The Slowing

We saw a slowing of per capita growth and an increase in income and wealth inequality starting in the early 1970's.

I present a few things that might be driving this trend.

One accelerating inflation

The 1970 was the end of a long period of accelerating inflation. Accelerating or unexpected inflation tends to help what I call commodity labor (that is worker that do jobs that almost anyone can do with a few hours of training).

This is because it fools businesses to thinking there is more demand for their products than there is and so to hire more employees.

Part 2 NIMBY

Some have contended that the reduction of Government action in the 1970's slowed economic growth and increased income inequality and lower quality of life for bottom 30% of earners. but it appears to that NIMBYism and a reduction in law enforcement are primarily to blame.

Here's an anonymous quote on the subject:

"Seeing the price of TVs falling down and down- and understanding that was capitalism." "Seeing the price of a flat in London going up and up and up- but being told this was also capitalism"

NIMBY has made it more expensive to build anything. Bryan Caplan says the top economist studying the rise in housing costs estimate that the typical US home is 2x as expensive due to NIMBY. NIMBY, though mostly a left generated movement is even slowing the expansion of green power.

Letting NIMBY's block owners from building is transferring some ownership to voters. In the 1970's people started to gain power to stop even residential building.

Here is Matt Rognelie of Massachusetts Institute of Technology answering the question of what is driving the growth in inequality he lands on NIMBY.

Not only does NIMBY make housing more expensive but also construction is large employer of men without college degrees and has historically paid more than the manufacturing jobs. 

It also increases inequality by keeping low earners from moving to places where pay is higher.

3 Crime

There was a rapid increase in measured crime and disorder in the mid 1960s. It might be measurement error (some contend that murders with Black victims were under reported prior to 1965), but it might be partly due to the Democratic, in attempt to reduce police and prison brutality went more with reduced sentences and getting criminals off, to punish the system rather than focusing all their efforts on reforming police and prisons. leading to more crime in poor areas degrading life and increasing divides that would impact inequality in standard of living. BTW it might even be that more police would lead to less abuse rather than more.

The optimal Tax rate for the Very Rich is Zero

The optimal tax rate for those who spend a small percentage of their income and invest the rest, like many billionaires, is 0.

Pigovian, LVT and progressive consumption taxes would be better than income and corporate taxes

Monopoly Pricing

People seem to assume that a monopoly's optimal price is much higher than it is. A monopoly business optimally prices where marginal revenue = marginal cost which is way below were people seem to imagine.

(BTW IMHO Governments can and do sometimes price much above that, they have less motivation to maximize goods and services or profits.)

Even an unregulated electric utility would probably not price much higher than they do with regulation and also since almost all monopoly utilities are regulated it is hard to know what the price should/would be

Here is a link presenting Joseph Schumpeter's theory that monopolies produce more innovation and so do not hurt consumers on net.

Monopoly Pricing

People seem to assume that a monopoly's optimal price is much higher than it is. A monopoly business optimally prices where marginal revenue = marginal cost which is way below were people seem to imagine.

Even an unregulated utility would probably not price much higher than they do with regulation and also since almost all monopoly utilities are regulated it is hard to know what the price should/would be.

(BTW IMHO Governments can and do sometimes price much above that because that have less motivation to maximize utility or profits.)

Getting the Direction Wrong

Interesting debate here:

Is The American Dream Alive and Well?

David Leonhardt and Bhaskar Sunkara often get the direction wrong on many of the points that they make. Examples are drug deaths, divorce and lower rates of marriage. Those are more likely the result more wealth and opportunity. Let's face the awful fact that when some people have more ability to get drugs they use more and when women can earn a good living they can be more selective of whom they marry and stay with.

And when David Leonhardt and Bhaskar Sunkara did get the direction right that is on crime, a big part of the cause is on their side. Poor law enforcement in places where democrats control law enforcement (though the illegality of drugs is probably also a factor).

Let's try to stop crime before it occurs like some have argued has been done in New York city.

My Biggest Governmental/Political Issues as of Feb 2024

• The war in Ukraine - it looks to me like the failure to get a negotiated agreement to avoid the war was big foreign policy failure. Putin is an evil dictator but there have already been about 15,000 deaths and many more injuries. We should have pushed the Ukrainians to offer Russia the parts of where the majority of the people prefer to be part of Russia plus neutrality and no entrance to NATO. If he refused that then we have to support the war. Further Putin though an evil dictator unlike the communists in the old USSR allows people to live fairly normal lives as long as they stay away from politics and there is hope for change from within. As the US Government learned in Afghanistan, Governing a place were the people hate you is often not beneficial in the modern world, so Ukraine may make problems for Russia if they try to dominate it.  

