Illusion Economics

One game plan for liberal politicians (and some conservatives) is to first convince you that you have it bad so they then can make the case that they can help.

There is a good example of this in my previous post. Graphs might lead you to believe one thing, but that’s blackboard economics. Look out the window and you will see a different story.

Thinking you have it good or bad is a matter of perspective. Poverty, itself, is a matter of perspective. Sure, if a politician compares the life of a poor person in the U.S. to a rich person, the poor person might feel slighted.

But, the observations from a student from India (via Instapundit) might help poor people in the U.S. find a better perspective:

[The U.S. is] An almost-classless society: I’ve noticed that most Americans roughly have the same standard of living. Everybody has access to ample food, everybody shops at the same supermarkets, malls, stores, etc. I’ve seen plumbers, construction workers and janitors driving their own sedans, which was quite difficult for me to digest at first since I came from a country where construction workers and plumbers lived hand to mouth.

Sometimes it’s hard to see the conveniences and standard of living the wealth of this country affords all people.

This reminds me of a news magazine show I saw long ago, when Brad Pitt was still courting Angelina Jolie. He said that on one of his visits to Africa he asked why they don’t have grocery stores and pharmacies on every street corner filled with remedies for basic ailments — ailments that kill people in poverty in other countries.

Capitalism is the answer. They don’t have much of it and we have more. Here’s why capitalism ensures we have ready access to the thousands of things that help improve our standard of living in ways that we are too spoiled to recognize.

Live in a country where the government or thieves (often one in the same) are going to take your stuff as soon as you have appeared to add value to it (like building a water well or fence to keep livestock) and you quickly learn that it isn’t worth expending the effort.

So, while the graphs Daniel Little uses and the speeches that politicians use may convince many that they are being slighted, in reality all of those people have a standard of living that is unsurpassed ever on this planet. Little’s charts don’t measure the value of having quick, easy and cheap access to basic rubbing alcohol that can easily prevent scrapes and scratches from becoming infected, life threatening injuries.

PS I also thought it was funny that the student from India thought we drank way too much coffee and thought it was crazy that we would spend so much on it, when we could brew it so easily and cheaply at home.

But, I think this goes back to his comment on the classless standard of living. We are generally so wealthy that we choose to hire others to make coffee for us.

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22 thoughts on “Illusion Economics

  1. “Thinking you have it good or bad is a matter of perspective. Poverty, itself, is a matter of perspective. Sure, if a politician compares the life of a poor person in the U.S. to a rich person, the poor person might feel slighted.”

    Perhaps a solid education in world history and economics would help. Give people a sense of perspective, that is.

    • Or, you could pay close attention to when Marty McFly goes back to 1885 in “Back to the Future III”. It did an excellent job of showing how people did without some of the modern conveniences like grocery stores and clean water.

  2. I always enjoy your posts but this one reminds me of one I did a long time ago. I’ll snatch this one up and publish it at my blog if you don’t mind. The wife and I enjoyed his perspectives over our (homemade) coffee this morning.

    Oh yeah..we enjoyed your perspectives too.

    • Hi Grant — Ha! I hope you didn’t use a Keurig! I still haven’t quite discovered the value prop that has over my $15 coffee pot and bulk coffee. Though, I do enjoy a cup of Starbucks several times a week. It’s good to stretch the legs and chat with someone on the way.

      Can’t wait to read your previous post on the subject.

  3. It’s part of our fabric to “want more” or , more precisely, to want to better our condition. Wolfer and Stevenson demonstrated that there is no satiation point at which increases in income don’t correlate with increases in subjective well-being. Put differently, people will never be satisfied with what they have – even the Buddhists!

    But what about those who complain about all those in the US living in “poverty”? Well, what is poverty. A dictionary definition defines poverty as “the state of one who lacks a certain amount of material possessions or money” and goes on (in true progressive fashion) to define absolute poverty as “the deprivation of basic human needs, which commonly includes food, water, sanitation, clothing, shelter, health care and education.” Huh? The DEPRIVATION of…. Just who deprived them of those things? And to look at the other side of the coin, who supplied the wealthy with the things they do have?

    The problem is that “poverty” like “fair” is subjective. If Seth has a 1963 Corvette that he inherited from his rich uncle and has no interest in keeping the car and I am an antique car nut, we might enter into negotiations. We each place a subjective value on the car – If I offer Seth $3000, he thinks to himself, “Do I want the car or do I want that new camera that I can buy for $3000?” Seth has the choice of taking my offer or negotiating with me or others for more so that he can buy the camera plus a new lens. If Seth values the $3000 more than the car and I value the car more than my $3000, we make the exchange and each receives something that he values more than what he had. This is a FAIR deal.

