Baby Boomers and the Stock Market, T+3

It’s been over three years since I mused about a rare flat decade in U.S. stocks.


Since then, millions of Baby Boomers have retired, and…. stocks are up 50%…

Dow Jones Industrial Average 2001-2015

Apparently, demographic realignments are no still match for the dynamism of the modern American corporate machine and its ability to turn invested dollars into innovative dividends. My pessimistic musings based on ten years of evidence are looking increasingly naive compared to the roaring hundred-year-based optimisms of Mr. Money Moustache and jlcollinsnh. Maybe this time, it’s… not different?

The unemployment rate has been dropping. Pundits like to point to the labor-participation rate or the employment-participation rate and argue about how much can be blamed on retiring Baby Boomers and how much it matters. There seems to be a significant chunk of people quietly hiding under the rug of Social Security disability (if you haven’t seen the excellent This American Life podcast). The less well-known fund is set to run dry at the end of 2016, leading to all sorts of interesting political game theory.

Labor Participation Rate 1948 to 2014Some people seem to assume that falling employment rates are a problem. The labor participation rate is the lowest SINCE 1977!! With every drop, the year goes back and sounds more ominous. Yet every time, I think, well how did the country survive 1977 anyway? We went through several decades with a lower proportion of people employed than today.

What changed between then and now? Participation rates went up as lots of women started working and now goes down as Baby Boomers retire while living longer. So we’ve essentially traded a world where men worked to support their wives for a world where men and women both work to support their grandparents. The biggest difference, of course, is that the support is channeled through the government at mismatched levels, essentially relying on foreign investors to give those grandparents better support.

Some seem to see the downfall of America and its self-sufficient legacy in the growing numbers of non-workers. If we include children under 16, surely the number of productively employed people supporting the rest of the country is less than 50%. Yet there does not seem to be any fundamental problem with that proportion. We used to do it all the time, and we were far less productive then.

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If You Want Moderate Muslims To Denounce The Radicals

“If Muslims are peaceful, why don’t they condemn terrorism?”

This is a common question in some philosophical corners in response to headlines about attacks by radical Islamists. Assuming the good faith of those who ask this question, there are three important things to recognize.

1. Muslims do denounce terrorism.

It only takes a few minutes on Google to find condemnations of radical Islam by the Secretary General for the Organization Of Islamic Cooperation, the top cleric of Turkey’s Religious Affairs Directorate, Al-Azhar’s Grand Mufti (the highest religious authority of Egypt), the chief of the Arab League, the Muslim Council of Great Britain, the Muslim Public Affairs Council, the American Muslim Political Co-ordination Committee, the Grand Mufti of Saudi Arabiadozens of UK imamsa Muslim HuffPo bloggerMuslims in Toronto, Muslims in Norway, and many, many more.

When someone says “I haven’t heard moderate Muslims denouncing radical Islam,” maybe what they really mean is “I haven’t looked for it.”

2. These denunciations are handicapped by the disincentives of information flow biases.

Why should this person have to look for it? He didn’t go looking for news about terrorist attacks – the news just came to him. Or so it seemed. Perhaps he implicitly assumes that news about condemnations of terrorist attacks should just come to him the same way.

I think there is a fallacy that “news” is a generally consistent portrayal of “things that are happening in the world.” I think this fallacy is especially seductive to those of us who “follow the news.” We know there are political biases in the way these “things” are portrayed or emphasized by certain sources, but I think we often ignore the inherent biases that affect whether or not events show up on our radar as “things” to be portrayed at all, and how they filter their way to our consciousness when they do.

Denunciations about terrorist attacks face multiple handicaps. First. people being killed tends to attract more attention than people talking. The latter is less likely to be introduced as “breaking news” or front-page headlines. Regardless of how prominently it is introduced, it is less likely to propagate through clicks, shares, comments, and general discussion.

