Money, Taxation and Randomness

There was an interesting (and rather typical) letter to the editor today in our local paper. Here’s one piece of it: “… productive members of the electorate are punished for being diligent in their pursuits and successful in their endeavors.”

It was, predictably, a call for lower taxes and support for candidates who run on lowering taxes. It went on to make silly claims like how America’s poor, who pay no taxes, hurt the economy and how countries with high taxes end up as socialist or communist. Few take that kind of nonsense seriously but many take that first claim very seriously. It’s a flawed claim, flawed at the deepest levels but it is still very seductive.

The first thing to note is that it’s factually wrong. The poor pay taxes, sales taxes, social security taxes, medicare taxes, automobile registration taxes, property taxes. In fact, they pay far more as a percentage of their income than others, especially the wealthy.

Second, most of those who have “made it” or, in the terms of the writer, are “productive,” “diligent” and “successful” believe that the “diligent” component is the reason for those “productive” and “successful” components. And this is where the problem lies — this proposition is both very true and very false. Yes, those who made it on their own, who found success in society mostly have been “diligent.” They’ve worked hard, studied, took risks, made good choices and should feel proud of their success. The rub is that an awful lot of other folks, including those who didn’t make it, also worked hard, studied, took risks and made good choices. There’s a lot of chancy stuff behind every success story — and every not-so-success story.

A case study here, mine. I got into the academic world because I chanced across a professor who was sympathetic to my style of thinking. I was brash and opinionated (still am, I guess). He thought it was amusing and asked me to come work with him. I ended up publishing, with him, a major research paper while still an undergraduate. With his support I got into a top-flight graduate program when my grades were so low that no such university would normally look at me (I had flunked out in my second year and barely graduated with a 2.3 GPA). If I hadn’t stumbled across him or if he was not so accommodating I sure as hell wouldn’t have ended up a successful researcher.

Every one of us has had moments like this in our lives, moments where choices were made external to us. Some of my many colleagues in academia ended up as highly respected thinkers and teachers, some not so.

Again, a personal note: On my way to Providence to start my graduate training I ended up sharing a U-Haul with an old friend. We drove to her family’s home to unload. I discovered, to my utter astonishment, that her father was a famous cognitive psychologist at Harvard and among the most respected theorists in the field. We became friends. I used to ride my motorcycle up to Cambridge regularly to meet with him and his students. He got me interested in a research area that became my life’s work. I developed a theoretical model that made me well-known.

If there had been no fluky friendship, no lucky encounter I probably would have ended up studying some utterly mundane topic that nobody really cared about rather than breaking ground into a new area of research. Did I work harder than my colleagues? Nope. Was I more diligent? I can say with not a shred of doubt in my mind, absolutely not.

Every successful, diligent, focused, hard-working, smart person would not be where they are without these random happenings. And every not-so-successful, diligent and hard-working slob had other random happenings.

Malcolm Gladwell’s book “Outliers” pursues this line of thinking to its logical extreme. It’s fascinating and a recommended read.

Finally, our letter writer also tossed in a line that often appears in conservative writings, the ironic claim that inheritance taxes should be reduced or eliminated. Inherited wealth isn’t wealth that came from diligent, hard work. It is, in fact, precisely the kind of wealth that he was arguing at the beginning of his rant should be taxed. Just for fun, here’s a list of the ten wealthiest people in America.

Bill Gates

Warren Buffett

Larry Ellison

Charles Koch

David Koch

Christy Walton

Jim Walton

Alice Walton

S. Robson Walton

Michael Bloomberg

Notice anything? Four of the ten are Walmart babies and inherited Sam Walton’s wealth and the Koch’s father was a millionaire businessman. Only two of those started with little or no family wealth, Bloomberg and Ellison. Ellison acknowledged that his wealth came from a fluke: he managed to get a contract with the CIA by a gentle misrepresentation of his software product and he used that edge to build Oracle. Bloomberg didn’t begin building wealth until he got fortunate enough to make partner at Salomon Brothers. Gates’ family was upper-middle class, Buffett’s father was a Congressman. And if anyone thinks they “made it on their own” they need to read their biographies. Intriguingly, the four on this list who started with the least (Gates, Buffett, Ellison and Bloomberg) are all committed to giving all or nearly all of their wealth to charities and foundations and all have called for higher taxation, particularly progressive tax codes.

Football points and peeves

I’m certainly not an expert on professional football though I think I understand the game better than the average tailgater. I don’t bet on games but if did I’d follow my own advice as outlined in The New Gambler’s Bible and Gambling for Dummies. My enjoyment of the game has been complicated by the growing, compelling evidence that the long-term impact of all those hits to the head accumulate and result, all too often, in a midlife of depression, memory loss, cognitive dysfunction and emotional turmoil. FWIW, the easiest way to cut down on concussions would be to ban helmets. Australian football is a very physical game, so is rugby — but concussions are rare. No helmets so no one leads with their head and no one goes for an opponent’s head.

