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Thursday, November 17, 2011

Interview: Susan Walsh of Hooking Up Smart

The responses to the interview questions may not represent the views of The Echo Boom Bomb's author. These interviews are provided to inform readers of information from experts and provide these experts with a medium where they can answer questions without any content changes. All linked material to products in interviews such as books or videos are affiliated with the supported platforms, such as Amazon or others. To see the full list of interviews related to Echo Boomers, iGenZ or Automons, see the ending acknowledgements on this post.

In the past, I was asked about hooking up and I wrote a short post, Generation Y and the Hook Up Culture. However, I got in touch with Susan Walsh, who writes Hooking Up Smart [Update: dead link removed]. A quick introduction from her site [Update: dead link removed] :

Since earning my MBA in 1983 from The Wharton School, I have worked with companies and non-profit organizations to identify key challenges and opportunities, and formulate winning strategies. Launched in November, 2008, Hooking Up Smart brings together my passion and concern for young women with a professional, practical and systematic problem-solving approach.

[She also describes herself as a "cool mom" which is awesome.]

In other words, she understands the hook up culture.

1. People have expressed interest in learning about the current hook up culture that's popular among Echo Boomers, and a few other generations. Given that you counsel young women (and it seems, young men too) on the hook up culture and hooking up smart, could you give a brief explanation of what the hook up culture is?.

  • Hooking up is a term to describe a sexual encounter between two people. It is a deliberately vague expression (providing plausible deniability), and can mean making out, having intercourse, or anything in between.

  • Hooking up has replaced traditional dating on college campuses, and has also become prevalent in the general population and culture. The hallmark of hooking up is the clear understanding between both parties that the encounter will be free from any expectations for further contact. It is designed to avoid the possibility of commitment. However, hooking up is still the primary pathway to a potential romantic relationship, although only 12% of hookups eventually lead to relationships.

  • The hookup script reverses the sexual norm; the pair becomes sexual first, before emotional intimacy or a relationship is established.

  • Hooking up is awkward for both sexes. Most students get drunk to relax inhibition about getting naked with a stranger. Research shows that hooking up is not something unplanned that happens when people drink. Rather, young people drink heavily with the full intention of hooking up later in the evening.

2. It seems like there's a lot of pressure on young women to "be like men" in any and all ways. What - if any - are the potential consequences and/or benefits to this pressure? And why does Western culture assume that it's a "man's world" (being a man, I hardly feel like it's our world 96.7% of the time)?

First, hookup culture is the consequence of the Sexual Revolution, which occurred as a result of the Women’s Movement and the introduction of the Pill. Once women were able to have sex without fear of pregnancy, and with the blessing of Second Wave Feminists, they set out to have sex without restraint, much in the way that men did. When colleges stopped acting in loco parentis, the stage was set with coed dorms, and the hookup became the prevalent mode of male-female sexual interaction.

What happened over a period of 50 years is the loss of assortive mating. That is, it used to be the case that sex was tied to commitment, and people often married their first sexual partners. People generally married a mate with similar characteristics – education, intelligence, socioeconomic background and physical attractiveness.

As casual sex became more prevalent, and the Women’s Movement provided opportunities for women to pursue more education and professional careers, the average age at marriage increased significantly. In the meantime, both men and women seek sex, whether casual or in long-term relationships. However, they no longer limit themselves to people of similar traits.

[Some of what Susan Walsh mentions here may come in the form of serial monogamy, which is growing in popularity as well.]

As the gatekeepers of sex, women soon learned that while they might not hope to marry a man significantly more attractive or higher status than themselves, it is quite possible to command his attention in the short-term – often just for one night. This has led to a sexual “wealth gap” in the population, in accordance with the Pareto Principle. That is, 20% of the men are deemed highly desirable by women. They have the most options for sex, and as a result are the least likely to form committed relationships, especially at a young age. The other 80% struggle to find mates of similar traits, even if they’re willing to offer commitment. I’ve also estimated that about 20% of women are highly promiscuous. They seek short-term male attention. The other 80% recognize that they are unlikely to garner much male attention without offering casual hookups.

