Is the Upper Middle Class Ruining America? A Modification of Director’s Law (Bumped)

“Director’s Law” states that the middle-class, as society’s most politically dominant group, will use its influence over the government to benefit itself at the expense of the rich–and also at the expense of the poor. The ‘law’ was formulated many years ago by the late Aaron Director, brother of Rose Director Friedman, brother-in-law of Nobel laureate Milton Friedman. Milt and Rose mention Director’s Law in chapter 4 of Free to Choose.

We’re not sure we totally believe in Director’s Law, because to the best of our knowledge, it has not been rigorously established by statistical analysis. The evidence on Director’s Law remains anecdotal, and even here, much of the evidence contradicts the law. For instance, it is clear that government sometimes acts to benefit the poor and rich rather than the middle class. If you’re very rich, you might be able to get the government to refrain from building an oil pipeline you don’t like. Or you might influence the government to shower your shady solar company with hundreds of millions of dollars in subsidies. If you’re poor, you won’t have to pay any federal income taxes at all, not even a dime. On the contrary, if you have earned income, you could receive from the government a couple thousand or so in the form of the Earned Income Tax Credit. But despite these contradictions, it could still be that Director’s Law holds on average, even if it might fail in particular instances.

We don’t know if author Reihan Salam has ever heard of Director’s Law, but if not, he seems to have discovered it independently, although in modified form. Salam focuses not on the whole middle class, but just the upper middle class, which he claims is “ruining America.” His evidence, although anecdotal, is pretty good.

Having spent so much time around upper-middle-class Americans, and having entered their ranks in my own ambivalent way, I’ve come to understand their power. The upper middle class controls the media we consume. They run our big bureaucracies, our universities, and our hospitals. Their voices drown out those of other people at almost every turn.


Take a seemingly small example—occupational licensing. In North Carolina, teeth-whiteners without expensive dental degrees would like to be allowed to sell their services but are opposed by the state’s dentists, as Eduardo Porter noted in a recent New York Times column. Are the good dentists of North Carolina fighting the teeth-whiteners because they fear for the dental health of North Carolinians? It doesn’t look like it. A more plausible story is that dentists don’t want to compete with cut-rate practitioners, because restricting entry into the field allows them to charge higher prices. We often hear about how awesome it is that Uber is making taxi service cheaper and more accessible for ordinary consumers but how sad it is that they are making life harder for working-class drivers who drive traditional cabs. Notice that upper-middle-class credentialed professionals like dentists, lawyers, and doctors rarely get Uber’d to the same degree. Even when innovative services try to do things like, say, offer a free alternative to expensive insurance brokers, state and local governments will often step in to say, “Oh, no you don’t.” Want to offer a low-cost, high-quality education by, say, replacing expensive professors with Filipino instructors who teach calculus over streaming video? Sorry, pal, you first have to get approved by an accreditation body controlled … by the existing schools you’re trying to out-compete, which employ upper-middle-class people who don’t take any crap…

You’d almost get the impression that while working- and lower-middle-class people are expected to compete, whether with the Ubers of the world or with Chinese manufacturing workers or with immigrants with modest skills, members of the upper middle class ought to be immune. The result is that all Americans have to pay more to get their teeth whitened, to get a formal education, or to do any of the other million things that we can only get through licensed providers.

Suppose you accidentally lacerate your finger with a power tool. You show up at the emergency room or the urgent care clinic to get the wound cleaned and maybe stitched. A nurse or maybe even a nurse practitioner or a paramedic could handle the job at a relatively low cost. But they’re not allowed to handle it alone–you have to be seen by a full-fledged doctor. And that doctor, even if he sees you for only three minutes and just looks at your wound and does not stitch it, will send to you or to your insurance company a bill, in addition to the bill from the hospital, for possibly several hundred dollars. Why can’t you avoid this cost by seeing just a nurse? Because the rule says you have to see a doctor. Why is that the rule? Because upper-middle-class.

