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The New York Times published a story recently Given a Shovel, Americans Dig Deeper Into Debt that illuminates the problems faced by families that take on overwhelming amounts of debt. Depending on the situations of the families involved, the response by most people is either to believe that the debtors were taken advantage of by unscrupulous lenders or to condemn the debtors for a lack of frugality. NYT columnist David Brooks posits an interesting third explanantion: in a society where unlimited credit and bankruptcy is becoming much more commonplace, are debtors simply a reflection of the community’s mores?
We live in a time when Wall Street actively solicited loans that ignored traditional underwriting standards, in order to create massively complex financial security instruments, for which the risks to investors were largely incalculable. The credit industry seems to have created a situation where their most valuable customer is the one unable to pay their bills, because that enables the company to impose fees and penalties, and the resulting revenue dwarfs the pedestrian business of lending at a reasonable rate of return.
Marx talked about end-stage capitalism and the ennui and soullessness of a society whose only bonds were those of commerce. However, I’m beginning to think that the focus on the individual and (depending on your viewpoint) either their exploitation or their vulgar excesses, to be pretty much beside the point. It’s not about families going on a VISA card binge, it’s the system that’s rotting.
We may believe that the proper way to live is in line with Benjamin Franklin’s list of virtues, especially those of frugality, industry, and moderation. However, our economic system will not tolerate these virtues. Gross Domestic Product is the measure of the size and health of our economy: what we buy, what we export, and what we invest. 70% of our nation’s GDP is personal consumption expenditures–what we buy. Only 17% of GDP is what we invest–you know, frugality, industry and moderation.
If we all adopted the Franklin mindset and started paying off all our credit balances monthly, started to save much larger portions of our income and just generally “make do or do without”, our economy would collapse. To paraphrase Woody Allen: “an economy is like a shark, it’s got to keep moving forward or it dies. And what we’ve got here is a dead shark.”
Well, not quite dead, but certainly dispiriting.
Get a load of this. A discussion paper by an economist at the University of Calgary on how the different vocal stylings of Bon Scott and Brian Johnson effect economic decision making.
The author of the study, one Robert Oxoby, admits that the long standing argument on which AC/DC vocalist is better may be too subjective to answer conclusively. So instead, while testing Canadian college students in traditional economic game theory on negotiating, he had a song from each vocalist playing in the background. The goal is to determine if players in the game made more economically advisable decisions while listening to one or the other of the vocalists.
The songs chosen were “It’s A Long Way To The Top If You Want To Rock and Roll” featuring the late Mr. Scott and “Shoot To Thrill” by the current vocalist Mr. Johnson. The study used deeper cuts to avoid listener identification with monster smashes like “Highway to Hell” and “Back In Black.” Skimming the conclusions, apparently Mr. Johnson’s vocals resulted in more economically efficient decision making by the students.
Some comments.
1) Everyone knows that Bon Scott freakin’ rules so the study is flawed from the outset.
2) AC/DC music doesn’t make me want to maximize the utility of my economic decisions, it make me want to act as stupidly as I am able (hopefully within legal boundaries, but certainly while vigorously head-banging, an act that will cause severe cognitive dysfunction over prolonged periods.)
3) Listen to “Let There Be Rock” by the Drive-By Truckers and try to imagine any rational brain activity going on while listening to Bon Scott-era AC/DC.
4) “It’s A Long Way To The Top If You Want To Rock And Roll” kicks ass and is without a doubt the greatest song in the AC/DC catalog (dig the dueling solos between the electric guitar and the bagpipes!) I mean, that has to compromise the integrity of the study, right?
5) Steven Levitt, one of the authors of Freakonomics (and the source of this link), had it exactly right: “I hope this guy has tenure.”
