Archive for March, 2008

I was surprised to discover some weeks ago that Germans pay out the most in taxes among rich countries in the OECD (at least in terms of income tax and social security payments):

Perhaps my surprise was unwarranted, however, since my own pay stubs provide all the evidence I need. Currently I pay about 22 percent of my monthly earnings in taxes, a tremendously high rate considering how little I earn. What’s more, about half of my taxes (≈10 percent of my income) goes toward social security. I tend to disagree with a government forcing me to save at all, but I find it especially laughable when I’m forced to pay for benefits I will never receive (I’m not planning on retiring in Germany, after all).

To be fair, I can make a claim for a refund when I return to the US, but even that is the equivalent of providing the German government with an interest free loan. One wonders how this practice could be considered anything but unethical in view of the fact that I am coerced—ultimately upon threat of violence—to contribute. Alas, that is simply the nature of the beast.

More worrisome for me at the moment, though, is that my taxes went mysteriously up by about 1.5 percent between February and March. Something pernicious is undoubtedly afoot…

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The Wall Street Journal reports a new challenge in the cutthroat global business environment:

Shake hands? Kiss? Or kiss-kiss-kiss?

This is the quandary for Frank Higgins, one of today’s global business soldiers. He is employed in Glendale, Calif., by Swiss-owned Nestlé USA Inc. as president of two divisions, one of which markets to Hispanics. With so many national customs involved, ordinary office greetings require savoir-faire.

This is not a problem in Germany, of course, where a handshake and a warm “Moin!” is as personal as a greeting gets.

I did, however, face the dilemma the article describes during two visits to Romania, where the double cheek kiss is common as a friendly greeting. I never grew completely comfortable with the practice because my American mind could never quite shake off the perceived suggestiveness of the gesture, especially when it was directed at one of the rather numerous beautiful young women I had the pleasure of meeting.

Nonetheless the practice does become somewhat mechanical after time. I can recollect leaving an event at a high school and walking down a line of four or so teachers, all of whom I dutifully double-kissed as a farewell. I was so caught up in the repetitious process that I did not notice that a middle-aged American whom I did not much care for was standing idly at the end of the line. When I finally reached this woman, I had already begun to lean in before I noticed who it was, and, already committed fully, was thusly forced to see the thing through. To have to fake cordiality and kiss someone whom you are loath to be even near was for me severely upsetting, and I still feel a slight shiver at the base of my spine recalling the event a year on.

If there is such a thing as cooties I contracted it on that day, and I fear no amount of circles, dots, or any combination thereof will inoculate me against so terrible an affliction.

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As I mentioned in the previous post, opportunity cost, though a concept critical to economic understanding and possessing a simple enough definition (“what you give up in order to get something”), is often inadequately apprehended even by economics undergrads. Even I, after having opportunity cost beaten deep into my psyche by one of my professors in college, still fail to apply correctly the concept all too often. As I’ve engaged in further mental self-flagellation since graduation, I’ve found that the best pedagogical whip is nothing simpler than an example. If you’d like to grab your own cat o’ nine tails in the interest of beating irrationality into submission, then read on (and, if learning with a buddy, remember the safety word is “laissez-faire”).

Now let us consider Christmas, where sentimentality always trumps reason:

Suppose Sony has released the PlayStation 4 just at the start of the holidays, and everyone is scrambling to buy the season’s hottest new gadget. You have been dying to get your hands on one at the retail price of $300, but the PS4’s quickly sold out and the only units available are selling on eBay for over $1,000 a pop. Although a PS4 would be nice, it’s not even close to being worth $1,000 to you. It seems you’re out of luck.

Come Christmas morning, however, you are startled to see that Santa left you none other than a PS4 under the tree. Heart beating in rhythm to the cycles of a Banshee’s engine at full speed, you immediately rip open the packaging and start playing Grand Theft Auto 5, right?

Not so fast, Tommy Vercetti.

Santa wants you to be happy, right? He doesn’t care what you do with the gift he has given you; he just wants you to maximize your own satisfaction. And in order accurately to gauge satisfaction, you need to be honest about the costs and benefits of keeping the PS4.

