Today on Trend Following Radio Michael Covel interviews Angus Deaton. Angus is a British American economist. In 2015 he was awarded the Nobel Memorial Prize for his work in economic sciences on his analysis on consumption, poverty and welfare. Those topics go into one of the most hotly discussed issues in America right now, inequality. He brings some great data driven insights and angles to the discussion.
Michael starts the podcast off discussing the benefits of winning a Nobel Prize and how it opens up debate and reshapes topics. Angus agrees that the Nobel Prize does get conversations going and as an academic, it allows him able to reach a broader audience. Michael and Angus move right into discussing inequality. Angus says that in periods where there has been the most innovation, this is typically when there is the most inequality. Angus also quotes a famed economist saying, “Data is like meatballs. I won’t eat them when I’m out because I don’t know what is in them and I won’t eat them when I’m home because I do know what is in them.” When going through data from places like India, where about 1/3 of all global poverty resides, it is hard to tell whether the data is correct. For example, although there is a rapid rate of growth, the poverty level has not raised. Are poverty levels not moving because the aid money is going straight to the 1% or is it because the data is not correct? Angus says the data is easily skewed so it is hard to really get a read on what is going on.
Next, Michael and Angus discuss how arbitrary the idea of “the poverty line” is. It is hard to classify what poverty truly is. Angus likes to look at the subject as if everybody is poor, but some are just much poorer than others. Measuring poverty across time and place is an impossible thing to do. Poverty data can be skewed by various factors such as if the area being studied has government healthcare or public school systems. Michael brings up the emotional side of poverty next. Angus says that it is very possible to be happy and sad at the same time. Emotion isn’t cut and dry. He has found that not having enough money does have a large impact on your happiness. However, most day-to-day emotional happiness comes from having contact with other people and friends, not money. Money starts to affect your day-to-day interactions if you are so poor that you are not able to do certain things that allow you to spend time with friends and family.
In this episode of Trend Following Radio:
Money and happiness
The birth lottery
“In periods where there has been a tremendous amount of innovation, there is typically a very large increase in inequality.” – Angus Deaton
Today on Trend Following Radio Michael Covel starts off giving listeners perspective on the feedback he receives. Over the years Michael has received thousands of emails that have created insightful and thought provoking give and take discussions. He reads an email that came in recently on a fairly controversial topic. The listener talked about his disagreement with Yaron Brook in episode 183. He disagreed on the shared viewpoint between Yaron and Michael. The listener’s email also touches on unemployment, minimum wage, and government regulations. The email was extensive and Michael gives his feedback as he makes his way through reading it.
Michael furthers the discussion by moving into reading from an article titled, “The Case Against the Minimum Wage” by Daniel Bier. Daniel says that there is much we may not agree on, but when there are topics that economic professionals do agree on, we should take notice. Economists across the board agree that by raising the minimum wage we will actually increase unemployment. The article’s main premise is that the core value a young person gets from their first job is the life experience rather than the monetary gain. Working with a team, punctuality, and taking direction are just a few fundamental skills that can be taken away from a minimum wage job. These jobs create a track record for an individual that lets them move on to other higher paying jobs.
So many people miss the point: It isn’t about the money, it’s about the experience. Having exposure to minimum wage jobs at a early age has long term effects. Daniel Bier says that it is actually more about politicians trying to feel good than actually doing good. Michael finishes with a quote from Nobel laureate James Buchanan further touching on the ramifications of raising minimum wage.
In this episode of Trend Following Radio:
The seen and unseen consequences of a law
“Given that minimum wages hurt the very people they are supposed to help, by restricting workers’ freedom, reducing their choices, and increasing unemployment, One must wonder why, despite decades of consensus among economists, politicians and pundits continue supporting these destructive regulations. They often do so because they want ‘send the right message’ about the ‘kind of society’ we want to live in. While this appears well-intentioned, the principle underlying such arguments is actually quite perverse: that it is better for us to feel good than to actually do good.” – Daniel Bier
“Prices are not levels that set value, they are metrics that reflect value.” – Anthony Davies
Just listened to your podcast on the universal kick-in-the-ass known as the death of the McJob. I couldn’t agree more. What people do not realize, however, is that through osmosis we pass our attitudes on to our children. If we are afraid to get out from under the weight of societal expectation to be another drone zombie with the rest of them, what message does that give to our children? A child looks up to its parents for guidance and reassurance. We see it during, say, a thunder storm, where our children are nervous and instinctively glance over at us to see if WE are afraid. Well what if we are and we show it? What do we communicate to our children if we show our fear? The obvious answer is that they then become afraid because they rely on the parent to show them the things they should be afraid of.
So when a parent does not follow your message, does not get out there and make something happen, and instead retreats into the illusory safety of corporate zombi-ism, they have let down their child in a way that goes far beyond not giving them the latest toy or a ride to the mall. They have basically told them that there is safety to be had by huddling in a collapsing building. So if people won’t take your words to heart for themselves, then they should at least do it for their children.
By the way, Mike, I’m writing this from my hotel room overlooking The Bund in Shanghai. I’m here visiting my daughter who graduated last year as a top-notch high school student and winner of a couple significant citizenship awards. She has read all your books and has the Trend Following mentality. Last summer she made the decision to head to China to learn Mandarin and to see more of the world before going to university. And in case everyone thinks that what you’re saying is all about money, she is volunteering for a charity that helps Chinese kids make a difference in their world because she herself wants to make a difference. Because of her can-do attitude, the money is already there; it’s a given, because once you are there mentally, the results are inevitable. She has had no trouble accumulating the money she needs to achieve her goals, but she’s taking this year to go beyond the money, and as you probably guessed, I couldn’t be more proud of her. She not only thinks it, she does it.
Thanks Michael, keep up the message!
Thanks Dale. I couldn’t have said it better myself.
If you want to live a life of complacency, a life that is run by what the masses are telling you to do, then that is your choice. Just know that your children will be subject to the same kind of ruling over their lives. Don’t lead them to believe that “there is safety to be had by huddling in a collapsing building”.