Skip to content

The End of Director’s Law?

August 10, 2010

Many have long believed that big government helps the poor at the expense of the wealthy. But back in the glory days of economics at the University of Chicago Aaron Director noticed a recurring theme in the way democracies cut the pie. Given the power to tax and redistribute, you might expect those on the bottom (plus one to gain a majority) would form a coalition to snatch away the wealth of the top 49 percent. But this doesn’t happen. Director teased out why: forming a winning coalition requires intelligence, effort, organization, endurance, resources, indignation…capabilities the poor simply do not have. This is part of the reason why they’re poor, after all. For the very same reasons they struggle in a free market, they fail in the political market too. By Director’s logic and contrary to popular belief, the big jackpot winners in democracy are the members of the motivated middle class. They take from the rich and the poor. (Here’s George Stigler’s paper on Director’s Law.)

Today Eric Falkenstein says the middle class is no longer the dominant coalition in the U.S.. Instead, we have a bar bell coalition made up of the political savvy and the lowest classes. He says it’s the end of Director’s Law:

So, perhaps every society has a different optimal coalition at various times, and currently I don’t see what will keep it from bringing everything down to the coalition of a few elites, sincerely deluded as to their belief in the virtue of government spending, combined with a vast entitlement mob at the bottom, all literally feeding off the middle class. It sounds a lot like South America.

I’m not certain Eric’s got it right here, though. I wouldn’t repeal Director’s Law yet. There’s a publicly funded middle class that is still grabbing, grasping, gripping, plucking, possessing and raiding quite well. Just like old times. The inexcusable public pensions, the outlandish salaries for cops, tenured public school teachers, and city managers, the coming baby boom entitlement tsunami, increasingly generous student loan programs for increasingly useless undergraduate degrees, bailouts for unions, banks and insiders—all of this is tribute paid by the rich and the for-profit middle to the politically connected. The demographics have changed some, but not completely.

Anyway, Milton Friedman explains Director’s Law here:

Share

147 Comments
  1. July 3, 2014 2:26 am

    Wow, that’s what I was looking for, what a data!
    existing here at this blog, thanks admin of this website.

  2. July 2, 2014 6:08 pm

    At this moment I am going away to do my breakfast, after having my breakfast coming
    over again to read other news.

  3. July 2, 2014 8:41 am

    Thankfulness to my father who informed me concerning this webpage, this weblog
    is truly awesome.

  4. July 1, 2014 8:02 pm

    This is the right blog for everyone who wants to find out about this topic.
    You realize a whole lot its almost tough to argue with you (not that I personally will need to…HaHa).
    You certainly put a new spin on a topic that’s been written about for years.
    Excellent stuff, just great!

  5. July 1, 2014 8:40 am

    I all the time used to study article in news papers
    but now as I am a user of internet therefore from now I am using net for content,
    thanks to web.

  6. June 30, 2014 6:00 pm

    Hurrah! Finally I got a blog from where I be capable of really get valuable information concerning my study and knowledge.

  7. June 30, 2014 10:55 am

    I enjoy what you guys are up too. This type of clever work
    and exposure! Keep up the superb works guys I’ve incorporated you guys to my personal blogroll.

  8. June 29, 2014 3:45 am

    We are a group of volunteers and starting a new scheme in our community.

    Your website provided us with valuable info to
    work on. You’ve done a formidable job and our entire community will be grateful to
    you.

  9. June 28, 2014 2:57 pm

    Attractive part of content. I simply stumbled upon your blog and in accession capital to say that I acquire
    in fact loved account your weblog posts.
    Any way I will be subscribing in your feeds or even I achievement you access consistently fast.

  10. June 27, 2014 6:44 am

    I almost never comment, however i did some searching and wound up here The End of Directors Law?

    | Let A Thousand Nations Bloom. And I do have some questions for you if it’s allright.
    Is it simply me or does it look as if like some of these comments look as
    if they are written by brain dead visitors? 😛 And, if you
    are writing at other online sites, I would like to
    keep up with anything new you have to post. Could you make a list of all of all your community pages like your twitter feed, Facebook page or linkedin profile?

  11. June 26, 2014 8:40 pm

    Have you ever considered publishing an e-book
    or guest authoring on other websites? I have a blog centered
    on the same subjects you discuss and would really like to have you
    share some stories/information. I know my audience would value your work.
    If you are even remotely interested, feel free to shoot me an email.

