The Bermuda Triangle of Wealth
conradbastable.com
conradbastable.com
And then there are the absurdities. Where I went to school they now have all sorts of fancy places to eat on campus. I can't imagine students paying $4 a couple times a day for a Starbucks coffee when they're paying with borrowed money. This is just grossly irresponsible. I imagine the justification is "but everybody does it". The problem is nobody is teaching the general public anything about managing their money or evaluating costs of anything.
Sure, if you get a good job you can pay off your loan in X years, but that has nothing to do with the fact that you drastically overpaid for what you got (services provided).
This is exactly the reason why I don't donate to my alma mater, neither should most people. Less "alma mater" and more "greedy mater who funnels taxpayer money into a growing bureaucracy".
http://www.washington.edu/news/2008/06/05/moving-cunningham-...
When I was in college, undergrads would have to purchase a meal plan, which could take a few forms. You could have a designated number of meals, and buy things from the cafeteria that qualified as a meal (one entree, one side, one drink), or you could have balance of food dollars which could only be spent on campus. There were also plans that involved a mix of those two types of currencies, but the better plan was to get the food dollars (which were called Declining, for whatever reason), and use that to buy food, because that gave you more flexibility. You could spend Declining at the cafeterias, at the corner store, at the Starbucks on campus, it was literally cash that you could only spend on the campus and only on food.
At the end of the academic year, though, your balance gets zeroed out, no matter how much you have left in Declining. So every year starting in April or so, people would start buying stuff in bulk from the corner store or from the Starbucks just to get something out of the money that was going to evaporate. My senior year, my girlfriend spent like two hundred dollars on coffee beans and gave them to people as presents, because what else was she going to do? I myself spent like sixty bucks on fifteen pounds of sour patch kids.
No reason to not buy that four dollar coffee every day when the money's already spent and you're not getting it back.
In standard economic teaching, Is not this what happens when there is a cartel acting?
Yeah, this is exactly a rephrasing of the point I was trying to get across.
It reminds me of when I realized that banks have an interest in balancing income from issuing more loans with default rates. Someone responded who was close enough to banking to say that they were aiming for about a 7 percent default rate as optimal. In other words, lower lending standards until you're at that rate for optimal profit. These forces are obviously financially good for the institution, but bad for the public. We need to find a way to fix that and the only thing I can think of is educating people on how they are getting screwed so they can make their own judgements on when to participate in such games.
That's the most important question. Same applies to health care. Where does the money actually go and how has that changed over the last 50 years? Everybody immediately complains about their favorite scapegoat but there is no comprehensive accounting.
https://www.air.org/system/files/downloads/report/Delta-Cost...
The table on page 11 summarizes the story. The big consistent increases in spending are on student services and academic support.
The growth in spending on student services covers a lot of things. One big chunk is explained by the trend toward organizing and professionalizing things that were historically handled in a sort of ad-hoc manner by a student's academic advisor, sometimes by the Greek system, or by nothing at all: Career counseling and networking, academic advising, mental health services, stuff like that. Another big chunk is non-academic, non-instructional activities like student clubs and athletics. I believe advertising costs also tend to get lumped in under the "student services" budget item.
Academic support is stuff that's related, but maybe not quite so directly student facing: Dean's offices, instructional material development, the IT department, stuff like that.
It is important to note that relaxation of regulation is important as well, since the direction of that easement usually favors banks and big business[1] - it's a matter of perspective. Always ask what the true purpose of a political action or movement is and follow the money; more often than not there's an ulterior motive.
"All politicians should serve two terms: one in office and one in jail." ~My Grandfather
[1] https://thehill.com/blogs/congress-blog/economy-budget/28362...
The actual answer appears to be that it´s being squeezed into the financial sector by several positive feedback loops operating around lending, and in particular securitized lending - but that´s not the sort of answer that helps to pander to populist sentiment, and securitized lending is a trillion dollar industry - so you won´t see it discussed very much.
Money creation through debt is another topic, but still benefits primarily the same parties.
The earliest reference I see in Google is from 1992, with an Arizona anti-Semitic pamphlet.
A member of one of the administration teams at ASU (a dean or someone of similar position) told my sister, "everyone carries debt," as if to justify that 40k a year at an honors college is a valuable investment compared to virtually any alternative.
The comment was so asinine and destructive, I can only gather as a blanket statement that the members of administration there are either incompetent to help direct students, or are explicitly volatile for one's growth in the context of broader society, and are out to protect the institution's interests. It may be sensible to assume a bit of both.
I'm not defending it, but there isn't Trader Joe's or Aldi of college yet (slightly better than average generic product with low/no frills).
If you want the answer: college loans are very lucrative, so they are pushed on the consumers heavily, just like home loans were 10-15 years ago. The people that profit from that benefit from irresponsible behavior and a broken system.
Community college.
They tend to be older and more focused on their education; to have already demonstrated that they can complete 2 years of basic coursework without dropping out; and have mostly completed their general education classes, meaning they are much less of a drain on the institution. None of these reasons demonstrate 'better-than-average' quality of community college education, just the quality of the kind of students that pursue it successfully, and where they are in life when they apply somewhere else.
The very strategy of doing your first couple of years (ie - the general stuff you can teach yourself from the text book) before going somewhere else to your final degree belies the argument that the education is 'better than average'.
The second problem is that even if this was a reasonable system, people estimate the risk associated with getting the job paying X very poorly, colleges exploit this, even if only few people get a job paying X everyone pays the same costly multiple of X.
Doubtful. If that were true, you would pay differently for a English degree than a Chemical Engineering degree. And I've never seen that.
