

Did Bankers Rob the Middle Class?  - cwan
http://www.theatlantic.com/business/archive/2011/01/did-bankers-rob-the-middle-class/69248/

======
iwwr
The argument is really simple. Big banks (and the bigger of the enterprises)
benefit disproportionately from cheap or free money. These businesses are
receiving real goods in exchange for "printed" money.

Tyler Cowen's argument is less strict than that though: big banks (or related
enterprises) benefit disproportionately from taking high risks. Individuals or
small companies would go bankrupt, while big companies are saved with printed
money. This money will displace regular consumers from the market, making them
relatively poorer (than otherwise).

~~~
presidentender
Privatize profit,

socialize loss,

blame the free market,

and strut like a boss.

~~~
flatline
"I've abandoned free-market principles to save the free-market system."

\- George W. Bush

~~~
arethuza
At least Bush never presented himself as an expert on economics, what about
this classic:

"we today in our country have economic stability not boom and bust"

\- Gordon Brown

~~~
borism
said on March 28 2002, speech to the TGWU conference, Manufacturing matters.

When this might have well been the feeling. For everyone.

------
100k
Kevin Drum responds to this argument here: <http://motherjones.com/kevin-
drum/2011/01/matt-yglesias>

Basically, here's arguing from deduction: increasing prosperity from
productivity enhancements could have gone to workers, but their wages have
remained flat while the top 0.1%'s have skyrocketed. The mechanism is unclear
(he suggests the wealthy have manipulated government policy and smashed
unions), but the action is not.

------
scrollbar
The author introduces the topic of banks skimming money off the top during
good times and receiving bailouts in bad times, but does not make the
connection to the real economy.

Huge interventions in the economy do not happen in a vacuum. If capital chases
high returns in the financial sector, it does so at the expense of investment
in productive industries. If profits are generated by financial institutions
leveraging the "privatize profits, socialize losses" system and then paid out
to their employees, they are in essence feeding off the taxpayer to pay their
bonuses.

Further, wages rise in a sector when the sector is growing: seeing increased
profits and/or increased investment. It's natural to see wage stagnation if
the financial sector continues to skim off the top of productive industry.

And finally- the prices of education and healthcare mentioned by the author
are most definitely tied to loose monetary policy that benefits the financial
sector. While some of these costs aren't measured in core inflation, inflation
is still happening, the end result being that people make the same but have to
pay more to send their kids to school, take care of their health problems, eat
food, drive cars...

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drblast
I wonder about the "value of degree" graphs in these articles. I don't think
they tell the whole story.

In particular, over a person's working life they'll typically increase income
by gaining experience and probably jump jobs a few times for a pay raise,
particularly early in the career.

Consider that college student with a summer job or the waitress putting
herself through school; they will be part of the income statistics for "no
degree" but clearly the lack of a degree isn't necessarily holding that person
back. The fact that they've chosen to go to school rather than work full time
hurts their income.

If that's not clear, consider two people, one who graduates high school and
becomes an electrician, and another who has a part time job and goes to
college. They're both included in the high-school graduate category before the
student graudates, and the student's income drags the statistic down.

Now the student graduates and immediately gets a job with a salary on par with
the electrician. Even though they're now making the same amount of money, the
statistics show the "no-degree" person is far worse off.

It seems there's a significant demographic bias at play here. Arguing that a
specific person is likely to benefit financially from getting a degree based
on that data seems wrong.

And the salary chart doesn't include the opportunity cost of not working
during the time it takes to get a degree, or the actual cost in tuition, etc.

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meterplech
I don't understand how this gets dropped in every single article on this. They
don't differentiate between different types of education. Patio wrote a great
blog post about this recently, and there was a ton of HN discussion about it.
The shortest answer is that not all the degrees are the same. All these
studies really show that a lot of engineers, doctors, lawyers, and yes people
in finance, make a good salary and are less likely to be unemployed. That does
not mean that college is a good value for everyone. Many people would more
likely benefit greatly from learning to be a plumber, mechanic, or other trade
than getting a degree in american history. Sure, if you have the money to burn
on the experience, fine. But, the idea that a degree in a non-professional
field (especially if financed via loans) is worth it should be over.

