Citizen Economists » Economic Theory

Macroeconomics: A reading list

Ajay Shah — Thu, 09 Feb 2012 19:55:58 +0000

Economics is a rich and fascinating subject. But all too often, the teaching process forces young people in the field to look at the tail
of the elephant, to think about macroeconomics as the game of solving dynamic models. There is actually much more going on. (On a related note, you might like to see Books that should be read before starting a Ph.D. in economics on this blog, 18 May 2011).

In this blog post, we walk through the evolution of the key ideas in historical order, and offer suggestions to interesting readings,
which will help you see the fuller picture. Many of them are on your reading list, but some are not.

The old paradigm

Nobody tells it better than The age of uncertainty by John Kenneth Galbraith.

The old paradigm is now in the dustbin of history. But in order to comprehend the revolution in macroeconomics, it is rather useful to start from there. One encounters these arguments from time to time, so it’s worth knowing about the furniture of that mind.

The revolution of modern macroeconomics

The starting point is a speech : The role of monetary policy by Milton Friedman, American Economic Review, 1968, which had enormous influence in arguing that the mainstream Keynesian paradigm was fatally flawed, and that it was not going to work as a guide to policy on a sustained basis. By the early 1970s, the empirical evidence was showing that Friedman was on the right track, which led to everything that followed. This speech is arguably the beginning of modern macroeconomics. At the same time, this was only an argument conducted in English, and not a model.

The next big milestone was the Lucas critique: Econometric policy evaluation: A critique by Robert Lucas, Carnegie-Rochester Conference Series on Public Policy, 1976. This devastated traditional macroeconomics. In addition, it’s a remarkably elegant idea.

Lucas, Sargent and others mapped out a work program in a series of non-technical pieces, which were enormously influential. They set a generation of economists going to build a class of models that were rooted in the intuition of Friedman, 1968, and were invulnerable to the Lucas critique. You should read: Understanding business cycles by Robert Lucas, Carnegie-Rochester
Conference Series on Public Policy, 1977; After Keynesian Macroeconomics by Lucas and Sargent, Federal Reserve Bank of Minneapolis Quarterly Review, 1978; Methods and problems in business cycle theory by Robert Lucas, Journal of Money, Credit and Banking, 1980.

As important as the Lucas Critique was Rules rather than discretion: The inconsistency of optimal plans by Kydland and
Prescott. An accessible set of materials on this work is found in their 2004 Nobel Prize page.

This work came to fruition in the early 1990s in the form of the NK-DSGE model with a policy rule. Important tools got developed in a
classical setting (the RBC model), and then Keynesian frictions were put in, to give the NK-DSGE model. It has many problems, but with this, the Lucas program did work out. Nice readings on the NK-DSGE model are The science of monetary policy: A new Keynesian perspective in the JEL by Clarida, Gali, Gertler (1999), and their Monetary policy rules and macroeconomic stability: Evidence and some theory in the QJE in 2000.

The new macroeconomics is nicely showcased in Technology, employment, and the business cycle: Do technology shocks explain aggregate fluctuations? by Jordi Gali in AER, 1999. This is a wonderful example of confronting empirics with theory, plus a fundamental (if highly controversial) contribution in the eternal quest for the sources of business fluctuations.

On the other side, there is a powerful critique of the micro-founded approach to macroeconomics: The scientific illusion of empirical macroeconomics by Larry Summers, Scandinavian Journal of Economics, 1992.

By the late 1990s, there was a lot of progress to report. There is a nice article: Thirty-Five Years of Model Building for Monetary Policy Evaluation: Breakthroughs, Dark Ages, and a Renaissance by John B. Taylor, Journal of Money, Credit and Banking, 2007. There is the best single book on monetary policy: Monetary Policy Strategy by Frederic S. Mishkin, 2007. And, there are two other nice articles: A stable international monetary system emerges: Inflation targeting is Bretton Woods, reversed by Andrew K. Rose, Journal of International Money and Finance, 2007, and How the World Achieved Consensus on Monetary Policy, by Marvin Goodfriend, Journal of Economic Perspectives, 2007.

The second stage

Once the basic plan was laid, important work emerged in connected fields. A critical issue that came to fore was the role of finance in macroeconomics. Agency costs, net worth, and business fluctuations by Bernanke and Gertler, AER 1989, is the most elegant illustration that financial structure matters for macroeconomics.