Even without the commercial angle , the cost of teaching English is not remotely the same as chemical engineering, you need lot more labs , more depts with different expertise , more courses to cover etc. why is it costed the same ? Unless both are heavily subsidized and cost is a just token amount it doesn't make sense.
We could literally print nearly free wealth, inflation free, if we just opened up land for development. It's a win win win.
Doesn't neighboring real estate value decline as you put more capacity on the market? You can't print real estate wealth anymore than you can print dollars without consequence. At the end of the day, all of this "value" is trying to get dibs on the output of labor today (housing prices are usually tied to incomes, with some distorted market exceptions).
The more interesting question is: can you provide these basic necessities at such a low cost that you can drastically reduce the labor output required to enjoy them? What if you only had to work three days a week to meet your basic needs? What if healthcare inflation wasn't consuming wage increases as rapidly as it is?
Great example! More to the point, total wealth is useless, just as GDP is useless as a measure of citizen wellness and happiness (US GDP was 18.57 trillion USD in 2016). It's the distribution that matters and where we're utterly failing. Your example is not progress when necessities inflation (housing, food, education, and healthcare) races ahead of other consumer expenses and incomes in general, unless one is expected to watch that 50" TV in a van down by the river.
https://www.yahoo.com/news/blogs/lookout/fed-official-heckle... (March 11, 2011)
> Reuters reports that New York Federal Reserve Bank President William Dudley was heckled at a speech in Queens today when he suggested that the rising cost of food is offset by how cheap iPads are. "Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said referring to Apple Inc's (AAPL.O) latest handheld tablet computer hitting stories on Friday. "You have to look at the prices of all things," he said. This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment "tone deaf." "I can't eat an iPad," another quipped.
Shelter and medical services have ballooned due to ever increasing regulation. That regulation may be necessary, but it unquestionably comes with a cost.
Land is also necessary on which to build said shelter, but vacant lots in rural areas can be had quite cheaply. Lots of places where an acre, which is more than plenty to build shelter on, won't fetch much of anything dollar wise. That is, where regulation allows you to actually buy a small lot in a rural area from the surrounding landowner. Regulation often makes doing that very difficult.
The problem, at least not in a huge country like the USA, isn't population. There is incredible amounts of unused space ripe for housing someone. The problem is being able to build shelters for those people without getting caught up in red tape.
Hardly anyone wants to live in rural areas where land is cheap because there are no good jobs or services nearby. In desirable areas, land acquisition costs are far higher than construction costs. Regulation has little to do with it, although in some areas zoning laws that limit density are a factor.
Desirable areas are expensive because regulation has allowed some people to make vast fortunes, allowing them to spend almost limitlessly on living in those desirable area.
Tech is the prime example of that. Without regulation like that which surrounds intellectual property, software would be quite literally worthless.
> "Get rich or die trying"
I have always seen this as USA's major flaws. You are not supposed to have a good life but to risk everything for riches. This was working when the rest of the world was under-developed. USA citizens had so much more than the rest. As the world catches up and surpases USA its problems are getting bigger and bigger. If ever the dollar stops being the defacto world currency I can't even imagine what will happen.
How many TV shows I have seen that people laugh at the janitor looking down to him? There is no pride in a job well done, there is no self-fulfilment on doing what is correct. Money and fame are the only thing that matter. You even have religious groups that see economic wealth as a sign of God blessing!
Other countries have different and even bigger problems, but meanwhile the american dream is about economic aboundance and not about having a good life you are doom to a rat race.
> The taxman. I’d like 30% please. 40% if you got a bonus this year. Good job. > Medical conditions! Your income means you have to pay out of pocket
The fact that your taxes are disconnected from a public health care system is scary. I am very proud of paying taxes that helps people to survive cancer, to get an education or to live with a disability. Your problem is not that you have to pay taxes but that the taxes are not used to give you back services as it was designed to be done (and that rich people does not pay their fair share, and that is something that it is also true in Europe).
Well it turns out that is HIGHLY regulated. You need a dealers license which means you need a building to act as the place of business (can't be your residence), the business has to have $75,000 in assets or you have to get bonded. You have to pay insurance. You need signage. You, of course, have to pay taxes on everything. Basically by the time everyone takes their little piece there's nothing left for you.
I think this happens in any industry. It gets regulated to the point of a normal person not being able to participate. You dont own a bakery, you work for the bakery. You don't own a corner store, you work at Walmart.
What I see is a lot of closed doors yet we still act like they're open. They aren't real options anymore. So what are the real options?
There might be situations where corrupt government is inhibiting competition for the gain of particular parties, but some things do make sense, such as being bonded when the risk of the work you are performing could be result in large costs.
Surely this is not true?
Does having kids just bankrupt ordinary people in the US or what?
I'm not asking about exceptional cases, like what is the normal way of dealing with having to pay $15,000 just to have a baby climb out of your body, when I'm assuming most people don't have that much money?
The happiness a "bundle of joy" should bring to the family is often replaced by additional stress of having to work a "better paying" (but often soul-destroying) job to be able to afford the bigger house, school/education, extra curricular activities like sports/music/ballet and eventually college tuition.
Conrad Bastable's well-researched post could easily have concluded that having kids "too early" will bankrupt a family.
The solution/answer is affordable housing. Housing is the single biggest "expense" for all people/families. Which is why it's the problem I want to tackle personally: https://github.com/dwyl/home
The fact that merely giving birth to a child in SF is $15k is mind-boggling. The "Government" needs to fix that or risk population decline catastrophe which will have many knock-on effects!
SF should follow the model from Finland where young parents/mothers are given cash incentives and all FREE healthcare: https://www.kela.fi/web/en/families
I just tend to write the way I talk and using punctuation, speech marks and italics/bold is the only way I can think of to convey intonation/meaning. I will try harder to avoid the excessive use of emphasis, as you say it detracts from the writing/reading.