    The majority of people in the world would love to live in the “poverty” enjoyed by the bottom 5% of people in the US. Most of our “poor” live better than kings and queens of centuries past. Poverty can be viewed as a lack of wealth, but what is wealth. The dictionary defines it as “the abundance of valuable resources or material possessions”, but this definition lacks the true meaning of wealth. The word “wealth” derives from the word “weal” which means “well being” and “th” which means “the condition of”. So wealth is a condition of well-being. A wealthy person possesses the things that make life worthwhile (not all of which are purchased with dollars). However, as the Wolfers and Stevenson study indicates, it’s more likely that one’s feeling of well-being” is higher if one has a higher income. Note that this is a correlation and does not mean causation, i.e. giving someone a higher income may not increase their well-being – even though the politicians operate on this assumption (or at least that Mr. Voter’s income increases Mr. Politician’s well being). People (or nations) with a higher income may have a higher well-being because of freedoms associated with countries that have higher incomes or the fact that they lead more productive and purposeful lives, etc.

    Giving people more stuff doesn’t lead to more happiness. People will always want more and the incentives to actually earn it for themselves will have been destroyed setting up a vicious cycle of government dependence.

    • Amazing how we let politicians keep moving the bars. Can you imagine what the original poverty fighters would think if they were to look to the future and see that food “insecurity” and overweight kids were the political problem du jour?

      • Can someone explain to me how we simultaneously have an “epidemic” of obesity in our kids and a hunger “crisis” that demands that we subsidize kid’s meals? Before someone trots out the idea that these are two different populations of kids, have them go to the schools (as I have) and see if the “poor” subsidized kids appear underfed or overfed.

        It’s telling that when Michelle Obama pushed “healthy” meals at schools, the kids stopped eating the school food! Even adults don’t eat healthy when you try to force healthy foods on them – Dan Ariely has shown that when fast food restaurants add “healthy” choices to their menu, people actually select more “unhealthy” choices!

          • Hi Wally — Thanks for the link. I think it’s a good example of ‘illusion economics.’

            First the study doesn’t explain the relationship. It claims to have found a relationship and offers one possible explanation (food stamp cycle) that they admit is an untested hypothesis.

            Second, food insecurity in that study was based on the chosen response to one question:

            “Which of the following statements best describes the food eaten in your household in the last 3 mo?”

            The possible responses were: “Enough of the kinds of food we want to eat [Not insecure]. Enough but not always the kinds of food we want to eat [mild insecurity]. Sometimes not enough to eat [moderate]. Often not enough to eat. [severe]”

            What they found was that the % of overweight people increased on responses 1 through 3 and dropped on 4.

            I have alternative hypothesis: Overweight people who eat a lot and have unhealthy eating habits are more likely to say they don’t have enough of the kinds of food they want to eat because they want to eat more food. Also, my guess is that what they consider ‘food we want to eat’ isn’t necessarily healthy food.

            So, I don’t think the study answers Mike’s question. I think the real answer is that someone is trying to cast an illusion of a problem to justify their bureaucracy and support their ‘good intentions’.

            Further, the study shows that response that had the highest % of overweight people was the 3rd response at 52%. If they’re really interested in helping those 52% out, maybe they should take a look at what the 48% of the people in that group who are not overweight are doing and teach it to the 52%, rather than assume that there’s an automatic case for some unaccountable bureaucracy.

    • I think those explanations are good examples of disconnected cost-benefit analysis and confuse cause and effect. They also ignore the impact of personal choices.

      Being healthy and unhealthy isn’t someone else’s fault. It’s not the “system’s” fault. Despite what anybody says, it isn’t too expensive to be healthy. Those are silly and poor and enabling excuses. Makes it to easy for someone to say “it’s not my fault”.

      I have 2 $7 DVDs for Yoga and Boot Camp that have given me years of fitness. Most everyone has a TV and can get a hold of DVD player.

      • “I think those explanations are good examples of disconnected cost-benefit analysis and confuse cause and effect. They also ignore the impact of personal choices.”

        Certainly personal choice matters. People are always free to do anything and make any choice they want. I would argue that the environment that one finds oneself in can make certain choices more difficult, easier or even invisible. There are people who can see beyond this, certainly but most people are (for better or worse) influenced by the culture (or subculture) that they live in.

