200ProofMath

The latest thinking on economic justice, care of 200ProofLiberals, by Christopher Freiman. Worth comparing and contrasting with our own recent discussions of labor-management relations here at PoT.

Marx writes, “In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.”

However, by making you significantly richer, a capitalist society does a much better job of enabling you to hunt in the morning and criticize after dinner than a non-capitalist society. Ironically, though, you have to cut way back on your consumption to make this happen. But if you’re willing to save 50-70 percent of your income, there’s a good chance you can retire in your 30s or 40s and spend your time doing whatever you want. So capitalism allows you to achieve the flexibility that Marx dreams of—you just need to buy a lot less (which, if you reject consumer culture, should be pretty easy) and save a lot more.

There’s too much wrong here to waste time fisking it all, so I’ll just leave anyone interested with a modest mathematical-logistical exercise.

  1. Suppose that you work one full-time job doing physical labor, and earn $14/hour before taxes or any other withholdings (including withholdings for benefits, e.g., health insurance). I’m assuming that a full-time workweek is 40 hours long, give or take, and that $14/hour is base pay that might be supplemented by occasional overtime.
  2. Suppose that you pay $1,200 in rent for a one-bedroom apartment.

Come up with a plausible scenario whereby you could follow Freiman’s or Forbes’s advice under these circumstances (he gets his advice from an article in Forbes that’s linked in his post). If there are no such scenarios (or very few of them), how useful is the advice?

Let me get you started. $14 x 40=$560 per week, before withholdings. $560 x 4=$2240 per month. $2240-1200 (rent)=$1040 after rent. Sixty percent of $1040 is $624, which ex hypothesi, you’re putting away in savings and leaving untouched for quotidian expenses. That leaves you with $414 to live on per month–not calculating withholdings for taxes or benefits. Once you factor them in, you’re left with much less than $414. Factor in payments for prior debts, and you’re left with yet less. Take it from there.

PS. Just to clarify: I had meant conditions (1) and (2) above to be a baseline or starting point for answers to my query, not fixed features of the answers. My claim is: suppose that someone starts at (1) and (2); how do they follow Freiman’s advice from there? I’m not closing the door on the possibility that they do so by getting another job, and/or getting a different job, and/or getting a different apartment, and/or getting a roommate, etc. Nor did I mean that (1) and (2) are exhaustive of any individual’s life-circumstances. They obviously aren’t. I was just omitting all life-circumstances beyond those on the premise that any plausible advice would have to address a variety of circumstances not mentioned in the conditions. Plausible advice would also (among other things) have to take stock of risks arising from any advice, as well as ordinary contingencies that arise generally, regardless of the specific risks arising from the advice. And as mentioned in the post, I’ve set aside (for now) a number of fairly obvious criticisms one could make of Freiman’s framing of the issue as such.

7 thoughts on “200ProofMath

  1. The only way this works at $14/hr is living with housemates for 25 years straight (the rent figure is the weak point in your calculation). Saving $1000/m for 25 years yields 300K. With investment and compound interest, you might have 400K or more at 45 years old. Not a lot to live on for 30+ years (even with Social Security benefits) — you are probably still either living with housemates or living in a cheap foreign country. Few people are up for this. Works better at $25/hr, but I bet that most of the people who successfully execute such a plan make quite a bit more than $25/hr. A better (but still not great) point would be: if you make over $20 and are willing to save and sacrifice quality of life in important ways while you are young, you can retire pretty early (maybe as early as 50 or 55) and then do what you want for maybe 25 years. Adjust as you like for different wage-rates and willingness to sacrifice and save. It is true that modern capitalist society allows this sort of thing and that this good. But it is not really much open to any but the most resourceful and spartan-living lower-wage worker (and not really that close to Marx’s vision).

    I know younger folk who do a piecemeal version of this. They work a lot for several months (but not at some high wage rate) and save like hell, then travel and do what you want for several months. One can do this, if one is willing to live lean, for 10 years or so when one is young. Very appealing! But nothing close to Marx’s vision and really, again, only open to a particular sort of independent, resourceful person.

    The most potent point against this whole family of arguments is that they assume considerable psychological resources that those making the arguments have (or think they have) but that — for whatever reason — the average lower-wage worker does not. One of the above, reasonably-appealing scenarios might be possible for a moderate wage earner of considerable fortitude, independence, etc., but the reality is that the average $14/hr wage-earner increasingly more or less gets crushed by the system. That (maybe) you or I or Jason Brennan could make things work or even save and retire early is entirely beside the point if you want actual people not to get crushed by high rent, high expenses for having and maintaining a car, low wages and hard-to-resist social expectations that one spend money on various things like eating out and going drinking.