PG almost never uses any sort of emphasis in his essays: http://paulgraham.com/articles.html so I'm going to wean myself off it.
I am genuinely grateful for the feedback. =)
The fertility and associated problems of local population can be completely ignored by the government of country like US - country with low population density, predictable steady population growth, and always a large group of people around the world willing to immigrate into the country. If not you, it's going to be someone else.
Half (or more of) the battle in these public policy discussions is coming to an agreement on terms.
Thus, insurance actually acts like insurance, like car insurance or fire insurance, there to catch you in a bad situation, not to give you discounts on your day-to-day expenses.
In Switzerland there is a deductible for adults but everything connected to pregnancy and child-birth is deductible-free. Also, kids below 18 yrs old have mandatory insurance that is has no deductible, thus treatments for them are free.
That's an average. The problem is the huge variance. Also just because you have heath insurance doesn't necessarily mean your insurance will pick up the tab.
I’ve been charged out of network at an in-network hospital because the physician didn’t identify themselves or their network. If they’re not your primary doc it might be worth asking for someone who is covered to save you hundreds or thousands of dollars.
Do most people just decide to do it at home and take the risk?
Deductibles can vary wildly depending on someone's insurance plan. However, there are a myriad of financing options, charities, etc if for some reason you can't afford that.
https://www.bloomberg.com/news/features/2018-06-26/sky-high-...
I would estimate the vast majority of people in the US need to budget at least $5k for a baby, if everything goes right. It would be better to have $10k cash though depending on prenatal visits, c section possibility, and multitude of other costs that can arise.
Spain sometimes subcontract public healthcare to private hospital. However from a patient point of view, you are still treated as a public healthcare patient (i.e. you pay through your tax and the government has a specific financial agreement with the company running the hospital).
Otherwise I'm confused by France model. What's the business model of a Private Hospital is they receive no money neither from the Government nor insurances nor their patient ?
For everyday care the public health insurance reimburses 70% and the private health insurance the remainder.
For more serious procedures (such as a baby delivery) the public health insurance reimburses 100% of the fees. The prices are fixed by law, the practitioner can charge more (if it's a private hospital) but then the private health insurance will have to pay the difference.
The public health insurance is paid through taxes (I think something like 5 to 10% of the salary?) and the private health insurance is between 50 to 100e depending on your family and coverage (glasses, teeth, etc.)
I think we'd have been given a shared room for free, but at the time it seemed like a good choice to make.
Both the UK and Spain have also a public health sector, with Clinics, GP, ... that is accessible for free.
In the UK and Spain, very few private health insurances covers Birth or Emergency Care: for those you are supposed to go to the public service or pay cash in a private clinic.
Other countries like Belgium have health insurances that give you the kind of extra comfort you mention. But they cost something like 5 EUR a month vs the 100 EUR in Spain and the UK.
Letting all the healthy white collar office people stick with their employer chosen health insurance means the leftovers are the poor and unhealthy which many insurance companies can’t handle the losses from since there is no health population to balance it out, so you have places that have no health insurance competition.
Even then, the people that make the most money in healthcare are the providers (doctors) and by a significant multiple, so increasing their supply would be necessary to bringing costs down.
> ...unless of course we needed a C-section, in which case it’ll be a casual $30,000.
In India, we got c-section done in a luxurious hospital in a suite ward for slightly over $1K. About 80% of that was covered by insurance. Even if it wasn't that kind of money is a typical middle class family in India can easily afford. Note that I'm talking about top of the line hospital so the median cost for a c-section is somewhere around $500.
I guess what I'm trying to say is that I'm really blown away by that kind of cost difference. In a developed country shouldn't health be more affordable? No wonder medical tourism is on the rise in India.
This cost disparity is not one of developed world vs undeveloped, it is one of an insane health care system vs a rational one.
[1]https://www.rcn.org.uk/employment-and-pay/nhs-pay-scales-201...
Unless you're really rich. It's now more of a status symbol amongst the rich. "Oh you have 5 kids? Two nannies, a cook too. That's the life!".
So with 3 kids, I'm likely $750K down on my wealth. As a tech worker, that is not bankrupt. But if I were living closer to poverty? Then the problem is less about my personal wealth and more about where I choose to cut corners when raising the kids.
But I recall reading a vivid passage about ten years ago, talking about the difference between rich and poor maternity wards: the wailing.
Anesthesia is an elective expense in childbirth, not always covered by Medicaid.
I had a friend who got an appendectomy at Stanford that was paid for by Google (she was on business travel, works in the London office) and the price was obscene, far above what should ever be charged, literally 10x what other hospitals charge. That place is crazy.
Maybe you could move in and set up a maternity ward and advertise it as “only $10,000!” And then people will ask what the competition charges and you won’t be able to answer. They won’t be able to answer.
Also, I would expect any service to cost 50% more in the Bay Area.
How well things go during an emergency depends on how much effort you put into preparing ahead of time. Nothing new or strange about that.
[0] http://www.chhs.ca.gov/Press%20Releases/Smart_Care_Californi...
If you have insurance that covers this, it’s simple. You don’t even need to call anyone. You’ll pay your deductible.
If you want to compete on price, you’ll either need to charge substantially less than people’s dedictibles in order to make a noticeable difference, aim your price competition at insurance companies (who pay vastly lower prices already), or target the not-exactly-lucrative uninsured population.
That is an incredible misunderstanding of supply-and-demand. Just, wow.
It's commonly said that having a baby will result in costs that exceed your out of pocket max, so you can think of the out of pocket max as the real cost to a family on one of these for the medical services from prenatal care through the birth. Caveat: Your accumulation towards this maximum will typically reset to 0 at the beginning of the calendar year, so try to finish your pregnancy before 12/31.
