Altucher on Personal Finance

October 19th, 2014

James Altucher provides a “real education” on personal finance:

A) Don’t save money. Make more. If you think this is not so easy then remember: whatever direction you are walking in, eventually you get there.

B) That said, don’t spend money on the BIGGEST expenses in life. House and college (and kids and marriage but, of course, there are exceptions there). Just saving on these two things alone is worth over a million dollars in your bank account.

C) But doesn’t renting flush money down the toilet? No, it doesn’t. Do the math. You can argue all you want but the math is very clear as long as you are not lying to yourself.

D) Haven’t studies shown that college graduates make more money 20 years later?

No, studies have not shown that. They show correlation but not causation and they don’t take into account multi-collinearity (it could be that the children of middle class families have higher paying jobs later and, oh by the way, these children also go to college).

E) Don’t invest in anything that you can’t directly control every aspect of. In other words…yourself.

In other words:

  1. You can’t make or save money from a salary.And salaries have been going down versus inflation for 40 years. So don’t count on a salary. You’re 20, please take this advice alone if you take any advice at all.
  2. Investing is a tax on the middle class. There are at least 5 levels of fees stripped out of your hard-earned cash before your money touches an investment.

F) If you want to make money you have to learn the following skills. None of these skills are taught in college.

I’m not saying college is awful or about money, etc. I’m just saying that the only skills needed to make money will never be learned in college:

  • how to sell (both in a presentation and via copywriting)
  • how to negotiate (which means win-win, not war)
  • creativity (take out a pad, write down a list of ideas, every day)
  • leadership (give more to others than you expect back for yourself)
  • networking (a corollary of leadership)
  • how to live by themes instead of goals (goals will break your heart)
  • reinvention (which will happen repeatedly throughout a life)
  • idea sex (get good at coming up with ideas. Then combine them. Master the intersection)
  • the 1% rule (every week try to get better 1% physically, emotionally, mentally)
  • “the google rule” – always send people to the best resource, even if it’s a competitor. The benefit to you comes back tenfold
  • give constantly to the people in your network. The value of your network increase linearly if you get to know more people but EXPONENTIALLY if the people you know, get to know and help each other.
  • how to fail so that a failure turns into a beginning
  • simple tools to increase productivity
  • how to master a field. You can’t learn this in school with each “field” being regimented into equal 50 minute periods. Mastery begins when formal education ends. Find the topic that sets your heart on fire. Then combust.
  • stopping the noise: news, advice books, fees upon fees in almost every area of life. Create your own noise instead of falling in life with the others.

If you do all this you will gradually make more and more money and help more and more people. At least, I’ve seen it happen for me and for others.

How to see into the future

October 18th, 2014

So, what is the secret of looking into the future?

Initial results from the Good Judgment Project suggest the following approaches. First, some basic training in probabilistic reasoning helps to produce better forecasts. Second, teams of good forecasters produce better results than good forecasters working alone. Third, actively open-minded people prosper as forecasters.

But the Good Judgment Project also hints at why so many experts are such terrible forecasters. It’s not so much that they lack training, teamwork and open-mindedness — although some of these qualities are in shorter supply than others. It’s that most forecasters aren’t actually seriously and single-mindedly trying to see into the future. If they were, they’d keep score and try to improve their predictions based on past errors. They don’t.

This is because our predictions are about the future only in the most superficial way. They are really advertisements, conversation pieces, declarations of tribal loyalty — or, as with Irving Fisher, statements of profound conviction about the logical structure of the world.

Some participants in the Good Judgment Project were given advice, a few pages in total, which was summarised with the acronym CHAMP:

  • Comparisons are important: use relevant comparisons as a starting point;
  • Historical trends can help: look at history unless you have a strong reason to expect change;
  • Average opinions: experts disagree, so find out what they think and pick a midpoint;
  • Mathematical models: when model-based predictions are available, you should take them into account;
  • Predictable biases exist and can be allowed for. Don’t let your hopes influence your forecasts, for example; don’t stubbornly cling to old forecasts in the face of news.

The Advent of Cholera

October 17th, 2014

Cholera seems to have existed in the Ganges delta for a long time, but it only spread to the rest of the world fairly recently, Gregory Cochran notes, and two factors interfered with an effective policy response:

[Scientists] concluded that contagion was never the answer, and accepted miasmas as the cause, a theory which is too stupid to be interesting. Sheesh, they taught the kids in medical school that measles wasn’t catching — while ordinary people knew perfectly well that it was. You know, esoteric, non-intuitive truths have a certain appeal — once initiated, you’re no longer one of the rubes. Of course, the simplest and most common way of producing an esoteric truth is to just make it up.

