Signals v Causes: The American Nightmare?

An effective political and election strategy has been to identify the signal of the American dream (e.g. home ownership, college education, preschool) as a cause of the American dream — or the American dream itself, and then promise to make it easier for people to achieve it.

Hopefully, we are learning that this actually undermines the incentives and feedbacks that made those things signals of the American dream in the first place, turning them into nightmares.

It turns out that getting a college degree doesn’t cause the American dream. Rather, all the hard work and gumption that use to go into getting the relatively more scarce and useful college degrees of the past was truly what set those kids apart and put them on the path to prosperity and independence.

Change the college degree from a sorting out mechanism to an easy path and the college degree no longer is a reliable signal of those hard workers to employers. Then the nightmare ensues.

As this Wall Street Journal editorial describes:

A lot of these borrowers can’t generate the income to service this debt, especially when so many of them can’t get decent jobs. The left-leaning Center for Economic and Policy Research recently noted that among recent college graduates age 22-27, a full 45% were underemployed in 2013, meaning they were either unemployed or doing jobs that typically don’t require a four-year college degree.

Of course, it doesn’t help that politicians have also mucked with the incentives of the innovation economy, reducing its capacity to create job opportunities for these folks.

Enhanced by Zemanta

The American Dream ain’t what it use to be

Thanks to commentator Mike M. for pointing out a fantastic observation from Wall Street Journal columnist, Peggy Noonan, yesterday.

In her column, How Obama Wooed the Middle Class, she writes about how The American Dream has changed over the past couple of generations:

There is pervasive confusion about what the American dream is. We seem to have redefined it to mean the acquisition of material things—a car, a house and a pool. That was not the meaning of the American dream a few generations ago. The definition then was that in this wonderful place called America, you can start out from nothing and become anything. It was aspirational. The limits of class and background wouldn’t and couldn’t keep you from becoming a person worthy of respect, even renown. If you wanted to turn that into houses and a pool, fine. But you didn’t have to. You could have a modest job like teacher and be the most respected woman in town.

When we turned the American dream into a dream about materialism, we disheartened our young, who now are forced to achieve what we’ve defined as success in a straitened economy.


Over the last generation, part of The American Dream was twisted to mean owning (I use that term loosely) a home. Owning a home previously meant establishing a pattern of responsible behavior by saving money for a down payment while paying your bills on time to build a good credit history so you could earn the privilege of obtaining a loan to buy a home. The American Dream then was about slaying those irresponsible and impulsive demons that cause people to live beyond their means. Owning a home resulted from the American Dream, it was not the American Dream itself.

But politicians, bureaucrats and community organizers — rather than encouraging folks to pursue the American Dream by adopting responsible behavior — thought it better to skip that altogether and take responsibility out of the equation as if being irresponsible was a basic right not be infringed upon by expecting them to be responsible. How dare we?

Now we’re seeing something similar with college education. Were told that people with college degrees earn more and that everybody should be able to get a college degree if they want, as if the latter would do nothing to spoil the former.

Having college degree is The American Dream. Before, earning it was. Even being expected to work hard and scrap to earn that degree was admirable. It was part of the process. Now, let’s skip that. We wouldn’t want anyone to have to struggle.

One way to do this is to put taxpayers on the hook for student loans, so students don’t necessarily have to be responsible for getting a degree that leads to good job opportunities and colleges can charge high prices for crappy degrees. That’s a predictable result when you loosen the tie between the future earning potential of holding a ‘college degree’ and the cost of the degree itself.

I think folks are duped into supporting replacement of behaviors with material things as the American Dream because they have an affection for the class conspiracy theories.

They hear that some certain cross sections of people aren’t as represented in the materialistic definition of The American Dream, like home ownership or college degrees, and they accept that as evidence as some systemic barriers — even if they are hard to pinpoint exactly.

And, there might be. But, how often do we then skip over a crucial step of first examining the behavior of that cross-section to see if there are any self-fulfilling prophecies and just jump to the systemic barrier conclusion?

Having the American Dream should not be an entitlement

Rather, you should be entitled to the pursuit of the American Dream.

From Mark Perry’s blog post, Opening the Floodgates:

Government housing policies turned “good renters into bad homeowners” and created an unsustainable housing bubble.  It’s now becoming apparent that government education policies have turned “good high school graduates, many of whom should have pursued tw0-year degrees or other forms of career training, into unemployable college graduates with excessive levels of student loan debt that can’t be discharged,” and created an unsustainable higher education bubble.

That got me thinking that the underlying driver of politics — both liberal and conservative — of the past decade or two has been to try to guarantee the achievement of the American Dream, rather than guarantee its pursuit.

Politicians tried to remove “barriers” to home ownership, college education, cadillac health insurance, jobs and an overall comfortable life. By doing so, they’ve changed what these things mean. Back in the day, having a pair of Jordache jeans meant something…until everybody had a pair.

It’s a grave misconception to view all hurdles to achieving the American Dream as discretionary and unfair barriers. Most are not barriers, the hurdles are the very things that make achieving those things valuable and removing or lowering them also reduces the value in achieving them.

Consider college education. In the old days you had to work hard to earn it. Even if you were fortunate enough to have parents who would cover your college costs, you still had to make the grades to stay in. If you had to scrounge to finance it yourself, even better. That meant you were a self-starter and could balance financial and academic responsibilities.