When people talk about 'good' health care plans in the US they tend to think of traditional low deductible PPO. Those tend to have family deductibles in the $500-1k range.
Though the employee premium differences might add up to more than 10K in the face of a 'good' health care plan so its largely not relevant to the argument about health care costs in a nation vs nation way (though you'd want to include tax burden for health insurance in that case).
Many employers offer high deductible plans but also contribute into the employee's HSA which can be used to pay deductibles. In theory that incentivizes the employee to shop around and get the best possible deal on care.
To the people downvoting: please read properly. If you move your place of residence outside your country, you're no longer insured, and that's what I'm talking about - I specifically said "if you don't have insurance".
The only case that would maybe trigger a payment would be if you were a visitor to EU and had a baby - but most likely no hospital would bill you as hospitals are just not equipped for billing, they don't have the staff or the equipment to do such weird things as issue bills for treatment to people. I know at least several non-EU people who had treatment in EU and no one ever asked them for any insurance info to bill them, unless it's something major and very very expensive there's just no point, it would most likely cost the hospital more to figure out how much and how to bill you in the first place.
In Sweden every visit to a doctor or hospital is billed, as is every night spend at the hospital, so they are definitely equipped to handle it.
Slightly different, but also extreme, case - Germany. There, one always is insured, only for the months one doesn't pay a debt is accumulating (you thought healthcare can incur debt only in US?). It's quite difficult to get out of German healthcare insurance actually, even while being EU citizen and moving out of Germany.
In fact, for a EU citizen who takes advantage of free movement of workers and relocates often between EU countries, one can fall pretty badly on its face healthcare insurance-wise.
In Germany free-lancers face issue, they need to get their insurance somewhere. But thay have to get, there is no such thing as uninsured German resident.
It's true that you'd be covered even if you never paid but you have to be entitled to be a part of the system - and thus you're insured. Also the money for treatment will be later demanded from you, on top of insurance payments and interest (personal experience); of course there are options for the socially less able (the government pays insurance for them, that's why it might seem free) but as a software engineer, no it's not true.
If you read my comment properly you'd know that I'm talking about uninsured people.
In the Nordic countries that's extended quite a bit for citizens of other Nordic countries (even if the other country isn't in the EU), and I wouldn't be surprised if there are other groups of countries in the EU with their own similar agreements.
None of the above says anything about the level of welfare the individual EU countries have, however. If an EU member has a below-average welfare system then you might end up with nothing simply because you don't meet the requirements for receiving benefits.
It sounds like there's a hole for people to fall in: if you're a Czech national, but not resident nor employed in Czech Republic, but in the country anyway, and you don't have private insurance, then you have a problem.
(It looks like if you're a resident proper in another EU country with resident-based healthcare, such as the UK, then that would work for EHIC purposes if you visited Czech Republic.)
My comment was talking about uninsured people, so mostly non-EU residents and people that didn't pay and weren't entitled for coverage by their government - the way it works is that your governments pays the insurance for you if you can't, but will not if you can; there is an exception - Germany, where everyone is covered through taxes.
In Germany everybody who is employed in way that pays social insurance is also health insured, you cannot opt out of it. In that system, in addition to taxes, social security and unemployment insurance, you pay a certain percentage of your gross salary to get health insurance. This percentage varies by your choosen provider. Your employer is paying the same amount (more or less, not sure if the employer amount is fixed). You can opt out of the public system above a certain salary and pick private insurance, prices vary greatly.
Unemployed people are insured by the state, I guess using taxes or social security or unemployement budgets, I have no idea. You have to be registered as unemployed to be covered. If you do not register you have the choice of being insured with a family member (public health care) or voluntarily (private or via the public system). You are obliged to be insured oine way or the other.
Exceptions are soldiers (some kind of in-service system with cost reimbursement, don't ask for the details), public servants (something similar in a lot of cases, again, please don't insist on details), certain professions (doctors, pharmacists, artists,lawyers) with their own insurance solutions. You are screwed as a afreelancer, your only solution is a private insurance that can get quite expensiver.
TL/Dr: You are always insured one way or the other. It is not paid for by taxes.
And sure, health care ia costing money, nobody is argueing that. What Europe figured out is that a solidaric system, one where people with less individual costs are covering for those with higher costs, are the optimal solution from a national perspective. It still pizzles me how that can actually be a issue in any developed democracy.
And again, all legal residents are eligible for health care in EU countries. A good thing if you ask me.
Yes, but that's comparing listed prices and not adjusted for purchasing parity. They will substantially reduce the price if you're not insured and ask them.
> And again, all legal residents are eligible for health care in EU countries. A good thing if you ask me.
I tend to agree, but that's not my point. I'm just saying that a clinic will bill you (indirectly) roughly the same as they'd in the US after you get it adjusted, but of course it's fully covered for most people here.
So if an EU citizen moves to another EU country, there's no problem.
An average hospital in The Netherlands (#1 in quality in Europe [2], but #6 in costs) charges the insurance company between €607 (natural birth) and €4450 (c-section).
[1] https://en.wikipedia.org/wiki/List_of_countries_with_univers...
[2] https://en.wikipedia.org/wiki/Healthcare_in_Europe#European_...
I guess what I'm trying to say as someone who lived a lot of years in the U.S - why the hell they gotta screw you so hard there?
on edit: of course I should also specify that Denmark is pretty capitalistic, so you pay for your kindergarten once you enroll the kids in there and that will cost more per month then you are getting in stipend.
The same reason most things happens: Lots of short term profit, no matter the long term cost.