We close this off with a canonical reference about fiscal policy from a macro perspective. A good recent treatemnt is Activist fiscal policy to stabilise economic activity by Auerbach and Gale, from the 2009 Jackson Hole symposium.

Post-crisis revisionism?

On this, see Monetary policy and financial stability: Is inflation targeting passe? by Takatoshi Ito, July 2010.

The Cost of Signaling

Simon Grey — Thu, 09 Feb 2012 15:00:09 +0000

Like this isn’t an attempt to split a non-existent hair:

The segregation model predicts that as the society gets wealthier, the dollar cost of college will get higher. The signaling model would not necessarily predict that. In fact, it would predict that the market would try to find less expensive signals.

It’s like Kling has never heard of anyone signaling their status through conspicuous spending. As anyone who has ever observed human beings can readily attest to, there are plenty of people who spend money just to show that they have money to spend. Why shouldn’t this form of signaling extend to higher education?

Let us suppose that college serves as a way for young people to be sorted into their societal roles. Those who go to more prestigious (read: expensive and/or exclusive) colleges will likely come from families that are relatively wealthy.* They will also spend a lot on their education, relatively speaking.

Signaling theory would suggest the exact same thing, for there is a) a general correlation between the cost of college and its prestige and also b) a general correlation between family wealth and college choice. That is to say, the children of wealthier parents are more likely to buy social prestige at college, and will be charged a lot to do so. Now, given the limited number of prestigious colleges and universities, it should be the case that more prestigious universities command a higher price, and that students from higher-class families are able to pay them. Thus, signaling theory predicts an outcome extremely similar to segregation theory.

What Kling neglects, then, in attempting to differentiate segregation from signaling is that some signals do not become “cheaper” over time because some signals only work because they are expensive. What Kling must prove, then, is that the signaling theory of post-secondary education is flawed because college is not a cost-driven signal. Until then, his assertion regarding the predictive ability of signaling theory is incorrect, and his attempt to differentiate between signaling and segregation is pointless.

* There are some general exceptions to this, obviously, as even impoverished minorities can occasionally make it to Harvard. But, for the most part, the people who go to pricier colleges can generally pay for them.

What’s The Point of Financial Aid?

Simon Grey — Mon, 06 Feb 2012 20:00:07 +0000

I suppose that the original intent of financial aid—most particularly scholarships—was to attract good scholars who would be likely to become famous and thus increase the prestige of the university. By offering intelligent, driven individuals an opportunity to be educated for reduced rates or for free, universities could be assured that they would attract some number of desirable students, and increase their prestige. Note that increasing prestige has a tendency to turn into a self-reinforcing feedback loop, which means that increasingly prestigious universities attract increasingly desirable students, thus making the university more prestigious. As such, universities engage in a sort of arms race to increase their prestige, and thus offer scholarships to scholastically-minded students.

However, the role of financial aid has morphed in recent years to serve as a marketing tool, and functions similarly to a price-sensitivity indicator.* By this I mean that financial aid is to colleges as coupons are to grocery stores. The comparison is not perfect, of course, but the general comparison is the same in that both financial aid and coupons both serve to differentiate the price-sensitive from the price-insensitive.

What’s interesting is that both the original function and the modern function of financial aid are both the same: marketing. The original form, though, is less direct and has a longer time horizon. The latter is more price-driven. This suggests that the product has changed in some way. Assuming that a postsecondary education is a way to signal employ-ability, it should make sense that colleges emphasize affordability in their advertising because the signaling benefit has declined due to the increase in noise.

When only a few people graduate from college, there is likely an appreciable difference in the graduates of different institutions, hence the need for prestige. However, if a lot of people graduate from college, it will likely be difficult to discern a difference in the graduates of different institutions. The lesson in all this is that colleges that emphasize prestige in their marketing are colleges that will offer a clear signal of prestige while colleges that emphasize affordability are all likely interchangeable in terms of signal utility. Therefore, if you aren’t going to a prestigious university, the best course of action is to acquire a college education as cheaply as possible. And if you can’t a get a cheap college education, you are probably better off skipping college.

* I recall when I was being recruited by various colleges that many would state what percentage of students received financial aid. There were a large number of colleges that claimed that over three-quarters of their students received some sort of scholarship money.