In this way, the idea that it’s a “man’s world” or that men have it made is misleading. A small percentage of men have it made. I don’t see any real winners among the women, frankly. Some women do enjoy no-strings sex, and are not seeking a relationship, but many struggle with feelings of regret, depression and low self-esteem.

3. I've heard two basic theories about the future of anything: the pendulum analogy, where things go back and forth from one extreme to the other, and the slippery slope analogy, where once things go downhill, they never return (note to readers: both of these are fallacies in logic). But based on your interaction with people involved in the hook up culture and dating, experience in the pros and cons of each, and knowledge of Western culture, what do you see for the future in terms of (dating/hooking up/seeing each other) interactions between men and women?

That’s a very interesting question, and we debate it at Hooking Up Smart [Update: dead link removed] all the time. Personally, I subscribe more to the pendulum theory. History is characterized by large swings in morality, with periods of extreme hedonism followed by more disciplined or restrictive norms. I see hookup culture sticking around for a long while, but there is some backlash already occurring. In the three years I’ve been blogging, college student newspapers have been printing a greater number of editorials by students opposing the culture. One thing that’s interesting to note is that while most students believe it’s common, and that many other students are hooking up regularly, 90% of college students have only 0-5 sexual partners during their four years. So the culture doesn’t really reflect the reality, but it dominates nonetheless.

Another possibility is a crisis in sexual health. STDs continue to spread rapidly, and are becoming increasingly resistant to treatment. HPV is causing cancers in both sexes, and there is a strain of gonorrhea in the UK, which is now considered untreatable. Of course, there’s the very real possibility of a new, opportunistic virus, much as we saw with AIDS in the early 80s. A worsening of the outlook in this area could create behavioral changes.

We’re in uncharted territory, and the Sexual Marketplace feels hostile to most people. My own view is that regardless of what is happening in the culture at large, each individual has the agency to formulate and implement a strategy that is most likely to help them meet their personal mating objectives. At HookingUpSmart.com [Update: dead link removed], I’m working on the margins. There are always opportunities in chaos, and hookup culture is no exception.

Wednesday, November 16, 2011

Interview: Sander Daniels of Thumbtack

The responses to the interview questions may not represent the views of The Echo Boom Bomb's author. These interviews are provided to inform readers of information from experts and provide these experts with a medium where they can answer questions without any content changes. All linked material to products in interviews such as books or videos are affiliated with the supported platforms, such as Amazon or others. To see the full list of interviews related to Echo Boomers, iGenZ or Automons, see the ending acknowledgements on this post.

After my recent article on Forbes, When Will the Education Bubble Explode, I had an email exchange with Sander Daniels of Thumbtack, who had some fascinating information to share about student loans, especially regarding liberal arts versus technical degrees.

Anyone Considering Education: Pay Attention To This Interview

This could end up saving you a huge amount of time and money and provide you with many more opportunities than those who went to a "traditional" school. Or if you know anyone who's considering college, forward/email/Facebook/Tweet this to them immediately.

1. You recently released data "showing that service professionals with a bachelor's degree earn no more than those with a technical college degree." For readers, explain the details and finding of these data and what this means for people considering a bachelor's versus a technical degree..

Thumbtack is an online marketplace for local services. So anyone who offers any kind of local service - from a contractor in Los Angeles, to a portrait photographer in Minneapolis, to an ice cream truck in Houston, etc. - can list themselves on our site. More than 225,000 independent professionals have listed themselves on Thumbtack since 2009.

We surveyed these professionals and asked "What is the highest level of education you have reached?" A little more than 11,000 people responded, with answers ranging from "high school degree" to "doctoral degree".

Since these professionals advertise their services on Thumbtack, they frequently list the price at which they offer their service. For example, this photographer offers her service at $95-195 per hour.

We found something very surprising when we mapped average hourly rate against educational achievement. We expected to see hourly rates rise with a higher level of education, and that's exactly what we found - except that the hourly rate for those with technical degrees and those with undergraduate degrees was exactly the same.

