Tag: society

Financial independence and universal basic income

Posted by – February 20, 2018

It is interesting to compare financial independence that with what many people want to achieve for the masses via redistribution (a “universal basic income”). Something like that does seems to be bound to happen eventually. In fact, it has already happened from the point of view of, say, a hundred years ago. In Finland it is quite possible to go through a lifetime without working, and never starve, be homeless or go without health care. It can be mental and emotional torture for people today to live that way, but someone from a hundred years ago might consider it to be “free living” (though after actually experiencing it they might change their minds). The same is to some extent true of third world immigrants, for whom employed family life in their home countries can be unaffordable compared to unemployed family life in the west.

The mysterious thing to me is how few of those who really strongly advocate for it to happen *right now* take any serious steps in their own lives to achieve it. It’s a long and hard road to go all the way, especially if you start from a bad position, but even some measure of financial independence can make a big difference. I have successfully nagged at least one friend of mine to go from being out of money or even in debt most of the time, to accumulating some savings. The difference between never having any money and always having some money can be just a few thousand euros you save once, and then you’re free from small-time money worries FOREVER. From that point on, you can maintain the same long-term consumption level you would have otherwise. In fact a little more, because you don’t need to pay interest any more.

So why wait, probably for the rest of your life, for some financial security instead of doing something for yourself today? Perhaps the politically active non-savers are virtuously refusing to get something for themselves before everyone can have it, like those who postponed their weddings until same-sex marriage passed. But I think it is more likely that this fact shows why a substantial universal basic income is impossible in our present (non-automated) economy. People are just fundamentally different. The proportion of people who are willing to sacrifice consumption in the present to a sufficient extent is quite small, so most people must stay about as productive as they are now. They are not willing to lower consumption in exchange for lower productivity. In a democracy, that places some sort of limit on what a UBI can provide (meaning, people will demand excessive consumption through politics).

Of course, that’s also true of private financial independence. It can only ever apply to a small minority. The more people rely on UBI / financial independence, the higher the price of labor becomes, and the smaller the return to capital. The equilibrium of where enough people are indifferent between working or not isn’t going to shift dramatically, and people are going to continue to feel “deprived” at the margin, even as it continues to improve.

(I do know that the real promise of UBI is not free living, but better employment incentives, but Nordic countries are actually the least likely place for that to work, because we perceive strong employment incentives as “harsh”. We prefer to have people nagged and looked after rather than barely subsist on a small UBI.)

The collectivism of collectivism

Posted by – February 12, 2018

In a low tax society, the wealthy always have the option of casually bearing the modest burden of taxation and then mostly ignoring politics. If they don’t like the school system, they can build private schools. The same goes for health care, public transportation, libraries – most services that aren’t a natural monopoly. And even water and electric systems can be to some extent privately substituted. I’m thinking of some South American countries (though I’m not really well informed). Supposedly in South Africa whites rely on private security more than they do on the police.

In a high tax society, that becomes impossible (except for the very rich). The tax burden is just so high that very few people can afford private alternatives. In the Nordic countries total tax receipts are over 50% of GDP. We squeeze everyone who earns any money quite hard, and then everyone has to fight over the pot. We certainly don’t redistribute it all to lower income earners, we distribute it in a thousand little ways to various stages of life, industries, occupations, life situations, hobbies, societies. Everyone gets a piece. Sometimes it seems that not much goes on in Finland unless it can be somehow supported by public funds.

This has a unifying, society-building effect in two ways. First, people are more motivated to engage in politics, because that’s where the money is. Farmers, public sector employees, parents and pensioners are a few groups who might in another sort of society be not so engaged in politics, but in a high-tax society are both motivated and powerful political influences. Everyone is clamouring for a piece of the pie, but in some sense everyone is also “in it together”. Even people who are relatively wealthy. The stakes are so high that people really don’t want to see the money wasted. Some of it does get wasted, of course, but not before vigorous politicking and dealmaking on all sides.

(Though it is quite possible that a lot of people are only “in it together” for ethnocultural reasons, ie. nationalism, and the solidarity will eventually dissolve if the nation dissolves.)