On the other hand, 19th century liberals (somewhat like modern libertarians, but way less crazy) knew that trade and individual freedom were always good things, by definition, so they also opposed quarantines — worse than wrong, old-fashioned! And more common in southern, Catholic, Europe: enough said! So, between wrong science and classical liberalism, medical reformers spent many years trying to eliminate the reactionary quarantine rules that still existed in Mediterranean ports.

The intellectual tide turned: first heroes like John Snow, and Peter Panum, later titans like Pasteur and Koch. Contagionism made a comeback.

Welcome to Our Reality

October 17th, 2014

How do the Swedes recruit soldiers? Like this:

How do Unschoolers Turn Out?

October 17th, 2014

Peter Gray and Gina Riley surveyed 232 parents who unschool their children:

Getting into college was typically a fairly smooth process for this group; they adjusted to the academics fairly easily, quickly picking up skills such as class note-taking or essay composition; and most felt at a distinct advantage due to their high self-motivation and capacity for self-direction. “The most frequent complaints,” Gray notes on his blog, “were about the lack of motivation and intellectual curiosity among their college classmates, the constricted social life of college, and, in a few cases, constraints imposed by the curriculum or grading system.”

Most of those who went on to college did so without either a high school diploma or general education diploma (GED), and without taking the SAT or ACT. Several credited interviews and portfolios for their acceptance to college, but by far the most common route to a four-year college was to start at a community college (typically begun at age 16, but sometimes even younger).

None of the respondents found college academically difficult, but some found the rules and conventions strange and sometimes off-putting. Young people who were used to having to find things out on their own were taken aback, and even in some cases felt insulted, “when professors assumed they had to tell them what they were supposed to learn,” Gray says.

[...]

The range of jobs and careers was very broad—from film production assistant to tall-ship bosun, urban planner, aerial wildlife photographer, and founder of a construction company—but a few generalizations emerged. Compared to the general population, an unusually high percentage of the survey respondents went on to careers in the creative arts—about half overall, rising to nearly four out of five in the always-unschooled group. Similarly, a high number of respondents (half of the men and about 20 percent of the women) went on to science, technology, engineering or math (STEM) careers.

Why is Football More Popular than Ever?

October 16th, 2014

Why is football more popular than ever?

In practice getting people to watch spot advertising means programming that has to be watched live and in practice that in turn means sports. Thus it is entirely predictable that advertisers will pay a premium for sports. It is also predictable that the cable industry will pay a premium for sports because must-watch ephemera is a good insurance policy against cord-cutting. Moreover, as a straight-forward Ricardian rent type issue, we would predict that this increased demand would accrue to the owners of factor inputs: athletes, team owners, and (in the short-run) the owners of cable channels with contracts to carry sports content. Indeed this has basically all happened.

Here’s something else that is entirely predictable from these premises: we should have declining viewership for sports. If you’re the marginal viewer who ex ante finds sports and scripted equally compelling, it seems like as sports get more expensive and you keep having to watch ads, whereas scripted gets dirt cheap, ad-free, and generally more convenient, the marginal viewer would give up sports, watch last season’s episodes of Breaking Bad on Netflix, be blissfully unaware of major advertising campaigns, and pocket the $50 difference between a basic cable package and a $10 Netflix subscription.

The weird thing is that this latter prediction didn’t happen. During exactly the same period over which sports got more expensive in absolute terms and there was declining direct cost and hassle for close substitutes, viewership for sports increased. From 2003 to 2013, sports viewership was up 27%. Or rather, baseball isn’t doing so great and basketball is holding its own, but holy moly, people love football. If you look at both the top events and top series on tv, it’s basically football, football, some other crap, and more football. I just can’t understand how when one thing gets more expensive and something else that’s similar gets a lot cheaper and lower hassle, that you see people flocking to the thing that is absolutely more hassle and relatively more money.