Sometimes people talking about big events can attract more attention due to the connection to the big event. But a second handicap is that Western media and its Western consumers tend to pay more attention to Western people, especially those who are Important. That’s how Obama not going to France – a non-event that would normally register even less attention than Obama talking about something – was apparently a bigger deal last week than hundreds or thousands of Nigerians killed by Boko Haram. If dying Africans can’t compete with Obama’s travel plans, what hope do talking Arabs have?

A third handicap is that we tend to pay more attention to events that elicit emotion than events that absorb emotion. An article about someone condemning violence – if it finally manages to make it past the other handicaps – is less likely to elicit much reaction. Well, duh, denouncing violence is what we would expect any normal person to do. Normal expectation satisfied, emotion absorbed, not much impulse to share that story with others,

These handicaps hold true independently of political bias. A couple of the above links are from Fox News and the Blaze. But how prominently were such articles featured on these sites to begin with? How many clicks and shares did they receive? What percentage of articles do regular visitors to these sites read, what percentage of front-page vs. below-the-fold/deeplinked articles do regular visitors read, and what is the chance they saw those lesser articles at all?

3. If you really want more moderate denunciation of radicals, you should encourage and amplify the voices that are already doing that.

Some respond to the above points by moving the goalposts or making weaker claims: “Well, there’s still not enough of them” or “Well, they need to try harder” or “Well, it doesn’t seem to be working, does it?”

It can be simultaneously true that there are Muslims condemning violence done in the name of Islam and that the efforts of those voices should be increased. But I think people in good faith, if they really want those moderate voices to be more successful, should not respond with derision, but by recognizing the handicaps faced by those moderate voices and helping them out by encouraging and amplifying their voices.

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Reinforcing Our Views On False Choices

An activist in Arizona went through some use-of-force training scenarios with police and came away with a different attitude. I think it’s a great example of the power of rejecting False Choices and trying to understand opposing perspectives. The better you understand what it’s like to be a police officer, the better you can offer legitimate critique and ideas for improving things as opposed to baseless criticism and demagoguery.

I think it would be great if every protester did this. I also think it would be great if, say, every pro-police counter-rally-goer would spend a couple days driving around and hanging out with some young black men in the inner city (it’s harder to come up with comparable reverse scenarios due to some of the power asymmetries involved, but something like that might be a start). Increased understanding leads to increased empathy, breaking the negative feedback cycles of defensiveness and outrage.

It was interesting, though, to see the article making the rounds in the conservative wings of False Choice land. Many people seemed to view the story through the tribal lenses that divide these issues between “police” and “protesters” and insist on choosing sides between them. False Choicers already knew that “police” was the right side and “protesters” was the wrong side, and this activist’s experience simply proved that he was on the wrong side in his ignorance, but his enlightenment showed him the truth about the right side.

Instead of the article making them think that their own views might suffer from similar ignorance, they could only think about all the activists on the other side they wished would also become enlightened to their side. Instead of the article implying that protesters who want to fix problems with police are more likely to be able to make genuine improvements if they understand an officer’s position, the article only implied to them that there are no problems with the police that need fixing at all!

As someone who rejects False Choice land, the incident reinforced to me the value of rejecting False Choice land. For someone who thrives in False Choice land, the very same incident reinforced the value of thriving in it.

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Why Conservatives And Liberals Both Let Police Unions Get Away With Stuff

No one holds police unions accountable because conservatives like police and liberals like unions

I created this hypothesis while observing the events unfolding in my city of St. Louis late last year. I learned that the head of the local police union was a former officer who was fired from a nearby district for falsifying police reports! To me, this looked like classic corruption. The newspapers kept quoting the man about ongoing developments, yet few seemed to question his past.

I found it amusing to think about how well many conservatives can expound upon the problems of teachers unions protecting bad teachers while remaining completely silent about the potential for police unions to protect bad cops. Perhaps it is the loudest and most extreme criticisms from some liberals which provokes this defensive blind spot; it would likely be easy to reverse roles and find similar blind spots in the other direction.

