Wednesday, February 8, 2012

Inequality and the Derangement of the Rich

I just read about an interesting new book by Charles Murray called “Coming Apart: The State of White America 1960-2010.”  I haven’t read the book so I can’t endorse its analysis, but its premise touches on a question I’ve been thinking about a lot lately: how inequality deranges the rich, in addition to oppressing the poor.

I approach this idea as a young professional who is, somewhat against my will, a member of the rising elite.  While I’m not yet part of the national 1%, my salary as a finance professor puts me squarely in that percentile for my demographic and on a good track to achieve full status at some point in my career. 

And I do question where that salary comes from.  I think most finance academics derive solace from our one degree of separation from the finance industry.  But it doesn’t take a PhD to trace the provenance of our high salaries to the same financial sector excesses that have sparked widespread outrage and protest around the world.

I entered finance from a position of idealism.  Finance is an incredibly powerful force in the world, and I wanted to marshal that energy toward solving important social problems that affect everyone, not just the rich.  I still believe in that premise, which is why I’m still in the field.  But throughout my career I’ve felt tidal forces that keep pushing me away from the issues I care about most.

Although there’s a growing mass of financial scholars working on issues of economic development, financial literacy, and consumer protection, academic finance is still centered on how to help banks and big corporations reap greater profits.  Other sectors face similar disparities in the allocation of talent and research energy.  In health for instance, the vast majority of resources go toward addressing the problems of the richest minority of the world population like baldness and impotence, instead of problems of the poor majority like malaria and diarrhea.  When the American Economics Association held its annual conference in New Orleans in 2008, I marveled at how few economists ventured into the downtrodden city to learn about economic problems in vivo and apply their much-needed expertise.

The forces through which the rich segregate ourselves can also be found in our personal choices.  My current home of St Louis is one of the more economically segregated metropolitan areas in the United States.  Professionals inevitably congregate in its rich suburbs and chic urban center (the latter with requisite griping about the fiscally-starved city’s 1% income tax), completely insulated and out of touch with the decaying city and its desperate denizens right in our backyard.  I myself feel at a loss for what I can do to improve the city I live in.

While I do my best to combat the forces pushing me toward fat cat insularity – trying to maintain a modest lifestyle, seeking out opportunities to interact with and serve the poor, and choosing research topics accordingly.  But the effort of continually violating the norms of my social caste is draining, and I'd rather spend my energy doing actual good.  


I don’t (completely) blame myself or my socioeconomic compatriots for giving in to the forces that push us toward self-isolation.  Inequality deranges us because people everywhere do things largely because we can.  When we have the means to do basically anything we want, it’s hard to find perspective.  It’s hard to grasp what it means to live in want, because we so rarely feel it ourselves.  Even with a desire to do social good, it's hard to form a vision for concrete action.  Bill Gates and Warren Buffet aside, role models are scarce and career paths barely existent for applying an elite education toward solving the poor world’s problems instead of diving deeper into the bubble.

I have a nagging feeling that I’m not the only member of the elite that feels deranged by inequality.  The younger generations especially seem comfortable incorporating social responsibility into our career plans, and seek satisfaction through helping others instead of simply acquiring status, security, and a comfortable life.  I’d love to hear from other deranged elites about your thoughts and attitudes about work, money, and living a meaningful life in an unequal world.

11 comments:

C Jenq said...

It's nice to see other academics thinking similar thoughts. There's a lot that you cover in this post but one thing I wanted to comment on was your anecdote about economists' disengagement with New Orleans.

I'm not surprised by this and I think this is representative of most economists' approach to research.

I'm pretty disappointed by how disengaged from the "field" many economists are, particularly education/health/labor/applied micro economists. Of course there's a notable minority of people who go into the field who collect data, and it is understandable why so many people are disengaged from field data: Collecting field data is downright expensive in terms of both time and money.

Also, taking the time to learn about the detailed context of the data one is analyzing also takes a lot of time. It's a lot easier to just make convenient assumptions about the data than to pick up the phone, go to a site, or talk to real people from the dataset about the context of the data collection.

At the same time I admire how political scientists, sociologists, historians, anthropologists, ethnographers, etc. are spending years in the field immersing themselves in the context of their research topic. (But yes it is somewhat sucky that they spend an avg of 7-8 yrs in grad school.)

I often wish my PhD program encouraged me to spend time in the field, to spend more time thinking about how to incorporate qualitative data effectively, etc. Of course it costs more money, which is probably why they don't do it. I mean, administratively, the "Efficient" thing to do is to provide the minimum amount of resources necessary for PhD students to get an academic job.

