Comments (12)

• Laura Miller

  It is worth looking at the overview page that shows income mobility - http://www.nytimes.com/packages/html/national/20050515_CLASS_GRAPHIC/index_01.html

  
  For those in the lowest 20% of incomes, 5% ended up in the highest 20% class between 1988 and 1998. I couldn't find the source of the data for the graphic, but I think the point of the series is supposed to be that class mobility is declining. It is not at all clear from their analysis that that is true. For example, in the article on education, the statistic is cited that only 41 percent of low-income students entering a four-year college managed to graduate within five years, but 66 percent of high-income students did. What they didn't provide is the number of students entering college. It is very possible that the number of low-income students entering college has grown substantially, and that this is one of the factors influencing class mobility. Also, if you look at it the other way around, 34 percent of high-income students DON'T manage to graduate from college in five years.

  
  I believe that education is one way to get ahead. At the same time, I believe that there are large numbers of students entering college that don't belong there - and many of those students drop out.

  
  But generally, the series is claiming that class mobility is decreasing without really providing a systematic analysis.

  Published: June 6, 2005 9:39 AM

• Dennis Sperduto

  Thanks so much Professor Reisman. As someone who lives in New Jersey and who is in both professional and personal contact with many who worship and take as fact what the NYT prints, it is heartening to see an article such as this thoroughly refuted by a distinguished economist. As bad as the Right and the neo-cons are, the NYT and this type of article are a stark example of why I see little principled and consistent support for economic rationality and property rights by most of those on the Left. The NYT worshipers have little if any regard for economic freedom. In my opinion, the modern Right and Left are fundamentally just different sides of the same statist coin.

  Published: June 6, 2005 9:45 AM

• Randy Young

  Indeed, thanks, Professor Reisman. I have been increasingly disappointed with several Mises articles lately as they started containing way too much slanted political opinion vs. facts which lets the readers formulate their own conclusions. This article reminds me why I started reading Mises articles in the first place.

  Published: June 6, 2005 10:21 AM

• tribalecho

  "a stark example of why I see little principled and consistent support for economic rationality and property rights by most of those on the Left."

  I used to read a lot of left-leaning economic stuff and they sure sound a lot more rational than the liaissez-whatever crowd. And the only time I ever felt my property seriously threatened was this year after the historic Republican sweep in GA. brought a new breed of Republicans who've converted to "smart-growth" boosters immediaetly(well right after "tort" reform) tried to ram through a bill that would allow them to confiscate your home if developers wanted to do "smart-growth" where you live. The uproar on all sides was tremendous, but......

  Discovering the metals markets in late 2000 thankfully introduced me too a whole new set of ideas, and once Bush's horrible reign quieted the infantile Clinton, the Commie, bashing (as opposed to the Left's really more substantive Clinton-bashing), I found some ideas I could incorporate into my own ever-developing world view. Cool.

  ps. I watched Cheney, week after week, often on Face the Nation and Meet the Press at the same time, quoting the NYT's to justify the BS he was spouting. I watched the NYT's close off any debate about a single-PAYER, not a guvmint health care system. I used to subscribe to a 'zine called "Lies of Our Times". I'm capitalist with a small c left. The NYT's ain't. People who take Tom Friedman seriously, though they usually seem really well-meaning, ain't Left.

  Of course, I always referred to folks on a site like this as Right. Till I watched the Bushites and started really paying attention to the Trinity Broadcasting Network.

  Published: June 6, 2005 10:41 AM

• Dennis Sperduto

  I did not mean to imply that the modern Right supports economic freedom and an unhampered market economy; they clearly do not. In fact, most of those on the modern Right are so clouded by their interventionist economic and foreign policies that they would not recognize true free market social organization/cooperation if it stared them in the face. I attempted to convey that point with the statement "in my opinion, the modern Right and Left are fundamentally just different sides of the same statist coin."
  

  Published: June 6, 2005 11:07 AM

• Allen Weingarten

  In the article, class is "defined as a combination of income, education, wealth and occupation". Let us note that this is the very opposite of the traditional definition and its usual connotation, which suggests being born into and being unable to escape from, a group that governs one's well-being.

