Santa Fe Institute economist: one in four Americans is employed to guard the wealth of the rich

Here's a fascinating profile on radical Santa Fe Institute economist Samuel Bowles, an empiricist who says his research doesn't support the Chicago School efficient marketplace hypothesis. Instead, Bowles argues that the wealth inequality created by strict market economics creates inefficiencies because society has to devote so much effort to stopping the poor from expropriating the rich. He calls this "guard labor" and says that one in four Americans is employed to in the sector -- labor that could otherwise be used to increase the nation's wealth and progress.

The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.

The problem, Bowles argues, is that too much guard labor sustains "illegitimate inequalities," creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time--perhaps starting their own businesses or helping to reduce the US trade deficit with China.

Guard labor supports what one might call the beat-down economy. Community Action's Porter sees it all the time.

"We have based almost everything we have done on the idea that we always need a part of our workforce that is marginalized--that we can call this group into action at any time, pay them nothing and they will do anything that needs to be done," she says.

More discouraging, perhaps, is the statistical fact that a person born into this workforce has little chance of rising beyond it.

Born Poor? (via MeFi)


  1. Kornbluth and Pohl first commented on this in “Gladiator At Law”, which also included crumbling exurbs and disnefranchised citizens. The book is still relevant over fifty years on, perhaps even more now. Recommended.

  2. I can just imagine how FOX News and the conservative pundits are going to spin this story:

    “New study shows that 1 in 4 jobs in the United States are created as a direct result of policies designed to benefit the rich. Liberal economic reforms designed to punish the wealthy could cause unemployment rates to rise as high as 25%.”

  3. The ever-expanding copyright laws(both the passing, and the expense of enforcing) are a good example of this.

  4. How about the money that goes into keeping wealthy rent-seekers from appropriating the wealth of the poor?

  5. I guess this is an example of Karl Marx’ observation in the 19th century: “relations of production lag behind the productive forces and become fetters on the growth of society’s productivity” — A Contribution to the Critique of Political Economy (1859)

    Adding my interpretation in here: “relations of production (wealth relations) lag behind the productive forces (what could have been produced) and become fetters (using guard labour) on the growth of society’s productivity”

  6. Reading a bit further down the article, Bowles wants to give everyone 250,000 when they turn 18. There are 300,000,000+ people in America. This means we would have to spend more than 75 trillion dollars. This is about 5 trillion more than the GDP of the entire planet for 2009.

    I’m just sayin’

    1. Well, I want my $250,000. And I’m well past 18. So I want mine with compound interest. Preferably at the interest rates that were in effect when I turned 18 (which were around 10%). In fact, since I’m not greedy, the government can keep the $250k to cover my tax burden. Just send me the interest I’ve earned. That should come out to a bit over $3 million. I’ll be looking for my check in the mail from the U.S. Treasury.

    2. That is probably the wildest piece of extrapolation I’ve seen in a long long time. Note: He doesn’t say that the emolument is retroactive or should be applied to everyone at once. In fact using some quick facts


      we can see that

      Population US: 304,059,724

      % under 18 : 24.3% so 230,173,211 are automatically excluded.

      Also 6.9% of the population are under 5 years old so we don’t have to worry about them any time soon, so another
      20,980,120 off the table.

      But it’s no good stopping at the under 5’s we’d actually have to get finer grained and see how many people are actually 17. We can only guess but if we are conservative and assume that 10% of the population is between 5 – 15, that’s 30 405 972. Leaving 22,500,420 in 16,17,18 cohort of that only 33% will be 17 going on to 18 so 33% of the above is 7,425,138. (of course I might be missing a few people, I don’t count the .6th of a person.

      So every year we’d be funding $1,856,284,650,000 or 2.4% of your original estimate.

      A hefty chunk of change, some 13.1% of US GDP,(14.2 trillion) but if we cut health (16% GDP), and military 4.38% (GDP) Agricultural subsidies and a few other pieces of pork, there would be enough to go around. Also if we stopped bailing out banks, there would also be enough.

      And I’d like to see how you get from an economist disparaging the inequality of wealth to the two most hierarchical and unequal countries in the world.

    3. I would have to spend too much time looking up the citation but a researcher in global economics suggests that $5,000 is the magic number to stimulate economic growth, everyone either has to have $5,000 burning a hole in their pocket at the end of the year after tithe-taxing or they have to get a gift check in the mail, for the economy to have a positive growth rate.

      Obviously, BEA’s statement that ‘GDP grew 5.7% in the 4Q09’ is because they are measuring pixelated growth and not real tangible growth at all, just the growth of the bloat is what’s driving this economy, and the $14 trillion debt second mortgage our kids will have to pay … with what? What American has even $5,000 laying around to get the economy growing?

  7. The problem is that people like Bowles occasionally come out on the winning sides of revolutions. Then you end up with Zimbabwes and North Koreas.

    Why can’t we subject social change to scientific rigor? You start with an idea (subjected to basic scrutiny to weed out the Bowles of the world), then you run experiments to see if it works. E.g., Take a county in Ohio, let them run the new economic and social paradigm for a few years, and let bean counters stand off to the side and take notes.

    1. JohnCJ #7:
      No, the problem is rather people who can’t see any other options than (a) the ever growing and undeserved inequalities current US capitalism and (b) the soviet political dictatorship and command economy. If you do some actual reading you will become perceptive to more alternatives. Like the nordic welfare states – beating the US on almost all key social indexes (health, happiness, environment, trust, social security , child heath, child care benefits, elderly care …)

    2. “The problem is that people like Bowles occasionally come out on the winning sides of revolutions. Then you end up with Zimbabwes and North Koreas. ”

      Well.. I know why *you* can’t subject ideas to scientific rigor, you seem to have a little trouble with cause and effect, or at least a penchant for wild hyperbole.

      I am sure that the world would be a far far better place if we could just marginalize those leftist thinking out of the box economists with ludicrous and unsubstantiable reductio ad absurdum arguments.

      Oh wait..