Now, it likely a) does cost a lot less in Denmark than in the States in real terms and b) paying for it with taxes might absolutely make the most operational sense. But it isn't free.
https://www.babycenter.com/101_what-birth-costs-around-the-w...
I know someone who works in a warehouse. She's done that for a while, she's good at her job, and management wants to promote her but can't -- because she doesn't have a degree. They told her as much: if she gets a degree, they'll promote her, but without one they can't, because HR says managers need degrees.
I have a degree, but it isn't a degree from a good college in a useful field, which it seems you need nowadays to get a job better than warehouse manager. I didn't know this, and neither did my parents; they just figured that you need the piece of paper, and that's it. But people with a higher-class background did know that.
And for those people... well, class mobility isn't in their interests, now is it?
(It's worth remembering that colleges themselves switched from academic performance to "holistic admissions"... to ensure that they remained a preserve for the hereditary upper class.)
In 2000, less than 25% of the working popultion had a bachelors degree. Today, every young person I talk to expects to finish a Phd, JD, and MBA. And, now everyone wants to live in the trendiest (highest-cost areas). There are plenty of places in the US where a house can be purcahsed for under $100k.
Unless you came from wealth, or you’re definitely in the top 1% of your peers, maybe set your expectations a bit lower. Or, at least be patient as you work your way up. Build wealth the old fashion way (like we did 25 years ago) - get a menial job (i.e. “in the mail room”), genuinely try to help your bosses (not compete with them), slowly build your reputation and circle of influence, take night classes at the community college, live below your means, save, etc.
It isn't that everyone wants a degree - certainly not, given the price - but if you don't have one then you don't even have a chance of making enough savings to afford housing, healthcare, education for your children, et cetera.
People _can't_ "set their expectations a bit lower". Your options are to have no expectations, and accept that you're not going to be able to provide for your children, or to join the same rat race as everybody else and get locked into this cycle of wildly increasing prices. There isn't a middle ground for people to aim at any more.
Salaries don't scale like rent does. In Cleveland, you can get a 1 bedroom for around 900 dollars, in SF, that's 3.5k+. That means to maintain the same purchasing power and keeping monthly rent at 1/40th of salary, you'd need to earn 36k in CLE, but 140k in SF. 140k isn't out of reach in the Bay Area at all, but usually requires a college degree, while 36k in CLE is in reach of those without a college degree, and numbers twice that high are in reach of those with a STEM degree.
This means you're going to have more disposable income, not having to deal with 5%+ rent increases every year, pay less in the higher tax brackets, and be able to buy a house without paying nearly as much interest. All just because you stop trying to be the top 1% and live in some place that isn't NYC or SF, but is still in the top 50 largest cities in the US.
The problem here is the trends, not today, because those big expenses are in the future and we need to worry about what they'll be then, not what they are today. The trends are happening just about everywhere, just to different degrees.
It's statistically unlikely that you and your offspring going to perform at world leading levels of being in the 1%. It's the equivalent of buying the best carpentry tools in the industry and then complaining that they're too expensive for your hobby use. If you're going to pay for Harvard/MIT, you're going to get a lot out of them, but the ROI for going to a such expensive school and living in a highly competitive area only works if you can take full advantage by really maximizing connections and getting high grades. If you can't, which is ok, you're just wasting time and money where spending 60% to go to a decent state school and living in a place that isn't next to FAANG office is going to get you 95% of the return in purchasing power.
Sooner people realize you don't have to be the best, richest, smartest, etc to be happy is when people will stop mortgaging their future to try to achieve something they don't actually want.
Thanks for summarizing this here. This is spot on. And of course I'm being a bit hyperbolic -- like I said, the median American still gets to build wealth. Just not as much as their parents. Or their parents' parents.
The only "expectation" I took as a granted was that a given person not-so-far-from-the-median can build Wealth in America. If you're willing to set THAT one lower, then perhaps there is no problem now or on the horizon...
I commented elsewhere that it doesn't seem to me that "Economic Surplus" / "Building Wealth" is an axiom of any system. So perhaps that expectation should in fact be lowered. But that's certainly not something my peers or I are willing to do. Thus the race.
Where does this idea come from?
According to the OECD, only 48% of American adults have a post-secondary education. I find it hard to believe that 52% of Americans truly cannot afford housing, healthcare, education for children, etc. I might even bet that the 52% have an easier time (especially with shelter), as there seems to be a correlation between the desire to live in an expensive city and having post-secondary attainment.
Additionally, wages are stagnant. The rapid rise in post-secondary attainment mentioned by the parent has done nothing to increase incomes among the workforce. The article points out that incomes have been on the decline for those without a post-secondary education. But misses the obvious: As colleges select for the most successful people, the most successful people without a degree who brought up the average in previous years now belong to the college group.
People can't set their expectations lower, but they can set them higher by not falling prey to misleading interpretations of the data surrounding college. The data is abundantly clear that there has been no advantage in the significant rise in post-secondary attainment. If anything, people are worse off now because of it.
Someone who is 60 years old or older today (which again makes up fully 1/4 of the adults in the US) would have seen average (nominal) wages of about 12k/yr and would have been able to jump into a mortgage only a few years after entering the job market, on a home price of just 60-100k. With a 30 year mortgage they would today be living with a fully paid off house worth easily half a million dollars, and would have had one to two decades of being able to plow their former mortgage payments into investments. Those people have no problem paying for housing, healthcare, children, etc.
It's folks who were born after 1980 who face lower wage jobs with higher requirements, higher costs of education, higher housing costs, higher medical costs, etc. And face an uphill battle in terms of building their careers, increasing their income, and building their wealth.