        I’ll use a personal example. Where I went to high school, everyone went on to college. It wasn’t a choice. You picked some schools, applied and then went to one. It didn’t feel like something good or bad. It was just what you did.

        Am I wrong? Am I confusing cause and effect? Was I really smart so I went to college or was it the fact that everyone else around me went to college?

        • I disagree with your assertion that not going to college was not a choice. Based on your reasoning, we should absolve Nazi war criminals. Indeed, we should absolve anyone involved in criminal conspiracies on the basis that they had no choice because “everybody was doing it.”

          As far as assuming that you went to college because you were smart (in the sense that going to college was a smart idea versus smart as a qualification for getting into college), perhaps it wasn’t a smart idea. Who knows what the opportunity cost was – maybe you would have founded CrossFit instead of going to college, etc.

          But you are right that culture matters. That’s why I disagree with those who disavow religion and our Judeo-Christian heritage and the culture of Western civilization and declare that “all cultures, religions, lifestyles, etc. are equally “good.” Ideas (cultures) do matter and they do have consequences.

          • Mike –

            Thanks for drawing me out on this one.

            Perhaps I’m not being clear on what my point was. My point was simply that at that point in my life (around 18) I did not perceive the option of not going to college. Certainly that option was there for me to take but because of how I was raised and my peer group I did not see that option. This personal story is meant to be my attempt to show that cultures and subcultures shape what kinds of choices people can make.

            “I disagree with your assertion that not going to college was not a choice. Based on your reasoning, we should absolve Nazi war criminals. Indeed, we should absolve anyone involved in criminal conspiracies on the basis that they had no choice because “everybody was doing it.””

            To me the idea of choice implies self reflection in which the agent (me in this case) seriously considers two or more options. I don’t feel like I did that. I only looked at which colleges I could go to. There wasn’t a “none of the above” option in my analysis.

            Ignorance of the law is no excuse, you’re right. Doing something because everyone else is doing it is also no excuse for bad behavior. I’m not trying to absolve myself (or nazis) for not seeing clearly – I’m trying to make the point that being a member of a culture sometimes makes it difficult to see all choices clearly.

            “As far as assuming that you went to college because you were smart (in the sense that going to college was a smart idea versus smart as a qualification for getting into college), perhaps it wasn’t a smart idea. Who knows what the opportunity cost was – maybe you would have founded CrossFit instead of going to college, etc.”

            I have no clue if going to college was a smart idea. It was simply what I did and is now part of who I am. Again, my only point was that I did not perceive it as a choice at that point in my life.

            “But you are right that culture matters. That’s why I disagree with those who disavow religion and our Judeo-Christian heritage and the culture of Western civilization and declare that “all cultures, religions, lifestyles, etc. are equally “good.” Ideas (cultures) do matter and they do have consequences.”

            Cultures and ideas do matter and they do have consequences. Agreed. I certainly feel like I was shaped by the wealthy private school subculture that I grew up in. I don’t mean this in as a judgement of that culture. I only want to make the point that it had an effect on the choices I made, the choices I could perceive and the ones that I couldn’t perceive (as I believe I honestly could not see skipping college as a choice).

            So if culture matters, does subculture matter? Does it matter if we grow up in a rich neighborhood or a poor neighborhood? Does it matter if we grow up next to a community center or a hockey rink? Does it matter if we grow up in a town of 90 people or a town of 1,000,000 people? Or is it simply the larger culture of the nation that matters?

  4. Wally, no disrespect, but the authors of the two articles you linked are – as we say in the profession – F.O.S.

    “Food insecurity” is an invented “disorder”. Furthermore, the “study” (and I use that term loosely) says nothing about the population I was discussing, i.e. KIDS (that’s generally taken to mean school age children, K-12), which the press and Ms. Obama are “concerned” about because of the prevalence of obesity in this age group (not that it’s not a problem in other age groups) and which were the subject of my comments regarding subsidized school meals.

    In olden times and in many third world cultures, obesity is a mark of wealth as the poor either lack the money for healthy foods and/or they engage in more physical labor. I hope you all pick up on the irony that in olden times and the third world, lack of healthy foods results in skinny kids whereas Wally’s second paper says it results in fat kids! And yes, I’ve been to third world countries on five continents and in ALL of them kids (even poor ones) have access to the high density junk foods referred to in the second paper so it’s not a matter of the poor kids in the third world being thin because their diet lacks junk foods and plenty of carbs.