    3. Yes, yes let us subject the airy fairy academic theories of uncle miltie friedmann and the U. of Chicago gang to rigorous test. Oh wait, we just did. They failed, causing potentially the biggest bank bust in history. Let’s see now how about that rigorous old alan greenspan. He based his ideas on, wait for it, a romance novelist named ayn rand. Man that’s great academic rigor. We need more of that kind of clear headed thought. Then there is ben bernanke, reknowned academic expert on the Great epression. He must have seen the bank failures coming. Anything that radical must have shown some signs to such an expert, right? Nope, guess not.

      Now what was your problem with this Bowles guy? Lack of rigor, yeah that was it. How about class warfare, that sounds more like it. Any nonsense that favors the upper class is declared rigorous, clear and well thought out. Any minor protection for working people is just terribly impractical. Now why don’t you just say it and quit trying to put out this smokescreen about scholarly test?

  8. @JohnCJ: “Why can’t we subject social change to scientific rigor?”

    A good question and a good idea!
    But, alas, exactly the guard labour will stop us doing such scientific experiments.

  9. John #6,

    Most people only turn 18 once. So let’s say the cost is 1 trillion per year instead of 75 trillion. Compare that with the bank bailouts, the Iraq and Afghanistan wars, etc…

    1. I don’t know about that…I have friends that have been turning 18 for the past 30 years heheheh (good point *grin*)

  10. Did anyone see QI in Britain yesterday evening? They were quoting some amazing statistics about the US prison population –

    America has 5% of the Earths population but about 25% of the Earths prison population, many of whom work as forced labor.

    US prisoners make almost all helmets for the military, 42% of bullet proof vests, 60% of license plates, etc.

    The ‘three strikes’ rule was highlighted for putting some people away for 25 years to life for trivial offenses such as stealing videos, cookies, etc.

    They were claiming that in some parts of America there are more 19 year old black males in prison than in college, and implying that America has basically re-invented slavery.

    It’s a weird world we live in.

    1. “They were claiming that in some parts of America there are more 19 year old black males in prison than in college, and implying that America has basically re-invented slavery.”

      And we haven’t stopped at enslaving petty criminals. Our major banks (read: rich old white men), are allowed to go onto college campuses and give credit cards to students who have never held a full-time job in their lives. Most will max out these cards before they ever land their first job. The interest rate? Close to 20% typically and if they miss a payment it just goes up. The risk for the banks? None. If the students default, the American tax payer will surely be held accountable for the bailout. God bless America.

    2. Danegeld, yep, just watched it moments ago on iPlayer. I was hoping someone would bring it up here, cause otherwise I’d have to do more transcribing.. :)

      While I knew some of the statistics before, and understood the prison/industrial complex as far as the prisons earning x dollars per prisoner, I never really understood the forced-labour side of it.

      Regarding your stats, it was actually 100% of all military helmets, ammunition belts, bulletproof vests, ID tags, and other items of uniform, are made by prisoner labour.

      Also made in the US by forced prison labour, for 25¢ an hour (meaning a competitive edge against Mexico and China):

      93% of domestically produced paint.

      36% of home appliances.

      21% of office furniture.

      And remember 1 in 30 men, aged 20-34 is in jail. For black men the figure is 1 in 9.

      They were claiming that in some parts of America there are more 19 year old black males in prison than in college..

      Actually, the stat wasn’t restricted to an area, in the US there are more 17 year old black men in jail than in college.

  11. The graph above (specifically the y axis) makes me think that the USA guard labour force should be 2.5% not the 25% claimed in the article. If so, that’s quite a change and a giant mistake for the journalist.

    1. Yes but if you look at the X axis, it’s fractionary, so multiply x10 to get an unit, hence the 25%.

      As far as I am concerned this figures must only take into account the DIRECT labour employed at guarding wealthy interests.

      If you make a deeper study and include all the INDUCED labour who indirectly and/or in a concealed manner does the same job, including taxes to be white washed into private funds through wars, bailouts, corporate lobbying, etc.. you could easily raise that figure to probably nothing short of 100%.

      Hope this clarifies your doubt.

      1. Yes but if you look at the X axis, it’s fractionary, so multiply x10 to get an unit … you could easily raise that figure to probably nothing short of 100%

        Not make sense. Is joke?

      2. You might want to hold off on the revolution. The positive relationship between a state’s Gini coefficient and the portion of the labor force employed in money guarding is cool, but read them axes! Like other readers here, I see a problem with the assertion that 25% of Americans are employed in money guarding. The graph shows that the average number per state is actually around 2-3%. The x-axis is a state’s Gini coefficient, which is a measure of income inequality. while the Y-axis the portion of that states labor force employed by money guarding. Not a single state has a value anywhere near 25%. So this posts headline is factually wrong and should be corrected.

    2. >> The graph above (specifically the y axis) makes me think that the USA guard labour force should be 2.5% not the 25% claimed in the article.

      Since the horizontal axis expresses the “gini” number as a decimal value (ie, divided by 100) rather than as a whole number as expressed in the article, this chart seems to be doing something not obvious with the units here. A key to the units might have been a nice addition.

    3. I agree, if you look at the graph the total percentage never exceeds 3.5% per state.

      To clarify the graph, the Gini coefficient listed on the x-axis is a measure of the wealth inequality in a given area. A Gini coefficient of 1 is perfect inequality, with one person having 100% of the wealth and all others having none, and 0 is perfect equality with everyone having an equal share.

      Viadd, I don’t have time to read that article but what you’re saying is flatly contradicted by the figure, unless the two graphs are using entirely different definitions of “guard,” which I think they are.

  12. As usual, the main point that is missed is that we have no free market.

    The rich are bolstered by government by rafts of anti-free market laws (from restricting entrance to a market through regulation to the privileged position of banks and legal constructs such as corporate personhood).

    It is not surprising then that there is a large portion of the population who can only make ends meet by serving the rich.

    The actual number is in fact far higher – most government employees work to guard the interests and wealth of the rich.

    This doesn’t disprove the efficient markets hypothesis (although that may be false for other reasons), it just shows the inequity of the current rigged market system – something which can only emerge through concentrations of power and authority, primarily through government.