These findings aren't conclusive - perhaps Thumbtack members with technical degrees and undergraduate degrees aren't representative of all people with technical degrees and undergraduate degrees. And there are certainly advantages to getting a broad education at a four-year college over getting a vocational education at a two-year school.

But if I could go back in time and choose between a four-year liberal arts degree and a two-year technical degree, these data would make me think twice. These data at least make it clear that more education doesn't always mean a higher income.

2. You mentioned that you work with a team of Echo Boomers at Thumbtack. What things do you do there at Thumbtack and how can readers, who may be business owners or local merchants, use your services?

Thumbtack is a relatively young company. We're a company of 12 people based in San Francisco. We're all between 25 and 33.

It's a fun place to work - not only do we have an open working environment with a private chef who cooks meals every day, but we also feel like we're creating something truly innovative - and helping out small businesses in doing so.

Thumbtack offers small businesses and independent professionals a home online. It's free to list yourself and advertise your services on our site. In general, people really like the look of their profile - some people spend hours setting it up, filling it out, and making it look nice.

We also bring work to you. If someone comes to our site looking for a caterer for their holiday barbeque, we'll email that job to those in the area who can do that service. This is how we make our money - it costs a bit of money to respond to that client and pitch your services.

In general, the response to Thumbtack has been overwhelmingly positive, and we look forward to coming to work every day. More than 4,000 small businesses list themselves on Thumbtack every week, and a new user signs up on our site every minute of every day.

We love what we do, and encourage you to check us out!

Thursday, November 10, 2011

Wednesday, November 9, 2011

Who Killed the Electric Car? No One.

Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.

Some already out, and more coming during 2012, these 3 electric cars should be top sellers and expect more electric cars to come.

The Coming Electric Car Boom: 3 Hot Electric Cars

Tesla Roadster: the expensive electric car that's already in the market. But Tesla Motors is already creating other electric cars that will appeal to average consumers. What's more interesting than Tesla Motors? Their CEO: Elon Musk. The next Henry Ford or John D. Rockefeller, anyone?

Nissan Leaf: an expensive electric car, but one that will appeal to some middle-class environmentalists.

Mitsubishi i [Update: dead link removed]: remember that Mitsubishi is number 2 in car sales to Echo Boomers, and this addition will help seal their top position for the next generation.

Trust me, there will be naysayers: "Oh those are just TOO expensive" which will easily fall to pieces when gas prices rise above $4 a gallon (and they will in the long run). Also, recall that all new technology costs a lot of money in the beginning, but becomes cheaper in time (see the below video of Bill Gates talking about energy).

Starting around 1:20

Now the price of energy has come down over time [see graph in video to see how far its fallen]. Really advanced civilization is really based on advances in energy.

...

Even in the 1900s we've seen a very rapid decline of the price of electricity.

Video link (video embedding is no longer supported).

(I wrote this post in honor of my dad, who said that electric cars would never succeed because oil companies would stop them. I think they will succeed.)

Wednesday, October 12, 2011

Oph Topik: Disrespecting Private Property

Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.

It's peaceful now [Update: dead link removed], but what if things continue to heat up?

Protesters showing up at millionaires' and billionaires' homes is crossing over the line of private property. I've warned others before this event and I'll continue to warn people: America has raised a generation that does not respect private property (Echo Boomers). While I don't agree with any of this behavior, I view the behavior of some wealthy people extremely foolish. Provoking envy historically causes major problems.

(As anyone who's travelled to other countries will tell you, most wealthy people around the world do not show off their wealth. This human behavior (showing off wealth) has generally been a sign of a stable society. But a stable society never lasts. As that former stable society becomes unstable, any sign of wealth could cause you to quickly become the victim of a crime. Given my predictions about Echo Boomers, what do you think that best course of action will be in the future?)

Of course, failure to respect private property will produce abysmal results for everyone - including the people disrespecting private property. Look at history. Still, showing off to make people feel envy is an action that produces an opposite reaction that is never good.