Lucky for you, you already performed a cost/benefit calculation when you tried to purchase a PS4 before Christmas: you were perfectly willing to buy a PS4 at a price of $300, which is simply to say that at that price you deemed the benefits were greater than the cost. Just as importantly however, at a price of $1,000 you were quite confident that the cost far outweighed the benefits.

So what about now?

“Well of course the benefits are greater than the costs” you say, “for I got this PS4 for free.”

But even as this silly utterance escapes the confines of your fleshy lips, you hear a Christmas newscast reporting that PS4 units are still selling for over $1,000 on eBay. It is only then that the truth comes into sharp relief: by keeping the PS4, you are forgoing the $1,000 you that would receive if you sold it on eBay. In other words, keeping the PS4 isn’t free—it would cost you $1,000, and at that price, you recall, the cost far outweighs the benefits for you! Alas, keeping that PS4 would carry a cost you simply aren’t willing to pay. Thus, being ever the rationalist, you sell the PS4 and use the $1,000 towards more satisfying ends.

Somewhere in the distance, you hear a chortling as jolly as gumdrops: “Ho ho homo economicus!”

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The first six months of my stay in Germany were, for better or for worse, without much television. That has changed since I’ve moved to Schwerin, and in the nearly two months I’ve been here the German show I’ve watched most regularly has been Quiz Taxi, where passengers can answer trivia questions for cash as they travel to their respective destinations:

The show is appealing for me because it is straightforward, relatively easy to follow, offers a good way to improve my German, and simply because I like trivia. But what’s interested me as I’ve become a regular viewer is how passengers handle the “Master Question,” which is only offered to those who have won the game by reaching their destination without missing too many questions. With the Master Question, passengers are offered the chance to double the money they’ve won by answering correctly one question of medium difficulty. If they cannot answer correctly the question, however, they lose all their winnings.

Germans, fitting the European mold, are stereotypically risk-averse (in finance and in life), so my expectation was that very few players would choose to play the Master Question since they would conclude that it’d be better off to pocket the money they’ve already won—which usually ranges from 500-1,000 €—rather than risking it even for a possible 100 percent return. To my surprise, however, I’d estimate that about 1 in 3 of those who are offered the chance to play the Master Question do so.

Unfortunately, too many of those who do choose to play seem to do so on an irrational basis, for all too often a passenger will accept the challenge to play the Master Question with some remark along the lines of “Well, even if I lose, I wouldn’t be any poorer than before I started playing.” Upon hearing this, the little homo economicus on my shoulder never fails to start a-wailing, because he understands that the player is failing to consider forgone money as a cost. A player, for example, who has won 500 € in the normal game but incorrectly answers the Master Question will disembark 500 € poorer—in other words, the trip has cost her 500 €. This would be no different than if she had simply handed over 500 € without even playing, it’s just that this explicit cost is easier to see than the implicit cost: in the case of the former, the player’s bank account goes down by 500 €, in the case of the latter the bank account fails to go up by 500 €—either way, the cost is still there. It thus makes no sense whatsoever for a player to opt for the Master Question under the justification that “I wouldn’t be any poorer than before.”

This implicit cost that is unrecognized by so many hapless Quiz Taxi passengers has long been known to economists as opportunity cost, and it is a core concept in economic thinking. Once one has internalized this deceptively simple idea, no decision will ever be viewed the same way.

In the interest of helping readers discover their own little homo economicus, my next post will contain another example of “opportunity cost accounting” (Copyright © 2008 Jeffco Enterprises, Inc.) in action.

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Vernal Venality

Easter is more far more celebrated in Germany than in the United States, perhaps ironic given America’s relgiosity. Perhaps not, if one considers Easter’s pagan antecedant and that most–regardless of nationality, of course–concern themselves with bunnies, eggs, and pastels rather than religious observance.

Addendum: Easter (or rather the office accountant) did bestow upon me a milk chocolate bunny today, which served as my lunch due to my unwillingness to brave the awful weather and fetch something more appropriate come midday. I remain unsure as to whether religious observance would have yielded such fortuitous providence.

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After struggling with his faith in rhetoric in two blog posts, Jeff calls for Aristotle to provide sweet reconciliation. Just then, Aristotle descends from the heavenly firmament—not too fast, not too slowly, but at just the right speed.

Aristotle: Jeff, you called for me?
Jeff: Why yes, Aristotle, I did.
Aristotle: What for, my son?
Jeff: I was having trouble coming up with a suitable conclusion to my thoughts and decided to utilize the deus ex machina.
Aristotle: You’ve never read my Poetics, have you?
Jeff: That and I’ve always been partial to dialogues—wait, what?
Aristotle: Never mind.
Jeff: Anyway, now that you’re here, I need sweet reconciliation.
Aristotle: Concerning what?
Jeff: Your ideas on rhetoric.
Aristotle: Aha! Yes, do continue.
Jeff: My problem is that politicians seem to use rhetoric to lead people away from truth.
Aristotle: Not possible.
Jeff: Why?
Aristotle: Didn’t you read Rhetoric?
Jeff: Yes…
Aristotle: Jeeeeeff?
Jeff: Ok, I skimmed a little. I only read enough to make me sound smart at cocktail parties.
Aristotle: You talk about rhetoric at cocktail parties? What a ball of fun you must be.
Jeff: Go choke on some hemlock!
Aristotle: That was Socrates.
Jeff: Yeah, well it’s all Greek to me.
Aristotle: Touché.
Jeff: Just answer the question, please!
Aristotle: The simple answer is that politicians aren’t rhetoricians.
Jeff: How so?
Aristotle: Well, if I may quote my own work: “the term ‘rhetorician’ may describe either the speaker’s knowledge of the art, or his moral purpose.” Politicians may have knowledge of the art, but we can’t use the term ‘rhetorician’ to describe their moral purpose.
Jeff: So what do we call them?
Aristotle: Sophists. And what makes a man a ‘sophist’ is not his faculty, but his moral purpose–he is not concerned with truth and justice, but instead seeks power.
Jeff: In other words, a politician!
Aristotle: Exactly.
Jeff: Oh, wow–my faith in rhetoric remains! You’re good!
Aristotle: I know.
Jeff: A shame that most of your work is lost to history.
Aristotle: WHAT!
Jeff: Yeah, gone.
Aristotle: Did my cookbook survive?
Jeff: I don’t think so.
Aristotle: Oh, that raises my ire.
Jeff: Hey Aristotle, is it true you were a racist?
Aristotle: I don’t know, what’s a racist?
Jeff: Someone who thinks one race of people is inherently superior to another, basically.
Aristotle: Oh, well yes, then. Of course.
Jeff: And men are inherently better than women?
Aristotle: Does a Spartan train naked? Come man, what’s the point?
Jeff: Wouldn’t you think that might encourage somewhat imperialistic tendencies?
Aristotle: Ok, wait a minute–I see where you’re going with this, and it needs to stop.
Jeff: He conquered virtually the entire known world, Aristotle.
Aristotle: Listen, Alexander was always a little impetuous, but I do not appreciate the insinuation that I was somehow responsible for his conquests.
Jeff: His formative years were under your tutelage. He kept a copy of The Illiad you gave him under his pillow. Don’t you think hearing about the wrath of Achilles roused him up a bit?
Aristotle: Oh for the love of Zeus! Alexander had daddy issues, not teacher issues. Go summon Philip II if you really want to know what was going on with Alexander.
Jeff: Oh all right. Besides, I suppose if we’re going to start blaming philosophers for atrocities committed with the seeming endorsement of their teachings, we’d probably start with Nietzsche anyway.
Aristotle: Ooo–what happened there?
Jeff: Well let’s just say someone with a will to power took Nietzsche’s idea of a master race just a wee bit too far.
Aristotle: I totally fail to see how that the idea of a master race could be misapplied.
Jeff: I know you do–listen, I appreciate all your help with rhetoric and everything, but do you think we can call it a day?
(Deep, gravely voice in the distance): Yes, we can! Yes, we can!
Aristotle: What is that aggravatingly affected sound!
Jeff: Oh crap, it’s Barack Obama—and he’s coming this way! Listen, I don’t suppose you have any drachmas on you, do you?
Aristotle: No—why?
Jeff: Well, he’s always calling for change, so I figured giving him some might be a good way to get him to shut up.
Aristotle: I think you’d best run.
Jeff: Would that I could, Aristotle, but he’s half Kenyan and running marathons is that country’s national pastime. Any other suggestions?
Aristotle: I suggest you forget what I said about the aesthetic undesirability of the deus ex machina and conjure up one to get you out of here. Anyway, I’ve got an appointment to get my beard trimmed. Later! (Vanishes)
Jeff: But you were my deus ex machina! He’s almost here! Oh the humanity!

(Just then, Jeff sits up in his bed in a cold sweat. He realizes it has all been just a dream.)

Jeff: Oh, well that tied everything up nicely, and I didn’t even have to think of a new deus ex mach—oh, right.

–The End–

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In the previous post, I presented two simplified and contrasting views on the worth of rhetoric by Plato and Aristotle. On one side, Plato argued that rhetoric is used to render the rhetorician “more persuasive with the ignorant than he who has knowledge,” while on the other side, Aristotle argued that because “things that are true and things that are just have a natural tendency to prevail over their opposites,” rhetoric serves to bring truth and justice into sharper relief for the masses. One essential difference, as I see it, is that Plato seems to assume most people are credulous and easily lead away from truth, while Aristotle confers on them a higher measure of confidence to vet the worth of the rhetorician’s arguments. I’ve always favored Aristotle over Plato on this matter, but after watching the multitudes—especially my peers—engage in a sort of hero worship for Barack Obama in the past few weeks has given me pause to wonder.

It is only with politics, I think, that my confidence in the worth of rhetoric begins to waver, for it is especially in this murky realm that truth (or at least truth according to knowledgeable experts) can be so blithely ignored or abandoned so that one can become ingratiated with an audience. I pick on Mr. Obama (admittedly unfairly) not because he owns a political monopoly in talking nonsense from time to time, but because he seems to have an above average faculty for discovering the means for persuading the electorate—rhetorical skill, in other words. But Mr. Obama, thus far in his campaign at least, seems to be following the typical political and Platonic path of using his skill to flatter audiences with what they want to hear. In trade policy for example, Mr. Obama’s protectionist discourse, while sounding righteous to workers who have lost their jobs in the Rust Belt, does not reflect the views of most economists (of any political persuasion), nor indeed that of his (former?) economic advisor. And some of it is just flat wrong.

But I am not interested in a Platonic relationship yet. Aristotle granted that rhetoric could be used for disingenuous purposes, even when the audience was smart. He maintained, however, that the propensity of rhetoric would be to the good, and not to the bad. Further, Aristotle argued that rhetoric was necessary because the truth can be boring or hard to understand, so a skilled rhetorician would make truth easier to obtain, using some combination of the following three modes:

The first kind depends on the personal character of the speaker [ethos]; the second on putting the audience into a certain frame of mind [pathos]; the third on the proof, or apparent proof, provided by the words of the speech itself [logos].

Aristotle conceded that while pure, logical argumentation is the best mode of persuasion, it cannot be relied upon alone. The manner in which a rhetorician speaks and the emotions he is able to imbue in the audience also matter.

But alas, though Mr. Obama is good at pathos and ethos, his logos seems to be a no-gos (I already sighed loudly as I wrote that last bit, Dear Reader, so you don’t have to). Worse still, on the things which I am knowledgeable about, Mr. Obama is leading the multitudes away from truth. Is this, and 99 percent of all political discourse, really rhetoric? Give me sweet reconciliation, Aristotle!

Just then, Aristotle descends from the heavenly firmament—not too fast, not too slowly, but at just the right speed.

What tidings he brings will come in the exciting third installment! Stay tuned!

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