A Referendum On Everything

October 16th, 2014

The Red Tribe and Blue Tribe have different narratives, which they use to tie together everything that happens into reasons why their tribe is good and the other tribe is bad:

When an issue gets tied into a political narrative, it stops being about itself and starts being about the wider conflict between tribes until eventually it becomes viewed as a Referendum On Everything. At this point, people who are clued in start suspecting nobody cares about the issue itself — like victims of beheadings, or victims of sexual abuse — and everybody cares about the issue’s potential as a political weapon — like proving Muslims are “uncivilized”, or proving political correctness is dangerous. After that, even people who agree that the issue is a problem and who would otherwise want to take action have to stay quiet, because they know that their help would be used less to solve a problem than to push forward the war effort against them. If they feel especially threatened, they may even take an unexpected side on the issue, switching from what they would usually believe to whichever position seems less like a transparent cover for attempts to attack them and their friends.

Empire of the Summer Moon

October 16th, 2014

Scott Alexander reviews Empire of the Summer Moon, about the Comanche Indians:

When Mexico took over from Spain and tried to colonize Texas, the Comanches beat them so soundly that they decided to get some “help” by inviting Anglo-Americans to come in and colonize, leading to the Texas revolt, the Mexican War, and so on. Through the first thirty years or so of American Texas, American control only extended through the eastern half of the state, with the western half being totally Comanche and almost totally unexplored. The border was so feared that places like Fort Worth, Texas were originally a line of actual forts intended to protect the Texans from Comanche raids.

These raids were probably the most disturbing part of the book. On the one hand, okay, the white people were trying to steal the Comanches’ land and they had every right to be angry. On the other hand, the way the Comanches expressed that anger was to occasionally ride in, find a white village or farm or homestead, surround it, and then spend hours or days torturing everyone they found there in the most horrific possible ways before killing the men and enslaving the women and children. Sometimes people were scalped alive. The women would usually be gang-raped dozens of times, and then enslaved, carried off to Comanche territory, and gang-raped some more. Children were forced to watch as their parents were raped and tortured and killed, or vice versa.

Their favorite pastime was to find a remote farm somewhere, ride in dressed in full war gear, communicate some version of “Oh, hi, I know what this looks like but actually we’re just stopping by, mind giving us a bite to eat?”, enjoying a lavish feast put on by extremely nervous settlers, and then saying “Very good, in exchange for this feast we give you a five minute head start”, then giving them five minutes to run away before riding them down and torture-killing the entire family in the manner described earlier.

On the other hand, the Comanches fit the classic pattern of hunter-gatherer civilizations of simultaneously being really mean to people outside the tribe while showing deep and heartfelt kindness to everyone within. We know this because sometimes if there were very young children, and the Comanches were feeling a bit low on headcount, they would capture the children and adopt them as full Comanches (after torture-killing the parents, of course) and some of these children would later grow up to write English-language books about their experience. But this practice definitely led to some awkward situations, and the book centers around one of them: the last great chief of the Comanches, Quanah, was half-white, the son of a Comanche chief and a Texan woman who had been captured when she was nine years old.

So there was a bit of traffic back and forth between America and Comancheria in the 19th century. White people being captured and raised by Comanches. The captives being recaptured years later and taken back into normal white society. Indians being defeated and settled on reservations and taught to adopt white lifestyles. And throughout the book’s description of these events, there was one constant:

All of the white people who joined Indian tribes loved it and refused to go back to white civilization. All the Indians who joined white civilization hated it and did everything they could to go back to their previous tribal lives.

There was much to like about tribal life. The men had no jobs except to occasionally hunt some buffalo and if they felt courageous to go to war. The women did have jobs like cooking and preparing buffalo, but they still seemed to be getting off easy compared to the white pioneer women or, for that matter, women today. The whole culture was nomadic, basically riding horses wherever they wanted through the vast open plains without any property or buildings or walls. And everyone was amazingly good at what they did; the Comanche men were probably the best archers and horsemen in the history of history, and even women and children had wilderness survival and tracking skills that put even the best white frontiersmen to shame. It sounds like a life of leisure, strong traditions, excellence, and enjoyment of nature, and it doesn’t surprise me that people liked it better than the awful white frontier life of backbreaking farming and endless religious sermons.

The Church v the Family

October 16th, 2014

Why isn’t Europe clannish? Ed West explains:

The answer is the Catholic Church. Christianity in our minds is linked to “family values”, as Right-wing politicians used to say before an imminent sex scandal, but from the beginning it was almost anti-family, and Jesus told his disciples to leave theirs. Whereas Judaism had been heavily kinship-based, Christ voiced the view that the noblest thing was to lay down one’s life for a friend – a gigantic moral leap. This universal ideal was spread by St Paul who famously stated that there would be neither Jew nor Greek, “for ye are all one in Christ Jesus”.