Even more egregious is the way that upper-middle-class NIMBY-ism pushes for strict land-use restrictions that drive working- and lower-middle-class people out of the country’s most desirable and productive cities, as Timothy B. Lee of Vox reminds us. We see this most vividly in affluent suburbs, where the local public schools are just as exclusive as elite private schools, and where high home prices do the work of high private school tuitions. Sometimes exclusivity is justified on other grounds. The UCLA economist Matthew Kahn has found that in California, at least, it is liberal cities that have the most stringent zoning regulations. It seems that upper-middle-class California liberals use their supposed environmentalism to justify policies that wind up excluding the less well-off…

When lilly-white liberals in Seattle raise the minimum wage to $15 per hour, they claim they are “helping low-income workers and families.” In practice, they are excluding from their community any less-skilled workers who are not worth at least $15 per hour. It’s a way to keep out the hoi polloi. White liberals–feigning compassion and inclusion while practicing venality and exclusion.

A Tale of Two Countries

Milton Friedman caught a lot of criticism for visiting Chile in 1975, when the country was a military dictatorship. Friedman, however, helped to convince the dictatorship to pursue market-oriented policies, and his former students from the University of Chicago–the “Chicago Boys”–assumed policy making positions in the government. As a result, Chile has the freest economy in Latin America.

In contrast to Chile, Venezuela adopted socialist policies. With huge oil reserves, Venezuela’s per capita income in 1975 was about three times as high as Chile’s.

Four decades later, Chile is now richer and politically freer than Venezuela.


Queens Waged War More than Kings

A lot of people assume that a world led by women would experience less conflict and war. In Aristophanes’ Lysistrata, the women go on a sex strike to force the men to end the Peloponnesian War. More recently, Melvin Konner wrote in the Wall Street Journal last year that

there is every reason to think that a future national hierarchy staffed and led by women who no longer have to imitate men, dealing with other nations similarly transformed, would be less likely to go to war.

Konner didn’t cite any actual evidence to back up this assertion, but now comes some contrary evidence from two political scientists.

In a recent working paper, New York University scholars Oeindrila Dube and S.P. Harish analyzed 28 European queenly reigns from 1480 to 1913 and found a 27 percent increase in wars when a queen was in power, as compared to the reign of a king.

One possibility is that queens weren’t actually more warlike, but found themselves attacked more often from outside. Some evidence supported this interpretation, although the evidence was limited to a very small sample of queens who were unmarried and so had no king.

If a queen were single — which was the case with 13 of those they studied — she was more likely to be attacked compared to the times when a king was in power, perhaps because her country was seen in the outside world as being more vulnerable and thus easier to attack.

But queens who were married were actually more likely to be aggressors: “among married monarchs, queens were more likely to participate as attackers than kings.”

The authors also shot down the theory that queens went to war in order to signal their strength.

Were that true, you’d expect a spike in war participation earlier in the queens’ careers, and that wasn’t the case according to the data analyzed here.

Maybe Kipling was right.

And She knows, because She warns him, and Her instincts never fail,

That the Female of Her Species is more deadly than the Male.

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Brain Damage in Babies–Due to Federal Bureaucrats

So we just happened to be reading this very scary story in the New York Times about how 80 percent of the population of Puerto Rico could eventually become infected with the mosquito-borne Zika virus. The virus “has been linked to abnormally small heads and brain damage in babies born to infected mothers, and to paralysis in adults.”

Deep into the article we find that efforts to eradicate the mosquitoes are being hampered by…wait for it…federal bureaucrats.

Highly visible fogging by trucks is what most people associate with government mosquito-fighting. But permethrin, the insecticidal fogger used for years, may actually be useless.

Tests at several sites have found that its ability to kill mosquitoes has significantly faded, so the island will have to choose a new pesticide and retrain workers to use it.


