What Else Would You Expect?

While in his Washington Post column Robert Samuelson laments the sorry state of the U. S. economy:

The spoils society advances.

The “spoils society” is a phrase I coined some years ago to illustrate a basic problem of wealthy societies, including, of course, the United States. After all, our annual gross domestic product is approaching $20 trillion. The problem is that, as societies become richer, so does the temptation for people to advance their economic interests by grabbing someone else’s wealth, as opposed to creating wealth.

We see the resulting redistributive struggles all the time. They’re part of the social fabric: divorcing couples fighting over the marital assets; Congress debating who should — or shouldn’t — get tax cuts or subsidies (say, Social Security); lawyers launching “class action” suits to remedy alleged wrongs; patent “trolls” suing tech companies over possible infringement issues.

What else would you expect? Considerably more money can be made via rent-seeking at lower risk than via entrepeneurship. That’s why the money spent on lobbying is so high. The return on investment is great and it’s an arena in which only the big boys may play. Just as a single example, IMO the balance sheets of pharmaceutical companies more resemble lobbying organizations that do a little research on the side than research organizations that do some lobbying.

Also, we graduate twice as many MBAs annually as we do undergraduate engineers and vastly more than we do individuals with advanced engineering degrees. That points to the rewards of manipulating the financial economy compared to the rewards of making things and creating processes.

But notice the symmetry between Mr. Samuelson’s column and the other two articles to which I’ve linked today. Mr. Ryu and Dr. Summers are arguing in favor of the status quo, the “spoils society” that Mr. Samuelson is complaining about.

11 comments… add one
  • Bob Sykes

    Our engineering schools actually produce a surplus of degreed engineers. A surprisingly large percentage of BS holders never practice engineering but go into other fields, as much as half of all graduates in some disciplines, like civil engineering, for example. Engineers have high intelligence, good work habits and excellent quantitative and basic science skills, and all of these are good for other careers, like law or medicine.

    Anyway, the fact that we produce more businessmajors than engineers merely reflects job opportunities in our current economy. Even if we could repatriate all our lost industry, once again be the arsenal of democracy, we would not the ratio of engineers to business majors.

  • steve

    I read the Summers piece. He argues strongly against the Trump proposals. I think it a mischaracterization to say that he is arguing for the status quo, or for anything really. His was just a critique of the proposals as we know them.

    Steve

  • steve

    Nice chart/graph on percentages of majors. Business majors, as a percent of total grads, peaked in 1987.

    http://www.npr.org/sections/money/2014/05/09/310114739/whats-your-major-four-decades-of-college-degrees-in-1-graph

    Steve

  • I think it a mischaracterization to say that he is arguing for the status quo, or for anything really

    If you argue against somebody else’s proposal without having one of your own, you’re arguing for the status quo.

  • If it hasn’t been mentioned before Bob Sykes is a civil engineer. Guarneri is a metallurgical engineer with an MBA.

    Anyway, the fact that we produce more businessmajors than engineers merely reflects job opportunities in our current economy.

    which is another way of saying the same thing that I did.

    When MBAs and engineers start businesses they tend to start different sorts of businesses. If you want the sort of businesses that hire people and make things, you want businesses started by engineers. If you want IPOs searching around for business models, not so much. It’s a statement about the sort of society you want. If you want a society that’s more financialized, makes fewer things, and is less equal, produce more graduate business majors.

  • Andy

    I’m a liberal arts guy but I’m married to a PhD engineer. She’s done very little engineering or science – instead she’s mainly filled leadership, management and advisory roles.

  • steve

    “If you argue against somebody else’s proposal without having one of your own, you’re arguing for the status quo.”

    Absolutely not true. If nothing else, you are often limited to how much you can write when you are writing a column. You just aren’t allowed enough space to do a comprehensive piece. Also, sometimes you may not have an alternative in mind, but that shouldn’t stop you from criticizing what you see as bad ideas. It may allow better ideas to take root as it is clear that the ones you are criticizing are inadequate.

    If Summers were questioned and said that his preference was to maintain the status quo, and/or he rejects all other alternatives, then he is supporting the status quo.

    Steve

  • Andy

    Steve,

    I think you give op-ed writers too much credit. It’s simply easier to criticize than to come up with solutions and, for difficult problems, any solution will garner legitimate criticism. If someone of Summers stature, education and experience is given column space, I would hope they would show some leadership by doing more than criticizing.

  • Steve:

    It is absolutely true. You have forgotten a basic principle: silence signifies assent. If you criticize what is proposed, offering no alternatives, that you like the status quo is a completely reasonable inference, indeed, the reader is left to draw whatever conclusion he or she cares to. If Dr. Summers wanted to foreclose that possibility, he’d’ve offered alternatives.

    Andy:

    And, as I point out in the body of my post, he’s not an innocent bystander. His fingerprints are all over the economic decisions of both the Clinton and Obama administrations.

  • Guarneri

    Bob

    The points you make on a surplus of engineers and engineers not practicing can be made for MBAs as well. There is no demand for Keller MBAs to “manipulate the financial economy.” In fact, these days there are more physicists, math majors (but I repeat myself) and music majors than Keller MBAs.

    The oft cited financialized economy is a neat thing to say, but pretty empty. VC is ownership and investment. Marketing is still marketing. Capital raising is still capital raising. And insurance is still insurance. They have all been around forever. It really is only more exotic instruments like options or derivatives that have experienced outsized growth. That is, in excess of the capital base. Much of it is currency related for trade purposes, and some for risk management. But those are actually tiny.

    I know it’s very unpopular, but government has been very bad for blood and guts business disciplines, and very good for instruments and disciplines to circumvent government. Can you say tax accounting?

  • steve

    Andy- In some ideal world a Summers does that. In reality, he does what most everyone else does when given op-ed space. They devote the whole piece to attacking something or advocating for something. You just don’t (often) see well rounded writing that criticizes then offers other options.

    What I really object to is what I think I see happen way too often and is what helps to fan our partisan differences, which is ascribing motivations to others when you don’t know if that is really what they believe. To use a medical example, of course, I am pretty sure that the people who created and released Thalidomide really did mean to treat nausea and vomiting, not cause birth defects. To say that they meant to cause birth defects because that is what happened is false. So, in the case of Summers, unless he has written elsewhere supporting the status quo, you are ascribing to him beliefs he may not really hold.

    “physicists, math majors (but I repeat myself) ”

    Boy genius was both a physics and math major. The physics guys used to all get pretty pissed when I suggested that they were just another arm of the math department.

    Steve

Leave a Comment