Plan B Forum

The Asshole Theory of Profits
I’m reading Evicted: Poverty and Profit in the American City by Matthew Desmond and it’s wonderful. You should read it too if you haven’t already.

In the middle of the book is a section in which the likely profit of one of the two slumlords Desmond tracks is estimated. Roughly speaking, he takes in about half a million net of all expenses from a single trailer park south of Milwaukee. To do this he has to make decisions every day that crush the lives of desperately poor people. (Yes, people with drug issues, chaotic family lives and spotty maintenance habits, but real, breathing human beings all the same.) He evicts some who have no place to go. He charges rents that absorb nearly all the renter’s monthly income. He skimps on repairs. He does things that most of us could never do, and his reward is an income a lot higher than ours.

So what is the economic explanation for raking in half a million with relatively little work or skill? He paid just over two million for the entire park, so his rate of return is 25%—rather more than the opportunity cost of capital. In a competitive economy, either there would be a flood of new trailer parks built to chase these superprofits, or, if that were prevented by regulation, the price of the property would be bid up so its return was back to normal. We need to understand this.

That’s where my asshole theory comes in. There are a lot of highly lucrative opportunities out there that require you to basically sell your soul, to act like a jerk. These are businesses or managerial jobs where you gouge money out of people or force them to work longer and harder or more dangerously than they want. Your kid is sick and you want to stay home with him? Do that and you’re looking for another job. I’m sorry, putting on that gear each time you’re exposed to this machine takes too long; if you don’t like the risk go somewhere else. It’s not my problem you had to pay the utility to keep your heat on and you don’t have enough for rent this month; you’re out of here. Most of us can’t do this, but a few can.

Incidentally, this should not be thought of as a compensating differential process. Whatever their initial feelings, people who choose this way of life quickly become inured to it and may even derive some pleasure from taking out their frustrations on those below. You can see this in the portrait of the other slumlord in Desmond’s book, who started out with a bit of idealism but is being transformed, step by step, into someone who sees herself meting out justice when she throws tenants out into the street. In winter. In Milwaukee.

My theory is it’s a scarcity rent, pure and simple. There’s a shortage of qualified assholes, and the ones who have what it takes to do these jobs earn the rewards. Indifference to the hardship of others could be described as a form of human capital, and it earns a high return in an exploitive society.
Posted by Peter Dorman at 1:26 PM

Burning Petard wrote:I look at this slum lord as perhaps an asshole, but definitely a good follower of the "Opportunity Gospel" school of Christianity. see Matthew 15:14-20 and Luke 19:12-19. Generally known as the parable of the talents. The lesson leaned is that a 100% return on investment is barely acceptable.

snailgate

Burning Petard wrote:I look at this slum lord as perhaps an asshole, but definitely a good follower of the "Opportunity Gospel" school of Christianity. see Matthew 15:14-20 and Luke 19:12-19. Generally known as the parable of the talents. The lesson leaned is that a 100% return on investment is barely acceptable.
snailgate

the parable of the talents has been seen as an exhortation to Jesus' disciples to use their God-given gifts in the service of God, and to take risks for the sake of the Kingdom of God. These gifts have been seen to include personal abilities ("talents" in the everyday sense), as well as personal wealth. Failure to use one's gifts, the parable suggests, will result in judgment.

Burning Petard wrote:Rubato, you are depending on contemporary use of the word talent. When this story took place a "talent" was a unit of weight, or that weight in silver as a monetary unit, it was about SIXTY POUNDS of pure silver. In the story in Matthew, the money was huge, more than the lifetime earnings of an ordinary laborer. The story in Luke is a smaller unit a minas, about 60 minas equal to one talent. The story is specifically about return on investment for a a'master' who is notorious for 'reaping where he did not sow." Do you have a better metaphor for exploitation of workers?

snailgate

Yep. That is the traditional Religious way to make the story palatable for us today. And why is it not actually about money? Look at the context of the story, at least for Matthew, it is clear that this is a story about final judgement

Certainly, even in the traditional current 'Christian' mainstream view of the Talents parable, those with small talents are screwed.

MajGenl.Meade wrote:... IMO

RayThom wrote:

MajGenl.Meade wrote:... IMO

Yes, that's also how I interpret the bible. It means what you need it to mean.

MajGenl.Meade wrote:

RayThom wrote:

MajGenl.Meade wrote:... IMO

Yes, that's also how I interpret the bible. It means what you need it to mean.

You are confounding ignorance with modesty.