Echo Boomers Don't Value Privacy

I've noted to thought leaders to remember that Echo Boomers do not value privacy (theirs or yours). Privacy is a simple example of private property and they don't value it. A fellow thought leader once note to an audience we spoke to that the downloading of music without paying showed that Echo Boomers didn't care about other's work or property.

As I've warned and will continue to warn, this generation does not respect private property from your intellectual endeavors to your privacy to even your home and property.

Monday, October 3, 2011

Do Echo Boomers Want Money, Sex or Self-Esteem Boosts?

Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.

A humorous Monday article on what the Millennial generation prefers.

The Highest Reward

Echo Boomers [updated link] apparently will take a self-esteem boost over money, food and sex. Granted, studies like this can be heavily affected by the survey's wording (ie: "your preferred self-esteem boost"). Some thoughts before taking away anything from this survey:

1. A self-esteem boost could be any number of things. Echo Boomers might think of a raise as a self-esteem boost, in which case they would be making more money. They may also see hooking up with a hot boy/girl as a self-esteem boost. Notice how alcohol consumption scored very low - this of all the options would have the lowest affect on an Echo Boomer's self-esteem (or so I would imagine). However, an Echo Boomer's favorite self-esteem boost still beats more money, sex, etc.

2. The article highlights the repeated point that Echo Boomers are the trophy generation. Echo Boomers grew accustomed to receiving feedback on a regular basis and Penelope Trunk has noted this as well - Echo Boomers love feedback.

In interacting with thousands of Echo Boomers, I have observed that they highly value verbal positive feedback over many other forms of praise and they like this praise public. The more public you make the praise, the more rewarding it is for them. In a few tests that I've done, I noticed that public praise beat actual rewards like gift cards. This does align with them receiving participation trophies when they were younger and being praised for participating in sports, even if they didn't win anything.

3. Businesses and employers have a variety of ways to use this. Don't assume that traditional rewards will affect Echo Boomers in the same way that they would affect Generation X or Baby Boomers. One tip for readers I advise business leaders: start with public praise and evaluate the results. You may not need further rewards with Echo Boomers.

4. This does not apply to all Echo Boomers. Male Echo Boomers, especially married males, show a tendency for traditional rewards (higher pay, etc) because they have more responsibilities. "Feeling good from praise" doesn't pay bills or help your kids go to college.

Don't Miss the Behavioral Pattern

As I repeat multiple times when speaking about Echo Boomers, this generation obsesses over attention and validation from others. This differs from Baby Boomers, who wanted to move out in the middle of nowhere and do their thing and Generation Xers who were abandoned by everyone and sought an "I-can-get-it-done" attitude without help. (This is why I chuckle when Echo Boomers tell me, "Everyone wants attention." Actually, no. Some people do not and also understand its dangers.)

Echo Boomers make a daily choice to overshare their life. Why? They need someone to like it! Think about how many activities that you've done that none of your friends would like? Echo Boomers would feel horrified at the thought of doing things their friends don't like or envy. This is why Echo Boomers love social media. They want praise and a "like" or "positive comment" rewards them in their special way.

Monday, September 26, 2011

The Internet Beats Dating, Partying, Status Symbols

Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.

After a few serious weeks covering Echo Boomers [updated link], it's time for a funny article about the Millennial generation.

For Generation Y, the internet ranks as most important, according to an article [Update: dead link removed], over things like partying, dating, going out with friends or even status symbols (like cars). Get this: over half of respondents - college students and young professionals - stated that they could not live without the internet. Obviously, every non-Millennial knows that we all can live without the internet and some older individuals spent most of their life without it.

Remember that Facebook will assimilate you:

More than one in four (27 per cent) college students will rather update their Facebook account than to hang out with friends.

Note that nine of 10 of these students have a Facebook account — of those, 81 per cent check it daily and 33 per cent at least five times a day.

Mark Zuckerberg must absolutely love this generation.