  12. June 24, 2014 9:50 pm

    This is very fascinating, You are an overly professional blogger.
    I’ve joined your feed and look ahead to in search of extra of
    your great post. Also, I’ve shared your web site in my social networks

  13. June 20, 2014 8:47 pm

    Spot on with this write-up, I absolutely feel this site needs much more attention. I’ll probably be back again to read through more, thanks for the advice!

  14. June 19, 2014 8:47 am

    Wow, wonderful blog layout! How long have you been blogging for?
    you make blogging look easy. The overall look of your site is excellent, as well as the content!

  15. June 19, 2014 8:42 am

    I blog quite often and I truly thank you for your content.
    The article has truly peaked my interest. I will book mark your site
    and keep checking for new information about once a
    week. I subscribed to your Feed too.

  16. June 15, 2014 8:52 am

    Right away I am going to do my breakfast, after having my breakfast
    coming again to read additional news.

  17. June 13, 2014 1:29 pm

    Appreciating the persistence you put into
    your blog and in depth information you provide. It’s awesome to come
    across a blog every once in a while that
    isn’t the same out of date rehashed material. Wonderful read!
    I’ve saved your site and I’m including your RSS feeds to my Google
    account.

  18. June 7, 2014 4:18 pm

    I’ve been browsing online more than three hours these days, yet I never discovered any interesting article like yours.
    It is pretty value enough for me. In my view, if all webmasters and bloggers made good content as you did, the net will likely be a lot more helpful than ever before.

  19. June 6, 2014 9:17 pm

    Hurrah! Finally I got a website from where I know how to actually obtain valuable information regarding
    my study and knowledge.

  20. June 5, 2014 3:30 am

    If some one desires expert view on the topic of blogging
    then i recommend him/her to go to see this weblog, Keep up the fastidious job.

  21. June 1, 2014 6:39 pm

    What’s up, of course this article is genuinely good and I have learned
    lot of things from it about blogging. thanks.

  22. June 1, 2014 11:58 am

    We’re a gaggle of volunteers and opening a brand new scheme in our
    community. Your website provided us with helpful info to work on.
    You’ve done a formidable process and our whole group will probably be thankful to
    you.

  23. May 31, 2014 12:16 pm

    When someone writes an piece of writing he/she keeps the plan of a user in his/her brain that how a user can understand it.
    Therefore that’s why this post is amazing. Thanks!

  24. May 29, 2014 9:14 am

    For most up-to-date news you have to visit web and on world-wide-web I found this site as
    a finest web site for newest updates.

  25. May 28, 2014 7:16 pm

    I know this if off topic but I’m looking into starting my own blog and was wondering what all is needed to get set up?

    I’m assuming having a blog like yours would cost a pretty penny?
    I’m not very web smart so I’m not 100% certain. Any recommendations or advice would be greatly appreciated.
    Cheers

  26. May 28, 2014 12:49 pm

    This article will help the internet viewers for setting up new webpage or
    even a weblog from start to end.

  27. May 27, 2014 2:48 pm

    If you would like to obtain a good deal from this article then you have to apply such methods to your won website.

  28. May 26, 2014 11:02 pm

    It’s a pity you don’t have a donate button! I’d without a doubt donate to this
    superb blog! I suppose for now i’ll settle for book-marking
    and adding your RSS feed to my Google account.
    I look forward to new updates and will talk about this site with my Facebook group.
    Chat soon!

  29. May 26, 2014 10:46 am

    I always emailed this blog post page to all my contacts,
    for the reason that if like to read it afterward my links will too.

  30. May 26, 2014 8:51 am

    Prilosec OTC is the trusted name when it comes to the relief
    of heartburn, indigestion, dyspepsia, peptic
    ulcer disease, Zollinger-Ellison Syndrome and many more.
    If you are encountering heartburn, ask your health care provider about the medicines that you are taking.
    A qualified golfer is equipped with particular equipments that are needed to play the game.

  31. May 25, 2014 11:01 pm

    Hey I know this is off topic but I was wondering if you knew of any widgets I
    could add to my blog that automatically tweet my newest twitter updates.