Redistributing Wealth

Simon Grey — Fri, 03 Feb 2012 17:35:10 +0000

In an axiomatic sense, wealth is always distributed in some way. Likewise, any transfer or exchange of wealth is a redistribution of wealth.

Redistribution of wealth comes in two forms: coercive and voluntary. The former method of redistribution is associated with socialism and, more generally, any statist attempt at transferring the goods or wealth of an individual or group to another individual or group. The latter method of redistribution is associated with capitalism and, more generally, any form of voluntary exchange.

It is obvious, then, that wealth is continuously redistributed. People constantly desire to trade some portion of what they have for something else they desire more. Thus, redistribution of wealth occurs in the free market, and often occurs via the mechanism of exchange. However, there are some instances when wealth is redistributed freely, such as when a parent provides for his child in exchange for nothing. More generally, though, the redistribution of wealth in a free society usually requires exchange.

Therefore, what those who clamor for the redistribution of wealth actually desire is an option to acquire wealth by force in exchange for nothing. They may not be inherently opposed to trade, nor may they be totally desirous of charity—particularly if that charity has behavioral strings attached. Rather, they simply desire to have the option to have wealth redistributed to them without having to offer anything in exchange.

Is Socialism an Ex Ante Rationalization?

Simon Grey — Thu, 02 Feb 2012 20:00:37 +0000

A while back, I asked if libertarian political theory was an ex post rationalization used simply to justify the cause of freedom without actually explaining why it worked. It seems reasonable to ask a similar question of socialism: is socialist political theory* simply a rationalization for pursuing a certain course of action?

At first blush, the answer is no. Socialist theory is pretty robust and generally accepted as sound. For example, one tenet of socialism is the redistribution of wealth, wherein it is theorized that poverty can be eliminated by taking money from rich people and giving it to those classified as poor. This proposition is so self-evidently true that it borders on being tautological.Yet, every time the redistribution of wealth is put into practice, it generally tends to not eliminate poverty. Of course, poverty can never be eliminated if it is defined in relative terms. But, even when poverty is defined absolutely, there are still some who persist in living in poverty, and no government program is apparently able to change that fact.

Thus, it is to be concluded that socialism is nothing more than an ex ante rationalization. How else to explain its unmitigated and predictable failure? Incidentally, the reason why socialism continues to fail in practice is simply due to the fact that the theory is predicated on artificial class constructions, and can therefore never truly and properly account for individual motivation. It should be note, though, that libertarian political theory accounts for individual motivation but is still incapable of explaining why humans do what they do.

At any rate, the easily observed fact of the matter is that socialist political theory has little grasp of reality, and continues to fail miserably. It only use is in convincing people that there is a reason to try collectivism in spite of its miserable and repetitive failures.

* Please note that “socialist political theory” is a broad term that covers any political movement that generally tends toward increasing government power instead of limiting it. This stands in contrast to libertarian political theory, which refers to any political movement that attempts to limit government power instead of increasing it.

Heennnrrryyyy GGeeoooorrrgggeeee!!!!!

Christopher Briem — Wed, 01 Feb 2012 20:05:59 +0000

OK.. I can’t resist this one. It’s just floating up there.

EPR has this story on County Councilman Matt Drozd upset over the valuations of 4 vacant properties he owns in the city. Their inconsistent valuation is evidence that the whole assessment is kaput. He really seems to say that his new property valuations are evidence that the reassessment of all 580 thousand properties in the county must be wrong.

So let’s see. Indeed Mr. Drozd owns 4 vacant properties on Perrysville Ave. Technically one is owned by him, and 3 others by DROZD DEVELOPMENT & CONSTRUCTION CORP. Here they are in the current assessment records.

http://www2.county.allegheny.pa.us/RealEstate/GeneralInfo.aspx?ParcelID=0023B00203000000

http://www2.county.allegheny.pa.us/RealEstate/GeneralInfo.aspx?ParcelID=0023B00204000000

http://www2.county.allegheny.pa.us/RealEstate/GeneralInfo.aspx?ParcelID=0023B00205000000

http://www2.county.allegheny.pa.us/RealEstate/GeneralInfo.aspx?ParcelID=0023B00206000000

The source of anger it seems is that all 4 properties were indeed assessed similarly at ($2000, $2100, $2,200 and $2,000) respectively. Yet the new assessments: $6200, $1000, $8000 and $8800. Egads. what is up with that? We’ll come back to the $1,000 valued parcel in a minute, but the other prices all may make a lot more sense than you think.