The funny thing about this is that I still recall the time when the internet was only for nerds. In high school, surfing the internet was "not cool," in the same way that having a website, knowing what "www" meant, or having an email account was "not cool." Yet now, 90% of students have Facebook accounts, and I'm sure that trend will continue to rise across the Millennial generation.

This isn't to say that Echo Boomers will always feel this way. They may look back at their time spent on the internet as waste in the future, but for now, they're obsessed. For iGenZ, they only know of a world with the internet and we'll see how that affects their mindset and activities.

Saturday, September 24, 2011

Facebook Will Assimilate You

Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.

Fascinating read about the social network, Facebook. Notice:

Facebook, in short, aims not to be a Web site you spend a lot of time on, but something that defines your online — and increasingly offline — life.

Mark Zuckerberg is quite ambitious, and I have little doubt that his company will continue to perform well. If the trend hasn't happened already, I would expect few people to not be on Facebook over time.

Wendy: You do have a Facebook page, Stan!

Stan: Oh [bleep] No, I just got that because Kyle ...

Wendy: Yeah well I saw your page Stan. Relationship status: single?

Stan: Relationship status, I didn't even pay any attention to ...

Wendy: You like being single, Stan, so that you can use Facebook to find other girls? According to your Facebook page we aren't friends.

Stan: All right, I'll add you as a friend, I'm sorry.

Wendy: And you better change your relationship status to in a relationship!

Stan: How?

Wendy: By editing your profile under basic information!

See, even Stan Marsh had to join.

As I've privately said many times, I highly respect Mark Zuckerberg because he understands people better than many people understand themselves.

Tuesday, September 20, 2011

Are We Seeing the Rise of Relationship Quickies?

Note that this article has been updated to also include some of the private discussions with thought leaders in the past. You can read my final overview of my research into the Millennial generation along with what I predicted and what happened as they matured at this link. While I still speak about Echo Boomers and iGenZ privately, I seldom add new articles to this specific blogspot site. If you're reaching out about a speaking engagement, you can contact me at the research firm SqlinSix.

During my junior year at university, I listened to a social psychology professor discuss a new trend that was beginning to emerge called serial monogamy. He pointed out that in the past people married for life, but that as time went on, this lifetime view of marriage had become impractical. What someone needs in their life in their twenties might be very different than what they need in their forties, for instance, and thus we shouldn't expect to see the long term relationships of our grandparents.

And along came Echo Boomers.

So Long Marriage?

Look at the Pew Research Data:

[Update: dead image]. Image showed 21% of Echo Boomers married.

And from my own short study, I confirmed Pew's numbers - 21% of the Echo Boomers I communicated with were married.

Notice that in the Pew Research Data when the age range of each Generation was 18-29, 29% of Generation Xers were married, 42% of Baby Boomers were married, and 54% of the Silent Generation were married. As they aged, 64% of Generation Xers married, 67% of Baby Boomers married, and 57% of the Silent Generation married (notice the large number of widowed individuals in this generation due to its age). Yet 21% of Echo Boomers are married and their current age range is between 16-31. The numbers seem to indicate that the Millennial generation won't marry like its parents and grandparents.

The Millennial generation dislikes marriag, and even if they marry, Echo Boomers see divorce as convenient exit. While traditionalists may bemoan these trends, we are seeing exactly what my professor mentioned: the view of relationships is no longer a lifetime commitment, but a periodic partnership.

Pertinent Side Note:

I've noted 4 major reasons why Generation Y won't marry like other generations:

1. Even if marriage rates tripled, Echo Boomers would still have the highest non-married rate of any generation.

2. Echo Boomers have seen more divorce than other generations and will be more reluctant to marry.

3. Single parents pose a problem for those seeking to marry; how many non-parents will be open to marrying a parent?

4. More single people mean more option, plus it changes the attitude of not having a seat when the music stops.

Still, Echo Boomers may change their opinion about marriage and marry much later, even if I don't see this happening.

"Let's [Date/See Each Other/Hook-Up/Move-In/Marry]" ... For Now

Many relationships seem to be based on emotional circumstances today, though emotions often ebb and flow unbeknownst to the one experiencing the emotion. If people base their relationship off feelings solely, and not on logical factors, we should find short-lived relationships no surprise.