Second, it leads to more shared experiences. Having fewer private systems means that the rich and poor have fairly similar lives. There is also a strong motivation to frame the results of politics as shared, treasured values. Finnish people commonly believe the heavily subsidised food grown in Finland to be especially “clean”, and public money is spent on advertising this. The default assumption in everything is that our systems are good, precious and embody us in some way. If something is wrong in Finnish schools, healthcare, or anything else, it is seen as an anomalous corruption, probably due to cuts to funding or some moral failure on someone’s part.

(We are not even the worst in this. Swedes can be unbelievably pompous in their belief that everything is done in the best possible way by their public systems and that their general consensus is correct. They’re probably often right, but this must lead to a tremendous societal myopia and some sort of karmic comeuppance in the future. We Nordics have a “nice” reputation, but in some ways we are the real “ugly Americans” in terms of intellectual arrogance.)

On an ideological level, I don’t really personally like this sort of collective setup, but I can’t deny that it is culturally deeply embedded here (and therefore shouldn’t be meddled with too much), and that it has something to do with social cohesion, which I do think is important.

Longevity of nations

Posted by – August 29, 2017

Some countries, like Israel or Finland, are not likely to exist for very long, because if they are ever in a weakened state, they will be quickly overrun or assimilated and be unable to make a comeback. And everything runs into problems at some point. (Incidentally, I think it’s more likely that Finland will disappear into the EU than Russia.)

Other countries, like Russia or China, will probably exist indefinitely, because even in a weakened state they are next to impossible to truly wipe out, both due to expansive geography and culture.

Finland is a classic borderlands country, and I sometimes think of it being that way in time too – occupying a brief window from the dawn of nation-states to its end sometime in the future.

This has something to do with the Lindy effect, whereby a long history suggests a long future. Even though Switzerland is small, it has good chances judging by a ~700 year history of its confederacy that hasn’t been extinguished by historical events yet.

The immigrants’ burden

Posted by – April 5, 2017

There is a tremendous amount of attention and pressure on refugees and humanitarian immigrants (for lack of a better term) in Europe. They must be acutely aware of their status as tokens in westerners’ ingroup-outgroup games. This is something I think far-ethnic people (meaning approximately nonwhite) in general have been dealing with in Europe for a long time.

I saw a Finnish national of Somali background, who is running in the upcoming municipal elections, post some hateful messages he’d received on Facebook. A common (and to me remarkable) sentiment in the FB comments supportive of him was along the lines of “You’re much more Finnish than those racists”. It’s as if Finnishness is such an unqualified and universal positive even to the antiracists that bad behaviour reduces one’s Finnishness more than one’s actual national background can.

Perhaps I was so surprised because it’s easy for me to accept that I have some non-Finnish cultural and ethnic background – it’s not looked down on, so it doesn’t bother me. In some sense the people telling the Finno-Somali guy that he’s “extra Finnish” are being racist (or culturalist) themselves, because they implicitly place value on Finnishness over Somaliness.

But this somewhat unrealistic guarantee of “total Finnishness” doesn’t relieve far-ethnic people from the burden of performing an exotic or “culturally enriching” role. They are in demand as bringers of “colour in the streets”, of increasing genetic diversity (I am not joking) and as teachers of tolerance. Given their origins, they may well have participated in considerably greater intolerance than westerners generally do, but it’s all about us – our tolerance, and our point-scoring over our co-ethnics.

(This appreciation of people for their inherent appearance would not be appropriate in many other contexts. A politician could hardly remark how happy he is of the arrival of summer bringing out the miniskirts and tank tops, but the positive objectification of ethnic diversity is standard.)

This phenomenon is brought especially into focus by the currently intensely followed deportations from Europe back into the immigrants’ home countries. Having faithfully stuck to providing the universal right to seek asylum, a process has had to be put in place to assess both the validity of the application and the situation in the home countries. No matter what such a process determines, a lot of people will be upset. But the focus is always completely on us westerners.

