The Adam Smith book club starts Monday

slaniel | Inquiry into the Nature and Causes of the Wealth of Nations, An | Saturday, November 13th, 2010

As promised a month ago, the Adam Smith reading starts Monday. I was late, myself, to buy the books, so I only discovered a few days ago that the editions I mentioned before — Modern Library for Wealth of Nations, Great Minds for Theory of Moral Sentiments — are hard to come by. They don’t look hard to come by on Amazon, but my favorite bookseller — from which I buy all my books, if I can help it — tell me that it would be hard for you fine people to find them in your own favorite local retailers.

So. What I have here next to me is the University of Chicago Press edition, which is a reprint of the apparently canonical Cannan edition. This one is unabridged, five books long, and about 1200 pages.

I hope this new edition doesn’t screw people up. I was aiming for unabridged editions before, and this is an unabridged edition. So whatever edition you have won’t be too far from what I have.

I’ve got my best people at the Harvard Book Store working ’round the clock to find me the proper edition of Theory of Moral Sentiments. When I have that one in hand, I’ll mention it here as well. But we have our hands full with Wealth of Nations for a little while.

What’s the definition of “disposable personal income”?

slaniel | Economics;Statistics | Monday, November 8th, 2010

Matt Yglesias today looked at the change in disposable personal income over the last few years, and I wanted to check that the definition of the term didn’t count “disposable income” as income less, say, mortgage and credit-card payments. If it did, then you’d expect to see disposable income go down as people pay down debt.

Turns out the definition doesn’t deduct debt payments, but it confuses me in other ways. Here it is:

Personal income is the income received by persons from participation in production, from government and business transfer payments, and from government interest. Personal income includes income received by non-profit institutions serving households, by private non-insured welfare funds, and by private trust funds. Income from production is generated both by the labor of individuals and by the capital that they own. Private income not earned in production, such as from capital gains or the sale of assets, is excluded. Personal income is calculated as the sum of wage and salary disbursements, employer contributions for employee pension and insurance funds, proprietors’ income, property income (personal interest, dividend and rental income), and transfer payments to individuals, less personal contributions for social insurance.

Disposable personal income is personal income less personal tax payments. While personal income does not include capital gains realized through the sale of assets, personal income taxes do include the taxes paid for these capital gains.

(Internal footnote omitted.)

I’m puzzled by a couple aspects of this definition:

  1. “[E]mployer contributions for employee pension and insurance funds” makes it in? So when my employer contributes to my 401(k), that counts as disposable income? Okay, I can half-see that: if need be, I could raid the 401(k). But I’d pay a penalty if I did, so I hope that something less than 100% of my contribution counts toward my disposable income. But then what about the “insurance funds” part? My employer’s contribution to unemployment insurance counts toward my disposable income? The employer contribution to long-term disability? To health insurance? This would seriously inflate this measure of disposable income: as has been well-documented, health-care costs have been rising, so a lot of money that might otherwise have gone toward rising salaries has instead gone into health-insurance payments.

  2. Disposable income doesn’t include capital gains? But why? That’s income I can spend, just as much as is income earned through honest toil. And if they’re not going to include capital-gains income, then why do they deduct capital-gains taxes?

I’ll look around for a more in-depth discussion of this definition. If anyone can clarify, please do.

To all those who insist on tarring every Jon Stewart fan with the same brush

slaniel | Helping the Less Fortunate | Saturday, November 6th, 2010

…namely the “it’s all a bunch of ironic hipsters whose lives are so comfortable that they don’t feel any real commitment to anything” brush, I ask: isn’t it just possible that much of Stewart’s audience voted for Barack Obama expressly because they feel sadness for those who can’t afford health insurance, and want to help those less fortunate than themselves? For instance, maybe, just maybe, the young liberals in the audience wanted universal health care for entirely non-ironic reasons?

I resist the temptation to close with an unironic fuck-you.

Sudhir Venkatesh, Gang Leader for a Day: A Rogue Sociologist Takes to the Streets

slaniel | Gang Leader for a Day: A Rogue Sociologist Takes to the Streets | Saturday, November 6th, 2010

The author looks at the camera. He's Indian and looks kind of tough, but he's also clean-cut with a nice haircut. He's a handsome fellow. He's wearing a leather jacket with the collar turned up. Behind him is a bombed-out inner-city neighborhood

The greatest danger of a book like this is that it could become catastrophe tourism — the sort of book that you read, then recite to your friends with excessive condescending blinking that says, “Yeah, it’s real tough out there in the shit, man.” Fortunately, Gang Leader for a Day is very much not like that. The author himself also isn’t trying to impress you with the friends he made in the gang, and he removes himself as much as possible from the story. That story is about the people living in the projects; the author only appears when he explains — always briefly — how he got the access he did.