As to your point about college educations, it is much more difficult to obtain a high paying job without college. And study after study show that college educations result in higher incomes. You might claim that colleges select for the most successful people, which skews the results, but that doesn't change the fact that most desirable and well paying jobs still list college educations as requirements.
As a millennial, I bought my home for $120k. I'm not sure if your figures are real or nominal, but even if they are real, at worst we're talking $20k more. That's not life ending. Food is way less expensive now. I will easily save $20k on food during the lifespan of my home when compared to what they had to spend, not to mention that interest costs are much cheaper today.
The housing issue is vastly overblown, except in certain major centres. But if you have a job that compensates for the higher cost of housing, what's the problem? You cannot expect to have more money than someone outside of the city. The economy and its quest for equilibrium would never allow that over the long term, although there may be short term opportunities now and again. Economically speaking, your higher paying job must, on average, come with higher expenses so that you don't make more money than people with low-income jobs in low-cost areas.
If you don't have one of those jobs that makes up for the cost of housing, why are you there? There are houses everywhere.
> it is much more difficult to obtain a high paying job without college.
A common misconception that it matters, but a higher paying job doesn't mean anything. The goal is to maximize income less expenses. If a job is higher paying, but you have higher living costs due to the job being in a high cost city, and needing a high cost college degree, then you're not necessarily further ahead.
If you are further ahead than you would be without, what's the issue? You're literally further ahead. The costs are a non-issue. The costs are recouped and then some.
> And study after study show that college educations result in higher incomes.
Not quite. Study after study shows that successful people are successful in college and in the workplace. This is not the same as college resulting in higher income. Handing a college degree to someone who has a crippling mental disability is not going to benefit from it in the workplace. They are going to struggle no matter what, just as successful people will succeed no matter what.
If we took it to the logical extreme and assumed everyone had a post-secondary education, the jobs wouldn't change. Someone would still be flipping burgers at McDonalds, someone would be driving trucks around the country, someone would be writing software, and so on. And they're not going to magically pay more just because you have a degree. Why would they? When have you ever offered the burger flipper at McDonalds more money because they happened to have a degree? College degrees have no bearing on the job market.
I see how it is easy to mix them up, but the data is abundantly clear that it is the latter and not the former. After all, incomes are stagnant and have been for 50-some-odd years. If incomes were increasing with post-secondary attainment, they couldn't also be stagnant.
In this case, the author appears to have a degree from MIT and a background in finance and engineering. Out of curiousity, I did a job search (outside the trendy areas), and there are plenty of high-paying jobs available to them. A person would just have to live in a boring area or take on a boring job, or live a boring lifestyle. I guess I’m not understanding why seemingly few people seem to accept trade offs these days.
Why should any of us set our expectations lower? Because you say so? Why is the best piece of the cake reserved to some 1% folks largely with inherited wealth? Why should 1 billion Chinese set their expectations lower? Because they happen to not be born in Silicon Valley and their father doesn't run a law firm in Manhattan?
This is called wealth inequality to the max and it will crash our societies sooner or later. Pseudo-meritocracies will eventually break their necks over this and the developing crisis of democracy is one step into that direction. 2008 proved that the system is utterly broken and since then we put on a few bandaids at best.
> There are plenty of places in the US where a house can be purchased for under $100k.
Sure, those places just don't have the jobs people strive after, for example to escape automation in the 21st century.
High expectations = high chances for disappointment. I was exceptional in high school. One day a teacher bluntly told my “gifted” class, “You guys aren’t special. You may feel special right now. But, there are millions of people better than you. Be ready for disappointment.” That advice hurt, and I hated that teacher. But, the truth is that even after being lucky and working hard for 20+ years, the best I got was to be an exceptional person’s captain. And, only through helping that person was I able to retire early. YMMV.
I think this is where our differences in viewpoints really emerge. I certainly do not want to contest that there are exceptional individuals who fundamentally have a vastly more profound impact on the development of the human civilisation.
However, it seems like you want to assign special conditions and resources to those who, in your view, deserve them - and to them only. Everyone else should take a step back and not demand stuff they haven't earned.
This view is fine, but I disagree that it is realistic or even possible to establish true meritocracies as long as you stand by values of liberalism. You have to take away the individuality of people itself in order to achieve a system in which its inhabitants are content with getting what they deserve. And that is because the meaning of "deserve" is then required to be centrally controlled rather than a subjective viewpoint that is different for 7.5 billion people.
So a Chinese farmer might find they "deserve" the same quality of healthcare as Jeff Bezos simply on account of being human. Others might argue that you should have to work and contribute to "earn" your cancer treatment. Both have merit.
Had they been real about the inflation, the interest rates on savings would've been higher. Sure, it would crash the stock market but the stock market only benefits the rich disproportionately. Not teachers, admins, nurses etc.
Oh btw, has anyone noticed that 20% of the 20 trillion dollar US GDP is healthcare? That's 4 trillions spent on healthcare every year!!
I don't believe it either, or they are counting the wrong things.
5% avg inflation
It sure did drive inflation. It went into asset prices, which have been massively inflated by low interest rates.
Absurdly, the article is ranting about the rate at which real estate and rent are increasing, then pretending the inflation from printing all that money didn't go anywhere. From one paragraph to the next, somehow the author managed that disconnect. The Fed's zero interest rate policy, spurred the big recovery in housing prices (intentionally), and has enabled people to spend more on housing via artificially cheap mortgages than they otherwise could have, pushing prices up rapidly.
No elected government wants to do a review on a metric that will make them look bad unfortunately if it was corrected.
This essay is obviously backed by a lot of thought, but this specific conclusion is a bit glib. Talking of things which are exponential, 2 trillion dollars is a few magnitudes bigger than 2 million dollars. That is more than the annual GDP of most countries.
