American Exceptionalism & The State of the Labor Market

As Americans gripe about the weak labor market, ‘America being in decline’, and wealth inequality, foreigners cannot get enough of America:

Libs awaiting the next financial crisis that will never come:

Brad Delong, who is a Democrat, writes:

Question for Tyler Cowen: Haven’t we gotten foreign policy right since World War II, more or less? Haven’t we created a world in which everyone save for the oligarchs of Muscovy and the princes and princelings of China wishes that their country was more like ours, and hopes that their grandchildren will have the option to move here if they want? What could we have done better over the past fifty years–aside from a lamentable tendency to think that right-dictatorships are more likely to evolve into democracies than left-dictatorships, that our soldiers can train “third forces” that will stand up on battlefields, and that we can intervene to both make people, in Woodrow Wilson’s words, “elect good men” and to make those we imagine are democracy-minded strongmen actually hold fair and honest elections?

Despite being a liberal, he’s correct. Again, to clarify the differences between a welfare liberal and a pragmatic neo/classical liberal, read this. ‘Liberals’ like Sheldon, Summers, Delong, Clinton and Gates are not leftists like OWS leftists, but are neoliberal/neoconservative pragmatists who believe in policy that maximizes the creation of wealth, technological innovation, and prosperity – even if it means more wealth inequality. America, especially in the post-2008 era, has become the envy of the world. Smart foreigners can’t get enough Bay Area and New York real estate and are also inundating our most prestigious institutions of higher learning with applications, while also coming work at America’s most innovative companies. Despite all the whining about intransigence and dysfunction, Congress, to their credit, has always risen to the occasion during trying times, and that has helped make America a safe place to invest in a world of dysfunction. Despite setbacks in Iraq, maybe spreading capitalism could have long-term benefits as we’ve seen in instances like Vietnam, China, and the Philippines. Every country that has abandoned communism has experienced a rise in standards of living.

You cannot bring up the middle class by attacking the top, and that is usually what happens in these discussions about wealth inequality. We need to change our perspective: despite record wealth inequality, the middle class of today has a much higher standard of living than the middle class of 70 years ago. For $10-20 a month you can have access to pretty much every TV show and movie ever made, whereas generations ago people only had 5 black and white TV channels. Adjusted for inflation, your dollar today buys much more utility than 100 year ago. So why is this possible? Because of rich people and the technologies they create within a free market.

This romantic idealization of ‘old economy ‘ jobs is counterproductive. Those jobs are gone or dying off. We need to teach individuals the skills and mindset to be competitive in today’s hyper-competitive economy. The millennials to their credit are getting this right, while the old economy folks call this ‘entitled’. We need to lower our expectations; unless you major in a good field, a lifetime of low paying service sector work should not be out of the question. Degrees from good schools signal intelligence and competence. In today’s competitive economy, the huge labor pool gives employers the luxury of only choosing only the best and brightest.

Economics is useful, despite the whining from the left that economists ‘failed to predict the crisis’. Economists are better at fixing crisis than preventing them. The tradeoff between less growth in exchange for stability is not a worthwhile one, especially when policy makers have become so adept at stopping crisis as soon as it arises.

Economists being paid more is part of the post-2008 trend of high-IQ people earning more than everyone else. This trend of the cognitive elite coming apart from rest of society is longstanding, but has accelerated since the 2008 financial problem and will continue a long time to come. More automation and offshoring is inevitable, I hate to say. Trying to bring millions of people of average IQ up to speed on STEM is also an impossible task. There are few solutions to the problem.

Speaking of coming apart, Charles Murray – who is held in high esteem by millennials, neoconservatives and neoliberals – is a pragmatist who understands that the solutions to society’s problems won’t be solved with political correctness, but by understanding the inherent differences between individuals and the importance of these differences in determining life outcomes and utility-maximizing policy. In the 90′s there was a strong backlash to the ideas in The Bell Curve, but I think now in light of recent economic events and more wealth inequality people are starting to see where he was coming from, and his legacy is being redeemed. The basic income is one such example that is being endorse by even libertarians. People are like, ‘hmm.. maybe he was right’.