The unfolding events in New York City have me considering this hypothesis further.

Daniel Pantaleo, the officer who brought Eric Garner to the ground in a chokehold, was previously involved in a lawsuit for strip searching a couple African American men. The claims are denied, but the charges against the men were dropped and they got paid instead. Maybe there’s some defense to be made (overly litigious society, etc) but this sort of thing seems to happen a lot, and my unenlightened conclusion is that you only want to hand out money to avoid a trial if you think you might lose the trial. One of the side effects seems to be that the officer is less likely to receive consequences. Normally, incentives would induce the organization to remove officers who become too litigiously costly. Is there a union element standing in the way?

We have seen actions that appear consistent with an organization reflexively resistant to criticism. After Eric Garner, NYC mayor Bill de Blasio made remarks that to my ears were markedly moderate. To the NYPD’s ears, biased by previous developments, the mayor has two murdered officers’ “blood on his hands,” and they’ve taken to turning their backs on him at the officers’ funerals, even against the request of their own police commissioner and the officers’ own wives.

Meanwhile, Rudy Giuliani gets on TV and explains that this is all happening because the mayor “created an impression with the police that he was on the side of the protesters.” Giuliani even admits that “some of those protesters were entirely legitimate,” but when you live in False Choice land, if you don’t align yourself clearly enough with one side then you clearly must be “on” the other “side.”

Frustratingly, the False Choicers are the ones who, with a Smart-People-esque confidence, get to decide how you are aligned. They can even complain that you should “have said” less-outrageous more-on-my-side things that you actually did say but that they maybe didn’t hear due to the biases and discincentives of information flow about things that they and their information flow network consider outrageous/non-outrageous.

Maybe a skeptic would argue that none of this has anything to do with unions. At a minimum I feel like there’s enough circumstantial evidence that I wish more people seemed to care more about looking more into it.

Since you can’t criticize police unions without questioning police, to conservatives this smells too much like the people yelling death threats, and they reflexively block it off. I suspect something similar is at work with liberals and the conservative distaste of unions. Thus both sides develop blind spots against an organization they would otherwise be quick to criticize. Thus the unions are free to protect their members from the accountability they would otherwise receive, while the distracted demagoguery continues…

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The Road Taxes Are Coming, The Road Taxes Are Coming

Congressional Republicans are not ruling out raising the gas tax to keep afloat the broke Highway Trust Fund… (WashingtonExaminer)

I assure you I was going to predict this before it hit the news yesterday, but I can’t prove it. I never even tweeted about it. Oh well.

I first blogged about the growing road tax problem over three years ago (wow, that’s like forever in blog-years), and not much has changed since then. It’s been over two years since I blogged about the increase in US oil production, and not much has changed about that, either, except that the oil markets finally responded and dropped like 50% in the last few months.

A couple months in I started wondering if the corresponding drop in gas prices, which I don’t expect to reverse any time soon, would give Congress more appetite for a gas tax increase. The per-gallon funding system is still increasingly broken, but it’s only like 18 cents a gallon. That was a lot when prices were, like, 60 cents before adding that tax. But we’ve seen 300-400 cents now! Prices have dropped like 150 cents from the levels customers have gotten used to, so what’s, say, 9 cents back the other direction? That would immediately give the fund a 50% boost, extending the broken model out for at least several election cycles.

Yeah, yeah, Republicans taking over Congress, Republicans will never increase taxes. Yeah, right. The road tax is one of the more reasonable federal taxes out there (not that there’s a super high bar there), and the numbers just don’t add up anymore. Once they accept it the politicians will come up with any number of justifications. “It’s better than a Big Brother per-mile tax.” Or maybe they’ll extract some sort of concession that theoretically reduces construction union power to theoretically reduce ongoing maintenance costs or something. Or maybe they’ll just hide it in a spending bill somewhere with a graduated increase that hopefully won’t get noticed too intently.

