huge problem of being able to collect.  This added value from trade tends to get concentrated at the top.  Eliminate, or at least reduce, the added value of resources from capital-enhanced trade and you get closer to a meritocracy based on production that benefits the middle class.

For my own proof I previously offered not one company’s or nation’s management style but sixty years of economic data.  From the forties until the seventies different sectors of our economy grew in sync and wealth disparity decreased.  From the seventies to the present the financial sector, the sector that enhances the value of trade apart from productivity, far outpaced the overall economy.  During that same period the ratio of housing costs to median family income grew, the ratio of privatized health costs to socialized health costs grew, the ratio of health costs to median family income grew, the ratio of education costs to median family income grew, the ratio of savings to personal income went from around 10% to zero, the ratio of debt to family income grew, bankruptcy laws grew tougher for the little guys, subsidies grew larger for the big guys, corporate media consolidated their reporting of economic news, Jack Welch became the dominant business idol, Milton Friedman became an economic cult figure and dogma such as the Pareto Principle and vitality function grew legs.

New Forum Features

June 18th, 2009

Under the entry “Middle Class Economics” I asserted that the middle class would thrive in a true meritocracy.  Perhaps I should have added that a true meritocracy would be built around the notion that wealth was generated by production, rather than trade.  Perhaps that qualifier might have preempted the anonymous response I got (hence, not posted) that I must not support the vitality function.  The implication that the vitality function refutes a meritocracy being good for the middle class provides fuel for discussion.  Before I address that directly, this relates to some changes for The Middle Class Forum.

You will find some new Forum Features listed.  Under Products and Services I have provide an annotated bibliography.  Most notably, Forums and Feedback is a new feature, though the only active link right now is The Forums.  Yes, The Middle Class Forum will be featuring some forums.  Who would have guessed?  All this is in the formative stage right now and currently amounts to somewhat as a teaser, but this site will continue to grow and evolve.

The vitality function might have been a good topic for the Middle Class Economics forum, and perhaps will someday make its way over there.  I’ll address that topic the traditional way next.