Just today I was sitting in a political science professor's office who showed me a paper about political economy in an economics journal and showed me a table of summary statistics that included an improbably number. The paper was about political economy and he went on to express his frustration about how he felt researchers had very little contextual understanding of the phenomenon they were analyzing. (He also told me that a colleague of his tried to replicate the results but couldn't.)

And then he told me point blank that I should spend more time immersed in the context of the topic I am trying to write my dissertation on. He said that if I was truly serious about writing about this context he said I should live in this particular country and learn their language intensively for several months.

I would love to take his suggestion but the fact is I only have funding for a while longer and I have pretty heavy incentives to finish a dissertation and graduate within a particular time frame. A part of me likes the fact that Econ PhDs typically graduate in fewer years but a part of me also wishes that I would have some more encouragement to immerse myself in my research context.

I'm sure the pressures are even worse as a tenure-track assistant professor.

Fred said...

Jialan,

Hi! I'm fairly new to your blog, and find it refreshing. You raise an interesting point. What is a person of conscience who rises to the 1% to do (a problem I'll never have; I'm just a microbiology prof [wink])? From my experience, the need to maintain their toe-hold on an existence without want or fear of want drives middle-class people to live in segregated areas (so their houses -- their major stores of value -- don't lose value) and strive to send their kids to expensive and de facto segregated private colleges so *they* don't fall out of the middle class. These survivalist instincts make it very hard to live a virtuous life; it has nothing to do with wanting extravagant things. If you solve this problem, we all need to know.

I've not yet read Coming Apart either, but I've read a long review by reformed conservative ideologue David Frum (cited below). Apparently the part about the "new lower" class is interesting and problematic. It identifies a "lower 70%" of white Americans whose behaviors are starting to resemble the behaviors of poor Americans (almost all people of color) described in classic sociology studies of the post-WW2 period to an alarming extent. The author evidently gins up an explanation based on bad cultural influences, ignoring what is under his nose -- that decreasing economic opportunity and loss of upward mobility is damaging our society in frightening ways, and has been doing so for long enough that the resulting social pathology is here and now, not in the future. A country of 70% unmarried teens with babies, school drop-outs, petty criminals, etc., is not going to be able to compete in the world. If this is really what's going on, this new lower class will be a ball and chain that will doom the efforts of the productive 30%. A very scary picture.

Frum's review: http://www.thedailybeast.com/articles/2012/02/06/charles-murray-book-review.html

Best,
Fred V.

Blue said...

Two other related posts: Nicholas Kristof's current column and a blog post from Paul Krugman.

I admire your idealism. It does strike me as a bit over-idealistic, as if you could really solve the world's problems by being a better person. (Sorry if that sounds snarky.)

Along those lines, I'd recommend Gemot Wagner's Will the planet notice?, which applies economic thinking to (in his case) environmental problems.

Jialan Wang said...

C Jenq: I agree. While I also think that field immersion has its own pitfalls - "going native": becoming biased by the subjective biases of your subjects, being misled by anecdote, etc. - I think there *is* a way to astutely observe and fully absorb the subtleties of the real world while also taking a dispassionate and objective eye toward the big picture.

Economists tend to be better at the latter, but too often we mistake the intellectual laziness of standard assumptions for objectivity. In my view a subset of development economists strike close to the right balance - e.g. Esther Duflo.

A great passage from the end of Duflo and Banerjee's book:

"If we resist the kind of lazy, formulaic thinking that reduces every problem to the same set of general principles; if we listen to poor people themselves and force ourselves to understand the logic of their choices; if we accept the possibility of error and subject every idea, including the most apparently commonsensical ones, to rigorous empirical testing, then we will be able not only to construct a toolbox of effective policies but also to better understand why the poor live the way they do."

Jialan Wang said...

Fred: Thanks for reading and commenting!

I completely acknowledge the emotional need for security and to provide opportunity for one's children. Those emotions are very real and valid.

But I also want to push back on that. My whole life I've internalized philosophical notions of universality - that a moral life is one that could be lived in anyone else's shoes.

Our notions about what we need to feel safe are ever-shifting over time and socio-economic class. Our lives are already much much safer than it was a few decades ago. Although incomes fluctuate more and job security has declined, for the educated classes this has been more than compensated by increases in absolute salary (e.g. bankers complain about job security, but they're paid six figures).

My point is to ask - at what point can we say we have enough, and stop shifting our lives for economic gain and security? The average person in America would probably feel like they're set for life if they had a microbiologist's job. You in turn would probably feel set for life if you had a finance professor's job, yet I know many finance professors who distort their decisions based on getting ever more security.