It’ll give people something to complain about when prices go back up, but, hey, they’re going to complain about that no matter what even as they buy more fuel-efficient vehicles that more than offset it. It’ll give Tea Partiers something to complain about while they drive on the federally funded highways to get to their rallies about how the establishment Republicans are so unacceptably compromising of Big Government, which, again, they’re going to complain about anyway.

And the government will still pay people to Build The Roads. And the unsustainably subsidized suburban sprawl will sustain itself a little while longer. And life will go on.

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Are We Reaching A Turning Point In The Politics Of Outrage?

According to Betteridge’s law of headlines, the answer is “No.” But it appears that there a growing number of pundits who agree with me about the negative utility of political outrage.

Earlier this month Slate published a beautiful recap of 2014 as “The Year of Outrage.” (hat/tip @NickSacco55) A giant grid depicts their dutiful tracking of what they considered the most outrage-inducing story of every single day of the year, It’s stunning to look back at all the outrages I forgot about or never knew about in the first place. It’s interesting to ponder how many of the ephemeral outrages I avoided with my blogging hiatus.

It’s illuminating to see the stupid outrages side-by-side with the serious ones.

Throughout the piece(s), there’s a mournful tone about how the silly outrages distracted from the genuinely important issues (which naturally are the ones featuring the greatest crimes against Slate’s writer’s progressive political positions). Their conclusion is relevant for pundits of all stripes:

it’s fascinating to look at how our collective responses skipped from the serious to the picayune without much modulation in pitch.

When everything is outrageous, nothing is.

But it’s not just liberals who are questioning the long-term value of our obsession with outrage. Mollie Hemingway took on those trying to tie the NYPD police murders to Democratic politicians, reminding us of a similar Palin-blame game and asking if we can all “try to see the best in each other’s arguments.” An Atlantic feature on Erick Erickson noted that the Red State hero has been questioning the anger that made him famous:

In August, he wrote, “I increasingly find conflict between my faith and some conservative discourse.” He cited the right-wing furor over undocumented minors, Ebola, and the protests in Ferguson, Missouri…

He told me about a man who had come up to him to rant about immigrants ruining schools and neighborhoods. “I’m like, ‘Why are you so angry?’ ” He thinks conservatives suffer from a persecution complex…

Most of our modern political groups do. I’m encouraged to see more pundits recognizing the problems of outrage. Perhaps the movement will continue to grow, though I suspect the demand remains too strong for such things. Nash equilibria do not tolerate vacuums. Even if Red State manages to fend off the temptations to keep peddling its own outrage, will that just send more readers to the Matt Walshes of the world? Or can leaders like Erickson help bring down the demand curve while shutting off the supply?

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The Government’s Role In Urban Cycles of Poverty

I recently read an incredible book by David Kennedy called Don’t Shoot: One Man, A Street Fellowship, and The End of Violence In Inner-City America. It is full of amazing insights into the perspectives of law enforcement and urban neighborhood communities, and how their misunderstandings of each other lead to actions that perpetuate those misunderstandings.

Kennedy outlined a paradigm that he claims is “common currency” in many poor, black neighborhoods. In this paradigm, he says, America is engaged in a conspiracy to subdue blacks. After the civil rights era, the CIA invented crack. The government keeps trucking it into the ghettos to draw young blacks into the trade so officers can keep arresting them.

When Kennedy first ran into this paradigm, he laughed it off as craziness. But he came to see reasons that made it an attractive theory to people with their experiences and knowledge: America really did overtly subject blacks by law until fairly recently; the crack epidemic devastated the ghetto; the community sees white folks drive in to buy drugs but only sees black kids getting arrested for it; they see a powerful American government with global military and surveillance capabilities, concluding that they must not be stopping the drug trade because they don’t want to stop it.