  Individuals can earn income, have an education, obtain wealth, and enter an occupation, regardless of the groups to which their ancestors belonged. Generally speaking, one cannot even know which "class" people belong to by their dress or demeanor.

  One can of course define "class" as a logical grouping, such as the class of green cars. However, the intent of the NY Times is to suggest a society which persecutes the poor. Here, it should be mentioned that America does not have social classes, while the left yearns for them.

  Published: June 6, 2005 12:50 PM

• Horatio

  tribalecho
  There's a good reason the leftists sound a lot more rational than classical liberals on economic issues, they are. The left has a set of illogical beliefs and they rationalize everything to fit those beliefs. True liberals base their economics on logic and morality.

  Published: June 6, 2005 2:26 PM

• Bruce

  Reissman's rhetoric is a bit over the top. Why does he say that NYT readers -- who include thousands of bankers and financial analysts -- are "incredibly ignorant" about economics? And why does he say the NYT series has a "Marxist" orientation? Is Marx even mentioned? Throwing around these words is a McCarthyite scare tactic. If this article is typical of Reissman's coursework, then the surfers and undergrads at Pepperdine aren't getting their money's worth.
  

  Published: June 6, 2005 3:49 PM

• sam

  In the NYTimes, Tom Friedman argues that oil is what keeps theocratic regimes in power , and that the US should reduce its reliance on foreign oil by not using so much of it.

  yes and improve the technology on maremotricity, wave energy and wind...even if they might get stolen by israel who sends it to china and india, then throught a long process becomes open sourced technology, cheap access just after they get from the spy an amount to pay the stealing.

  Published: June 6, 2005 4:34 PM

• Aaron Kneile

  Thank you for an excellent article.

  
  It occurs to me that the NYTimes is operating from the basis of several assumptions that would be well reconsidered. My high school physics teacher would often remind us to “check our assumptions.� So too should we.

  
  Assumption #1: IF the super rich are, in fact, paying less in taxes than the rest of us, everyone else must therefore have to pay more. The unquestioned assumption at the foundation is that the size and burden of government should remain constant or increase. Certainly history bears this assumption out (I can’t imagine government shrinking in my lifetime). Yet failing to consider the alternative – that both taxes and government could shrink is just one of several faulty assumptions at the foundation of the New York Times’ article.

  
  Assumption #2: Deep beneath the discussion of how much richer the richest are getting compared to the “rest of us,� is an assumption that the free market is a “zero-sum� game. Put another way, many people view the economy as a kind of pie; the bigger my slice is, the smaller yours would then have to be. Any discussion of how a free-market economy actually works would certainly be outside the agenda of the New York Times. Professor Reisman correctly points out that capital accumulation is vital for economic growth, yet does not address specifically this point. The false assumption that capitalism is a zero sum game lies at the heart of statism. Barring theft, the increasing wealth of one person does not take away from the potential wealth of another – a point unconsidered by the New York Times and many of its readers.

  
  There are many other assumptions worth exploring, but these two stuck out in my mind. In any event, kudos for a well-considered article that needed writing.

  Published: June 6, 2005 5:07 PM

• Dennis Sperduto

  Bruce, if I am not mistaken, a major tenet of Marxist doctrine is that capitalism will progressively impoverish the workers and the vast majority of the population. The tone and slant of the NYT's article, is possibly an attempt by the authors to "document" this Marxist assertion. Also, from my own personal experience many bankers and financial analysts are ignorant of economics, at least the teachings of the Austrian School. In particular, the banking industry benefits greatly from the regulation and special favor conferred upon it by federal law.

  Published: June 6, 2005 7:43 PM

• Ryan D. Bond

  Dr. Reisman,

  Thank you for your continued willingness to share with the world, especially those who need it, your thorough knowledge of capitalism and its inferior counternotions - socialism to name one.

  Ever since I read Atlas Shrugged, I have become much more perceptive when reading newspapers and periodicals, as well as becoming more skeptical of government policies and the governments ability to get out of the way allowing progress to happen. A similar text that helped formulate my knowledge and understanding of key issues is Dr. Reisman's treatise, Capitalism, which effectively debunks bogus notions in place of rigorous logic and fundamental analysis.