Although both large Abrahamic faiths are universalist, western Christianity was far more jealous of rival loyalties, such as could be found in the clan, and wanted to weaken them. St Augustine of Hippo and St Thomas Aquinas both encouraged marrying out as a way of widening social ties, and in Summa Theologica Aquinas objected to cousin marriages on the grounds that they “prevent people widening their circle of friends”. He wrote: “When a man takes a wife from another family he is joined in special friendship with her relations; they are to him as his own.”

The influence of the Church caused Europeans to be less clannish and therefore made it easier for large territorial magnates to forge nation-states.

Another consequence was the nuclear family, which developed in the North Sea region around the turn of the millennium. It was influenced by the western European manor system of agriculture, under which peasants managed their own farms let out to them by the lord of the manor, owing him obligations of work. This encouraged adult children to move out of the family home, whereas in most cultures three generations lived together under a paterfamilias.

With the nuclear family came a move away from group identity and towards the western concept of individual rights and liberalism. It was a revolutionary idea and in parts of the world where the clan still rules it is still an alien one.

Compact Fusion Reactor

October 15th, 2014

Lockheed Martin’s Skunk Works plans to develop a compact fusion reactor (CFR):

Until now, the majority of fusion reactor systems have used a plasma control device called a tokamak, invented in the 1950s by physicists in the Soviet Union. The tokamak uses a magnetic field to hold the plasma in the shape of a torus, or ring, and maintains the reaction by inducing a current inside the plasma itself with a second set of electromagnets. The challenge with this approach is that the resulting energy generated is almost the same as the amount required to maintain the self-sustaining fusion reaction.

Compact Fusion Reactor Diagram

The problem with tokamaks is that “they can only hold so much plasma, and we call that the beta limit,” McGuire says. Measured as the ratio of plasma pressure to the magnetic pressure, the beta limit of the average tokamak is low, or about “5% or so of the confining pressure,” he says. Comparing the torus to a bicycle tire, McGuire adds, “if they put too much in, eventually their confining tire will fail and burst—so to operate safely, they don’t go too close to that.” Aside from this inefficiency, the physics of the tokamak dictate huge dimensions and massive cost. The ITER, for example, will cost an estimated $50 billion and when complete will measure around 100 ft. high and weigh 23,000 tons.

The CFR will avoid these issues by tackling plasma confinement in a radically different way. Instead of constraining the plasma within tubular rings, a series of superconducting coils will generate a new magnetic-field geometry in which the plasma is held within the broader confines of the entire reaction chamber. Superconducting magnets within the coils will generate a magnetic field around the outer border of the chamber. “So for us, instead of a bike tire expanding into air, we have something more like a tube that expands into an ever-stronger wall,” McGuire says. The system is therefore regulated by a self-tuning feedback mechanism, whereby the farther out the plasma goes, the stronger the magnetic field pushes back to contain it. The CFR is expected to have a beta limit ratio of one. “We should be able to go to 100% or beyond,” he adds.

This crucial difference means that for the same size, the CFR generates more power than a tokamak by a factor of 10. This in turn means, for the same power output, the CFR can be 10 times smaller. The change in scale is a game-changer in terms of producibility and cost, explains McGuire. “It’s one of the reasons we think it is feasible for development and future economics,” he says. “Ten times smaller is the key. But on the physics side, it still has to work, and one of the reasons we think our physics will work is that we’ve been able to make an inherently stable configuration.” One of the main reasons for this stability is the positioning of the superconductor coils and shape of the magnetic field lines. “In our case, it is always in balance. So if you have less pressure, the plasma will be smaller and will always sit in this magnetic well,” he notes.

The Secret Casualties of Iraq’s Abandoned Chemical Weapons

October 15th, 2014

From 2004 to 2011, American troops repeatedly encountered chemical weapons remaining from earlier in Saddam Hussein’s rule, C.J. Chivers reports:

In all, American troops secretly reported finding roughly 5,000 chemical warheads, shells or aviation bombs, according to interviews with dozens of participants, Iraqi and American officials, and heavily redacted intelligence documents obtained under the Freedom of Information Act.

The United States had gone to war declaring it must destroy an active weapons of mass destruction program. Instead, American troops gradually found and ultimately suffered from the remnants of long-abandoned programs, built in close collaboration with the West.