Once Kennedy understood the logic within this paradigm, he saw how law enforcement actions perpetuate it, and how it affects the community’s coldness toward police and the police’s coldness toward the community. By taking the paradigm seriously, he came up with ideas to address its fatal flaws, such as having law enforcement build up cases against dealer kids and tell them they could arrest them but they wouldn’t if they quit, which proved to the community the police wasn’t out to get them, which motivated them to help keep new dealers off the streets, which proved to the police the community really didn’t want the drugs either, which all in all literally turned dangerous neighborhoods into safe neighborhoods within weeks (!!!).

There’s a lot more fantastic insight and brilliant details about all of this in the book (seriously, read it), but I want to focus on this urban paradigm that America, particularly its government, is still systematically engaged in a racist agenda to subject the black man. I’ve stumbled onto parts of this idea before, but it’s still largely unfamiliar to me, Kennedy’s depiction is the most comprehensive I’ve ever seen. As an outsider, I can’t say if he’s being fair to the paradigm, and what sorts of variations exist and the various reasons people believe in various parts of it. But it seems safe to say that the paradigm exists, and is held by a non-negligible percentage of the American population.

I find it extremely interesting to compare this paradigm to one with which I am more familiar. Many conservatives also like to blame the government for perpetuating cycles of urban poverty, but for opposite reasons. The government is giving away too many handouts! Food stamps, Medicaid, subsidized housing, “Obama phones”… the list goes on and on. The “takers” keep taking from the government so they can lay around with their TVs and video game consoles while demanding even more goodies paid for by hard-working taxpayers who are not nearly as lazy as the folks suffering from the disincentives of ugly marginal tax rates.

Before anybody jumps in with some Doubtlessly Qualified Opinions on the relative truth values of these paradigms, I just want to marvel at the tension.

In one corner, we have a bunch of Americans who are convinced that poor people are poor because the government is doing so much to hurt them. In the other corner, we have a bunch of Americans who are convinced that poor people are poor because the government is doing so much to help them!

Isn’t that kind of… beautiful, in a strangely partisan political way? Isn’t that such a great example of how people with different experiences can come to such different conclusions about the same issue?

Please don’t mistake me for implying some sort of parity between the paradigms. I strongly believe the urban conspiracy paradigm is fundamentally flawed. But the opposing paradigm does not even allow for that paradigm to exist, right? (Well, at least without assuming the complete irrationality of the participants. But I have long believed it too simple to write off people on “other sides” as evil/stupid; most people operate with biases but act rationally based on those biases, and Kennedy’s book confirms the rationality of the participants enough for me.) If the government really is helping poor people so much, how could the paradigm that the government is hurting them even get off the ground? What does the mere continuing existence of that paradigm say about the weaknesses of the other?

I have some preliminary ideas, slowly coagulating in bits and pieces – a comment about a Charles Murray book here, a reference to 90′s welfare reform there. I suspect the “ample social safety net” does not actually catch the “poor” nearly as efficiently as some conservatives (perhaps surprisingly) seem to imagine that it does. Maybe some services require addresses; many people who live in poverty are transient, moving between houses and apartments or nothing at all with different family members and friends as living situations change. Maybe some services require going to city buildings; many poor have limited transportation options. Maybe some services require waiting in long lines, verifying income status, social security cards, whatever; many working poor do not have a lot of spare time, maybe they do not know where their social security card is. Now soak all that in the general inefficiency and ineptitude of the incentives we call “government,” mix in some mistakes and lost paperwork and more long lines to fix them… hmm, maybe it shouldn’t be surprising if a lot of poor people don’t exactly see the government as a Clear and Shining Beacon of Everlasting Free Goodies (That Could Lift Them Out Of Poverty If Only They Weren’t So Lazy).