But the game is just so much fun, so engaging and rich with tactics, strategies and counter-strategies that my Fall Sundays are booked and there’s a “reserved” sign on the comfy chair. I watch and root for the home team(s). My old “home team” was the Giants; my new one the Seahawks so my football watching life has been pretty good with three Super Bowls in the last seven years.

But with all the great games, clever coaching and high-end strategic moves there are two decisions that drive me totally bat-shit crazy. Punting on 4th and 1 and calling timeout to save 5-yards for delay of game.

Punting on 4th and short should only be an option when you’re stuck back in your own territory, like your own 25 or 30 or worse. I cannot, for the life of me, understand why a coach would elect to punt from say, midfield or the opponent’s 45. The most likely outcome is a touchback which puts the ball on the 20 and all you gained was 25 or so yards which can be taken back in one play. Even if you pin them down around the 10 you’ve still given them the ball. Why do this when the likelihood of making a first down and moving downfield is so high? Even the worst NFL team averages nearly 5 yards per play and close to 70% of all running plays gain more than two yards.

It just doesn’t make sense. It is terrible football strategy. Yet every team does it. Every one — well, not every. There’s a high school in Arkansas that never punts, ever. Not even from their own 5-yard line. Their coach explains the reasons.

They’re 124 - 22 since they started doing this and have won three state championships. Of course, part of why they do this is that they don’t have guys who can boom one 70 yards and I wouldn’t recommend this in the NFL but, if were running a professional team, I wouldn’t punt on any 4th and 2 or less any time I had the ball on my own 35 or better. Let ‘em holler all they want the first time it backfires. In the end it will prove itself.

Wasting a timeout to save 5-yards is stupid beyond reckoning. Timeouts are precious. They allow you to control the clock and run an effective 2-minute drill. A additional timeout at the end of a game can, and often does, make the difference in winning or losing. Five yards is, except in very special situations (like you’re on your opponent’s 1-yard line), relatively meaningless. How often do we see this: clock’s running down, QB stands up and calls TO — or even sillier, the coach runs down the sideline to an official to call one. On the next play a lineman jumps and, boom, there goes those 5-yards.

Want to win more games? Go for it on 4th and baby yards and don’t sweat the occasional delay of game penalty.

Writing and Reading

I’ve been away. I’ve been writing, so, of course, have been too busy to write. And reading too. Reading makes me pay attention to my writing which has made writing much more difficult. Paying attention complicates things. My friend Toni, who also writes, also reads. She’s been reading over some of my writings and been very helpful. She pointed out that I, like many who play at this writing thing, fail to firmly set a scene. We cheat on the reader who really wants to know who’s doing what to whom and where and when. But when I read writers, real ones whose bread is writer’s bread, whose shoes were bought with honest word-sweat, I find many who would unsettle Toni.

John Banville is one. I do not think Mr. Banville knows many words that I do not know. He did drop “plimsoll” on me this morning but I’d run across it before and had an inkling. Funnily, I thought it referred to underwear, not shoes. I thought it female roots, not male. My spell-checker didn’t like it so JB wins this round. But what Banville does with whatever words he’s using is to make sure they are in the right order. Order, I am discovering as I discover how to write and how not to, is what it’s all about. Banville would drive Toni absolutely nuts.

Banville has taken me with him to the mind of a child who could be him and we are watching and commenting on events from a past. Turn a page and we are with a child. The same child? Could be, we’ll know, don’t worry. Now we are watching other things from the same, maybe, past somewhere else. We are an old man and before us is that past, both of them perhaps. And there is no break, no ****, no “Chap XXIV” that followed “Chap XXIII.” The son-of-a-bitch is making me work. But that’s fine. As this reader who wishes to be a writer, if only he lives long enough, moves on it flows through you as Banville gently slides from place to place, from mind to mind, from allusion to reality to reflection and the reader understands what is happening. A lot of ordinary and a few extraordinary words and they are all in the right order.

And, because anyone who reads and writes also watches, I’ve been putting in the obligatory hours with the Roosevelts. Ken Burns directs like Banville writes. We are with Teddy, his broken sot of a brother, we are with Eleanor, with 5th cousin Franklin (who would count these kinly links? I do not even know if I have any 3rd cousins. A 5th might be anyone, Ken Burns perhaps, or John Banville), with the insecure, possessive woman who bore him and there are no breaks, no momentary blank screens, no shifts in framing, no new narrator and no ads. It works. It makes you work. Burns jumps back and forth in time and stitches together this family, dispersed and fractured as it was and it’s fine. All the pieces are in the right order. Order out of disorder. Banville and Burns. Maybe they’re 4th cousins, once removed.

I’ll go back to my writing now. I just wanted to share my excuse for not sharing.

Bankers Surprise

The NY Times headline [“Central Bankers’ New Gospel: Spur Jobs, Wages and Inflation”] was a surprise, to say the least — to me and, I bet, to Paul Krugman, my favorite economist, who just the day before predicted it would report exactly the opposite, something like “Central Bankers Fear Looming Inflation.” PK’s not often wrong but this was a good time to be.