Moreover, by a “very inconvenient coincidence,” the Environmental Protection Agency has effectively banned the chemical used here to kill juvenile mosquitoes, Audrey Lenhart, a C.D.C. entomologist, noted. The chemical, temephos, has been in use since 1965 and definitely works, she said. But it is not very profitable, so when the agency demanded safety data costing about $3 million to gather, the manufacturers decided instead to quit making it.

Puerto Rico still has a nine-month supply, Dr. Lenhart said, and the E.P.A. may issue an emergency use permit for more.

They ‘may’ issue an emergency use permit? So there’s some chance the E.P.A. might be willing to let babies get brain damage rather than issue the permit? And what good is the permit is nobody is manufacturing the insecticide? They stopped manufacturing it because the bureaucrats tried to justify their fake jobs by asking for more studies of a chemical already in use for 50 years.

And then, of course, we have the federal government to thank for also putting the use of DDT completely out of the question, even though DDT is perhaps the most effective anti-mosquito agent ever devised, with absolutely no evidence of harm to humans. As reader droberts notes on the Scientific American website:

DDT is sprayed on inner house walls to control malaria. Once sprayed, it will provide many months of protection and all people living within the house will be protected, not just those under a bed net. The primary chemical action of DDT is as a repellent. When present on house walls, it stops most mosquitoes from entering the house and biting people while they sleep. No other insecticide recommended for malaria control replicates DDT’s chemical actions. Additionally, no other insecticide can be produced as easily or as cheaply as DDT.

Eco-steve suggests that use of DDT for malaria control will reduce biodiversity in Africa. There is no scientific evidence or background information proving that DDT on house walls will adversely impact biodiversity.

Not a single claim of environmental exposures to DDT harming human health fulfills the epidemiological criteria for a cause-effect relationship. Specifically, no claim fulfills the criteria for concluding that exposure to DDT on house walls is a cause of significant human health harm. Hundreds of millions of people lived in houses treated with DDT, to include millions in the United States. The results for those who lived in DDT-sprayed houses were improved health, increased fertility, and greater childhood survival.

Yet DDT has been banned by the federal government for over 40 years.

How many babies, we wonder, will get brain damage thanks to federal bureaucrats and regulations?

The role of the federal government in American society is on the whole truly pernicious.

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Reminder: Banks Facilitate Government Theft

Megan McArdle recently wrote an excellent piece on the threat to liberty posed by moving to a cashless society. One of her anecdotes also reminded us of an ancillary point that McArdle might not have intended to make–it’s shockingly easy for the government to seize your bank deposit.

When I was just starting out as a journalist, the State of New York swooped down and seized all the money out of one of my bank accounts. It turned out — much later, after a series of telephone calls — that they had lost my tax return for the year that I had resided in both Illinois and New York, discovered income on my federal tax return that had not appeared on my New York State tax return, sent some letters to that effect to an old address I hadn’t lived at for some time, and neatly lifted all the money out of my bank. It took months to get it back.

There doesn’t seem to be any indication here that McArdle’s bank tried to warn her or that the bank put up any resistance to the government. When government comes after your deposit, the bank readily surrenders. Poof! Your deposit’s gone.

Another example involves the ongoing seizures of people’s deposits for allegedly engaging in “structuring.”

Since 1970 the humorously named Bank Secrecy Act has required financial institutions to report deposits of $10,000 or more to the Treasury Department, because such large sums of cash are obviously suspicious. You know what else is suspicious? Deposits of less than $10,000, because they suggest an attempt to evade the government’s reporting requirement, which has been a federal crime, known as “structuring,” since 1986.

In 2012 a Nassau County, New York, detective decided the banking records of Bi-County Distributors, a family-owned business that sells cigarettes and candy to convenience stores, were “consistent with structuring.” That judgment was enough to trigger an IRS seizure of all the money in the account, which caused an immediate financial crisis for Bi-County’s owners, brothers Jeffrey, Richard, and Mitch Hirsch.