Of course, since I’ve never been poor, and I’ve picked up most of my conservative ideas of how the government helps the poor from conservative people who have never been poor, I don’t even know how to know how close I am to the right track of what government-poverty relations have ever looked like, much less how they look in 2014. I mean, I know there’s like forty million people on food stamps. That’s got to count for something, right? But there are huge gaps in understanding. I’m having my eyes opened to previously incomprehensible paradigms that are helping me fill them.

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I Was Wrong About Obamacare

In the late 2000′s, I was very wrong about hyperinflation. I had unfounded confidence in a flawed view of the world which made me fall for simple projections peddled by confident people. In fact, I was very wrong about the Federal Reserve in general; I believed their responses to the crisis would quickly backfire with unintended consequences in a vicious feedback loop that certainly did not allow for a 2014 with record stocks, low unemployment, and no inflation – regardless of what may yet occur. Fortunately my risk aversion kept me from ever spending more than a few hundred dollars on silver.

In the early 2010′s, I was less confident about many things. But this blog has dutifully preserved a major mistake I must now confess: I was very wrong about Obamacare.

Two years ago, I fully expected that by now the law’s utter failure would be readily apparent. All the law’s interventions would be backfiring on a huge scale. The cost of plans would be increasing enormously. Insurers would be backing out. There would be undeniable negative effects on employment and the general economy. Every exception, delay, tweak, and twist of the Rune Goldberg machine would reverberate through the rest of the parts, unraveling in a vicious feedback loop of increasing interventions and unintended consequences.

But as I joined the rousing cries of the anti-government crusade, I started to look around, noticing that the looming Obamacare apocalypse didn’t seem to be getting any closer on the horizon. I started noticing that everybody was just appealing to the future. So I shut up and waited. And the future still isn’t here.

Sure, there are little stories all over the place of discontent. I certainly wouldn’t say the law’s been a roaring success. But a hundred million people didn’t lose their plans. Everybody didn’t see their premiums double. The people didn’t rise up and take to the streets in outrage. For the most part the healthcare industry and all the people in it seem to be plodding along pretty much about the same as before.

The Speak-O

Now this doesn’t mean conservatives weren’t right about the law’s problems. Jon Gruber’s YouTube highlight reel has been confirming things Republicans have been asserting for years: the cost analysis was gamed, the details were deliberately, opaquely rushed, etc, etc. And Gruber’s attempt to pass off his clear defense of the clear subsidy language as a “speak-o” is the epitome of intellectual dishonesty.

Seriously, guys. A speak-o, if it’s like a typo, would be when you say a word and the context of the speech makes it clear you mean the opposite. Example: “I think Rand Paul could go all the way in 2016 for the Republicans and take votes from Democrats. I think Hillary will fade for the Democrats and Paul’s coalition will expand the Republican base. I’m a pundit so I know things. And that’s why I think a Democrat will win the White House.”

It’s clear from context that the intended word in the last sentence is “Republican,” and the speaker just mixed it up. But if somebody had actually said “Republican” there, and after a Democrat victory tried to convince people that in the speech he was clearly predicting a Democrat win while making a “speak-o” he would be laughably dismissed. If a “speak-o” means you can simply claim what you really said is the opposite of what you really said when it’s politically convenient to do so, then I’ve got a new campaign strategy for Todd Akin.

The most charitable explanation I can think of is that the subsidy language really was a mistake made by non-Gruber-people, but then Gruber assumed it was real and invented motives for it as he carefully and logically explained the reasoning behind it. But that’s not what Gruber said happened, either.

So if you’re still with me, it looks like Republicans were right about all the problems behind the law; they’ve just been wrong about how terrible the consequences of those problems would be.

The Rule of Law vs. The Rule of Man

If the Supreme Court accepts the previous version of Gruber’s argument about the subsidies, it would be an interesting consequence on the law itself. After a few years of incessant “rule of man” interventions to keep the thing moving, the “rule of law” would finally stick a fork in a law that was initially passed with “rule of man” corruption. Or maybe it wouldn’t. What do I know?

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