"Yeah, I'm married, at least for now. I'm not sure if I'll continue this marriage five years from now," one Echo Boomer said when we discussed future financial goals. "To be honest, I needed it at the time because one of my parents died, and opening up to someone made a lot of sense, but not so much anymore."

In other words, this Echo Boomer sees relationships as a way to meet emotional needs during certain seasons of life, but as those seasons change, the relationship no longer makes sense. In addition, as she mentioned later the legal system makes it easy to divorce. Since her husband made more money and had more money than she did, she will probably also end up getting some extra funds as well when she terminates the divorce. I've spoken with many Echo Boomers who stayed in a marriage long enough to collect alimony and even told me that they had set out to do just that from the beginning.

Some in the Millennial generation are more casual than that, though. "Ehh, I'd just prefer to hook-up for a few months and then be done with it," another Echo Boomer said as we discussed what our hobbies were. "My parents were too unhappy when I grew up and I don't want that." Make no mistake, this Echo Boomer, like others, still sees emotional value in having fun for a while, but exiting when it becomes stable and patterned.

These stories have not been unusual since I started studying the Millennial generation in a financial manner. Relationships come up (in rapport-building questions), and the responses toward major relationships are always casual. Even in a face-to-face manner, Echo Boomers often deny interest in long-term relationships, though this can sometimes be an attempt to play off their desires (a lesson in statistics that many won't teach you in a statistics class is that people are often unaware of what they want and what they do; for instance, people report spending their money in one way, while an audit would show the opposite.

Of course, a few Echo Boomers still report wanting to be married for life. "That's my major goal," one said, "I'm just beginning to doubt that it will ever happen." And for those who actually want a lifetime commitment, they must realize that their peers may not.

What Socioeconomic Trends Do You See In the Future?

Of course, any prediction can fail to come true. Echo Boomers might end up with a higher marriage rate than any other American generation. Or, they may end up with the highest divorce rate. Or they may end up with neither. However, based on the current data, trends and anecdotes, I predict:

1. 33-40% of Echo Boomers will never marry (this only pertains to straight marriages; I do not know, if legal, how many gay marriages would occur due to insufficient data).

2. Of the Echo Boomers who marry (60-67%), they will have a higher divorce rate than previous generations. Remember, that subsequent marriages are included in this: if an Echo Boomer marries once, then divorces, marries twice, then divorces, marries a third time, and remains married, that would count as three marriages and two divorces (a divorce rate of 67% for applied mathematicians; 66.66666666% for theoretical mathematicians).

3. Since fewer Echo Boomers will marry, I'd expect that marital problems, like infidelity, psychological abuse and relational conflicts will increase because a large portion of Generation Y will be single. Do single individuals respect institutions like marriage if they are not a part of it (some might, some might not)? Add to that fact that single individuals often engage in different activities than married individuals, but married individuals may still have a mix of married and single friends.

[Update: dead image]

4. Male Echo Boomers will be more likely to move away from cities than former generations of males. To be fair, I've already noted this trend (it also has happened in Japan). At this present time, however, I'd expect most male Echo Boomers to stay in the cities for educational purposes, but post-education, some of them will exit and join rural communities or they will leave the United States. Now consider that in order to lower marriage rates (among heterosexuals), all you need is fewer members of one gender in a social community. As for the male Echo Boomers who start their life in another country, I have no predictions for this group, as the incentives I'm discussing only exist in the United States.

Any Business Opportunities or Perils For the Future?

[Update: dead image]

Any business that requires marriages to exist, such as marital law, family counseling or engagement jewelry, will be impacted. While those industries may do well with the Echo Boomers who marry, the amount of businesses that will do well will decrease. The industries will become increasingly competitive, though it will be easier to determine who will marry, so marketing overall will be cheaper.

In the meantime, businesses that sell products to single female Echo Boomers and single male Echo Boomers will see the most growth.