Venkatesh entered graduate school in sociology at the University of Chicago in the early 90s, he tells us, and rapidly found himself dissatisfied with the rarefied, high-level statistical approach to understanding groups of people. In order to feel that he knew something about these groups, he had to get to know actual people. So off he goes to the now-demolished Robert Taylor Homes, on the south side of Chicago. He walks into one of the homes, and just happens to run into a charismatic gang leader named JT. JT is central to the rest of the book: he shows Venkatesh how gangs work at the lowest levels, he eventually introduces Venkatesh to the very wealthy men at the top of the Chicago gang pyramid, and — as the title suggests — he lets Venkatesh “run” the gang for a day.

Let’s back up a little bit, though. The remarkable thing about this introduction is how short it is: there’s only a few pages between the start of the book and when Venkatesh starts spending serious time with JT. A more self-absorbed author would have spent lots of time laboring over the start of grad school, and would have even celebrated his remarkable stroke of luck at happening upon JT so quickly. But no: Venkatesh is in a hurry to tell us about the people he met. He’s got a heck of a story to tell, so he dives right in.

The eventually goal of his Ph.D. dissertation was to map out how the underground economy in the projects works. Central to that economy is the utter failure of official institutions to support a humane life. I would say that Venkatesh “portrays” the Chicago Housing Authority (CHA) as hopelessly corrupt and inept, if it weren’t, instead, that Venkatesh takes this as a basic fact of life. Everyone in the book knows that the CHA is a massive scam, and besides: the book offers endless examples of its criminality. Why bother arguing a point when you can instead show its obvious truth?

The folks living in the projects know, for instance, that the CHA will never replace the front doors to their apartments if those doors get busted down. On freezing, windy, snowy Chicago winter days, with the homeless and the drug-addicted squatting in the hallways, the missing doors can be fatal. Here’s where the gang, and Ms. Bailey (the grand dame of her swath of the Robert Taylor Homes) move in. Favors get traded: the CHA and Ms. Bailey have an I-scratch-your-back-you-scratch-mine policy going, someone knows someone else, someone else owns a spare door, someone else can offer a temporary apartment while the one’s getting repaired.

There are shootings and stabbings all over the place, but no one expects that the police will come investigate them. There are rumors, in fact, that a crooked cop forced one of the project’s women to perform oral sex on him in front of her boyfriend. The police are mostly not the projects’ friends: they stay away when they’re needed, and abuse the residents when they do stop by.

There’s no legal support for the poor folks there. The CHA provides almost no housing support. Upwards of 90% of the projects’ residents are unemployed; those who do manage to get an education and a job leave and never come back. … Well, except for JT: he left the projects, got a business degree, and returned to a managerial role within the Black Knights gang. I couldn’t help but picture Stringer Bell from The Wire playing the role of JT, almost from the start of the book.

In fact, I couldn’t help imagining The Wire as a film adaptation of Gang Leader for a Day. The guiding idea behind The Wire is that there aren’t good guys and bad guys; there are just forces operating on everyone from above and below. You do certain things to placate your boss at your company, and your boss is doing things to placate his. Go up a few levels, and the CEO is trying to get what he wants, subject to the whims of his board and the stockholders. Turns out the same thing is true in the Robert Taylor Homes: JT and the other managers are trying to keep their gang wars as quiet and contained and predictable as possible, because there’s nothing the police hate more than unpredictable violence that spills beyond the confines of the projects. CHA employees don’t need to demand the occasional sexual favor from Taylor Homes residents, but everyone knows that nothing’s going to get done if those favors aren’t forthcoming. (There’s a lot of casual prostitution in the Homes. It’s not a job; it’s a response to a pressure.)

Of course Venkatesh is subject to his own pressures. He has to get out a Ph.D. thesis. And it takes him a while to realize that he should consult a lawyer: he can’t watch over the illegal activities of a drug-selling gang without eventually inviting a police inquiry. In a really astonishing passage, he realizes that everyone else within the Homes has known this from the start. From the start, they’ve been keeping the really incriminating stuff away from him. Everyone other than Venkatesh is aware of the Wire-like world they’re living in.

Which makes sense, of course: most of the book’s readers live in a world with well-regulated, formally contracted transactions between well-behaved actors. Things break; we get them repaired. We hear gunshots, we call the cops, the cops come. Enough middle-class white people band together to make the South End a nice place, and eventually it works out. Ours is a world where everything functions more or less as it should. Peel back just a layer or two, though, and you lay bare the quid pro quo underlying it all. Informal institutions subject to their own rules govern everything, because the formal institutions have utterly failed. (This book makes economics look comical. Economics often studies only rigorously formalizable contracts; it’s as though medicine only studied diseases that aren’t cancer.)

I can’t recommend Gang Leader For A Day highly enough. Like Common Ground, it ends up speaking larger truths by never wavering in affection for its subjects. This affection translates into a relentless need to portray them honestly, warts and all. It’s a triumph of storytelling.