The Rich in Public Opinion: What We Think When We Think About Wealth

Dr Rainer Zitelmann’s new book, “The Rich in Public Opinion: What We Think When We Think About Wealth,” brings a much-needed counterweight to the rent-seeking academic politics and sensationalized accounts that cloud our understanding of wealth. It gives the reader the data, along with scientific study, to help us really understand how we perceive the prosperous as we do.

Zitelmann argues that our understanding of the rich is distorted by snobbery and pessimism, aided by media stories that pander to populists, plus a set of complex yet well-explained psychological coping mechanisms. He tests these against empirical polling data, finding his theses of social envy and contrived moralities confirmed. However, in ground-breaking international analysis, he finds the British and Americans share most respect for wealth creators, very much more than their German and French cousins. This exposes our deep cultural ties with the one, and our divisions with the other, and charts across borders how an increasingly international society deals with wealth.

Zitelmann’s detailed research enlightens the reader without stodgy jargon, and is helped along by his eloquent arguments and explanations. He explains not only how inverse classism arises, but also how it is studied and perceived by biased academics. The review of scholarship is his focus, without bias or subjectivity intruding, and he arrives at his conclusions convincingly.

Unlike a partisan propagandist, he gives his readers the opportunity to develop the arguments in their own minds. For example, he points out that when participants were asked about how they understood such notions as ‘fairness’ and ‘redistribution of wealth,’ there was an overwhelming disparity between what partisans would claim, and what scientific study revealed to be their true opinions. While the vast majority of individuals initially claim that major redistribution of wealth is fair to the rich, the study’s outcome revealed that only 14-18% of over 6,000 participants studied agreed with this when probed more deeply. 

Zitelmann shows that class-envy has a stunting effect, coming as it does from ingrained coping mechanisms. His eighth chapter is particularly useful, bringing in reputable research backed up by scores of citations. He finds that, in the words of Karl Marx: “their social being determines their consciousness.” He shows that the way wealth is perceived differs from culture to culture, from social group to social group, and varies with the political stance and the degree of education people have. As he concludes: “the findings of these international studies demonstrate that explanations for wealth and success vary greatly both between countries and social groups.”

Overall, Zitelmann’s new book presents a superb piece of analysis about the moral quagmire we find ourselves in today. Pulling together the neoliberal tradition of evidence-based analysis, Zitelmann offers a convincing and engaging prescription of how we can contend with the Jacobin and Guardian journalists who seem to derive damaging and dangerous conclusions from prejudices supported by nothing but empty air. His book presents us with exemplary scholarship and analysis, helping us understand the social and economic background of how the rich are perceived, and making the case for greater tolerance in our society. To say that it is well worth reading and absorbing the information presented in his pages would be an understatement, and an impoverishing one at that. I hope that as many as possible will read it and take its lessons to heart.

Not everything is about sex - nor even gender

Among the odd ideas The Guardian presents for our delectation:

As far back as 1977, an American poet and professor of architecture named Dolores Hayden wrote an article with the explosive headline “Skyscraper seduction, skyscraper rape”. Hayden tore into the male power fantasies embodied in this celebrated urban form. The office tower, she wrote, is one more addition “to the procession of phallic monuments in history – including poles, obelisks, spires, columns and watchtowers”, where architects un-ironically use the language of “base, shaft and tip” while drawing upward-thrusting buildings ejaculating light into the night sky.

Despite the manner in which some do think that everything is about sex - or, to be more modern, gender - it ain’t. Building up in an urban environment is a reaction to expensive land, not a reference to gamete application systems. Building as a tower rather than a block is about gaining natural light, not male vigour.

But let us leave those who think everything is about sex - or gender - to their fantasies and address something that is simply wrong:

The consequences have proved deadly as Covid-19 rampages through our cities. Take the crisis in long-term care homes. Care for elderly and disabled people has been largely privatised in many countries, ...

No, that care of the elderly hasn’t been privatised it has been socialised. That’s why it is taking place in homes, not at home. Private care of the ill, the halt, lame and elderly, is something that was, at one time, done within the familial structure and dwelling. It is now done on that social basis, it has thus been socialised into communal efforts and buildings.

We are entirely fine with it having done so too, we are not about to argue that each household must deal with its own instances of Alzheimer’s alone and unspecialised - we are the true believers in the division and specialisation of labour of course. But we do insist on a certain clarity in the description of what has happened.

The communal care of these groups is not privatisation, it is socialisation.