    In the US, obesity is not confined to any one socioeconomic group. It is widely encountered in poor people and rich people and everyone in between. We see it in men and women, blacks, whites, hispanics and even Asians. We find fat and thin people in every walk of life and in every region of the country.

    In the US, virtually everyone recognizes the downfalls of obesity whether it’s health related, cosmetic or social. Heck, even kids in kindergarden recognize that fat kids get called names and don’t get picked first for sports. It’s well known that some people, by virtue of their genetic endowment, tend to escape obesity – no matter what they eat – while other must struggle with their weight. For this latter group, however, obesity isn’t inevitable. Like most other consequences in life, it’s a choice – do I want to satisfy my immediate wants and eat that jelly filled donut and watch TV (in which case I will be fatter at some later time) or am I willing to postpone my pleasure (looking fit) by “suffering” now (by working out and eating stuff I might not like as much as the donut)?

    Back to the fat kids with the subsidized meals:

    The crap about poor kids not having the playground resources, etc. is so far removed from reality, I wondered if the pointy headed social scientist who wrote it has ever been outside. Kids don’t need $250,000 playgrounds or expensive toys to play games and burn calories. Kids will make their own toys, invent their own games or play games that have been around for years – that is, unless the social work do-gooders tell them the game is “dangerous” or harms the self-esteem. Indeed, interventions by the same people who wrote those two crappy papers have made play boring for kids. Here’s an example: When I coach wrestling, sometimes we have “free” day and do something other than wrestle, i.e like play dodgeball. In today’s school’s, kids are forced to play dodgeball with a soft, effeminate nerf ball. There’s no freakin’ danger there, but there’s also no enjoyment. What’s the thrill of avoiding being hit by a nerd ball (especially when it cannot be thrown with any velocity)? My kids love playing dodgeball – and they work vigorously at it – because we use the old style red kickballs. Sure, there’s a bloody nose now and then……….but I also don’t have any fat kids! Because kids aren’t allowed to enjoy the adrenaline rush of “dangerous” or “humiliating” games, they stop playing active games and enjoy the thrill of being a hero vicariously through video games. My point is, physical fitness is not dependent on costly resources. If well intentioned “experts” would get out of the way and stop “protecting” kids, the kids would get the exercise they need.

    Now, as far as the subsidized meals. It’s not that parents lack the financial resources to provide their kids with an adequate breakfast and lunch – PB&J is pretty cheap and it got me from K through med school – it’s that too many parents are too freakin’ lazy to get up a few minutes earlier and fix their kids a meal……and why should they when the government offers to do it for free? Our mal-incentives are rewarding bad parents and turning borderline parents into irresponsible ones.

    My church has a program called “backpack meals”. It was designed to send poor kids home with backpacks (filled with food) on Fridays after school so that the KIDS would have meals over the weekend. After the first year, they suddenly discovered that the “need” had increased threefold as there were many more “disadvantaged” kids that “needed” the help. BULL – FREAKIN’ – $#!T What happened was that more rats came out to get the free cheese. What’s the incentive to spend your own time and money fixing your kid a meal when some bleeding heart idiot will provide it for free. (Now, I realize these people had good intentions, but we all know about good intentions and the road to hell – these “kind” people are actually doing a disservice by creating incentives for bad behaviors). It gets worse!!! Parents would call the church and yell and curse at the program staff because their kid’s backpack got a can of tuna instead of a pack of Twinkies (i guess the “kid” needed some high density treats to fuel his video game workout). The staff found that the PARENTS were eating the food sent home for the kids……and the bleeding heart morons still didn’t get the message!

    Bottom Line:

    Lack of caloric intake is NOT a problem in the US for children.

    While our kids may not be eating the right kinds of foods, this is a parent issue, not a federal government issue. Studies have demonstrated that people eat worse when healthy choices are added to the menu and we’ve empirically seen that the federal government programs that attempt to force kids to eat healthy end up backfiring. Schools should stick to doing what they were created to do – teach the 3Rs – and leave parenting to parents.

    Attempting to protect kids physically (no “rough”games) and mentally (self-esteem) by feminizing their play ends up harming them physically (by creating a nation of lard-assess) and mentally (by allowing kids to “grow up” without having faced mental adversity).

    Fitness is achieved by work, not by money or expensive gear (i.e. if you haven’t put in the time in the gym, that new pair of Nike Nano 3’s aren’t going to turn you into Rich Froning Jr.)