  The tax issue is an interesting one to me. At first review, I come down on the side that says less taxes are better*. Better for me and everyone else, since less taxes means that each individual is realizing more individual freedom in the form of choices on how to most effectively use the wages (or income) they earn. Of course, I am for less taxes to a point, understanding that fundamentally important services need to be provided in order to substantiate rule of law, protection of private/personal property and relieve the citizenship from the fear of physical harm. Beyond this basic set of provisions (of which there are certainly sub-provisions), we as citizens should begin to question the programs and benefits our government creates for our benefit and then asks us to pay for.

  However, my own instincts have been challenged from time to time. For instance, two men that I consider business heroes - Warren Buffett (Dem.)& Charlie Munger (Rep.) - have both spoke out about seemingly pro-libertarian issues put forward by the current administration.

  Buffett has spoken out directly against the tax cuts that the administration has enacted, stating that his secretary pays more, as a percentage of income, in taxes than he does ~ essentially seeking to understand how that is fair? It should be noted for those unfamiliar with Mr. Buffett, he is paid $100,000.00 per year as Chairman/CEO of Berkshire Hathaway and has been paid that salary for decades. He receives no stock options or other incentive pay. Aside from some other paid positions on Boards of Directors, Buffett's annual income is largely from his $100K salary. He also has never sold a share of his company BRK and still lives in the same house he purchased in the 1950's for roughly $31K. So this is not someone who is actually taking home cash in the millions on an annual basis, although he's the worlds second richest man in terms of net worth. In terms of annual income, Buffett is a lot more like you and I than some bond traders for instance who may realized annual income in the millions. The point here for me is that heroes like Buffett have forced me to consider his perspective juxtoposed against my own natural inclinations, often forcing me to consider whether there are important non-economic issues of value as well.

  On a separate issue, Charlie Munger has spoken out against the current social security propositions forwarded by the administration seeking private accounts. On the surface, I was pleased to learn of the administrations suggestion for private accounts. After all - its our money right? We earned it, for other generations to enjoy. Interestingly enough, Munger, who is a starched and pressed Republican if there ever was one, has spoken out against the administrations plans, suggesting that it could be foreseen some years hence, that a few or numerous citizens investing their own money in private accounts realize the other side of the investment coin, which is that all stocks don't go up all the time. In a worst case scenario, assume that some otherwise sufficiently intelligent individuals unknowingly invest their private accounts in future Enron's and Worldcom's. Headlines proclaiming that these individuals social security accounts were defrauded could no doubt lead to large-scale governtment intervention in the markets, which would be extremely bad for all of us. Munger has essentially followed and oft-employed notion of Henry Hazlitt, we must think beyond the initial consequence of actions to the second, third and beyond consequences, which are often unintended. Moreover, and interesting to me, Munger has applauded "social" security for its social benefit, suggesting that it has actually served as incentive for people to work.

  Of course, when social security was created, the forumulators could not foresee the population demographics that we now must deal with in terms of managing the social security benefits.

  Dr. Reisman also highlights an important observation that has disturbed me personally to some degree, when he states:
  "One can be grateful that there are at least some politicians who have achieved some measure of understanding that cutting taxes on the rich is in fact the way to achieve prosperity for all. What these politicians, such as the current President, and, before him, President Reagan, unfortunately have failed to understand is that the benefit of such tax reductions is largely nullified by the failure to reduce government spending to the same extent."

  This is very true and save the war, I wish the current administration was more successful in cutting expenses/programs elsewhere in the budget that either are underperforming or wasteful in nature. Then we would see even more benefit of the tax cuts implemented.

  As usual, Dr. Reisman makes you think, not only about the issues he critiques, but also about his logic and propositions. In the same way, I have been influence to consider issues in full scope when I read the opinions of my business heroes Buffett & Munger. It is important the we all "think" about these issues, question, with healthy skepticism, the ideas and reports published in our newspapers, periodicals and books and formulate our own ideas based upon logic and thorough evaluation of not only the consequences of our actions/policies, but also the second, third, fourth...order consequences, which can often be unintended and contrary to the initial objective.

  If you haven't already, I highly recommend Dr. Reisman's Capitalism, as well as Henry Hazlitt's Economics in One Lesson.

  RDB

  Published: June 8, 2005 8:02 AM