  13. CBC Radio’s Ideas program ran two series of programs, years ago, which covered topics along the same lines as Bowles. (I can’t search for them in their much-too-web-friendly-and-therefore-useless pages).

    One series of programs compared the in-/efficiencies of running open democracies with those in running dictatorships. While dictatorships were, in a way, efficient to run, the costs were very high for the dictator, and thus for the society. Bribes, guards, monitoring systems, they all cost a lot of money for the dictator.

    ‘Inefficient’, open, messy democracies were usually more efficient to run.

    The other series of programs showed that the single most important factor in determining cardiac health was ratio of difference in income in a society from poorest to wealthiest. If the disparity was large, cardiac health was poor. Both for the poor, AND the rich. The stress from guarding your wealth is a killer, it seems.

    Note to dangeld: what would the unemployment rate be in the ‘States if the prisons were emptied of people who really shouldn’t be there, eh?

  14. Those who will not do math are condemned to spout nonsense.

    Depending on how you count, there are between one and two million people employed as “private security” and the vast majority aren’t guarding “the rich” — they are guarding warehouses, offices, and shopping malls. Throw in police, prison guards, lawyers, and such, and maybe, maybe, 2% of the US payroll is in “guard labor”. But “one in four”? Arrant nonsense.

  15. Boy, this is eye opening. I went from molding young, gifted minds to being a help desk contractor for a major (let me put it this way, you know the name very well) financial institution all because I decided I wanted to come back home, and the job that was supposed to be waiting never materialized. My current job is working with clients to make sure that they have access to their account information, and plenty of these are very wealthy. Don’t necessarily agree with his numbers, but… in my hometown, the biggest employers are now the military, financial institutions and insurance companies.
    God Bless America…

  16. Well I certainly agree with the concept of on demand labor. I work for one of the major PC manufactures and probably 40% of our workforce at the plant I work at are temp employees…

    There isn’t any better way to build products than with employees who don’t care. Quality, hell that went out the window a long time ago. Quantity, yeah that’s the ticket.

    Money isn’t the root of all evil, greed is.
    Not everyone wants more, many people just want enough.
    (And many more have no idea how to use what they have.)

  17. Perhaps there is a better explanation of “Guard Labor” in another article but here it seems over-simplified. The IT nazis are keeping you productive. For most employees, there really is no business benefit to allow them to watch youtube all day. True, if there was less poverty, there would probably be less crime and that would reduce the need for cops. I don’t view them as protecting the wealthy but just protecting everyone from each other.

    Beyond that, he makes a lot of claims based on the virtues of egalitarian societies but he doesn’t back them up with facts. Perhaps Sweden is a nice place to live but on the global scale it is not much of an economic player. The US and China seem to be the big dogs on the block and they don’t score well in his ratings scheme.

    As for the $250k idea for all 18 year olds…it seems like it would be a very far off goal. Firstly, it would require a major change in the financial education of our youth. Second, based on his philosophy of giving handouts, I seriously doubt that he would allow a kid who blew his money in a year to stay poor.

    Although a socialist society is probably ideal, it requires that people overcome human nature to do things the quick and easy way. Most people will do the minimum they need to get by if there are no incentives to do better. That’s why every society that is exclusively socialist has failed to date.

    1. I agree that the United States is in a unique situation in regards to it’s economy. There is no economy that is as large as the US economy and other countries have continually sought to participate in one way or another. American Capitalism is maturing, and due to the sheer size of the US economy, some unique externalities have formed. The prison populations is one example. Incidentally the poverty of the poorest class of African Americans can be traced to historical racism (exclusion from GI bill, segregation, etc). This class of American citizen is disproportionately more numerous in the prison population.

      Another example is the with market bubbles. The root of bubbles is that there is too much money pursuing good investments, and not enough good investments themselves. This is true especially if you want to think of markets as relatively unregulated thus making risky investments disproportionately attractive.

      These two problems when compared side by side suggest that either we should vote to ask the US government to take more money in taxes from the wealthy (since they won’t voluntarily pursue lower return/ lower liquidity investments), or academically attack some of the causes of these externalities and attempt to bring it up to the level of American culture like we did with issues like bigotry.

      An interesting alternative would be incentives for the wealthy to “bail-out” the victims of these extrernalities, such as having the option of instead of paying higher taxes, to be able to make low income/low liquidity investments which they have little control to legally manipulate but may still hope to receive an acceptable return on.

  18. Bowles has to be laughing at all this knee jerk dogma following this article. Even Cory falls into the trap with the mainstream branding “radical economist”.

    Bowles is taking a look at the underside of economic analysis as he always has – also with a good sense of humor about it.

    Debunking myths of the mainstream is a full time occupation if you know what to do. Unfortunately with a press that is so absolutely ignorant of economic theory – and a public that follows – its painful to even suggest full examination of the issues.

    Bowles sat with Galbraith, Samuelson, Thurow and many others; its just part of the dialogue.

    1. Night-Gaunt
      From the end of Reconstruction (1877-1965) the freed blacks were put under economic slavery. Reintroduction of wage debt based servitude. Many of the laws that were created when Dixie regained its independence from the North created debilitating laws that affected mainly the blacks who weren’t employed. Variations of that now catch anybody, but mostly the poor and colored, went into prison. Lately the use of prison labor in Capitalism has regained its allure since the downsizing of pay has gained such momentum during the last 40 years. They want the most work for the least compensation and most have no power to alter that.

  19. The guards/labor force looks like it is more like 2.5% (1 in 40) than 25% (1 in 4). The relevant tables from the census say that there are 3.1 million people in ‘protective service occupations’ (including lifeguards and firefighters), vs 145 million employed civilians. Add 1.5 million for the armed forces and you have total about 1.5% of the population in the Prevention, Coercion and Dissuasion sectors.

    Assuming that everybody listed is ‘guarding the wealth of the rich’, (he pulled that baby out of a burning building because she’s going to grow up to be a consumer!) and a comparable number in the ‘crush people so they don’t threaten corporate profits’ trades, you are still closer to the 2.5% number than the 25% number.