Friday, August 12, 2011

Interview: Austrian Economics With Dr. Paul Cwik

The responses to the interview questions may not represent the views of The Echo Boom Bomb's author. These interviews are provided to inform readers of information from experts and provide these experts with a medium where they can answer questions without any content changes. All linked material to products in interviews such as books or videos are affiliated with the supported platforms, such as Amazon or others. To see the full list of interviews related to Echo Boomers, iGenZ or Automons, see the ending acknowledgements on this post.

Instead of any Millennial Q and A this Friday, I recently had an exchange with Dr. Paul Cwik, an Austrian economist at Mount Olive College. He blogs at Tillman School of Business and provides some fascinating insights to our economy, for instance Economic Distress Index and Yield Curve Inversions. For further information on these, you can listen to free podcasts [Update: dead link removed] from The Foundation For Economic Education (FEE).

1. The prevailing C+I+G+(net exports) focuses on consumption as the main driver for economic growth and prosperity. What is the main driver in the Austrian view and how does that look in comparison.

The classic Keynesian formulation for measuring the Macroeconomy is National Income (Y) = Consumption (C) + Investment (I) + Government Spending (G) + Net Exports (X-M). In this formulation, Y = GDP and so it is true that C is the largest share of GDP. The rational conclusion is that GDP will move whenever C moves. In other words, C is the prime mover (main driver) of GDP.

The unfortunate part of the story above is that it is NOT a complete answer. GDP is a measure of final goods and services. It is constructed in the above manner so that double counting does not occur. While GDP does a fair job for what it was designed to do, it does not reflect the overall health of an economy. Just take a moment and think about what we mean with "the final goods sectors" of the economy. The final goods and services sectors are the "Do you want fries with that?" sort of jobs. Most jobs (and really most business activity) does not take place at the consumer level.

It is true that the only reason why we go to work is in order to consume later. We first enter the market place and sell (usually our labor services) to others before we can withdraw goods and services from society. Each dollar is a representation of service. We gain them by serving others. The way in which a market economy reflects the degree of service that we provide to others is through the accumulation of money.

A portion of these dollars are then used to consume, while the rest are saved. We defer consumption. When we choose not to run out to the store and blow the entire paycheck, we are deferring consumption. This suspension of consumption frees up resources to be used in other ways, namely used in the formation of capital.

Capital is absolutely essential for an economy to grow. Not only does it increase the productive power of the individual, it also allows individuals to create something new--products that would never come about otherwise.

And so we see the "Magic Formula" for economic growth: Savings leads to investment; investment is used to build capital equipment; and capital increases our productivity. As we become more productive, we become more valuable as workers. In other words, our real wages rise as a result. The increase in productivity also expands output, which increases our ability to consume. In short, this is how we raise our living standards.

So while the Keynesian economist focuses on the short-run aggregate of Consumption, the Austrian economist looks for the larger picture. When consumption falls, the Keynesian says that this is a calamity and must be reversed at all costs. It requires government to tax and spend in order to boost aggregate demand and supplant the drop in consumption.

Meanwhile, the Austrian economist sees that there is a trade-off between present and future consumption. A decrease in today's consumption is not the end of the world. We are deferring consumption and building up capital for future output expansions. In fact, the Austrian will see the government's attempts to prop up aggregate demand as not only delaying the inevitable, but it is a waste of resources, making a bad situation worse.

Do you want more details about the Austrian Theory of the Business Cycle? Click here to watch Dr. Paul Cwik at FEE. He provides a great Power Point presentation and further details (you can pull up his Power Point slides directly [Update: dead link removed] as well to see a comprehensive view of the Austrian view of Business cycles).

2. How would an Austrian economist view a consumption tax as opposed to an income tax?

There is no real answer here except for personal preference. Murray Rothbard wrote an excellent article called, "The Myth of Neutral Taxation." [Update link]. It is a little long, but the short summary is that all taxes distort the economy somehow.

