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What Is It About Anthropologists And Economics?

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There must be something given what David Graeber told us all about debt. Recall, that’s the book that told us that Apple was started by disgruntled IBM exiles.

Another example of this problem in Rolling Stone:

The Unraveling of America
Anthropologist Wade Davis on how COVID-19 signals the end of the American era

He wants to tell us that Orange Man Bad which, to be fair, perhaps he is. But in his telling of the iniquity he tells us:

In truth, at least in economic terms, the country of the 1950s resembled Denmark as much as the America of today. Marginal tax rates for the wealthy were 90 percent. The salaries of CEOs were, on average, just 20 times that of their mid-management employees.

Today, the base pay of those at the top is commonly 400 times that of their salaried staff, with many earning orders of magnitude more in stock options and perks.

Well, no, not really. The 400 times number comes from – it’s fallen a little which is why the latest version is lower – the AFL-CIO count. Which is here:

In 2019, CEOs of S&P 500 companies received, on average, $14.8 million in total compensation.
The average S&P 500 company CEO-to-worker pay ratio was 264-to-1.

Just to run a little check, $14.8 million divided by 264 is – $56,000 which isn’t far off the full year, full time, average pay for an American.

So, the $14.8 million is total compensation. That includes all the perks and the stock options (although not the rise in value of fully owned stock. That being something that isn’t coming as wages or income from work anyway). Thus it is not 400 times wages plus perks and options, it is 400 times wages including options and perks.

But the failure to understand numbers is worse than this. Sure, it used to be 20 times. But that didn’t include perks nor options. And as we saw in Barbarians at the Gate those could be – were – substantial, up to and including a dozen country club memberships and a private air force. It was the tax reforms of 1986 that changed this – under Reagan, recall? Stick everything an executive gets onto his taxable income and lower the tax rate in return.

As I’ve been told directly by Jamie Galbraith, the economist who worked on those very tax reforms, this was the point of doing it. Get all of that compensation out into the open and tax it. Which isn’t the whole story, nope, but it is a goodly part of it. We’ve changed what is reported at C-Suite income rather than it only being C-Suite income which has changed.

This is misleading:

Danes earn roughly the same after-tax income as Americans, while working 20 percent less.

For the only useful measure of your income is what you can buy with it. This also being known as your real income. When we compare across countries therefore we cannot just take the pile of money as being the same thing, we have to adjust for what you can buy with that money in the different places.

Economists know this which is why they use purchasing power parity exchange rates to compare wages – and thus living standards – across countries. Unlike anthropologists who use market exchange rates.

Clearly there is some problem with the economics from these sources. Dunno why really, perhaps it’s that anthropologists are the sociologists who cannot count?

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3 COMMENTS

  1. An American anthropologist is likely not bright enough to know that AFL-CIO “studies” are biased to the same degree as Baghdad Bob’s observations of no disaster today.

  2. Yes, but this is from Rolling Stone, the magazine that recently claimed that One Direction* were one of the greatest rock bands of the decade.

    (* A popular beat combo, M’Lud.)

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