  20. The key to evaluating these data lies in defining exactly what occupations count as “gurad labor.” Having read the entire sfreporter article, I still don’t have any idea how this term is defined.

    This editorial from a couple years ago:
    indicates the prison population and the unemployed, as well as police/security guards, supervisor and military personnel are included within this definition.

    If that’s the same definition for the data in the scatterplot shown above, you’d expect a positive correlation between income disparity and the size of the “guard labor” force, if it includes the unemployed and the prison population, no?

  21. “Actually, the stat wasn’t restricted to an area, in the US there are more 17 year old black men in jail than in college.”

    That’s not a hard stat. There aren’t may 17 year olds in college.

    I will make a wild guess that there are more 15 year old white men in jail than in college too.

  22. Actually, it turns out that 25% (1 in 4) is the number that they are claiming, and it is not just a typo by the reporter. This paper Figure 1 plots ‘Guard labor as a percentage of labor force.’

    BUT: Guard labor includes
    Guards (2.2%)
    Military (1.8%)
    Prisoners (1.5%)
    Anyone with any supervisory authority at all (15.7%)
    Unemployed (4.8% in 2002).

    To emphasize their role in sustaining the status quo distribution of property rights and claims, we call all but the employed workers guard labor 3 . Supervisors, guards, and military personnel exercise power in the sanction-based sense just defined, while prisoners and the unemployed are the necessary concomitants of the public and private sanctioning systems, respectively.

    A more accurate and inflammatory statement would be 99% of all people are employed in maintaining the status quo by keeping the richest 1% in the top percentile.

  23. Claiming that managers, who make sure people actually do the jobs for which they are paid, are “guard labor” seems like a bit of a stretch to me. And the quarter mil. sounds like a perfect recipe for turning dollars into toilet paper a la Zimbabwe.

  24. That $250,000 for 18 yos? Already being contributed. That’s the cost of tuition, housing and food for 4 years at NYU – and every other good private university. Remember, a job guarding wealth is a fuckin’ job. Have some pride.

      1. Of course not. Some have to get scholarships, perform work-study or take out student loans for state, city or community colleges. Then they gain employment and pay it back – or, apparently, if they wait long enough, they can skate on the payback.

        What would surprise me is if Bowles had yet another number for the number of 18 year olds who, gifted with their “universal welfare” $250,000, would use it to educate themselves or start a business.

        Plus I love this from A LIFELONG ACADEMIC:

        What about education?

        “Being willing to sit in a boring classroom for 12 years, and then sign up for four more years and then sign up for three or more years after that—well, that’s a pretty good measure of your willingness to essentially do what you’re told,” Bowles says.


  25. All of the people in guard labor jobs could be doing something more productive with their time–perhaps starting their own businesses or helping to reduce the US trade deficit with China.

    Sorry, but I had to roll my eyes at this one. The people who used to make up the manufacturing payroll in this country generally aren’t the type that would be paragons of entrepreneurship if they didn’t have to waste their time protecting the Man, radical fantasies about the proletariat notwithstanding. They want to punch in, do their shift, and punch out, and that’s really what they’re doing now, only with worse benefits. I don’t like the inequality of wealth distribution any more than you do, but let’s not be silly.

    1. I would disagree. Many manufacturing companies were started by people who were part of the labor force from either a parent company or a related company…sometimes even taking over the company that they started working at as a kid and worked their way up. That was not fantasy in the manufacturing world. Weren’t there a couple of car companies that started like that, branching off of Ford?

  26. Does this guard labor include the guy in your office who drops by your desk and tells you things like, “You don’t seem very passionate to me. I’m not entirely convinced you really want to work here.”

  27. 1) People will always want to improperly appropriate resources from others, even if we perfectly reallocated all the resources currently in existence. That is, under perfect equality, we’d still need to devote considerable resources to enforcing property rights and the rule of law.

    2) These phenomena could just as well be blamed on information and enforcement problems as on inequality.

    – An economist

  28. This is an interesting post and discussion. However, it also begs the question about the nature of money itself, and why is that there must be some substance that must be desired by those without it. I do not understand money and have not yet found a satisfactory discussion about why it must be what it is . . . It seems important. When we talk to people who grew up behind the iron curtain, we hear about the discomfort of living with envy, and so it seems that at least one of the alternatives (communism) remains equally confounded by this human reality.

  29. As usual, the main point that is missed is that we have no free market.

    Nor will we ever have one, god willing. If you want to see places where government is almost entirely hands off, I hear Somalia’s nice…..

    We’ve never had ‘true communism’
    We’ve never had a ‘true free market’

    I always snicker about how similar the excuses are by both ideological extremes.

  30. Actually Somalia was better of without the corrupt government, before the western powers tried to force western models onto them. Same can be said about the non government controlled parts of northern Côte d’Ivoire. Decentralation just works.

    Seriously, would anyone think, it would be a good idea to give every 18 year olds $1/4million? Would it be wise to give that to anyone at 18?

  31. We need more commmon sense in this country.
    “Taxes should be proportioned to what may be annually spared by the individual.” –Thomas Jefferson to James Madison, 1784.
    “Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.” –Thomas Jefferson to James Madison, 1785.
    “Birth and wealth together have prevailed over virtue and talent in all ages”
     John Adams

    “An imbalance between rich and poor is the oldest and most fatal ailment of all republics.”
    “Men are disposed to live honestly, if the means of doing so are open to them.” –Thomas Jefferson to Francois de Marbois, 1817.

  32. “All of the people in guard labor jobs could be doing something more productive with their time”.

    How does the author determine what is “productive”?
    Wages tend to reflect the value produced, so why would these guards be turning down more productive and lucrative jobs?

    People only gain money by serving other people. People who do it better accumulate wealth, which allows them to invest, raise productivity, and ultimately make the entire society better off.
    It is scary to see Karl Marx’s “struggle of classes” (the poor are slaves to the rich) and scientific government arguments re-surface in some of the comments above.

    Regarding mobility in the wealth ladder, what about smaller transitions? The 1.3% flux from the lowest bucket to the top bucket is only looking at the extremes.
    Similarly, “job creation” numbers are BS, as there is no way to tell how many jobs would have been created otherwise.