The New York Times found 17 American service members and seven Iraqi police officers who were exposed to nerve or mustard agents after 2003. American officials said that the actual tally of exposed troops was slightly higher, but that the government’s official count was classified.

The secrecy fit a pattern. Since the outset of the war, the scale of the United States’ encounters with chemical weapons in Iraq was neither publicly shared nor widely circulated within the military. These encounters carry worrisome implications now that the Islamic State, a Qaeda splinter group, controls much of the territory where the weapons were found.

The American government withheld word about its discoveries even from troops it sent into harm’s way and from military doctors. The government’s secrecy, victims and participants said, prevented troops in some of the war’s most dangerous jobs from receiving proper medical care and official recognition of their wounds.

Sexual Harassment at Restaurants

October 15th, 2014

Scott Adams (Dilbert) adds some context to the report that 90% of women in restaurant jobs that depend on tipping report being sexually harassed at work, based on his own restaurant-owning experience:

I believe it is true that 90% of women working for tips in restaurants are sexually harassed by coworkers and/or customers. That fits my personal observations after working in the industry. But let’s put some context on that and see if your feelings about the story change.

For starters, let’s remove from the stats the folks who take jobs at Hooters and other restaurants that position the staff’s appearance as part of the “entertainment.” I would argue that those employees are signing up to be sexually objectified in return for the promise of easy work and good tips. You can make a convincing case that Hooters should not exist, but I don’t think you can lump the servers at Hooters with the servers at Applebee’s and get a good statistic on restaurant sexual harassment in general.

So let’s say the non-Hooters rate of sexual harassment for female restaurant workers is something like 80%. That still sounds terrible. But I’m not done with context yet.

In my experience, attractive female bartenders and servers are completely conscious of trading their sexuality for higher tips. They talk about it freely. They pick blouses to accentuate their best assets. And some will admit they choose jobs that allow them to trade on their looks. If I were in my twenties and could make money in a job that depended on my looks instead of my muscles I would take it in a heartbeat, assuming I had good looks.

My best guess is that if you remove from the stats the women who are intentionally using their sexuality to improve their income, you get about 50% of women in tipping jobs who get sexually harassed and have done nothing intentionally to inspire unwanted attention. That is still a horrible number.

But 50% is also the rate of men who report being sexually harassed in server jobs. In my restaurant experience, when we had handsome male bartenders or servers the female staff and customers were shameless with their non-stop sexual banter, flirting, and direct sexual offers. And if you thought all of that attention was the good kind, you’d be wrong. It was an ongoing problem for the guys. The handsome gay servers had it the worst because they had no upside potential from the female attention.

So here’s the proper context, in my opinion, based on years of direct restaurant experience: 100% of attractive men and women are sexually harassed at work in the restaurant business. And nearly every one of them took the job knowing that would be the case, but they decided it was worth it for the relatively easy money.

The Bot Crossing Point

October 15th, 2014

In the last quarter of 2011, more iPhones were sold than babies were born, John Robb notes:

That’s interesting because that is also the quarter that Siri shipped.

FYI: Apple’s Siri is the first mass market bot that was designed to act like a human.

In hindsight, this apparently minor observation may be considered something more important: a tombstone milestone for humanity.

It’s the quarter when our future replacements on this planet began to outpace us.

Alexis de Tocqueville on the Dark Sides of Democracy

October 14th, 2014

Alexis de Tocqueville saw five potentially dark sides of democracy:

One: Democracy breeds materialism

In the society that de Tocqueville knew from childhood, making money did not seem to be at the forefront of most people’s minds. The poor (who were the overwhelming majority) had almost no chance of acquiring wealth. So while they cared about having enough to eat, money as such was not part of how they thought about themselves or their ambitions: there was simply no chance. On the other hand, the tiny upper stratum of landed aristocrats did not need to make money – and regarded it as shameful to work for money at all, or to be involved in trade or commerce. As a result, for very different reasons, money was not the way to judge a life.

However, the Americans de Tocqueville met all readily believed that through hard work, it was possible to make a fortune and that to do so was wholly admirable and right. There was hence no suspicion whatever of the rich, a certain moral judgement against the poor, and an immense respect for the capacity to make money. It seemed, quite simply, the only achievement that Americans thought worth respecting. For example, in America, observed de Tocqueville, a book that does not make money – because it does not sell well – cannot be good, because the test of all goodness is money. And anything that makes a profit must be admirable in every way. It was a flattened, unnuanced view that made de Tocqueville see the advantages of the relatively more subtle, multi-polar status systems of Europe, where one might (on a good day) be deemed good, but poor; or rich, but vulgar.