Afghanistan, for example, is right now home to over 30 million people of which over 10 million are children. Last year the return of refugees, both voluntary and involuntary, mostly from Pakistan, Iran and Europe, accelerated to over 700,000 people. It’s a dangerous place, but plenty of both westerners and settled-in-Europe-Afghans voluntarily holiday there. Despite this, the prospect of returning some tens or hundreds of people (who have been assessed not to require asylum), or any children, to join the tens of millions already there, has been met with a wave of hysterical moral outrage and accusations of lawlessness & comparisons to the holocaust at the Immigration Service and the Finnish government. This flare of attention probably came as a surprise, since it wasn’t the first deportation from Finland to Afghanistan, and other European countries have already undertaken deportations to Afghanistan in 2016, with the amount set to considerably increase in 2017.

The Afghans themselves are as nothing, our self-image and anger at our local outgroup is everything.


Posted by – September 26, 2009

I get the impression this is fairly accurate about the US these days (the part about low expectations applies to Helsinki as well, but people here just want to pass, not to be praised). One of the many reasons empires tend to crumble? Branford Marsalis on student attitudes:

Communion breakdown

Posted by – September 20, 2009

Holy shit, someone just explained to me what radical Islam is all about:

The history of religions sometimes resembles the history of viruses. Judaism and Islam were both highly virulent when they first broke out, driving the first generations of their people to conquer (Islam) or just slaughter (Judaism) everyone around them for the sin of not being them. They both grew more sedate over time. […]

I have a theory that “radical Islam” is not native Islam, but Westernized Islam. Over half of 75 Muslim terrorists studied by Bergen & Pandey 2005 in the New York Times had gone to a Western college. (Only 9% had attended madrassas.) A very small percentage of all Muslims have received a Western college education. When someone lives all their life in a Muslim country, they’re not likely to be hit with the urge to travel abroad and blow something up. But when someone from an Islamic nation goes to Europe for college, and comes back with Enlightenment ideas about reason and seeking logical closure over beliefs, and applies them to the Koran, then you have troubles. They have lost their cultural immunity.

(emphasis mine)

It seems so obvious now, as always.

The interesting thing is that most people’s response to this isn’t “beliefs which lead to immorality/absurdity when consistency and logic are applied to them are immoral/absurd” but “you shouldn’t apply too much consistency and logic to your beliefs”. Go figure!

This also happens with other things than religion. The other night I was talking about politics with someone and was reminded of how different our respective attitudes are (in caricature):

  1. one should formulate a consistent set of principles to decide everything with
  2. one should try not to break anything and to gradually improve things that seem particularly broken

I suspect 2 contains the idea that you shouldn’t be “too” principled because society is too complicated to be consistently improved by your preferences. To me that sounds like giving up. (Maybe giving up is the correct move here, but I’m not convinced yet.)

OP continued:

The reason I bring this up is that intelligent people sometimes do things more stupid than stupid people are capable of. There are a variety of reasons for this; but one has to do with the fact that all cultures have dangerous memes circulating in them, and cultural antibodies to those memes. The trouble is that these antibodies are not logical. On the contrary; these antibodies are often highly illogical. They are the blind spots that let us live with a dangerous meme without being impelled to action by it. The dangerous effects of these memes are most obvious with religion; but I think there is an element of this in many social norms. We have a powerful cultural norm in America that says that all people are equal (whatever that means); originally, this powerful and ambiguous belief was counterbalanced by a set of blind spots so large that this belief did not even impel us to free slaves or let women or non-property-owners vote. We have another cultural norm that says that hard work reliably and exclusively leads to success; and another set of blind spots that prevent this belief from turning us all into Objectivists.

A little reason can be a dangerous thing. The landscape of rationality is not smooth; there is no guarantee that removing one false belief will improve your reasoning instead of degrading it.

Sad but true.

Non-explicit effects of risk redistribution

Posted by – June 13, 2009

National (“socialised”) pension systems take money from people who are working and give it to people who don’t work anymore because they’re old. It’s a simple idea but inevitably it creates many biases and inequalities. Currently the best-known one is that the average baby boomer will end up getting more out of the system than they put into it. They were many and paid the pensions of few. The average person born in the immediately following generations will put more in the system than they get out, because they are few and pay the pensions of many.