    1. Wages tend to reflect the value of a job to the employer. They aren’t a measure of productivity – for a simple, extreme example, a capable thief, smuggler, or hitman can be paid very well. They may serve other people, but not in a way most of us can appreciate.

  33. Who says what is productive? Good question, but here’s a harsh reality about the US for the last 20 years (indeed, the last 30); those who are perhaps more qualified to do certain jobs cannot achieve those jobs due primarily to a lack of “schooling” (as opposed to “education”). Not so much a problem in the 1980’s and into the 1990’s, but today… an average person can barely afford to get a good “schooling”. Contrast this to, say , France, where most upper education is funded by the state and provided at a much lower costs. So, people who may have tremendous potential get left behind due to an inability to pay.
    Also, at this point in time, the belief that many (not most, mind you) of the wealthy are interested in using their wealth for public good has been borne out to be a fantasy. Many wealthy would rather increase profit at the expense of productivity. Darwinian? Yes. But that seems to be the way it is, right?

    1. “Contrast this to, say , France, where most upper education is funded by the state and provided at a much lower costs.”
      How is education different from other services provided by the market? It’s nature is not that different. The problem comes from the government monopoly on education.
      If it were not for government, education would become cheaper, more diverse and better like other goods and services on the market.

      The situation in France is reversed and illustrates the problem with the lack of market price: you can either have shortage or oversupply.
      In the case of education, France has an oversupply. You end up with graduate students not finding work, having long probation periods (internship after internship), and chasing ever higher diplomas to stick on resumes.

      Education is a trade-off like any other human activity. More of it is not necessarily a good thing. The only rational way to decide whether the trade-off makes sense is prices.
      An analogy, should I buy this new super-duper-shovel (TM) for digging holes, or stick with my old one? Well, it depends on the price and expected productivity effect of super-duper-shovel.

      1. How is education different from other services provided by the market? It’s nature is not that different. The problem comes from the government monopoly on education. If it were not for government, education would become cheaper, more diverse and better like other goods and services on the market.

        If you really believe The Market (peace be upon it, hallowed be its name) solves all possible problems, sounds like really what you’re doing is redefining all the problems The Market does not solve out of existence. If you can’t afford the Market price then by definition your problems don’t matter.

        And in North America “government” has no monopoly on education.

        Is this a joke?

        1. #79, there is nothing religious in my argument. You have dodged the question, rather than thinking and answering.

          The market is a natural artifact of human activity, as individuals trade goods and services voluntarily. Supply tends to adapt to fulfill demand, based on price and resource constraints.
          Force the price of something to zero (ie. government intervention, to offer a service “for free” to all) and you get a dysfunctional system, which provides too much, too little or the wrong thing.

          1. you get a dysfunctional system, which provides too much, too little or the wrong thing

            You forgot “or to the wrong people,” which is the real crux of your philosophy.

  34. It doesn’t sound like anyone commenting here has yet read Naomi Klein “The Shock Doctrine”. In which she describes how the Chicago School theory of economics has been used to trash the economies of several countries.

    In shocking times, the powers-that-be can get away with instutiting processes that normally would obviously unacceptable.

    Kinda’ makes me think of the US starting with G.W.Bush …

  35. Simply put, $3.55 trillion in welfare tax dole salaries have to be paid out of the income taxes on the total of $12,225,589,000,000 in total US personal income, and that’s just for the Fed’s not counting State and local, and of course not counting a TRILLION DOLLAR WAR or the interest on the $14 TRILLION debt ceiling, never mind SS/MC those are supposed to be firewalled paid in trusts.

    So if anyone is achieving ‘security’ and ‘preserved and protected’ status, it’s and their (BOLS, 2008) 30% higher lifetime salaries, benefits and pensions.

    And just to sustain that, requires a perpetual 30% tithe-tax, just about what the Church, the King and the Sheriff extorted out of the European peasants, and just about the end-state of Capitalist so-called ‘society’.

    NA$A alone has burned through $535,000,000,000, not counting their $4 billion bump to $40 billion a year for 2010. A half a TRILLION dollars, and all I got was this crappy moon rock.

    But the really scarey thing is between the 25% security and the 20% employees and contractors, they are now the MAJORITY of the United Soviet States of America, and cannot be voted out or have their tax bleed reduced.

    1. Half a trillion to Nasa over the last 50 years has produced trillions of dollars for the private sector in almost every aspect of our society. The advancements in technology and science because of spending for and by Nasa and the Military are what have made life as comfortable and productive as it is. Cell phones, computer advances, farming advancements, safety advancements. etc. etc. all have roots in military and nasa based needs and programs.

  36. Using the “brain as a resource” model, extrapolate the simple fact that a person preoccupied with the work to ensure his survival does not have the time to dedicate his brain to other activities.

    In an isolated world those activities don’t benefit others, however in the modern hyper connected world one brain making a beneficial discovery radically benefits everyone.

    Thus it may in fact be more beneficial to anyone in a society to ensure a level of public welfare which gives every brain the minimum things needed to exist so 100% of their time if desires can be spent on non survival related activites of discovery.

    In other words in an information connected society it becomes more beneficial to everyone to have no one HAVE to work and instead have every brain be able to explore non survival activities.

    It’s a simply geometric proof to show in a 100% information transference society that this is better for everyone.

    Give everyone a shelter and gruel and healthcare and if one in a million brains discovers something revolutionary and beneficial for everyone it is a faster rate of improvement for all of society than if 99% of those discoveries are prevented by 99% of the avaialble brains being forced to occupy themselves in trivial survival efforts (a menial job).


  37. That’s complete bullshit. What exactly would the people now doing “guard labor” switch to if they weren’t guarding wealth? Where would the jobs just magically come from? Also, do you think people will just stop stealing shit because they have marginally better jobs? Wealth is not distributed evenly, but neither are health, intelligence, education, physical attributes like strength, fertility or beauty – and especially just plain luck. Inequality is here to stay forever because it’s built right into our biology.

    There are exactly two things that can help alleviate that problem: easy access to free education and health-care, payed for mostly by contributions from the rich. Since the inhabitants of the United States of America are willfully ignorant of that fact, the state of your Union will just continue to deteriorate.