Actually, we'd be arguing that NHS salaries should decrease

The claim here is fine, of course it is, unions exist to better their members at the expense of everyone else. So, this is just unions doing their job:

Unions representing more than 1.3 million NHS workers have written to the government calling for talks to begin on a pay rise to take effect before the end of the year to reflect the efforts of staff during the coronavirus pandemic.

In letters sent to the prime minister and the chancellor on Friday, as the nation prepares to give thanks to the NHS on its 72nd birthday, the 14 unions say the government should build on the huge public support for staff during the Covid-19 crisis and deliver an early pay rise.

Economic reality argues in favour of significant pay cuts though. The current best guess is that GDP has decreased by some 20% or so. That means that the aggregate incomes of all in the country - GDP is equal to all incomes by definition - have fallen by 20%. It seems fair that all should partake of this pain therefore the default position is that all public sector workers, the NHS Angels included, should have a 20% pay cut.

Quite possibly more than that in fact. Private sector workers are at considerable risk of being laid off, seeing their pay reduce to zero. This is not a risk being faced by anyone in the NHS. That job security is now worth more as part of the total compensation for the job, isn’t it?

Of course, resetting public sector pay to fit the new economic reality isn’t going to happen, even if it should. But pointing out that reality is still necessary, even if only to highlight how absurd these demands for further rises are.

After all, think on it, we’re all 20% poorer, why shouldn’t they be?

The Leicester sweatshops wages appear to be more about illegal workers than wages

The Sunday Times tells us that certain factories in Leicester appear to be paying less than minimum wage to their workers.

Undercover at an East Midlands factory making clothes for the hugely profitable Boohoo and Nasty Gal labels, our reporter found almost no protective equipment, and wages as low as £3.50 an hour.

It strikes us that this is about a different part of the law:

I told him my name was Sri and that I was a student from India.

That is, someone without the correct documentation to take a job in the UK.

“You are working illegally, so do not discuss or say anything with other people. "

Despite what everyone is calling it this is not slavery, modern or otherwise. People have come half way around the world and volunteered to do this - there is no compulsion - because it’s better than not coming half way round the world to do it. That’s a reflection on the evils of conditions out there, not on those here.

It’s also an elegant demonstration of why free migration has its merits- those who migrate can, by dint of it being legal to do so, be covered by the same laws as everyone else. There is no such skulking in the shadows if that penumbra is not being used to protect breaches of work permit laws.

Another elegance is the example of how passing economic laws is so difficult. We have that minimum wage law and yet large numbers of people routinely break it. Because it is in their mutual interest to do so, the unpermitted and the low end employer. People just will do what is in their mutual interest which is a lesson to all of those who would constrain economic activity by politics and wishful thinking.

Strange truths in The Guardian

Chris Dillow tells us something true in The Guardian:

No, no, no. In fact, it’s young people who will lose out most from this superficially “fair” move. If the triple lock stays, an 80-something will get only a few years of real-terms pension increases. But younger people can look forward to decades of such rises. Because our wealth is the present value of future incomes, scrapping the triple lock will effectively impoverish younger generations today more than old people. Far from promoting intergenerational fairness, scrapping the triple lock will deal yet another blow to young people who have already been comparatively disadvantaged.

This is, of course, all about the state pension. The specific truth we would highlight being this:

our wealth is the present value of future incomes

Entirely so. Except, when we go out to measure wealth that’s not what we do. This is from the canonical Saez and Zucman paper but it’s a general concept used in all valuations and calculations of the wealth distribution:

Our definition of wealth includes all pension wealth—whether held on individual retirement accounts, or through pension funds and life insurance companies—with the exception of Social Security and unfunded defined benefit pensions. Although Social Security matters for saving decisions, the same is true for all promises of future government transfers. Including Social Security in wealth would thus call for including the present value of future Medicare benefits, future government education spending for one’s children, etc., net of future taxes. It is not clear where to stop, and such computations are inherently fragile because of the lack of observable market prices for this type of assets. Unfunded defined benefit pensions are promises of future payments which are not backed by actual wealth. The vast majority (94% in 2013) of unfunded pension entitlements are for Federal, State and local government employees, thus are conceptually similar to promises of future government transfers, and just like those are better excluded from wealth.

Dillow is right, our wealth is the net present value of all future income streams. Things like the state pension - and of course unfunded civil service ones - plus the value of free at the point of use education, health care, the insurance provided by housing benefit, dole, tax credits and all the rest, are wealth. And yet when counting the wealth distribution we don’t include any of these things.

This poses one specific problem, when it is suggested that we should reduce the wealth gap by taxing the richer to funnel money to the poorer we end up not including the effect of the funnelling. Because we deliberately don’t include the effect of receiving tax transfers upon wealth.