    On the docket for today: doing some more to help my brother not get crushed in this way. Plenty of bad decisions and room for criticism there, but at a certain point that is beside the point: it is just too hard to make it, especially in his area of the country, on his low-wage job.

    Liked by 1 person

    • On rent: see my PS above. I hadn’t meant to assume as a fixed feature of any answer that the person had to remain in a one-bedroom apartment costing $1,200 sans roommates, or that she would have to remain in the job paying $14/hour doing physical labor. My point is: assume that starting point, and if you think the person should depart from it in some way, explain how she’d make that happen from the starting point.

      So a person in a one-bedroom costing $1,200 could move to a studio and pay less, or move to a two-bedroom and get a roommate, or move to a three-bedroom and get two roommates, or even move to a two-bedroom and stuff it full of people, etc. He could also get a second job, or a third job, or apply to get a more remunerative job, etc.

      My point is, each move involves both costs and risks, and anyone laying out a plausible scenario would have to describe them, then explain how Freiman’s advice makes good sense all things considered. I’m assuming, though, that the 50-70% of the income Freiman thinks you should be saving is not to be touched for purposes of present consumption or expenses.

      So the question I’m asking is: how do you follow Freiman’s advice either from within those conditions, or by multitasking your way to different conditions? Your answer starts to make clear why there is no plausible way to do that. Freiman’s “advice” is not seriously meant as practical advice to actual people, but as a polemical one-off intended to put leftists on the defensive. The problem with it is that its polemical value is tied to its value as practical advice. Only a libertarian academic would think that you can plan your life by taking one piece of advice from an article by Forbes, and the rest from the Cato report on the Economic Freedom of the World for 2020. I’m not sure whether that’s better or worse than planning your life via the practical wisdom of “The German Ideology,” but that’s half the problem here.

      Liked by 2 people

    • I’m curious to see the math on your “it works out if you have a roommate for 25 years straight.” I’m assuming that two renters means a two-bedroom apartment. Once you shift up to a 2-bedroom, you increase the rent. Yes, you’re now dividing it by two, but are the savings enough, even in the more optimistic cases, to make Freiman’s advice work, holding the income itself constant? This is abstracting from 25 years’ worth of contingencies, and withholdings. So I’m skeptical that even roommates are going to do it. And of course, you’re not going to have one roommate for 25 years. You’re going to have dozens. There are search costs there, along with times when the extra bedroom is vacant for lack of a tenant.

      I should address the issue of one versus two bedroom apartments, and why I’ve defaulted to a one-bedroom apartment for a single person. Even though living alone in a studio or one bedroom is more expensive than having roommates (or so it may seem), I think for a variety of reasons that it should be the default assumption.

      First of all, living with a roommate is akin to being married to someone. We don’t accept as a default that marriage should be a purely economic arrangement–that people should become life-partners simply because it’s cheaper to do so. Obviously, I don’t mean that marriages of convenience should be legally impermissible, or that they’re somehow morally questionable. I simply mean that they’re not the default assumption about marriage, and shouldn’t be. If you were running a thought-experiment about marriage, you wouldn’t begin with a marriage of convenience as your paradigm case of a marriage. The default assumption is that people get married because they love each other, or at least care deeply for one another, not that they’re trying to reduce the rent through matrimony, or get health insurance that way, or get a green card, or whatever.

      Someone might say, “Well, that’s true of marriage, not of roommates.” But I would say that it’s true of both. Whether you live with someone because you’re married, or you live with someone because you’re romantically involved but not married, or you live with someone because you’re Platonic friends, or you live with a stranger, the salient fact in all four cases is that you are living with them–you are in constant physical and logistical proximity to them. That’s a life-altering decision. When you do it, it fundamentally re-structures your life, changing it in both foreseeable and unforeseen ways.

      So while there are times when it has to be done, I don’t think we can cavalierly assume that, “Well yeah, rents are unaffordable for single people seeking one bedroom apartments, but what’s the big deal? Just get a roommate!” That’s to bypass a fact that requires scrutiny (why are rents so high?) and fast-forward without reflection to a prescription that ought to be questioned (“it’s just obvious that everyone in the rental market should be doubling or tripling up”). If a roommate is the functional equivalent of a life-partner, the decision to get one (or the advice to someone to get one) can’t be assumed as a self-evident default. Just as it would be inappropriate to say, “Well, you can always solve your financial problems through a marriage of convenience,” it’s inappropriate to say, “Well, you can always reduce the rent by getting a roommate.”

      That’s the opening problem. A second problem is that getting a roommate is not that easy, especially if you’re alone and don’t know anyone else in the area in your financial circumstances. It’s not impossible, of course. You could advertise. But now you have to spend the time to vet your would-be roommates. This is in effect a part-time job, no different from what a property manager or landlord has to do when vetting a renter. So those costs have to be factored in.