(Our perception of) Risk will never be eliminated from our lives, so this ratcheting effect is infinite if we let it be.

Again, I think the drive for security is natural and powerful, so I don't blame anyone for succumbing to it. But I also think there's a logical argument for taking a step back and saying - "I'm already living a fairly safe and stable life. I can afford to go with my conscience instead of my gut." Perhaps I'm foolhardy, but that's kind of where I am right now.

Regarding your other point, I think there's a chicken and egg problem with social habits vs. economic opportunities. A growing consensus among labor economists is that the lack of opportunity in itself is due to stagnating college attainment of native-born Americans (see Goldin and Katz). While the economic returns to college have increased dramatically since the 70s, people haven't been making it to graduation to reach economic stability.

And a growing body of research suggests that this is largely due to gaps in "non-cognitive skills," the habits of mind, social graces, etc. that might be similar to what sociologists term "bad behavior." These skilled are learned early in life and very hard to teach or retrain.

Jialan Wang said...

Blue: Thanks for your comment!

One of my mottos since a young age has been that our most wonderful human characteristic is the ability to possess hope despite improbable odds.

I'm aware that most of my idealistic efforts will peter out, but I think I should try anyway on principle, and also in the spirit of learning and experimentation. Because if anyone in the world has the luxury to fail, it's me (see previous reply to Fred).

A deeper paradox I'm confronted with is the realization that those who do great things may not be great people, and great people may end up living small lives.

A model I've seen work is the high-powered professional who applies rapacious energy to become a captain of industry / politics / academia, not caring too much about the little things along the way. Who then in middle age applies their economic power and prestige to social causes (while possibly retaining their previous extravagance and prickly personal characteristics).

But that model won't work for me, because it's important for me to be the change I want to see. This might be more difficult strategy to pull off, but I won't know until I try!

Fred said...

Jialan:

I probably seem less jaded earlier in the week when I'm better rested. ;-) The urge to idealistic sacrifice is widespread, or Les Miserables wouldn't have been playing all these years, and people act on it in their daily lives, some more than others.

Best,
Fred

Blue said...

Bill Gates seems to fit your first description—turning to good works after being successful in business. I'm sure he is doing good things.

But somehow I'm more touched by Warren Buffet who doesn't (visibly) do good things. He just speaks out as the person he is, which seems to be a very good person.

You may be interested in a number of videos on happiness.

Fred said...

Jialan,
Perhaps predictably, Paul Krugman favors Frum's interpretation of the data over the one in the book. There has been a LOT of commentary about it over the last day. It's a real lightning rod. http://www.nytimes.com/2012/02/10/opinion/krugman-money-and-morals.html?_r=1&src=tp&smid=fb-share
Fred

Jialan Wang said...

Here are my thoughts on some of the commentary going around on Coming Apart.

http://econerdfood.blogspot.com/2012/02/more-on-coming-apart.html

Anonymous said...

Related to this is a general disconnect in a lot of academia that I find highly distressing. I guess it would fall under the old 'ivory tower' mentality...?

As a PhD student in Physics, I see huge numbers of absolutely brilliant people head off into the most theoretical, navel-gazing specialties. While I entirely believe in the need for basic, application-free research, at some point when the world is falling apart, shouldn't that take a back seat to doing something useful?

There is so much that a 'hard' scientist can help with in this world (new, cleaner energy sources, better materials, desalination methods, climate change amelioration methods, etc), but when I try to talk to most of my cohorts about this, it's laughed off, or they mutter something about conflicts of interest.

In the first case, apparently the only thing that matters is what tickles their fancy (exploding stars, the early universe, milliKelvin interactions), and the world can go to hell as long as they get to play with their toys (or toy mathematical models).

In the second case, the claim is that applications or goals somehow 'taint' the research. This is absurd, the physicists who developed the atom bomb and nuclear power certainly had goals in mind, and they achieved those goals through hard, pure research. The universe is what it is: if your goal is impossible, or your method wrong, it will become clear. The purity of your research comes from how willing you are to see and accept what the universe is showing you.

Either way, it manifests itself as the same sort of disconnect from the 'field' (i.e. the world, other people) that you discuss. I wonder if, at least in the US, it may stem from the current attitudes towards the more mathematical sciences (math, finance, physics, bio/med) in general. When you're derided in school for being a nerd, and half the country thinks you're doing the devil's work, I suppose it's easy to develop a mentality (at least subconsciously) of "why should I do anything to help others?"

It also doesn't help that there's no money in (or no additional incentive towards) socially-conscious research--something that our fearless leaders -should- be stepping up to address... Any day now, I'm sure.