  5. Food insecurity – an “ailment” invented by leftist/socialist-lite do-gooders for the ultimate purpose of said do-gooders gaining more control of our nations wealth by transferring a part of the wealth of the producers into the hands of the moochers.

    The reason the women in the study are fat is NOT because they fear they won’t have enough to eat. They are fat for the same basic reason behind most of their problems – they lack self-control and they blame everybody but themselves for their problems. In simpler terms, there is a failure in personal responsibility.

    As expected, the leftists solution is to throw more money at the imagined problem. To be more precise, their solution is to demand more control over and take more of the money earned by those who produce our nation’s GDP and split it between themselves, their cronies and their programs. But it doesn’t work….

    http://www.foxnews.com/politics/2013/09/09/government-failed-to-reduce-food-insecurity-despite-spending-billions-more/

    …and why doesn’t it work? Because people’s wants will never be satiated. No matter how many handouts we give to the moochers, they will always insist that it’s never enough and when the left tells them that they are entitled to all these handouts, they grow to expect and demand more. What little hope there was that these people would develop some personal responsibility is dashed by the leftist agenda. And that’s the real reason they overeat and become fat – they take no personal responsibility for the choices they make.

    If these American women want to see food insecurity, let them travel to sub-Saharan Africa and see what true poverty looks like.

  6. The other politically motivated reason for the “problem” of food insecurity: It attempts to justify the Obama administration’s expansion of the food stamp program, offering food stamps (bribes) to people who don’t even see themselves needing the program, i.e. fat women.

  7. Wally – I pulled up the latest USDA report on Food Insecurity. Here’s the link:

    http://www.ers.usda.gov/publications/err-economic-research-report/err155.aspx#.UjdCQxanmcI

    It’s not exactly “fun” reading, but here’s some points and comments:

    First, as I mentioned before, the authors have a bias in that they are out of a job, if there’s no problem (two are sociologists that work for the USDA).

    Second, I can appreciate it if somebody is chronically hungry and underfed and label that as a “problem”, but when we extend the definition of a problem – indeed, a problem in need of government handouts – to people who are merely “worried” that they might not have enough food or who are hungry for one or two meals, that’s….what was my French term…ah, yes B.S. Given the high incidence of “overweight” and outright “obesity” among food insecure women, it’s good that they experience periods of hunger, especially if those periods of hunger are not satisfied by handouts of food, i.e. they need to stick to their diets!

    According to the USDA reports – I reviewed the reports for the past 3 or 4 years – food insecurity a almost always an episodic problem rather than a chronic condition. Perhaps that’s why the women are overfed and fat rather than under or normal weight. Indeed, the USDA states that these families report few, if any, indications of REDUCED food intake! So, what’s the BFD?

    Apparently, financial pressures force them to r”educe the variety in their diets” or rely on “a few basic foods” at various times during the year. I don’t see the problem!

    The USDA states that a small number of people experience “very low food security” which means that at least ONCE during the year, some members of the household cut back on the size of their meals. I wrestled in high school and college, so again, I don’t see the problem.

    In general, kids are shielded from food cutbacks and food insecurity and it’s rare that a child even goes “hungry” for even a single meal – note that doesn’t mean he/she misses the meal. They further state that fewer than 1% of children miss even a single meal during the year. With the obesity epidemic in our childhood population, perhaps the problem is TOO MUCH rather than TOO LITTLE food.

    Before we hand out more money, it’s interesting to note that the USDA reports show that millions of families judged “food SECURE” have lower income than many home judges “food INSECURE”. This indicates that “food insecurity” is, to a considerable degree, dependent on how efficiently a family allocates its food dollars and how it distributes its available food over the course of a month.

    70-75% of “food insecure” adults are overweight or obese! Virtually no (zero, nicht, nada, zip) food insecure adults are underweight.

    To reiterate, the USDA states that most “food insecure” home DID NOT CUT BACK ON THEIR FOOD INTAKE AT ALL!

    It’s understandable that The Big O pushed food stamps during the recession, but now that he’s announced that the recession has ended, it’s time for him to cut back on the welfare spending. Unfortunately, Mister 0 wants to permanently expand the welfare state and create a larger dependency on the federal government. We currently spend more than $20,000 per year per poor person in federal government handouts (that’s not including social security and Medicare) – that’s PER PERSON, not per family.

    Being worried about a possible problem is not something the rest of us should have to pay for. Get a freakin’ job and you won’t have so much free time to worry about things that won’t happen.

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