    1. I keep hearing these darwinan justifications for how things work, as if we were still animals living in the wild. We’re not, and we haven’t been for a long time. As civilization enters the equation, certain adjustents need to be made to ensure peace of mind for all. We can’t expect to be civilized for some things, and savages when it’s convenient. To put it another way, if we can justify inequality with biology, then we can also justify murdering Bill Gates or Brad Pitt for their money. It’s not envy, it’s just human nature kicking in.

      I’m not a numbers person, so I can’t comment on the accuracy of the numbers included. However, it seems like the whole point of the article is that if there were less inequality, there would be less crime, and all these people could contribute to society in a more productive way. They might not all end up being entrepreneurs, but at least they will work towards creating something, even if it’s just working at a factory or farm.

      Someone mentioned how higher salaries or benefits would not really reduce crime, as people are greedy and envious. I disagree. If I am making enough money to cover my basic needs, meaning health, food, housing, and a few extra things, then I feel no need to steal. Yes, there will always be people that are willing to steal, but the numbers should go down. I’m sure if look at the nordic models mentioned above, we will find lower crime and imprisonment stats.

      Money, like pretty much everything else on this planet, is a limited resource. If we don’t take measures to balance it’s availability, then we’re in trouble. This does not mean that the rich should stop being rich, or be ashamed of being rich, it just means things should be a little more balanced, so that everyone (rich or otherwise) can benefit. If I make two million dollars a year, and most adult people make between 40-100k a year, I’d be less fearful of these people, since they really have no need to steal from me. And I’d still be rich.

  38. Saying, that Friedman advocates shocks to increase government control is just a lie from Klein. Friedman’s advice to countries spiraling in to dept and hyperinflation is to stabilize currency and economy, so that further shocks can be avoided. When people can feel safe, they can also demand democratic freedom. If they can’t feel safe, they will turn to dictators. Stabilizing currency was done by FED’s Paul Volcker in 80’s. You can’t have a productive and democratic society with hyperinflating currency. If hyperinflation is not stopped, people get radicalized, and dictators have an easy path to power, as we have seen in history. This is something, that economists have been warning for centuries.

    However, the Chicago school has a severe misunderstanding in causes of depression. They think dropping prices are causing debression, and try to fight the deflation. Of course the lower prices are not causing depression, but a sign of a healing economy. Depression is caused by bursting inflation bubble, and deflation is a way to get out of the false bubble economy.

    Greenspan tried to fight every bursting bubble by low interest rates(creating new money and inflation). The rising money supply kept building bigger and bigger bubbles. Bernanke is doing the same, just in bigger scale. Of course it’s quite convenient, that their pals at Wall st. and Washington are getting huge profits at the process. Central planning(like FED) fails in it’s inability to know the state of the economy and in the corruptive effect of power given to the planner.

    Real economists have seen the coming collapse for years. And as we see, this shock has made some people wanting to give even more power to central planners, like Greenspan and Bernanke. Bernanke was himself suggesting, that government should distribute thousands of dollars to people, so Bowles is a little late. US can’t base it’s economy on consumption and just print up money, and think that’s a real production.

    (I removed links for the sources)

    1. @Broken Window: Friedman’s promotion of economic shock treatment is no lie. Klein has written, for example, about Friedman’s trip to Chile in March 1975, where he advised General Pinochet that “shock treatment” is the “only medicine” and that “gradualism is not feasible.” As a direct result, Pinochet and the Chicago economists in his government slashed public spending, privatised hundreds of companies at ridiculously low prices, and removed trade barriers. This was supposed to induce both a painful recession and a realignment of public hopes and expectations, which in turn would result in a swift return to a healthy, liberalised economy. In fact, these policies were disastrous for Chile (and other countries which underwent similar “treatments” (Bolivia, Argentina, former Soviet countries, etc).

  39. They have made us their white picket fence. The time has come to turn our guns inward on them. This is the only way to free ourselves. I mean this metaphorically of course….

  40. Perhaps a better question is why people envy? After all, even a poor person today in the US is in better shape than a reasonably well-off one was a century ago. Why be tempted to make off with someone else’s stuff?

  41. @self-propelled: Klein’s lie is a lie, even if it is written by her.

    Chile had a runaway inflation peaking 1200%, dropping production, increasing black markets and shortage of food. This was a collapsing nation. Pinochet asked Friedman, how they could stop the inflation, and Friedman gave his advice. The inflation was slowed, but they still had to suffer all the destruction that the inflation had made. If inflation had been let to run further, the destruction would been even greater. With stable currency, they could build basis for a solid economy, which would lead eventually to the restoration of political liberties.

    Unfortunally, Chile pegged it’s currency in 1979 against the advice of Friedman, and had to face another depression. After unpegging in 1985, Chile has had the strongest growth in SA, and restoration of democracy. The marxist states are still crippling their economies and limiting personal and ecomonical freedoms of their citizens.

    Anonymous 57 stated, that Friedmans’s doctrine was used to trash chilean economy. Would it been better to keep inflating ones currency? Do you really think currency losing over 90% of it’s value is a solid economy? Do you relly think chileans would prefer to queue for their bread?

    If you live in US, you can also try how it feels like, as Bernanke and his banker pals keep printing fake money.

  42. @Broken Window: To be absolutely clear, the references in quotes to “shock treatment” etc were made by Friedman himself – from his letters, memoirs etc – and quoted by Klein, so although you may disagree with her interpretation, please don’t accuse her of lying when she is quoting Friedman’s own words.

    As to your interpretation of Chilean economic history: you seem to say that a) it was all Pinochet’s fault, as he didn’t follow Friedman’s advice closely enough; b) unpegging the peso in 1979 derailed a supposed Friedman-inspired recovery, and c) all the damage done under Pinochet would have been worse under Allende anyway.