So the pension system transfers wealth to baby boomers from people born later than them. On the other hand, there are other systems that transfer wealth in the opposite direction. Improved baby and student benefits are a governmental example, inheritance and financially supporting one’s children is a direct one. Perhaps the most important system is the improvement of everything with time. In a sense a thousand dollars was worth a lot more 40 years ago because of inflation, but in another sense it’s worth way more now because now you can buy an Internet-connected machine with it. Or: there’s no way for baby boomers to buy themselves a youth with Internet.

Of course, the world is also getting worse in some senses. Example: there is less cheap energy in the future now than there used to be. It’s quite difficult do judge fairness between generations, especially before all the news is in. Will the ecosystem turn out to be greatly damaged? Will the unemployed, un-needed masses of the future ever find meaning in life? Who knows. Suffice to say that almost everyone alive now is lucky with the perspective of the past.

But generations are just one pension bias. Another major one is sex bias. The pension system transfers wealth from men to women because women live longer. In addition, men make more money and thus pay more into the system, magnifying the effect. This is probably second only to marriage in wealth-transfers between the sexes.

There is a similar but opposite effect in the realm of insurance. Men have more risks from approximately everything, so insurance companies have to pay out policies on them more frequently. Interestingly, this is one biological inequality which is rebalanced by mechanism (there is nothing similar for pensions): insurance companies are allowed, and indeed do, charge men more for life and car insurance. What about other risk groups? Do insurance companies give discounts to unrisky ethnic groups? No, because that would be illegal.

In general, the more information insurance companies are allowed to use, the worse insurance works. If we had perfect information about the future, the fair price for anyone’s insurance would be the exact amount needed to cover their claims, plus bureaucratic overhead. Genetic profiling is a major step in this direction, and sex discrimination is a coarse kind of genetic profiling. Discrimination by ethnic groups is also a form of genetic profiling, one before which we currently draw the line.

The Internet is the new Academy

Posted by – November 19, 2008

Some interesting presentations I’ve watched of late:

Jared Diamond, author of Guns, Germs, and Steel on why societies collapse (18:21).

Martin Seligman, psychologist, on the state of psychology and especially the “psychology of happiness” or how to make people happier (23:41). If you’re interested in finding out whether you’re really happy you may want to do some of Seligman’s questionnaires (registration unfortunately required).

Barry Schwartz, psychologist, on the paradox of choice or why more choice isn’t always a good thing (1:04:07). If this is too long for you there’s also a 20:23 TED talk by the same guy on the same subject.

This was perhaps the most interesting one to me personally: Luis von Ahn on human computation (51:31). You really have to watch it to understand what it is. I’ve tried to get some of the old fogeys at the language technology department to watch this but they haven’t been interested; it’s truly their loss.

The big country

Posted by – December 11, 2007

I have received feedback that my entry about the state of finance in the US was a bit inaccessible. I thought at the time that there’s a lot there to write about but that nobody would want to read it – but what the hell. It’s my blog, right? Don’t like it, go to Russia.

1) US financial sector profits as a percentage of total corporate profits in 1947: about 10%. In 2007: about 50%.

The financial sector is supposed to provide two things: distribution of opportunity and distribution of risk. Where there’s an opportunity for financial activity, capital is needed to exploit it. Banks distribute the opportunity to a number of people who have money to lend for the venture (ie. people who make deposits). Interest and dividends earned represent the fruit of this distributed opportunity. And because economic activity (and life) always involves risks of catastrophic failure, it’s sensible to have insurance companies to distribute the risk among risk-takers.

So the statistic I quoted says that these activities, essentially peripheral to creating actual value, generated 10% of all profit sixty years ago in America. To me that actually sounds like rather a lot. But due to the fractional reserve system and other clever tricks (I’ll write about that some other time), modern banking is essentially a money-making machine. So people who own the banks get a cut from lubricating the wheels of the economy, ok. But over 60 years their slice of the profit pie has quintupled. To me this represents an increasing artificiality that happens to any developed economy; properties become super-valued and huge numbers of people get rich by moving property around. The financial sector “leech” has become very much larger.

2) Debt intensity of US GDP growth in 1965-1975: under 2. In 2006: over 4.