    I’ve been looking for a plug-in like this for quite some
    time and was hoping maybe you would have some experience with something like
    this. Please let me know if you run into anything. I truly enjoy reading your blog
    and I look forward to your new updates.

  32. May 24, 2014 5:28 am

    I am regular visitor, how are you everybody? This article posted at this site is in fact nice.

  33. May 22, 2014 3:21 am

    I do not even know how I ended up here, but I thought this post was great.
    I do not know who you are but certainly yyou aree going to a famous blogger if
    you are not already 😉 Cheers!

  34. May 21, 2014 5:37 am

    Asking questions are actually nice thing if you are not understanding anything totally, except this post presents
    pleasant understanding yet.

  35. May 17, 2014 8:43 pm

    Every weekend i used to go to see this site, for the reason that
    i wish for enjoyment, as this this web page conations truly good funny information too.

  36. May 17, 2014 7:24 am

    obviously like your website but you need to take a look at the spelling on quite a
    few of your posts. A number of them are rife with spelling
    problems and I to find it very bothersome to inform the reality nevertheless I will definitely come
    back again.

  37. May 16, 2014 7:05 am

    It’s impressive that you are getting thoughts from this post as well as from our argument made at this time.

  38. May 16, 2014 6:30 am

    This website was… how do you say it? Relevant!!
    Finally I’ve found something which helped me. Kudos!

  39. May 16, 2014 12:07 am

    Sweet blog! I found it while surfing around on Yahoo News.
    Do you have any suggestions on how to get listed in Yahoo News?
    I’ve been trying for a while but I never seem to get there!
    Cheers

  40. May 8, 2014 2:07 pm

    Hello, i read your blog occasionally and i own a similar one and i was just wondering if you
    get a lot of spam responses? If so how do you stop it, any
    plugin or anything you can recommend? I get so much lately it’s driving me mad so
    any support is very much appreciated.

  41. May 8, 2014 12:40 am

    Hmm it appears like your blog ate my first comment (it was extremely long) so I guess
    I’ll just sum it up what I had written and say, I’m thoroughly enjoying your blog.
    I too am an aspiring blog blogger but I’m still new
    to the whole thing. Do you have any helpful hints
    for first-time blog writers? I’d genuinely appreciate it.

  42. May 7, 2014 5:33 am

    Hi i am kavin, its my first occasion to commenting anyplace, when
    i read this post i thought i could also make comment due to
    this sensible article.

  43. May 5, 2014 10:04 pm

    It is actually a great and useful piece of information.
    I’m glad that you simply shared this helpful info with us.
    Please keep us informed like this. Thank you for sharing.

  44. April 27, 2014 2:29 am

    Hey there! Do you know if they make any plugins to help with SEO?

    I’m trying to get my blog to rank for some targeted keywords
    but I’m not seeing very good success. If you know of
    any please share. Appreciate it!

  45. Chris permalink
    August 11, 2010 4:27 am

    Interesting link, I am surprised at the part he mentions about income correlation in adopted twins. However, at the risk of bickering over words, correlation between levels of income and personality/intelligence is a lot easier case to make than that the poor in any society have that status because they are inferior in so many ways. Employers tend to select for certain types of individuals for a given job, but I don’t think the income level of those jobs is determined by the overall personality traits or intelligence needed to perform it. It’s difficult to come up with an example, because these traits are mostly subjective, but let’s say that it seems wrong to conclude that since most math professors make considerably less than most lawyers that they are also considerably lacking in valuable traits or intelligence that the lawyers possess. It seems more likely that personality traits and intelligence cause them to lean towards and be selected for those roles, and some roles happen to pay more than others for whatever reason (I’d certainly pay a guy more to keep me out of jail than to explain differential geometry to me).

    As for the poor in general, it was my view that there’s a large spectrum of reasons people are in such status, everything from stupidity, alcoholism or mental illness to abusive parents and poor career/academic guidance, bad luck financially or living in communities or social settings that discourage any kind of upward mobility. Claiming them to mostly be on some level genetically unfit seems more like self-serving bias to justify elitism, and it’s certainly social Darwinism (discredited in the post-eugenics era, as we all know, although I wish Caplan had linked to the research he claimed supported correlations between heredity and income levels, since it would support such a thesis).

    Anyhow, thanks for the reply.