Here the government has enlisted the banks to serve as spies, reporting on your deposit activities, and when the government decides to seize your deposit, the bank readily accedes. There’s not even the slightest notion that the bank might have a legal or moral obligation to protect the assets of its client from the depredations of government.

Or consider Greece, where the government last summer restricted peoples’ access to their deposits by enforcing a withdrawal limit of 60 euros per day.

In contrast, the government would seemingly find it much more difficult to seize or restrict access to funds in a non-bank institution, such as a mutual fund or hedge fund. Even a credit union, though subject to government oversight, might offer marginally more protection.

Of course, the banks would argue that when they cooperate in government seizures they are merely following the law. But experience shows that banks themselves enjoy considerable ability to shape the laws that apply to them, and they appear quite comfortable operating with the current laws that designate them as an effective spy network and enforcement arm for the government.

The fact is that banks and government have always existed in a close and symbiotic relationship. Through the process of chartering, every bank owes its very existence to government. And banking remains the most highly regulated sector of the entire economy.

Even in the early 19th century, when American banking was still in its infancy, banks were chartered at the state level primarily for political purposes, and individual banks owed political allegiance to particular factions and politicians. When the federal government later created the system of national banks now comprising roughly half of all bank assets, the purpose was not to serve the interest of the public. The purpose of the national banking system was primarily to serve the interests of government by requiring the banks to lend to the government.

The bottom line is that banks, although privately owned, could be considered quasi-government institutions. (Even the Federal Reserve is technically privately owned.) When you put money in a bank deposit, you are essentially putting your money in the hands of the government. Indeed, probably no asset is easier for the government to seize than a bank deposit.

Just something to keep in mind.

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The Road of Aesthetics

[A]t a solution even in the political problem, the road of aesthetics must be pursued…–Shiller

Yosemite Valley, ca. 1865, by Albert Bierstadt. We were fortunate enough to view this piece in Glens Falls, NY, in 2014. Bierstadt was a native of Marc’s hometown of New Bedford, Massachusetts.


Pols Promising Us Stuff We Already Have

Most people probably believe that, prior to the creation of America’s modern welfare state in the 1960s, the poor were totally neglected. The truth, however, is that the poor and unfortunate were taken care of by a huge network of charitable organizations and mutual-aid societies established by the private sector. For instance, even before the creation of Medicaid in 1965, the poor had access to quality medical care at Catholic charity hospitals. The prevailing view at the time was that it was the middle class, not the poor, that struggled to obtain health care, since they couldn’t access the charity hospitals.

The point is that our bloated $1 trillion welfare state has mostly just displaced services for the poor that the private sector was already providing. The politicians took credit for supplying something that already existed.

During this election season, we’ve noticed a couple of other examples of politicians curiously promising to deliver what already exists. Take for exmaple, the promise of “free college tuition.” We already have that, at least for the students who are most deserving. Although nominal tuition rates are indeed very high, that does not stop students that are both bright and poor from accessing a college education. Students that are bright enough and poor enough will qualify for scholarships that will pay for most or all the cost of tuition.

A poor but very good student can even go to Harvard for free. That has always been the case. President Richard Nixon grew up so poor in California that as a kid he walked to school barefoot. But he was an excellent student and so he was awarded a full tuition scholarship at Harvard. He still did not attend Harvard because his family could not afford the train ticket from California to Massachusetts.

We agree that college is more expensive than it should be, but “free” tuition paid for by the taxpayer is not giving the poor a leg up; instead, it’s just another shameful entitlement for the middle class. And who do you think will eventually pay most of the taxes to cover that tuition? The middle class, which means it’s not really free.

Next, this campaign season has seen politicians repeatedly promise “equal pay for women.” And how do they propose to bring that about? Do they intend to pass a federal law banning wage discrimination? Oh…wait.

Of course, politicians only promise us things we already have because the ignorance of the voters lets them get away with it.

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