    This is quite obviously false. Under Pinochet in 1974, inflation was 375 percent, the highest rate in the world at the time (and almost twice the top level under Allende). I have no idea where you get 1200% from. Quite apart from the death squads, executions and torture, the first two years of Pinochet’s attempts at Friedmanite policies were a disaster, with a contracting economy, rising unemployment, and plummeting standards of living. In 1975, Friedman privately assured Pinochet that even deeper cuts and the demolition of any remaining barriers would solve inflation and unemployment in months (see Friedman’s memoirs for this). Yet unemployment continued to climb (from around 3% under Allende, to around 20% under Pinochet), while inflation continued to be volatile, and only began a steady decline to low levels at the beginning of the 90s. Growth climbed for a few years before plunging again in ’81; real salaries fell; foreign debt grew by several hundred per cent; and poverty rates had greatly increased. During this time, the majority of Chile’s foreign export earning were from Codelco, the national copper company, which was one of the few large companies still unprivatised.

    In 1982, Pinochet was finally forced to abandon many of the central tenets of extreme monetarism and re-nationalise many companies, and it was only after this that the Chilean economy began to grow steadily.

    The central point is that from the very first days after the bloody coup in 1973, Pinochet’s economic policies – dreamt up by a team of Friedman’s students and ideological followers – were a disaster, and this was reinforced after Pinochet put Friedman’s advice into effect in 1975.

    The flawed US response to the recent crisis is a whole other discussion, but it’s fairly ridiculous (though characteristic of Friedmanite thinking) to constantly conjure up the bogeyman of hyperinflation. Without some form of stimulus spending following the crunch, the US would have fallen straight into full-blown depression. That’s where pre-Keynesian thinking got the US, and an exaggerated fear of inflation would have taken it right back. Plus ça change.

  43. Concentrating the wealth further would lower the number of guards required. If we can get all the money into just one persons’ hands, how many guards would she need? Maybe 10,000? 20,000? Even if she needed a MILLION guards, around the clock, that’d be just 1% of the US population.

    So, give all your money to my wife. Now.

  44. Inefficiencies notwithstanding, it is far from clear that states with less wealth inequality actually do have more self employed per capita, or more manufacturing employment per capita. It is not clear that making the guard jobs disappear would be a rainmaker for more productive employment.

  45. To paraphrase Anonymous “Wages […] aren’t a measure of productivity. [Hitmen] may serve other people, but not in a way most of us can appreciate.”

    The jobs you list are destructive of private property and function outside of voluntary exchange (free market).
    Please define productivity.

  46. Yes, Friedman uses the the word “shock” in his letter to Pinochet in april 1975. If you seek “economic growth of Chile” graph from wikipedia you can see, that the GDP growth bounced from -13% 1975 to +4% at 1976 and to +10% at 1977 and styed above 7% until 1981.

    The inflation was started by Annende and was some 10% at 1970, and reached its peak at 1973-1974. The average annual price inflation rate was around 500% for two years. After two years of “shock treatment” the inflation was brought down to 100% in ’77.

    You suppose, that Friedmans advices given in ’75 should have had effect earlier in ’73, in middle of a coup? He is an economist, not a Higgs boson.

    The reason for high inflation, was that government was financing it’s spending by printing money. Printing money is no substitude for actual production. It can bring short term employment by destroying savings. The excess money will take some time to work it’s way throught the economy. Those, who first recieve the money will rise their prices first. Those who get the money last, will also see their salaries rise last, but they have to suffer the greater prices of other goods. The average price inflation will lag few years the actual currency inflation, and so it is important to fight it early.

    The solution was to cut government spending, so it would not have to print more money. Friedman did not say, that inflation and unemployment would be cured in months. Quite the opposite, he warned, that it would bring great unemployment for some government workers, and therefore relief should be provided for the poorest.

    I am not saying it all was Pinochet fault, the crisis was created by Allende. Inflation from 10% to +500% in three years is not good managment. One of the mistakes of Pinochet was to peg (not unpegging as you stated) peso to dollar, that led to trade inbalance, that was bursted by ’81 South American crisis. I am sure, that his government made also other mistakes. Chileans would propably benefitted even more, if they rejected fiat currency entirely. However, the economy recovered rapidly, and chile has kept it’s liberal policy after transforming back to a democratic state.

    Klein lies when she suggests, that the depression(or the coup itself) was masterminded by Friedman, so that he could get the shocked population to agree on economical freedom. She bases her whole book on this silliness. Pinochet did not need a depression to introduce new laws, he was a murdering dictator, he could do what ever he wanted. The unemployment was unavoidable temporal side effect, that came only after the governemnt spending was cut back to sustainable level.

    I would like to know, what other measures they could have taken to bring down inflation and dept, if this is too slow for you? How long you think a governemt can run by just printing money to cover expences? Japan has tried keynesian thinking, and they’ve been stuck for two decades. So has the US, and is now paying the price of a bursting bubble, two wars, no production and massive dept.

  47. “poets, like whores, are hated only by each other”

    william wycherly, using a euphemism instead of “economist”, which was considered obscene in 1673

  48. @Broken Window: It’s clear that neither of us will be convincing the other any time soon. Just to correct you on a point of fact however, Friedman did claim in 1975 that if Pinochet followed his instructions, he could “end inflation in months”; likewise, high unemployment would be “brief – measured in months – and that subsequent recovery would be rapid”. See Milton & Rose Friedman’s Two Lucky People, pp292-294.

    Your points on Keynesian vs. monetarist solutions are perfectly valid, though of course I strongly disagree with them. However, on Klein specifically you have either not read her book or misunderstand her argument.

    Klein does not claim that either the depression or the coup was masterminded by Friedman. Her point is that Friedman’s ideas were transmitted through the Ford Foundation’s sponsorship of Chilean students (Sergio de Castro et al) studying at the University of Chicago. Friedmanite policies were, however, rejected by the Chilean electorate, and so his followers instead worked as part of Pinochet’s murderous regime to implement their policies by force.

    Friedman’s personal role as economic advisor to Pinochet is at best a huge failure of judgment, and at worst leaves him partially culpable for Pinochet’s crimes. Klein quotes journalist Anthony Lewis: “If the pure Chicago economic theory can be carried out in Chile only at the price of repression, should its authors feel some responsibility?” Friedman (wrongly) took credit for Chile’s later growth and return to democracy, and applauded the imposition of his policies in the 70s, yet refused any responsibility for the violence that made that imposition possible.