But more importantly, given that we already do rather a lot of such redistribution all and every current estimation or calculation of the wealth distribution is wrong. Something that we should probably fix before we discuss whether we should be doing more levelling - or perhaps, mirabile dictu, less. After all, in determining whether we wish to change the current reality we should start with the actual current reality, no?

Or, as we’ve remarked before, it matters what you count and how.

Jet Zero is trivially easy

Boris would like to support something called “Jet Zero”.

Will Boris’s Jet Zero ever fly?

The prime minister’s call for Jet Zero on Tuesday may owe more to his fondness for a punchy slogan than any realistic view of how UK aviation might develop in the next three decades.

“We should set ourselves the goal now of producing the world’s first zero-emission long-haul passenger plane,” Boris Johnson said. “Jet Zero, let’s do it!”

But as far as the technology goes, Johnson might have more luck building a garden bridge to France than getting British-made, long-haul, zero-emission passenger planes in service before 2050.

There’s no need to wait util 2050. This can be done today. In fact, it’s trivially simple. Just use created hydrocarbons to produce the aviation fuel that powers today’s jets and airframes.

True, it’s expensive - last time we looked algal oil would cost the equivalent of $200 a barrel. But it’s entirely possible, it’s just chemistry and people can do it today.

Doing it at a price akin to today’s $40 a barrel is more difficult, we admit. On the other hand it doesn’t need doing at all.

Aviation is some 2% or so (2.4% in 2018 apparently) of all emissions at present. This is a rounding error on total emissions, obviously enough. It is not true that the desire to reduce emissions means every sector must do so - we do not have to spread the pain. Instead we should continue to emit where what emits is of most value and cease where it is of little.

Aviation is of great value for people like going off on their hols. The correct answer, thus, to aviation emissions is to fuggeddaboudit. The benefit in terms of human utility is higher than the costs in those same terms of human utility. This is thus something we wish to continue being able to do even taking those emissions into account.

Sure, it would be nice if there were a no emissions method, maybe someone will get lucky with those chemistry sets. But it’s not important that any one does or not. For aviation emissions simply aren’t either a large problem nor is aviation itself something we want to stop doing.

Towards a valuation of Facebook

The Guardian witters about how we should truly value Facebook:

On 2 June, facing an unprecedented public protest by Facebook employees, Mark Zuckerberg told his staff that even if they disagreed with some of his decisions he hoped they agreed that “the net impact of the different things that we’re doing in the world is positive”, according to a transcript published by Vox. “I really believe it is,” he added.

As with all of Facebook’s algorithms, there is no transparency on how Facebook arrived at this net positive impact. We can only look at the outcomes and attempt to reverse engineer the decisions that produced them.

Nick Clegg’s attempt to produce a valuation is also mentioned.

The thing is such a valuation is trivially easy to perform. We can 0 and should - look at the outcomes.

Some 3 billion people think that Facebook adds value to their lives. They do so by using Facebook - humans tend not to do thing that do not increase the utility of the human beings doing the doing.

We do not get to define that increased utility, nor do you and nor even does someone wittering in The Guardian. Increased utility is defined and determined by the individuals trying to maximise it.

How else could it possibly be in a liberal polity? The entire point of which is that we all get to live our own lives by our own lights and good luck to all who sail in that societal boat.

That getting on for half of humanity thinks Facebook is a pretty good idea does rather tell us that it’s a pretty good idea. The alternative is that the elite tells the proles what they may do which is many things but it’s not liberal.

Crowding out Community

The clapping, the local action groups, the street WhatsApp groups. For a country that’s been told we’ve been made into selfish atomised individualists by the free market, it turns out we can be quite community minded when it comes to it. The strengthening of old community ties, albeit using new technologies, will be a silver lining of the otherwise wretched COVID-19 crisis.

Civil society’s response to COVID-19 has not only provided urgent support to those in need but has also helped forge new ties. The establishment of my street’s group chat has introduced us to new neighbours for the first time since that one-off 2012 street party. 

Indeed, it looks as if it is a feature to stay - early in the lockdown my family were delighted to see a house a few doors down sharing the birth of their baby in the group, an event that would have passed almost completely unnoticed under normal times. 

It’s not just about local groups. I’ve also enjoyed seeing a number of old school friends get back in touch. Many are making the extra effort  to look out for each other's mental health challenges and loneliness in lockdown.

Spontaneous order is not just a phenomenon of the market. Community ties organically spring almost from nowhere. Government programmes on the other hand, tend to be hopeless at artificially creating community. Despite David Cameron’s best intentions and efforts to pursue a ‘Big Society,’ his top-down approach achieved little compared to the organic community that has formed because of this crisis. You can only imagine the cataclysmic failure that would have resulted if the local authority had tried to establish these group chats or a government department to develop WhatsApp. It’s definitely not hard to after watching the recent debacle over the NHS track and trace app. 