Link to discussion: <http://news.ycombinator.com/item?id=2074044>

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srean
To me the major problem seems to be that anyone who is in a position to fix
the problem has no incentive to do so.

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markkat
I don't see why his argument, however weak it is, makes an argument as to
whether or not banks 'robbed' the middle class. Oddly, he didn't mention that
banks underwrote many educational loans. The whole article can be summed up
as: "You think banks robbed the middle class? Well, I think education costs
did; oh, and probably other things too."

IMO, this is particularly low-caliber for the Atlantic.

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dotcoma
of course. robbing poor people is the credit card companies' job.

~~~
axod
People don't have to get credit cards. They don't have to buy stuff they can't
afford.

People should be taught self restraint and living within their means in
schools.

Personally I wouldn't blame credit card companies one bit. They are taking
money from silly people who are giving them money in return for crap they
don't need.

~~~
jarek
> People should be taught self restraint and living within their means in
> schools.

People should be taught self restraint and living within their means at home.

~~~
axod
Sure... both.. Society should change and stop relying on credit.

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edw519
_Every statistic tells the same story: If you want to earn more, learn more.
Between 1973 and 2007, real wages fell 15 percent for non high-school grads;
stayed flat for high school grads and workers with "some college"; and rose 18
percent for both college grads and advanced degree grads. Upshot: Just as the
cost of college has become prohibitive for many families, the benefits of
college have only increased._

Perhaps OP spent too much time memorizing textbook details in college when he
failed to learn what almost every Hacker News reader has long known:

Correlation != Causation

Just because there is a correlation between "years of education" and "income",
it does not necessarily follow that "less education" _causes_ "lower income".
Just a few scenarios where correlation != causation:

\- One without the ambition for education may similarly lack ambition for
_anything_ , including hard work.

\- One with family responsibilities may lack the opportunity for _both_
college and a better job.

\- One with health issues will have equal difficulty pursuing higher education
and a higher earning job.

\- One able to afford long years of schooling may already be better positioned
by family/friends for higher paying possibilities.

\- One who cannot even imagine going to college (for any reason) may have
equal difficulty imagining succeeding in _anything_.

In each of these cases, lack of education didn't cause lower earnings, but
_both_ were the results of some other cause. I imagine there are many other
scenarios, as well.

~~~
ohyes
I think you are, perhaps, playing with the definition of causation in a
strange way.

Causation is constant conjunction of events; that these things are
correlative, and that there are other mitigating factors possibly leading to
both at the same time, does not mean that there is not a causal relationship
between them.

Correlation does not imply causation, but it also doesn't prohibit causation.
None of the things that you listed really have an effect on a causative
relationship between education and income (even though they might be
contributing factors to both).

From a common sense perspective, quite a number of high paying jobs require a
technical or professional degree. When you post a job listing, there are often
educational requirements. If you don't have a college degree, the highest
paying fields, such as doctor, lawyer, engineer... are completely closed off
to you. With the industrialization of HR in modern companies, certain things,
like years of education, are certainly used to 'weed out' candidates. (Try
applying to an engineering job with just a GED).

Aside from that, the author isn't really implying a causal relation, he is
just stating a strong statistical correlation. If you want to make a boatload
of cash, chances are that getting an education is a good idea.

~~~
yequalsx
I think the "correlation != causation" response is overplayed. Thank you for
your reply. I was about to respond similarly but what you said was more
succinct than what I was going to write.

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JSig
Money, power and greed. It's a force like gravity. Let's call it MPG The more
some people get the more that seems to fall their way. The acquired resources
will be used to keep the MPG going, everyone else be damned.

The number one enabler is the politicos who bend rules, ignore laws and create
laws that disrupt an otherwise functioning system in an effort to strengthen
MPG for those who have it and potentially acquiring some leftovers for
themselves.

~~~
phlux
I knew a guy who once said the following:

"It takes money to make money, but once you make money, money makes itself."

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yummyfajitas
Cached copy (site is down):

[http://webcache.googleusercontent.com/search?q=cache:http://...](http://webcache.googleusercontent.com/search?q=cache:http://www.theatlantic.com/business/archive/2011/01/did-
bankers-rob-the-middle-class/69248/)

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samd
Not a very informative article. There's nothing in it other than baseless
speculation and weak inferences.