  49. This article is pretty vague. I’d like a better description of what, exactly, Guard Labor is, and entails.

  50. A friend recently sent me the link to this article (context – we were discussing anarcho-capitalism)along with this “I’ve been reading through your articles [I sent him some stuff about anarcho-cap, Spooner, Mencken, RAW, some others]. I’ve attached a recent article that I want your opinion on. My biggest problem with what I’ve been reading is how the theories play out in the real world. There doesn’t seem to be precedent and markets that reflect your theories the most, like the BRICs, are places where the following link seems most relevant.”

    So here was my response

    “Here are some issues I have:

    1) The guy is a radical that spent his life in academia (his philosophy sounds very Marxist to me), for example, he supports universal welfare which totally negates private property rights.
    2) The Gini Coefficient loses much of its meaning when comparing Country to Country (because of different data collection methodologies), it is a noted flaw in the Gini Coefficient.  The statistic is useful when used over time within the same geographic area.
    3) He is using a very liberal definition of what constitutes guard labor in terms of job functions
    4) There is no cost-benefit analysis included in place between the choices of 1) keeping the guard labor in place vs 2) having the guard labor do something else.  For example, an example is used in the second link for guard labor as “the officers in the Santa Fe Police Department paddy wagon parked outside of Walmart.”  The question is, what else could this (probably unqualified educationally) be doing in the economy and is that greater (in terms of wealth production) than what he is currently doing.  Most of the people in guard labor positions (using his definition) are probably not well-qualified individuals that would be (as per the 1st link) “starting their own businesses or helping to reduce the US trade deficit with China.”
    5) His quote about IQ is interpreted to fit his thesis; however, the answer to the of IQ/income correlation is much more vague than he portends.  “The problem with IQ is that it’s just not very important in determining who’s rich and who’s poor. And most people don’t believe that,” Bowles says.”
    6) “smart policy, in Bowles’ view, is for the government to care for people who suffer misfortune through no fault of their own.”  That’s nice and all, but where is this money being distributed from.  If we were redistributing it from foreign aid, our military empire, etc, I would be all for this (redistributing from things that destroy wealth) … but if it’s another “tax the rich” scheme, then forget about it.  

    On the otherhand, I really did like some of his real world ideas (educational planning in terms of personal finance would be a great way to help people out, I would even be for a government program to do such a thing as the privatize incentives don’t seem to be there although in the long-term this would be a great way to boost net worth which would positively impact the private sector eventually).  

    A couple of other things …

    A)  I don’t see how the fact that there aren’t precedents invalidates a particular viewpoint; as a matter of fact, I think that if there are no “real life” precedents for a particular idea/concept/theory, it strengthens the argument for incorporating those ideas if the current ideas are not working.  Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results.”

    B)  That’s besides the point though, because there are historical precedents of communities that organized around anarchistic principles

    C) If small government is preferable to large government, then why not take it to its logical conclusion?  If large government is preferable to small government, then why not take that to it’s logical conclusion?  Which conclusion would you more readily accept?  
    “I HEARTILY ACCEPT the motto, — “That government is best which governs least”;(1) and I should like to see it acted up to more rapidly and systematically. Carried out, it finally amounts to this, which also I believe, — “That government is best which governs not at all”; and when men are prepared for it, that will be the kind of government which they will have. Government is at best but an expedient; but most governments are usually, and all governments are sometimes, inexpedient. The objections which have been brought against a standing army, and they are many and weighty, and deserve to prevail, may also at last be brought against a standing government. The standing army is only an arm of the standing government. The government itself, which is only the mode which the people have chosen to execute their will, is equally liable to be abused and perverted before the people can act through it.”

    D) Read the below  you get a chance … if you don’t want to read the whole thing read the last section “What Can Be Done,” especially the last two paragraphs.  This is tangential to anarchism, libertarianism, etc, but it summarizes my views on the contemporary political climate pretty concisely.  
    “Brave New World Revisited, written by Huxley almost thirty years after Brave New World, was a non-fiction work in which Huxley considered whether the world had moved toward or away from his vision of the future from the 1930s. He believed when he wrote the original novel that it was a reasonable guess as to where the world might go in the future. In Brave New World Revisited, he concluded that the world was becoming like Brave New World much faster than he originally thought.”

    E)  If you agree with the notion that individuals are best at making their own decisions, then the “system” should be devised in such a way to minimize interference to this process

    At the end of the day I view our Federal Government, and most governments, as an organized mob, echoing what Spooner says here …

    “But this theory of our government is wholly different from the practical fact. The fact is that the government, like a highwayman, says to a man: ‘Your money, or your life.’ And many, if not most, taxes are paid under the compulsion of that threat. The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful. The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a ‘protector,’ and that he takes men’s money against their will, merely to enable him to ‘protect’ those infatuated travellers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful ‘sovereign,’ on account of the ‘protection’ he affords you. He does not keep ‘protecting’ you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy, if you dispute his authority, or resist his demands. He is too much of a gentleman to be guilty of such impostures, and insults, and villanies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.”

    and here …

    “The ostensible supporters of the Constitution, like the ostensible supporters of most other governments, are made up of three classes, viz.: 1. Knaves, a numerous and active class, who see in the government an instrument which they can use for their own aggrandizement or wealth. 2. Dupes—a large class, no doubt—each of whom, because he is allowed one voice out of millions in deciding what he may do with his own person and his own property, and because he is permitted to have the same voice in robbing, enslaving, and murdering others, that others have in robbing, enslaving, and murdering himself, is stupid enough to imagine that he is a “free man,” a “sovereign”; that this is “a free government”; “a government of equal rights,” “the best government on earth,” and such like absurdities. 3. A class who have some appreciation of the evils of government, but either do not see how to get rid of them, or do not choose to so far sacrifice their private interests as to give themselves seriously and earnestly to the work of making a change.”

    I do understand though that a lot of my ideas have what’s commonly termed as the “implementation problem”

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