Water – Part 2

water

Robert Reich is a former Secretary of Labor. He did the 2013 documentary “Inequality for All” and he’s one of the more outspoken income inequality cry-babies in the intellectual world.  As I mentioned last week, his book Saving Capitalism (2015) articulates the “problem” of wealth inequality.  It’s the water all around us.  Reich believes a growing pervasive sense of arbitrariness and unfairness is undermining our economy because people who feel subjected to an unfair system will subvert the whole game so everyone loses.

 

He illustrates this with a simulation he does with students. Reich splits them into pairs and asks everyone to imagine giving one of the pair $1,000.  The other partner can keep some of the money on the condition that they both accept a deal.  The partner with the $1,000 can only make one offer on paper with how much he’ll share and the other guy has to write either “deal” or “no deal”.  Economic theory predicts the offeree would accept anything because even $1 is better than nothing.  Hell, I’d probably accept $10 because I don’t care if the other guy gets $990 – I’d go buy some beer with my ten bucks – no skin off my ass.  But that’s not what most people do in the experiment, repeated and confirmed many times.  The average is as least $250!  Low ball offers are almost always rejected.  The attitude seems envious and spiteful.  People turn down a deal that makes them better off simply because it makes someone else far, far better off.

 

Reich asks his students why they refuse to accept smaller amounts and they explain that it’s fundamentally unfair to let the winner take so much. Remember the $1,000 was given arbitrarily.  No one had to work for it or be outstanding in any way.  So, when the game is rigged, losers are willing to sacrifice gains in order to prevent winners from walking away with “unfair” gain.  The other reason stems from power.  If the game is rigged, losers try to stop the game not out of envy but out of a deep seated sense of unfairness and a genuine fear of unchecked power and privilege.

 

There are a lot more people than you think out there who are angry and fearful about the “unfairness” of our economy. It’s sometimes hard to see this “water” of America’s socio-economic temperament.  My attitude was you can play the game more effectively if you don’t whine about the rules.  They are what they are and it’s not going to change.  But the waters are getting choppy.  Today’s stormy seas drive our current political and economic instability.  It’s the source of the Bernie Sanders and Donald Trump phenomena.  Your Estate Planning War Chest is a life boat in troubled waters.  Keep situationally aware and financially and legally secure.

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