      Beyond that, the process of getting a roommate is highly fallible. Even if the advice to get a roommate were somehow self-evident, and you put time and energy into vetting one, it is possible to get things disastrously wrong (on either side, for you; for them; for both). Resolving those problems will cost time and money, sometimes enormous time and money. Never mind the cases in which the roommate turns out to be an all-out criminal, or turns out to be insane, or whatever.

      Finally, even if all goes right, some people are temperamentally unsuited to roommate situations. They need solitude to preserve their mental health. So if Freiman’s advice here entailed being in a roommate situation for 25 years, we’d have to recognize that that might well come at 25 years’ expense of at least one party’s mental health. Is it rational to sacrifice your mental health for 25 years in order to get an early retirement? And is that even a semi-sane defense of capitalism? I feel confident in leaving those as rhetorical questions because the answers seem obvious to me. What’s astounding is how non-obvious they appear to be to him.

      Let me end this comment and write another one on a slightly different aspect of this issue.

      Liked by 1 person

    • So my original post bracketed issues regarding framing and the like, and just “drilled down” to the math involved in Freiman’s “proposal.” Honestly, his advice strikes me as so dumb that I’m not even sure it’s meant seriously as advice. It just seems like Freiman blowing off steam after encountering some leftist who quoted Marx at him. This is his revenge: a cleverish post masquerading as advice that no one can take seriously.

      First point. I’m taking it as semi-settled that there are no plausible ways to adopt his advice from the baseline scenario I described, except at enormous cost that renders his advice pointless. And the scenario was hardly outlandish. It was based on my own situation prior to getting my most recent job. It’s worth noting that very few of the people in my hospital EVS unit could afford rent, or afford their own place. Most lived in their family homes, either with their parents or with extended family. The exceptions were: a supervisor, a guy who had been working there for 16 years and worked in two different units, and a guy living in subsidized housing. Otherwise, everyone in the unit, between ages 19 and 36, was living at home with their parents (or in my case in the home of a family friend). There’s no shame in that arrangement, and for some people in some situations, it may well be optimal. But in many situations, it is suboptimal. In others, it is highly suboptimal, and in yet others, it’s a fucking misery. In general, it should not be the case that productive people working full time should be unable to afford the rent, but that is ubiquitously the case for entry-level jobs based on physical labor.

      I would dispute your claim that Freiman’s advice can be adopted by someone with sufficient fortitude, independence, grit, etc. No, I think Freiman’s advice is just out-and-out unworkable. I don’t see how it can work for someone making minimum wage, or making $12-14 an hour at a full time job. Note that I specified that the job involved physical labor. I did that to deter anyone from saying, cavalierly, “Oh, just augment your income by getting another job!” There are diminishing returns to work if you work a full time job doing physical labor. As a rule of thumb, it is not possible to work two labor-intensive jobs without putting yourself in the hospital. If you work one labor intensive job, then the other job can’t be labor intensive. And whether labor intensive or not, your productivity will suffer at the second job from the toll that the first one takes on you. If your boss has a problem with that, you won’t keep the job for long.

      Never mind the fact that my own attempt to get a second job under much more favorable circumstances has run into an astonishing snag: an OR that is dying for my labor has not been able to do the paperwork to change my status from full time to per diem in two whole months. I was scheduled to do two on-calls for them (including this weekend), and was canceled both times. That is a loss of $400-500. As it stands, I wasn’t relying on that income, but suppose I was? What if some bill or rent had turned on my getting those checks? Well, I wouldn’t have gotten them. And I have no recourse for a fuck up that is 100% their fault, not mine. I just have to grin and bear it.

      This sort of situation seems not to figure at all in Freiman’s constricted view of the capitalist world, but it happens ALL the time. Do people really always get paid in full, or on time? No, they don’t. This is not the first time it’s happened to me. But the ramifications of losing a paycheck or two are not small, and obviously, they’re amplified if you’re trying to save “50-70% of your income.” Just a reminder: 70% of 0 is 0.

      You say the advice can work if we imagine someone making $20. I’m skeptical of that as well, but the relevant question is: how does someone move from making $14/hr to making $20? Is it very easy? Do you just put your resume into LinkedIn or Indeed or Monster, or just send an application for internal transfer, and voila! out pops a job making you $6 more? I happened to do it–I happened to move from a blue collar job paying $25K to a white collar one paying $48K–but some day I will blog the story of how I did it. What should become obvious is how much of the story turns on dumb luck and my reliance on unearned privileges. I did nothing underhanded, but could hardly use my procedure as a template for advice to other people on how to move from entry level blue collar work to entry level white collar work.