The banks havn't lost that money under the couch cushions, they will be using it to their advantage. If it is to their best advantage to have it in excess reserves, that probably means something complicated is happening that is letting them make out like bandits.
If they aren't using it to influence the wider economy, we really need to ask what exactly they are doing with it. It is an extraordinary claim that it "doesn't seem to have gone anywhere", implying that somehow it isn't doing something.
For sure, this was a bit intentionally glib. My own understanding of macroeconomics is relatively light, so I linked to two different perspectives on this event and glossed by it a bit.
The point I was trying to make (suggest? raise?) was that regardless of your views on printing $2,000,000,000,000, the crazy Cost-Disease-funded-by-debt does not appear to be a symptom of a banking system gone mad chasing risk (ala 2008). Which means it can rationally go higher still, which means it will keep going higher, past the point where all surplus wealth generated by the median Americans is consumed.
I was just trying understand what was fueling this fire, and whether it was rational or irrational exuberance.
I didn't put it in my comment because I have no evidence, but my first guess was that the cost-disease-funded-by-debt was exactly caused by those 2 trillion. My instinct is as follows:
* The reserves for fractional reserve banking are excess reserves at the Fed + other reserves.
* Fed is safer than other, so large portions of the banks reserves sit with the fed.
* New money is created by the banks as loans.
* The excess reserves allow massive lending (the multiplier was something like 20x if I recall).
* Banks now have an income stream & massive cash reserves. Actors willing to take on debt push any capitalists smaller than a bank out of capital markets.
Basically, I assume these "excess" reserves are misleadingly labeled and are actually in use relative to the fractional reserve system.
That is obviously a complicated guess with no evidence, and you look like you've put more effort into research than me, but it fails the sniff test that 2 trillion exists and is having literally no impact. I bet it is and it is just complicated enough that it is hard to pin down.
Its scary how many people are living hand to mouth, and with banks offering crappy interest rates it is no wonder people are spending rather than saving.
cue : rampant consumerism, payday loans, wage stagnation etc.
For pensioners the top complaint is usually energy bills, but I don't think it's a good idea to make energy too cheap lest people use more of it.
Have a tiered pricing system. Make the first N kWh cheap and then gradually increase the price.
I agree with you, but I don't know what the solution was. I've still got my thermostat set to "off" from summer, and am turning it on periodically. Last night it hit 14 degrees before I got home. Telling a pensioner to "use less energy" because their home is 14 degrees seems a little too far.
There's been an explosion in computing power over the last two decades, and computing power roughly equals the ability to optimise. Has this allowed the economy, through sheer market forces, to reach an equilibrium where people are maximally exploited while still being able to grow, and increase their "value output" over time?
Has the economy managed to dodge the malthusian trap with humanity, that it has otherwise fallen into with fossil fuels and rare metals/minerals?
Has not shaped of its own accord, it has been shaped. At least to some extent, this is planned, and governments are mostly complicit.
Look, on the one hand this can get a bit too cynical, to the extent that you start looking for a "grim cabal" (quoting myself, not you) to blame. There are no lizard people etc. etc. :) So you have to phrase things carefully.
On the other hand, this quote from the article is me trying to highlight...exactly what you're saying here about optimizing human output:
"The slave works for his owner. The indentured servant for his master. The communist for everyone. The American for himself. It’s a powerful idea, a powerful motivator, and a powerful system. A grand competition, where advancement can be achieved through merit and competence — so don’t be shocked when those with merit and competence flock to compete. And they make perfect competitors."
I wanted to dodge the Culture War / Politics questions a bit. This was more about specifying the pain points than proposing My Genius Solution To The Utopia Problem #729.
But I didn't want to let it go unsaid that the American system powerfully motivates the sorts of people most-apt-to-compete to do exactly that.
$160k would buy the whole house! (If not, most of it!)
> Success only begins when you build enough wealth to pay for:
> Your own continuing education: $0 — $125,000
> A home for your family: $750,000 — $1,500,000 (depending on how far you are willing to move from a major urban center — but don’t move too far because the wages go down too)
> Education for your children: $180,000 — $325,000 (start at the bottom of the range if your kids are 18 today, move up accordingly)
> Medical expenses: $50,000 guaranteed between childbirth and insurance, more with pre-existing conditions or any large event
> Your own medical care as you age: $0 — $LOTS
I get the feeling that the author purposefully picked one of the worst places to build wealth with "average" incomes (which so happens to be where he lives). While these are bad, these prices aren't average.
I live in the rust belt and might be making some very large (read: expensive!) life changes in the next year or two. There is no way it's going to this expensive.
Children are a true luxury in this day and age.
Housing in districts where public schools are ok comes at a massive premium. The difference between San Jose and Los Gatos is more than 300k.
Private schools are 2-3k per month.
To afford Bay Area both parents have to work 50+ hours a week with 30+ minute commutes. As a result, the time parents spend with children is very limited. Raising a famility with even 2 children is a big challenge.
It is understandable why you call housing a basic item. The small percentage without are often left to parish if the lack of shelter isn't quickly corrected. That is a real problem. But is any meaningful portion of the population actually taking out massive loans to make rent? In my experience, a massive loan is difficult to get even when you have a security to back it with. I am surprised that someone struggling to pay the rent each month has any collateral to put up against the loan.
For education, OP's article made a strong case for tertiary education (as the only group seeing wage growth). Also, if you believe that inequality and lack of social mobility are bad things then you should believe that all people should have easy access to tertiary education.
If wages are growing for this group, then it stands to reason that costs of joining this group should also be also rising. Economically speaking, there cannot be a disparity where simply having a tertiary education leaves you better off than not having it. If there is, then people will join that group, driving up costs and negating the disparity. The economy always finds equilibrium given enough time.