This certainly could have used more explaining. What is debt intensity of GDP growth? It’s the ratio of increased debt to increased economic activity per year. This takes into account both public and private debt without reference to holders of the debt, so it’s a pretty rough number. Essentially, it answers the question “How many dollars does the US economy need to borrow to produce one dollar of value?” It is normal for this number to be over one (creating more debt than value), but it’s less normal that this number has more than doubled in 40 years.

Why has it doubled? Well, as economies become increasingly developed their markets become increasingly competitive and easy opportunities get exhausted, so new economic activity becomes more and more capital intensive. That explains a part of it. But an arguably larger and certainly more worrying part of it is that Americans as private citizens have been living beyond their means for a while now (this becomes really noticeable around 1984-1985, the time of my birth), the government has been living far beyond its means since Bush took over and everyone’s been caught up in an property bubble for the last five years or so. What is the property bubble? It’s what Alan Greenspan said would keep the economy going when the dotcom bubble was bursting. Keep interest rates low, encourage people to remortgage, buy or build new houses and spend spend spend. A ludicrous number of people decided that borrowing money to buy houses and watch their value go up was a reasonable way to make a living.

What does this mean? I think it means that a big chunk of the growth the US economy has experienced over the last five years is a fiction. I think the US is in for a shock when private consumption finally drops off (the cheap money party is over for the lower classes) and everyone’s stuck with falling property prices and mountains of debt. I think this ties in with the finance sector, that ever-growing leech at America’s neck. A lot of people have become fabulously rich by slicing, dicing and re-packaging bogus loans and a lot of people are going to feel the pain.

3) After-tax corporate profits as a percentage of GDP (in the US) just before GWB took office: about 5%. Now: about 10%.

This was the political commentary part. Quite simply I think it’s a good index of the way the Bush administration’s response to all this has been to ramp up the plundering. In an economy where genuine productivity becomes harder and harder to achieve and financial perils abound, the government squeezes the patient to pump blood into the leech. That, and spends about 5e12 dollars (and counting) dollars on warfare in Iraq. The great American public is being had, and we’re all going to be sorry.

You can’t just change the rules, unless you really want to

Posted by – December 7, 2007

When banks lend irresponsibly to inflate profits, they usually end up in trouble. When lots of banks do this (and they do, time and time again) and end up in trouble, politicians get worried and bail the banks out with the people’s money. Lots and lots of it. Moral: if you fail really big, you will be bailed out. Capitalism without failure is like socialism for the rich.

Another thing that happens when banks lend irresponsibly is that people are given loans they can’t service. Then they end up in trouble, and typically default on the debt and lose everything. This is also considered to be a bad thing, but not bad enough for bailouts. Except now: rather surprisingly the US is mandating that there is to be a five-year rate freeze on currently existing subprime loans, many of which are scheduled to become more expensive in the next couple of years and to generate a lot of defaults. This is an instance of the US government rewriting existing private contracts, pretty much unheard of in that bastion of free marketeering. Moral: if you’re really irresponsible, hope that you’re not the only one and that there’s an election on the way.

What is the bottom line here? Redistributing wealth to the poor is out; redistributing it to the rich and the financially irresponsible is in. In the US it’s now more important to be able to live beyond your means than to get a university education or health insurance. Coming soon to a society near you.

One vision

Posted by – December 6, 2007

Via another blog, Der Spiegel reports that Amsterdam has been experiencing a surge of violence against the rather visible gay community there. Young males of Moroccan origin in particular have been identified as the aggressors. The problem has worried Amsterdamites enough to prompt the mayor to commission the University of Amsterdam to study the situation. And the results are in:

[…] researchers believe [the attackers] felt stigmatized by society and responded by attacking people they felt were lower on the social ladder. Another working theory is that the attackers may be struggling with their own sexual identity.

I guess recent immigrants really do need courses in cultural integration; they’re pretty confused if they think the prosperous and adored segment of homosexuals who make themselves conspicuous are on a particularly low social rung. Whatever happened to beating up hobos? Seriously, how is this anything but academic self-censorship? Everyone knows what’s going on here.