      Just about everyone back in my EVS unit was trying to get out, whether for money or to ease their workload or both. But they couldn’t. Internal transfers were tied up in the games that HR wanted to play about staffing various units (they wouldn’t move you if they thought your original unit needed you, whether or not you needed your original unit). Jobs with external firms are hard to get, even if they’re out there. Jobs may be plentiful, but are absolutely NOT awarded on pure merit simply because you’ve applied. If you don’t have an internal contact at the place to which you’re applying, or don’t know how to network your way to an internal contact, it is highly unlikely you will get a job there.

      One gigantic advantage I have over anyone in the entry level job market is that I went to Princeton. Once hiring managers see that on my resume, they’re stopped short. Why is a Princeton grad with a PhD trying to get a job in OR EVS? They’re puzzled and intrigued. That irrelevant fact draws attention to my application, and gets me an interview. Once I’m at the interview, my natural charm takes over, and I get hired. This has nothing to do with my fortitude, my grit, or any other positive quality about me. It has to do with the fact that 30 years ago, I went to Princeton. Meanwhile, the guys (meaning the guys and girls) back on my unit are struggling to get out, and may never do so. None of them went to Princeton. What advice should I give them? That they should have?

      I could go on, but stand back from the whole thing and ask yourself how stupid the framing of Freiman’s whole post is. He picks a famous passage from Marx, then suggests, outlandishly, that Marx’s (itself outlandish) daydream can be better realized under capitalism than under, I suppose, socialism or communism. He then offers up some advice worthy of a latter-day Marie Antoinette, drawn in a half-assed fashion from an article in Forbes and the Cato Economic Freedom report, and concludes, triumphantly that…what? Capitalism is superior to socialism? It’s not even clear what he’s trying to prove, much less that his argument yields the conclusion.

      First of all, why is Marx’s daydream a useful starting point? Taken literally, Marx’s own statement of the daydream is preposterous. Why would anyone want to hunt in the morning and rear cattle in the afternoon? Why would you want to rear cattle at all? Or hunt? Could someone who did that really have the energy to read Proust in the evening and engage in “criticism”? The whole thing seems to arise out of a neurotic fantasy world.

      But fine, change the examples. Marx’s larger point is that we should not really have to work; we should just have time to do a diversity of fun things our whole lives. But even this larger point strikes me as stupid. Freud got it right: work and love are central constituents of a good human life. So the aim should not be: how do I work so that I never have to work? The aim should be to find work that is remunerative and rewarding. Nothing in the Marx passage, or in Freiman’s framing, speaks to that commonsense way of looking at life.

      For the same reason, both Marx and Freiman overlook the fact that in the quest to find rewarding work (both monetarily and intrinsically), we suffer misfortune, sometimes misfortune that can’t be handled through our own resources. So we need reliable access to resources that insulate us from the ills of misfortune, whether that ends up being private charity or a welfare state, or whatever. This blatantly obvious fact figures neither in Marx’s picture nor in Freiman’s.

      Marx is so fixated on the extraction of surplus labor by the evil capitalists that he doesn’t seem to see that even if you got rid of them, bad things still happen in life. What then? You’re rearing cattle, and all of a sudden you get trampled. Now what? Don’t expect to get any enlightenment from Marx on pedestrian questions like the cost of ambulance services. (Ambulance services are expensive because technology has pushed up the cost, because people over-use 911 for non-emergencies, because government regulation imposes unrealistic ETA requirements on EMS crews, and because Medicare/Medicaid reimbursements for ambulance services are too low, so that ambulance companies can’t cover their margins. Marxism lacks the resources to deal with any of this.)

      Freiman’s cavalier “let them eat 70% of their income” advice belongs to the same out-of-touch-with-reality universe. Libertarians like him deserve Marx, and Marxists deserve libertarians like him.

      I hadn’t really meant to criticize capitalism per se, but to criticize Freiman’s way of defending it. Who would be convinced by such a cockamamie defense? Why is it even approximately rational to plan your life by asking, “How can I retire at 40?” vs “How can I find rewarding work that will support me until 65 and perhaps beyond?” Even if Freiman’s advice can be made to work, it can only be made to work if you sacrifice the earlier part of your life to the latter. But why think that “success” on those terms counts as success at all?

      The really interesting thing is not that Christopher Freiman is offering the advice in a blog post. That could easily be dismissed as one-off nonsense. What’s striking is that the advice comes from Forbes. But that just shows you how out of touch with reality financial journalists can be. They’re so immersed in their upper middle class world that the rest of it just lacks any ontological status at all. The problem isn’t this one rather stupid post, but the typicality of the underlying attitude–of which the post is symptomatic.

      Liked by 1 person

  2. Think how rich someone could get if they saved or invested ALL of their income, instead of blowing it on food and shelter and other such frivolities. Just defer all spending on basic life support for a decade or two, and boom. Silly poors.

    Liked by 2 people

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