  46. Chris permalink
    August 10, 2010 11:55 pm

    “Director teased out why: forming a winning coalition requires intelligence, effort, organization, endurance, resources, indignation…capabilities the poor simply do not have. This is part of the reason why they’re poor, after all. For the very same reasons they struggle in a free market, they fail in the political market too.”

    Hm, honestly this seems like simple-minded thinking and fallacious logic. But I’ll assume for a moment you’re correct. Can you tell me how this works exactly? I mean, is wealth directly proportional to such traits, so that I can say a person with $10 mil is twice as intelligence, resourceful, committed, etc. than someone with $5 mil? Or are there thresholds, like tax brackets, where people in different classes represent different levels of quality-of-person? Can we say that when someone is poor, then becomes rich, that their intelligence level has obviously grown? Or the opposite if they lose their wealth? Please, do enlighten me. I had always ignorantly thought that such things were largely circumstantial.

    Seriously though, when I hear stuff like this is makes it ever harder for me to keep an open mind to anarcho-capitalism, and not simply label it as farcical attempt to promote harmful levels of deregulation for the interests of the business community. Thanks for pushing me a little farther left. 😉

    • Mike Gibson permalink*
      August 11, 2010 12:46 am

      Chris, many on the left would agree with the facts of that statement. It is a taboo subject, but yes, intelligence and personality traits like conscientiousness correlate with levels of income. I don’t have the research at hand, but here’s a post by Bryan Caplan on the subject:

      http://econlog.econlib.org/archives/2009/05/its_not_who_you.html

      If you’re truly concerned about helping the poor, many on the left think in Rawlsian terms. In the Theory of Justice, it’s accepted as fact that personality traits correlate strongly with wealth. The next step in Rawls’ argument is to say that your personality and what flows from it are arbitrary from a moral point of view. I agree insofar as we ought to think of the institutions and laws that improve the lot of the worst off best.

      A final word: I should have added a disclaimer that I was speaking in general., Yes there are intelligent poor people. Yes, there are dumb rich people. But add up the total and follow the pattern.

      I do not intend for this question to be hostile, but why do you think the poor are poor? Help me change my mind.

      • August 11, 2010 2:34 am

        This comment is not meant to relate to Director’s Law, but Mike’s comment:

        (Apologies if this sounds melodramatic) What is the meaning of life (/our end goal for our lives)? Is it wealth? Is it only things/mostly things that can be bought with money?

        Perhaps the best thing we can hope for in life is happiness and fulfillment. Perhaps there is only a mild correlation between money and happiness/fulfillment.

        Perhaps the “most intelligent” people (whatever that means) realise this fact, and the majority of extremely wealthy are in fact unhappy and, deep down, a little bit disappointed they went through life investing their time maximising the wrong currency (and that the currency they have excess of can’t be converted into the currency that they really wanted all along).

        I have no doubt that poverty leads to discontent. But I am extremely skeptical that past basic necessities, there is a correlation between wealth and happiness/fulfillment (I recently bought a new HDTV, and was disappointed at the return on investment as far as happiness goes. I recently spent an afternoon teaching an adult friend how to ride a bike, which he had always wanted to do. This was incredibly rewarding, and much better and the TV. It only cost me an afternoon).

        I would have thought that happiness and fulfillment is what an intelligent person should invest most of their time trying to maximise.

        http://hbr.org/2010/07/how-will-you-measure-your-life/ar/pr

        Side note:
        How do you propose we measure intelligence? http://en.wikipedia.org/wiki/Intelligence#Theories_of_human_intelligence

        So to reverse your question, “why are the poor poor?”, why are the unhappy and unfulfilled, unhappy and unfulfilled (all the way along the wealth spectrum)?

  47. August 10, 2010 9:23 pm

    I question whether Director’s Law was ever valid. It seems to me that the factors enumerated explain how the powerful use the lower class to take from the poor. This seems to me to explain why the upper middle class is the one with the heaviest tax burden. The rich promise the poor the middle class’s money in exchange for supporting the rich’s agenda.

Trackbacks

  1. Law, Power, and Status « azmytheconomics
  2. Director’s law? « Entitled to an Opinion
  3. Weekend Reading: Last Days of Summer | Invest It Wisely

Comments are closed.

%d bloggers like this: