Twelve years ago at the blog -- Making fun of Megan McArdle columns is like blogger tee-ball

 

 Sometimes it almost feels like real baseball. McArdle is obviously an intelligent person and she's making real arguments that don't immediately collapse under their own weight like some tortured Maureen Dowd analogy, but one swing and they're out of the park.

Friday, March 2, 2012

Bleeding-heart Randians

Once again, Joseph has left it to me to play bad cop on the McArdle beat.

As you can see from the previous post, Megan McArdle has a piece up at the Atlantic complaining about the lack of sympathy for the wealthy when they find themselves in financial trouble.

Likewise, when middle class people take out a mortgage that's perfectly affordable on the income they've been enjoying for years, and then lose the house because they suddenly saw that income cut in half, we don't feel a delicious sense of joy because they finally got what was coming to them.

I keep getting the feeling that McArdle's default approach to complexity is to look at one dimension at a time until she finds a view she likes.

In this case the complexity lies in the way we see financial hardship. We generally react to news of other people's money troubles with a combination of sympathy and disapproval (read Charles Murray for an example of the latter). The level of sympathy is largely determined by where the fall leaves the victim while the level of disapproval depends on how avoidable the crisis seems to be. Both these factors tend to make us react somewhat more harshly to financial problems of the well-to-do.

And in the cases in question here, the avoidability level is up there. The Bloomberg story that McArdle was talking about concerned highly paid executives who are facing hardships because of smaller-than-expected bonuses. This is a very different situation than a drop in salary. Even for the very well paid a completely unexpected reduction in salary can cause problems. The possibility of a smaller bonus should always be expected.

These were financially literate professionals who failed to take into account the potential variability of their income stream and as a result made reckless decisions then failed to own up. This isn't to say that some of these families aren't facing painful disruptions. Of course we feel sympathy for them, particularly the children, but the adults in these situations got there because of bad decisions and now they have to take responsibility for their actions.

At least that's what McArdle used to believe.