Democracy and Capitalism had created a relatively equitable, but also very flat and oppressive way for humans to judge each other.

Two: Democracy breeds envy and shame

Travelling around the United States, de Tocqueville discerned an unexpected ill corroding the souls of the citizens of the new republic. Americans had much, but this affluence did not stop them from wanting ever more and from suffering whenever they saw someone else with assets they lacked. In a chapter of Democracy in America entitled ‘Why the Americans are Often so Restless in the Midst of Their Prosperity’, he sketched an enduring analysis of the relationship between dissatisfaction and high expectation, between envy and equality:

‘When all the prerogatives of birth and fortune have been abolished, when every profession is open to everyone, an ambitious man may think it is easy to launch himself on a great career and feel that he has been called to no common destiny. But this is a delusion which experience quickly corrects. When inequality is the general rule in society, the greatest inequalities attract no attention. But when everything is more or less level, the slightest variation is noticed… That is the reason for the strange melancholy often haunting inhabitants of democracies in the midst of abundance and of that disgust with life sometimes gripping them even in calm and easy circumstances. In France, we are worried about increasing rate of suicides. In America, suicide is rare, but I am told that madness is commoner than anywhere else’.

Three: The tyranny of the majority

Typically, we think of democracy as being the opposite of tyranny. It should, in a democracy, no longer be possible for a clique to lord it over everyone else by force; leaders have to govern with the consent of the governed. But de Tocqueville noticed that democracy could easily create its own specialised type of tyranny: that of the majority. The majority group could, in principle, be very severe and hostile to minorities. De Tocqueville wasn’t simply thinking of overt political persecution, but of a less dramatic, but still real, kind of tyranny in which simply being ‘in a minority’ as regards prevailing ideologies starts to seem unacceptable, perverse – even a threat.

Democratic culture, he thought, could easily end up demonising any assertion of difference, and especially of cultural superiority or high mindedness, which could be perceived as offensive to the majority – even though such attitudes might be connected with real merit. In a tyranny of the majority, a society grows ill at ease with outstanding merit or ambition of any kind. It has an aggressively levelling instinct; in which it is regarded as a civic virtue to cut down to size anyone who seems to be getting above themselves.

Four: Democracy turns us against authority

De Tocqueville saw democracy as encouraging strong ideas about equality, to an extent that could grow harmful and dispiriting. He saw that democracy encourages ‘in the human heart a depraved taste for equality, which always impels the weak to want to bring the strong down to their level’.

Five: Democracy undermines freedom of mind

Instinctively, you’d suppose that democracy would encourage citizens to have an open mind. Surely democracy encourages debate and allows disagreements to be resolved by voting, rather than by violence? We think of openness of mind as being the result of living in a place where lots of opinions get an airing.

However, de Tocqueville came to the opposite conclusion: that in few places could one find ‘less independence of mind, and true freedom of discussion, than in America’.

Trusting that the system was fair and just, Americans simply gave up their independence of mind, and put their faith in newspapers and so-called ‘common sense’. The scepticism of Europeans towards public opinion had given way to a naive faith in the wisdom of the crowd.

Income Inequality

October 14th, 2014

Income inequality is low in agrarian, pre-industrial societies, because you need income to achieve income inequality:

The idea is, there is an absolute level of subsistence income for the mass of peasants who are creating value in the traditional society. Above that level is the surplus, or the amount of income which can be expropriated by elites; and below that amount… starvation for the producers in the economy.

Thus, in a very poor society whose average income is close to the absolute survival level, the surplus extracted is pretty small and therefore inequality cannot be very high. But as average income rises, there is potentially more to extract. So the interesting question becomes, did pre-industrial societies at different levels of income have different “extraction levels”? Put another way: did peasant incomes also rise when the average income rose or did the increase simply lead to more elite extraction?

Pre-Industrial Inequality

Incomes may have been more equally distributed in China in 1880 than in England in 1688, but that’s only because the average income was quite low in China. But perhaps more importantly, China in 1880 was closer to its maximum potential inequality than England in 1688 was.

(Hat tip to T. Greer.)