Interestingly, as the heads of the central banks of country after country stood to speak the same refrain was heard: job growth has been too slow, the recovery from the crisis of 2008 too weak, wages have stagnated and the fears of inflation were overblown. This message, for those who haven’t been paying attention, is precisely the one that Krugman and other Keynesians like Joseph Stiglitz have been saying since, oh, 2008.

But while there was unanimity on the need to stimulate the economy in these capitalist countries, there was a similarly shared sense that it wasn’t going to be easy to do — especially not here in the US. The reason is that there are limits on what central banks can do. They can control the money supply but they do not control the legislatures in democracies. And there is still a strong pro-austerity sentiment in many European, Asian and North American governments.

In the US, the Republicans still control the House and all financial bills start in the House. So long as they hold the balance of power there nothing will happen. The party is controlled by two wings, the classic, “GOP” as in “Grand Old Party” which represents the wealthy, the bankers, the one-percent. Their job is, and has been for a century now, to protect the financial well-being of the upper classes and those folks like it the way it is now. One of the things in Krugman’s earlier column that I liked was that he seemed, finally, to be listening to psychologists and sociologists and argued that the main reason Congress hasn’t pushed for a larger role of government is based on issues of class, not economic theory. Paul Ryan’s budgets aren’t based on sound economic models. They are designed to protect the status of the people behind his political career, the fabled one-percenters.

The other faction that calls themselves “Republicans” are either unabashed Tea Party types or lean in that direction and they will never do anything — at all, ever. They are utterly useless in any discussion of economic theory. Many are too stupid to understand the issues and those who aren’t don’t believe the Federal government should do anything — at all, ever.

We’re back in familiar don’t-hold-your-breath land. It’s sad but there is some hope with the veil being lifted from the folks who run the central banks. The most likely place for sanity to return to economic policy is the European Union. If they do the right thing and others see the benefits it could spread. Stay tuned.

Goodman's Misplaced Rant in Newsweek

There’s a distinctly biased, inaccurate, cherry-picked anti-gambling, anti-online poker piece by Leah McGrath Goodman on Newsweek’s digital website. Goodman, a reporter not exactly known for being accurate in her journalism, has had her problems before, notably by blowing the story “blowing the cover” on the founder of Bitcoin where she fingered the wrong guy.

Most of the problems in Goodman’s piece have been noted by others and can be found in the scores of “comments” on Newsweek’s site. One thing they missed that’s worth noting is that Rep. Bob Goodlatte (R-VA), whom she identifies as one of the legislators looking at online gambling, was behind the stealth passage of the UIGEA in the first place. For those who have forgotten, the bill was ushered out of the House by Goodlatte and friends with the understanding that it would never pass the Senate. Then, at the last possible minute before a recess, Senators Kyle and Frist attached it to the Safe Port bill funding security at America’s ports which absolutely had to pass. Most estimates showed that only three or four Senators even knew the UIGEA was tacked on and that they voted for it.

But there’s much that is bothersome in Goodman’s article. Here are four key points.

First, it’s not going to be possible to stop online gambling and gaming. Criminalizing it or trying to outlaw it will result in unregulated, untaxed and unsupervised online sites run by folks who play fast and loose with everything. Why do we keep forgetting Prohibition? Why don’t we grasp what an across-the-board disaster the war on drugs has been? Why can’t we see the unending damage that comes from efforts to stop the sex trade? Criminalize something that people want and guess who shows up to run it. Legalize, regulate, tax the profits.

Second, in locales where gambling is far more common and socially accepted (e.g., the UK) the rate of problem gambling is far less that it is here. In fact, some studies show it to be only 1/5 to 1/6 as common (adjusted for population). When you make something illegal, it gains an allure that isn’t there when treated as just another thing to do on a rainy afternoon.

Third, while problem gambling (which is the issue that most moralists cite) is real, it has some intriguing elements that they seem to be unaware of. It is, for one, a highly co-morbid disorder. That is, it rarely occurs independent of any of a host of other psychological problems including substance abuse, bipolar disorder and borderline personality disorder, among others. Wide-spread legalizing of online gambling will produce an increase in the incidence of problem gambling — but it won’t increase the incidence of psychopathology, it will just redistribute it. Similarly, eliminating online gambling will not reduce the rate of psychological problems in society, merely redistribute them. The moralists who seek to ban gambling don’t appear to have recognized this pattern.

Fourth, the anti-online-gambling efforts are spearheaded by Conservatives which has produced a brilliant blaze of hypocrisy. Whatever happened to the high ideals of Conservatism, the ones based on the fundamental principle that people should be free to make decisions about their lives, that government should stay out of people’s personal choices, that freedom demands the loosening of the binds of oversight? Conservatives, alas, seem to lose their Libertarian stripes when issues like gambling (and sex and drugs) are on the agenda. When seeking to ban something they don’t like, they suddenly become advocates of big government.

Finally, one can only hope that Newsweek’s editors see the folly of letting this piece of bad journalism on the newsstands. It was painful enough reading it online.