Bad cause-and-effect

I just caught a TV news snippet comparing leisure time now to sometime in the 1950s or 60s.

Apparently, we spend 42 hours a week on leisure activities now compared with 36 hours back then. They said something like: We spend more time doing whatever we want now. What has caused this? The rise in the number of part-time jobs.

My guess is that is a result, not a cause.

I’d also guess that we have more leisure time now because we can afford more. We trade work for leisure because things have gotten better and we can afford to — or we can work less to have the lifestyle we prefer.

The rise in part-time jobs may have resulted from being able to afford to choose to work less.

What if we discovered that the average family takes more vacations than they did in the 1950s? What caused this? The rise in the places to go on vacation.

Update: Thanks to ColoComment for the link to the BLS leisure time study press release.

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What’s fair?

In the comments of this post, Wally posted a video about how actual wealth distribution differs from what a group of people feel like is the ‘ideal’ wealth distribution.

I think the video provides a good example of the dangers of convoluted reasoning disguised as something that sounds intelligent.

For instance, in one part of the video, the narrator says that CEOs make as much in one hour as their average employees make in a month and suggests that is unfair.

When framed this way, the unfairness seems plausible. However, this framing is like a distraction used in a parlor trick, or a red herring.

He implies that a CEO should make some multiple of the wages of an average worker, but he doesn’t tell you why. He figures you get it. But, do you?

Most of the average workers who have young children make several orders of magnitude more than those children.Is that fair? People with kids may now realize the distraction.

It’s not a question of fairness. They understand that there isn’t necessarily a relation between what they make and what their children make. They understand that what they make is based on the value they create for their employers or client and what others are willing to do that for, as well.

Now, don’t get me wrong. I think most CEOs are overpaid. But, I don’t base that opinion on nonlogic like what I think a fair multiple is between some unrelated job and their job, no more than I think what a nurse is paid should be some multiple of what a painter makes, or what a professional baseball makes should be some multiple of what the beer vendor in the stands makes. That’s nonsense.

I think most CEOs are overpaid in part because their decisions do not increase the value of their company enough to cover the risks they take and because Boards of Directors aren’t interested enough to get find truly good business leaders.

The whole video is a red herring. It basically compares ‘an ideal’ wealth distribution to the actual wealth distribution and implies that something is unfair. But, it takes more than a red herring to convince this guy.

Try to use some logic. Let’s talk about the value the people at the low, middle and high ends of the distribution create. Let’s talk about their financial behavior, their investments in human capital, decisions they’ve made.

Let’s talk about the absolute wealth at each end. Should I care than Bill Gates doesn’t fit on his chart, if I’m living a life unimaginable by my even fairly recent ancestors?

Update: ‘Dude Where’s My Freedom”s comment reminded me of the lyrics from Tenacious D’s song, City Hall. After starting riots to overthrow government and now ruling, Jack Black and KG are issuing their decrees. Their third decree is,

No more rich people and poor people. From now on, we’ll all be the same…ummm…I don’t…I gotta think about that.

Funny and true.

Putting your eggs in one basket

In the past, I’ve heard passionate opponents of privatizing Social Security argue that won’t do because it would expose people to the vagaries of the stock market.

Detroit may prove that counting on taxpayers to fund your retirement is not better than betting that folks will continue to buy Coke and McDonald’s hamburgers. Especially so if taxpayers disappear.

There may be $4 trillion in unfunded public pensions. Not sure why people trust public officials with their retirement.

Solving the wrong problems

I work with two contractors who are evaluating health insurance options because of Obamacare. They have been happy with their high-deductible, low premium insurance.

They are now discovering that the deductibles on their plans are too high to qualify as Obamacare plans and their insurance companies will not continue to offer them. They figure that changing to a lower-deductible, Obamacare-approved plan will increase their monthly insurance costs by $600 – $800 per month.

It seems I remember someone saying something like, if you’re happy with your insurance plan you can keep it (though, I guess not literally).

Ask, how much? Part 2

In the same EconTalk podcast with Morris Fiorina that I wrote about in this post, Fiorini describes another ‘how much’ scenario:

…I saw a paper presented yesterday on taxes. And it was very interesting that the population according to these surveys does think we should have more taxes on the rich. But then when you ask them, what are the rich actually paying, they underestimate, of course, what the rich are currently paying. And, what’s interesting is they think the rich should be paying less than they actually are. But you ask them, what is the fair tax to pay for various income brackets? They come in at figures that are actually below what the rich, what people in those brackets are actually paying. So here’s a case of people being uninformed and mal-informed at the same time.

Ask, how much?

I enjoyed this EconTalk podcast with Morris Fiorina discussing political polarization.

I also learned a valuable lesson. When somebody says that something sounds like a good idea, ask them how much they are willing to pay for it. Fiorina explains:

On spending items, we always ask these [in surveys]: do you think these programs should be increased, decreased, or kept the same? The only thing people ever want to cut is foreign aid, welfare, and the space program. Everything else they want to increase. But then if you ask them, what would you like to– I mean it’s true.

When you start asking them how much [it changes]. I remember when people in the business school here did a study during the health care fight: how much would people be willing to pay for universal access? Everybody says: that’s a good idea; of course everybody should have insurance. And I think they lost the majority at something like $50 a year for a family. That everybody’s willing to do something that’s good as long as it’s cheap. But if you say, well, it’s going to cost you $100, you say, well, I guess we can do without universal access.

Yep. Talk is cheap. It’s easy to say something is a good idea. You may even get a pat on the back. But, if we pry and ask how much they would be willing pay for it, we might discover they think it’s only a good idea if someone else pays for it.