A tax on beer reduces beer consumption. Why? Because a tax is a disincentive for whatever is being taxed. So a tax on consumption discourages consumption and an income tax discourages earning an income. While it is true that people need to consume and earn an income, that idea misses the economic point. People will do less of the taxed activity. Government is putting its thumb down on the scales and tilting it in a particular direction.

The best that I, as a citizen, can hope for is a minimization of governmental distortions to the market place. In order to achieve that, taxes must be broad, not favoring one group over another, and light. Both consumption taxes and income taxes can be broad and light. The question isn't which tax is better, the question should be which is lighter?

I am in favor of the system that taxes in the least burdensome manner.

The devil is in the details when it comes to measuring burden, because we can't assume that people will voluntarily pay taxes, nor can we assume that the bureaucracy will be incorruptible and efficient. As a result, it comes.

3. This blog is concerned with the Millennial generation, many of whom have told me that they feel helpless about our current economy. However, are there ways in which Echo Boomers can help Austrian economics become an influential view point in public policy decisions? And if so, what would those be?

Leonard Read was the founder of the Foundation for Economic Education (FEE) [Update link]. He would talk about how when he golfed, no one took any notice of him. Then he observed that if Arnold Palmer showed up, he (Palmer) would be mobbed. Everyone would want to meet him, shake his hand and then ask him about his thoughts on their swing, form, grip, etc. Why would no one mob Read, but they would mob Palmer? The answer is obvious--Palmer was an acknowledged expert in the field of golf.

People seek answers to questions from those they think are knowledgeable in different fields. When it comes to the field of economics, each of us has to become more expert. We need to deepen our own understanding of the topic. If we don't, then we won't be able to answer questions.

The next thing that Read would do is turn off the lights in the lecture hall and turn on a single light bulb. The light bulb had an adjustable dial. He would set it at the lowest setting. In that dark room, even the lowest setting drew everyone's eye to it. We are the light bulbs. As we acquire more knowledge, we become brighter. People will find out where the bright bulbs are. They will seek them out. We cannot go out and attempt to bludgeon others with our ideas. People are attracted to the humble. They are turned off by the loud.

This creates a dilemma for us. If we are to be quiet and humble, how can we have our voice heard in the shouting match that we call civil discourse? Well, there is a world of difference between being quiet and not saying anything. We don't have to shout down our opponents. We have truth, reason and empirical evidence on our side.

Now that I am a parent, find it difficult to remember that I don't have to yell at the kids. I have all of the power. If don't do X, they don't get Y. It's really that simple. I don't have to yell.

Obviously, we are not the parents of the US and so we don't have that same power. Nevertheless, we don't have to yell. People are naturally attracted to positive, optimistic, good-natured individuals who can emote their concern with others. We, each, have the capacity to be nice. Be nice and really mean it.

What concrete steps can we take? Well, there is no single answer to this. THERE IS NO CENTRAL PLAN FOR FREEDOM. Each person is the author of his own life. Each must determine what is the best use of his individual talents, and then act.

However, I will give you one concrete example.

My suggestion is to go to one's Town Council meetings. These are usually small, local affairs. Very few people attend. As a result, you will stand out. Almost always there is an open forum for people to address the council. I suggest that you attend each meeting. For each meeting prepare a 5 minute talk on a specific topic that relates to the Free Market and a local issue. Educate. Be kind. Demonstrate that you are a light. Show that you are interested. The local newspapers will initially cover you. You can then build on that exposure.

The goal is to change the hearts and minds of those who are interested in the levers of power (i.e., the people at the council meetings). You must never lose your temper. Must always be above reproach. Must always be dressed nicely (but not over the top). Try to present alternative solutions to local problems. If such things are attainable in a small community, then the larger communities will start to notice. It takes persistence, but it does not take a genius. It takes you.

Awesome stuff. I appreciate Dr. Paul Cwik taking out the time and answering these questions, and I hope that it offers a good introduction to Austrian economics. I cannot recommend the FEE podcast [Update: dead link removed] enough. Also, be sure to check out Dr. Paul Cwik’s blog, Tillman School of Business.