It's a similar situation to housing. As an advocate for lost-cost rural living, I have asked a lot of people why they choose the high-cost city. The answer is always the same: Their higher paying job justifies the higher cost of living. And thus living costs are rising to reach equilibrium with rural areas. There, again, cannot be a financial advantage to living in the city, else people will move there, drive up costs and negate the disparity.
Any time wages rise for a particular group, costs have to as well. It is the only way the balance will remain in the economy. The exception is when you don't let all people join that group. Without access, then people cannot move to find that balance. There is why everyone who is ultra-wealthy are so due to exclusive property rights (land, intellectual property, etc.) that are out of reach to everyone else.
Education is accessible to everyone for free. Not to be confused with schooling, which is presumably what you are trying to point to here. The government already provides all of the schooling one needs to be a useful member of society for free.
If someone wants to attend guitar school to learn how to play guitar on top of that, I am not sure why it cannot be controlled by the ability to pay. Learning how to play the guitar is a useful skill and all, but the time of guitar teachers is a limited resource. There has to be some way to manage that.
You are quite welcome to explain why everyone should have equal access to guitar school, schooling provided beyond the schooling the government provides to everyone. It is not clear to me why that is beneficial. What do we, as a society, gain by allowing everyone a chance to learn how to play guitar, irrespective of how much money they have?
I suspect the game here is that you are staring to realize that it is not actually beneficial to provide schooling to everyone beyond the schooling we already provide to everyone.
That said, I don't understand why 750K-1.5M for housing was considered in the one-time expenditure equation. Your home is an asset as well as a monthly liability, and you don't need to have it paid off in order to build wealth, either in prices or in savings while you pay off your mortgage.
A somewhat more realistic measure would be something like FREDs EM ratio. About a decade ago 62% of the population was employed, and after the great recession we've slowly climbed back up to 60%. Flat at 58% from the great recession until 2014, then continuous growth since. Sure theres boomers dying off, but that means demand dying off too, in theory the ratio should be fairly constant. FRED is an online product of the St Louis Federal Reserve; at least semi-trustworthy, surely more trustworth than unemployment stats.
Its not so much intentional dishonest as changing the definitions of what it means to be unemployed with all kinds of moral and ethical boundaries for welfare services etc. On the other hand, the percentage employed is reported honestly as a simple percentage of the population with a job. To have a job is a honest observational result; to be in the legal and welfare state of qualifying for unemployment benefits is a totally different kind of subjective observation. We could have 0% unemployment simply by not providing benefits anymore, which is kinda what we're doing.
Anyway the point is the last time the employment percentage was as low as 60% was after the 1983 recession; the graph is surprisingly not very dramatic and the percentage of employed americans post WWII has never been below 55% and never above 65%. None the less, the current stat of 60% is 3% below the peak in '07, almost 5% below the peak in '99, 3% below the peak in '90... For most of the 80s, all of the 90s, all of the 00s, employment was higher than it is now. Admittedly its better now than at the end of '09, but hardly at a high number.
As such, given that about 3% of the population was very recently working and now is not, we have a long way to go before any wage pressure.
50-year low unemployment may affect the former, but that does not mean that the jobs are worth doing at a higher rate. Like with the price of anything, there is always a point where something is no longer worth buying. A job may pencil out at $10/hr, but not $11/hr, and so as soon as wage pressure pushes for $11/hr, the job potential simply disappears.
But education is the big one: no real net improvement from many decades ago (arguably worse), and in greater supply than ever. Why has cost continued to go up?
I could write an article pointing out that wages have stayed the same but the cost of a computer has gone down by orders of magnitude - that doesn't imply that we're richer by an order of magnitude just as this article doesn't mean we're poorer
Also, looking at average cost is misleading because that includes purchases by people who gladly pay higher amounts because they can afford it. You want to look at the cheapest "reasonable-quality" cost to determine what's "affordable", not average.
electronics is the one fake anchor in that list. and there are a few. when he says repeatedly that he won't contest the official number, that is an economist joke. the official number is a joke and it only matters that the number can withold by not affecting other numbers the fed have no control. if those other number respect the ramdon number, the random number holds. if not, the random number is adjusted to meet reality as needed. so the "measure measures" joke in the article. inflation index is an index alrigth, but not of what everyone thinks it is.
Inflation is only low because better technology and bigger markets are now available which automatically makes everything cheaper to make, but even that isn't enough to compensate the loss of power of the middle class.
That's a nice sentiment to hold, but that's simply not true. All societies are formed by the elite for the benefit of the elite. If others benefit in the endeavor, it's simply an accidental side effect.
Industrialized human society is no different than the industrial animal farm. The industrial animal farm doesn't exist for the benefit of the animals. It exists for the benefit of the people who own, run or rule the farm.
> This is why the government usually sponsors education, for example.
Modern education system in the US and UK and everywhere was created to indoctrinate the students into a particular belief system of the elite, produce future factory workers and to keep child labor from competing against adult laborers. It was one part to serve as innoculation against "wrongthink", one part to produce factory workers who can read simple instructions and to remove labor supply ( child labor ) from a society which couldn't produce enough jobs for its adults. A reason for the constant increase in education demands from jobs is simply because there aren't enough jobs to go around. A solution is to keep successive generations longer and longer in school and out of the work force. But a side effect of this is that students are indebted more and more. And debt is slavery as adam smith pointed out.
> I believe the start of the problem was the rise of neo-liberalism, holding the market and competition above all else.
The problem predates neoliberalism. Neoliberalism ( and neoconservativism ) is just national industrialism writ large ( international ). It's the natural progression from national industrialization of the past 200 years.