Getting a college degree wasn’t easy. Earning one demonstrated that you had some moxie. Employers valued that because they wanted people who could use that moxie to contribute to their organization.

Making it easier to get a college degree changed its meaning and value. College degrees no longer signal intelligent self-starters with moxie. Now degrees are signals of risk averse people without much moxie.

Home ownership is another good example. In the old days you were expected to make a down payment of 20% and take out a loan that you could afford to repay.

Having saved enough to make a 20% down payment was a test. Passing this test demonstrated to lenders that you had enough financial discipline to keep your expenses in check and save money, which means you were more likely to pay your mortgage each month than someone without that financial discipline. It also gave you a vested interest in maintaining your property.

Removing this barrier (or hurdle) changed the meaning of home ownership. As someone once said, a homeowner with no or negative equity in their home is a renter.

Rather than wanting politicians to give us the American Dream (and destroy the meaning of it it in the process), we should ask government to help ensure that we can pursue it.

That means keeping us safe from foreign invaders and keeping our fellow citizens and government from infringing on our freedoms.

Well put

I’ll give Santorum credit for finding a concise and accurate way to describe those who want everybody to go to college, like President Obama, “What a snob!”

Jeff Jacoby writes about Santorum’s dig on Obama here and how it elicited criticism from, well…snobs:

Ridiculous? Offensive? Hypocritical? Manifestly, all of the above,” wrote Eugene Robinson in the Washington Post. On The Daily Show, the inimitable Jon Stewart was beside himself: “Just to be clear,” he said, “you’re coming out against people educating their kids because it’s – fancy?” Vice President Joe Biden assured a radio interviewer that Santorum had managed to separate himself from “all of America on this.”

A note to Jon Stewart: Just to be clear, no, Santorum didn’t come out against anybody educating their kids. That’s a straw man fallacy.

Santorum came out against the idea that college be considered the only path worth pursuing and using government policy to reinforce that mythical idea.

And Santorum meant that it’s snobbish to ignore the good work done by millions of people in this country who don’t have college degrees, but still managed to contribute to society and achieve the American Dream.

I know plenty of such people. They are business owners, electricians, factory workers and railroad workers. They build roads, program computers and edit video. They work on garage doors, paint houses, build fences, clean windows, fix cars and tractors and run restaurants.

They also start companies like Microsoft, win Oscar awards and play professional sports.

Many of these folks do amazing things that they didn’t learn in a classroom.

For example, I’m amazed that a painter I use can finish painting a room quicker than it would for me to set up and start, and his product looks far better than anything I’ve tried to paint.

I was amazed by the movers I hired a few years ago to move the heavy stuff from my old house to my new house. They accomplished in 3 hours what would have taken me days. I would have strained my muscles, maybe injured myself and I’m sure I would have marked up my walls or damage my furniture.

The path to the American Dream isn’t about going to college.

It’s about adopting a set of behaviors that includes a strong work ethic, integrity, personal responsibility, ability to get along with others, productivity, willingness to learn, careful consideration of decisions and resourcefulness, among other things.

The folks I mentioned above, who didn’t go to college, would score well on these behaviors. Likewise, I know folks who did go to college, who are struggling to achieve the American Dream and would score low on these behaviors.

We’d be far better off if we encouraged and reinforced the behaviors that lead to the American Dream, rather than encouraging shortcuts to achieving a facade of the American Dream.

What is the American Dream?

At one time I thought it meant the freedom pursue our interests and attempt to build the life we envisioned for ourselves and our families, without undue interference from others — private citizens or government officials.

There was no guarantee that you’d make it, but there was some assurance that our own government and others would not get in your way, so long as you didn’t get in the way of others.

The American Dream seemed to embody the fighting spirit.  To borrow an old cliche, if you got knocked of the horse, you got back on and tried again and didn’t whine about it.

It seemed everyone was expected to tend to their responsibilities.  Take care of your family and your home.  Raise your kids to be responsible and productive.  Don’t leave a mess.  When you visit someone’s home, respect their rules.

Folks did what they could to help others out.  Sometimes that meant giving them some short term relief from their unlucky circumstances (though even this was somehow understood to be temporary and that at some point the recipient would be expected to get on their own two feet again).  Sometimes it meant teaching the habits, skills and discipline that enabled them to come closer to their American Dream.

Over the decades, other ideas of the American Dream have come about.   Some folks seem to think the American Dream should be a life without struggle, risk, change, tough choices or hurt feelings where everyone is entitled to some “I-know-it-when-I-see-it” minimum standard of living regardless of their own choices and behaviors.

Now it seems, if we get knocked down, we look to blame someone.  We complain that there aren’t jobs for us.  Then when jobs do come , we complain that they don’t pay enough (never stopping to consider that it must be enough for the folks who agreed to work for that wage).

Or, if someone chooses ignore their responsibilities, we make excuses.  We view it as if not tending to their responsibilities is beyond their control or a systematic problem to be solved.  Instead of encouraging them to tend to their responsibilities, we seek to “change the system” to make it easier for them.  If a student doesn’t gain mastery of a subject in school, we assume there must be something wrong with the subject or the way it is taught, even though many others who did their homework or sought extra help, or both, didn’t seem to have a problem.

What is the American Dream?