Yet as the country emerges from lockdown, there is a huge risk that too much state interference and direction will undermine this newfound solidarity, replacing it again with individual apathy.  

These groups and networks arose out of a large problem. There was a gap in services, delivering food to those who needed to be shielded or checking up on others’ mental health as they spent weeks on end isolated at home. Community action has responded better than any governmental programme could. There has been little bureaucracy. People have gotten done what needed to get done.  

‘But wait!’ You cry. ‘What about that army of 750,000 volunteering for the NHS? That’s state led and centralised.’ While the willingness of those signing up has been amazing and indeed inspiring, this was still in response to another perceived hole in state provision. Moreover, it has emerged as a brilliant case in point in the inefficiencies and failures of such a centralized system. Some recruits were overburdened with 8 tasks per week while the vast majority have been given no referrals at all and have become increasingly frustrated by it. 

Yet this increasing centralisation could cause even more damage in the charity sector after the crisis. In early April, the Chancellor announced a £750 million package, half targeted at hospices and domestic abuse centres and the other half bound for local charities including through the National Lottery Community fund. With charities facing a large funding black hole at the beginning of the crisis, just as their work was most crucial, a small bailout in addition to the other support packages was indeed sensible. However, with the Chancellor planning to offer this help ‘into the future as we come out of this crisis’ there is a huge risk that temporary measures become the new status quo, to the detriment of our charity sector and civil society.

Reliance upon taxpayer money rather than donations risks the assimilation of charities into quasi non-governmental organisations - the extreme of which leads to the nationalisation of public conscience and philanthropy. Replacing the compassionate act of giving, either in form of time or money, with funding through taxes will inevitably result in a greater loss of public spiritedness. 

This shows the importance of achieving a strong economic recovery. Growing the economy out of recession will allow the British people once again to afford to give to charities they deem worthy and effective, rather than leaving government bureaucrats to decide their favourites.

The debate over the state’s role in strengthening civil society and communities, the so called “Third Pillar” (the other two being the market and the state), is only likely to grow louder after Covid-19. Devolution of power downwards is regarded by most as crucial at making people more engaged in politics.

Of course this means real devolution, giving powers down to mayors, councils and parishes, not the current kind simply indulging the desires of nationalists, salami slicing off more powers to their own highly centralised governments. Yet even with proper devolution it is important to remember there is little community in local authorities of tens, or more commonly, hundreds of thousands of people. 

This pandemic has served as a healthy reminder that people have the heart and abilities to come together without direction from the state. Communitarians, who advocate a more active government involved in communities and charities, should be reminded of the anthropologist’s Edward Banfield’s research. 

His work in Southern Italy showed how deprivation mixed with an overreaching (and incompetent) state helped contribute to a decline in the ‘social capital’ that many of those yelling for a more active government claim to want.

Prominent Indian economist Raghuram Rajan commented in his recent book, The Third Pillar, how ‘the misplaced expectation that the ghost of the inefficient government will eventually appear and do the job crowds out what little private initiative there is.’

The dark truth might be that we often look to the government to solve these problems, because we are reluctant to take responsibility for these things ourselves. 

We see the problem of not knowing the people on our street, the elderly feeling forgotten, or a lack of support for the vulnerable and expect the state to swoop in as some deus ex machina and solve it. COVID-19 has seemed to change this. Maybe it's because with the Government panicking to save the NHS we knew the rest was up to us, or maybe, when faced with a crisis, we decided to come together and finally take some responsibility. Either way, it has involved a greater level of humanity and solidarity, and nowhere near the amount of bureaucracy, than if it had been led by state officials.

As the restrictions are lifted and we once again venture out of our homes we will all be grateful for the community networks that remain. But caution should be applied towards ideologies who desire to organise and force these connections more centrally. We would do well not to lose faith in the capability of our little platoons, as Edmund Burke classically described. We should cherish the organic communities that form not only around physical localities but also as secondary benefits from churches, workplaces, schools, hobby groups, and even in the modern age, online. And maybe we will have learnt that it is up to us to make these networks and institutions thrive rather than a bureaucratic government. 

We must abolish taxation and rely purely upon charity

There’s no doubt about it, demanding that people have money taken off them in order to provide for the poor and or unfortunate robs the transfer of its moral transcendence. If we must, by law, pay for the housing, food and clothing of those poor then there is no moral virtue to that activity, is there?