• Drug prohibition - it seems to me that the illegality of drugs though it may reduce recreational drug use a little on net is a negative. The war on drugs has been destructive to parts of Latin America and in parts of the country here. I think we should try legalizing the sale so users can be assured of some level of constancy in the supply. Hopefully that will reduce accidental overdose. Drug OD deaths are now over 100,000 per year and they have been doubling each decade at least since 1980, and some researchers say since 1940.

• Euclidean zoning - Euclidean zoning allows people to stop building for frivolous reasons like increased traffic and neighborhood character. It is a denial of the right to build and develop and has driven housing costs up in the most desirable parts of the USA. It has contributed to homelessness particularly in west coast cities. The incentives being what they are in local politics, I think the Federal government needs to make it illegal.

• Crime - Crime is mostly a local issue but, the US murder rate is much higher than other developed countries, and we have an example of how to reduce it in New York city were crime is much lower than it used to be. There is a debate about the importance of "stop and frisk" in New York's success, was mainly due to a reduction in corruption in the police force and how much if any of the reduction was due to immigration.  

• Medical insurance reform -  the federal government pays for about 65% of healthcare in the US but Medicine is mostly regulated at the state and local level. That creates some undesirable incentives. So I think we should transfer more of the regulation of healthcare to the federal Government, or make the system more incentive compatible by having the Federal Government give the money that it would spent on healthcare to the states with the requirement that the cover people who are now on Medicare, the lowest income citizens (current on Medicaid) and all Federal government employees. The states can spend it in the most efficient way and if some money is left spend it on what they like. I've written about that and some other possible reforms.

• Medicare reform - if we do not do the above we should have Medicare stop paying for stuff that the UK's MHS does not provide. That is care that has not shown a positive net benefit to cost from what I've read that seems to be at least 20% of Medicare spending. I've written about other reforms that might help reduce costs. 

• Social Security reform - The system should stop giving COLA raises to the higher lifetime earners until all recipients receive the same payment in retirement. The system in Australia works that way, for the Government part of pensions, every retiree gets the same amount. It is and should a program to prevent the elderly from falling into poverty.

To me the issues we focus most on like immigration are problems but not as big as the above. Inflation has been a problem for the last few years but seems to be under control now.

A Compromise with Drug Law Supporters

As a compromise with drug law supporters, I have begun to propose that we legalize the sale of all drugs, to make the supply safer, but make the use of certain recreational drugs without a prescription illegal. This would be to reduce the collateral damage from drug use, including spouse abuse and child abuse and street crime. That way if someone calls the police because a drugged up guy in behaving bad, the police can arrest and jail him and it is an easier conviction.

I would say that they could then force him into treatment but from the evidence that I've seen forced treatment doesn't work. Of course in the future it might and so we should keep it as an option.

A UBI Design Again

I support a $260/week UBI given to all US citizens over 18 years old but it would replace TANF, SNAP, minimum wage laws, housing subsidies etc. and yes Social Security also. There would no longer be a reason to have those programs if we had a UBI. And I think giving more money to parents for there children would dangerous in that a very few but not 0 might have children that they neglect to get more money and that would look bad for the UBI and in fact be bad. Children are already subsidized through schools and free lunch programs and charities like to help children and the UBI would make the problem of child poverty small enough that charity could cover it. I would also start taxing the 1st dollar earned at 33% instead of 15.2%. The tax rate/bracket could lowered once income goes about enough to pay for the UBI ($40,969.70/year). 

If it reduces would too much a work requirement can be added.

Factors in Increase in Homelessness

What has contributed to the increase in homelessness in the USA 

One factor seems to be deinstitutionalization of the mentally ill.

From google AI: “Studies from the late 1980s suggest that homelessness is related to deinstitutionalization”

Another factor especially on the west coast is the increase in voters ability to block the rights of land owners to build for frivolous reasons like increased traffic, neighborhood character etc. See Euclidian zoning.

Which BTW is an extreme form of democracy. It is related to Social Democracy which is a system where workers and citizens get to vote on much more. In a socialist Democracy employees would get to vote on how corporations are run and voters in an are would get to vote on what gets built and much more.

Another factor is the reduction of police power and courts standing up for the rights of those who end up homeless who might in an earlier time been put in jail. One might look at this as a good thing but can lead to more people living on the streets.

Homelessness is a common problem now in most developed countries. Japan seems have overcome it by putting zoning in control of the national government. The national government represents the people in a given area but also the people who would like to live in that area.