Thus, in aid of the moral development of us all, we must ban this taxation and transfer. Instead, we must return to a system whereby the richer do exercise that moral worthiness by voluntarily providing. This has been the operating system of the world before now, in fact it was from Ur of the Chaldees up to perhaps the Elizabethan Poor Laws. Time to return to those old verities.

True, there is an argument or two against this. That many of the poor ended up dead in a ditch as a result is one, for reliance upon moral precepts in humans beings can leave rather large holes in the safety net.

And now to the not very well concealed point. When talking about such body products as gametes (both eggs and sperm), kidneys and partial livers and lungs for transplant, whole blood and blood plasma, reliance upon purely that charity isn’t enough - too may end up dead in those ditches. It does actually work with whole blood, doesn’t with gametes - the UK imports many of them given local restrictions upon payment for them - doesn’t with organs as the deaths on the waiting lists prove and most certainly doesn’t as Bloody Well Pay Them shows for blood plasma. No country that doesn’t pay providers collects enough for its own use, all countries that don’t pay providers import from those who do.

We’ve tried the purely voluntary method of providing for the poor and decided that it’s not enough, we must move to a more effective method. Taxation, a social security system and redistribution. We have the evidence that a purely voluntary system of plasma collection does not work. We don’t need to go to compulsion for we know that mere payment works.

And if the compulsion in the payment against poverty is morally correct then why isn’t the payment itself to solve the inadequacy of charity alone in plasma also morally correct?

We're doing our duty by Hong Kong

For decades the Adam Smith Institute has stood with the people of Hong Kong. The freedom loving dwellers of the pearl of the orient have been a testament to that adage of Adam Smith: 

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”

From a sleepy fishing village on the edge of China to a global megalopolis. All built by free trade. 

When Britain agreed to the handover of sovereignty to China in 1997, this country did so on the promise of increasing freedoms for the people of Hong Kong. Instead what we have seen over the past two decades is an increasing level of mission creep by Beijing, as they interfere in the internal affairs of the territory. 

The National Security Law, introduced last night without the people of Hong Kong even so much as seeing it, marks the effective annexation of Hong Kong and brings her people under the extra-territorial control of mainland China. 

The last British Governor of Hong Kong, Chris Patten, said as the law came in, that: "This decision, which rides rough-shod over Hong Kong's elected legislature, marks the end of one-country, two-systems. It is a flagrant breach of the Sino-British Joint Declaration.”

A good primer on what the law does, how it breaches the joint declaration and why that matters can be found on the BBC. 

Just hours after implementation, the world has watched mass arrests for people holding British and American flags, and for holding a flag saying ‘Hong Kong Independence’. These are deemed to be in violation of the new law, which seeks to protect the power and dominance of China’s one party communist dictatorship. Press covering protests have been targeted with pepper spray and water cannons. One fifteen year old girl has been arrested for promoting secession. 

Beijing thinks each arrest makes its grip on the territory more secure, but actually each one undermines the attractiveness of the city and increases the incentives for those that want to live in freedom to flee. 

Fortunately the UK has given Hong Kongers a new choice. Around 3 million Hong Kong citizens who either have or are eligible for BN(O) status (and their dependents) will now have 5 years of limited right to remain. After 5 years, they can apply for settled status. After 12 months of settled status, they can apply for British citizenship.

Taiwan too has said that Hong Kongers are free to live in the Republic of China. These options mean that while the Chinese Community Party has seized control of the land of Hong Kong, she may yet lose their most vital asset: the territory’s people. 

As Nus Ghani MP writes in the Telegraph today, the people of Hong Kong now have a choice: to live under Communism or to live under British democracy here in the UK. Hong Kong is still per capita richer than the UK. It is, of course, home for these millions of people and home means a lot. But as we saw with arrests today the creeping cold hand of communism will continue to close over Hong Kong. 

That they have a choice matters. That we’ve ensured promises made to British Nationals that their rights will be upheld in face of coercion and control by communists matters. That we’ve ensured a beacon of hope is lit on a dark day matters. Freedom matters. 

The Adam Smith Institute called for full citizenship for Hong Kongers all the way back in the 1980s when handover was being discussed. We made the same call last year, saying that all those that were eligible should become eligible again. That has now happened and residency and work rights given. We’ve called for a new Hong Kong be allowed to be built in the UK. With freeports on the cards already and planning reform on the agenda, perhaps we’ll get lucky there too. Our work here can sometimes feel abstract, but today it feels tangibly real. We couldn’t do it without you, so thank you. 

Peace, easy taxes, and a tolerable administration of justice. That’s our offer to the British people of Hong Kong. It’s simple, but it’s good.