First off, despite what is quoted in the article, they are not identical.. at least not in the parcel record which is consistent with the maps/shapes of these parcels.. The Sq. foot of each are: 2080, 2618, 2925 and 2800 . So for the three of them, the assessment per square foot is much more consistent with the new valuations than with the old. An error?

Then…. Are these recent purchases? No, it seems. One bought in 1980. Another couple bought in 1994. So they have remained vacant land in the city for literally decades. What were they bought for? $450, $2,275, $2,275 and $4,323. So he paid very different prices on them, maybe it makes sense they have slightly different values now?

Funny thing right when you think about it. When he bought decades ago there was a land tax in the city of Pittsburgh so he likely had to pay the split tax which really hit vacant land harder than other properties. He did well when the reassessment came in and got rid of the split tax in the city at the time.

So the property listed as $1000? It is the only property listed as having no utilities and no off street parking. I don’t see how 2 of them have off street parking as it is… All seem to have some hillside issues. Maybe if the good Councilman corrects the parking data on the property cards as they have shown for the last decade on those two properties he might get a big tax break administratively… no need to go to a formal appeal even. Though what I really think is happening is that the low valued property is one that has signed away an easement for this billboard. If I am right it is another reason the parcels are not homogenous and clearly a disamenity for one of them… if I got the spot right which is unclear.

I’d ask for a commission on that advice for the savings he will get.. but it just can be much. The county tax bill on each property now comes to about $9.38 per year. With the 2% for paying early, and he does pay early each year it comes down to $9.19. Works out to 76 cents per month. So 45 cents postage on the letter back to the county represents almost 5% of his entire tax bill. I guess since he works for the county part-time, he might just drop it off and save the postage.

But this is the entire point of Henry George’s land tax. Property in the city undeveloped is not supposed to happen. So sitting on 4 city parcels for decades with taxes so low that there is no incentive to either develop or sell to someone who is willing to develop is exactly what you don’t want to happen for a city parcel. Now with the new values jumping several hundred percent he might have to pay $25 in tax annually to the county. Granted a bit more to the city and school district, but still.

and since everything gets tied together in Pittsburgh. The nano-tempest over what percentage of Pittsburgh property owners who will see their taxes will go down with the reassessment?? Well, I excluded properties with previous values under $3K precisely to exclude the many parcels like these that just are not the point when you see the news interviewing long time residents worried they wont be able to pay their new tax bills. These 4 parcels showed up as 4 datapoints in the other calculation.. not mine… so implicitly weighted the same as 4 life long residents elsewhere in city. Does that make sense?

In the end though.. what looks to me like a prime example of the new assessments doing a lot better than previous values is turned on it’s head. In this case the old values sure seem to have been done a bit superficially and clearly didn’t reflect what was different about the parcels. Now that has been corrected, it is deemed to be evidence of gross error???

The Sad State of Mainstream Economic Analysis

Simon Grey — Wed, 01 Feb 2012 17:40:52 +0000

I have a new post up at In Mala Fide. An excerpt:

To be honest, this sounds like a lot of pious baloney. As Michael Beckley points out in a new article in International Security, “The United States is not in decline; in fact, it is now wealthier, more innovative, and more militarily powerful compared to China than it was in 1991.”

Yep, and the Roman Empire saw continuous growth right up until it declined. A trend line is not a guarantee of future performance, as anyone with half a brain knows. Yet this clown somehow thinks that this particular trend line will continue on its path. The best way to predict the economic future is to look at fundamentals of the economy (e.g. legal system, regulatory system, tax policy, etc.) and see what effect the current policies and practices will have on the future. Of course, this is significantly more difficult than identifying a trend line and extrapolating (probably because fundamental analysis requires thinking whereas trend analysis requires Excel and rudimentary data entry skills, which many trained monkeys are capable of performing), which is why most mainstream economists never bother with it.

The rest can be found here.

Greg Mankiw: Ignoramus or Liar?

Simon Grey — Tue, 31 Jan 2012 18:00:27 +0000

How else to explain this nonsense:

The anti-SOPA crowd argues that this is a matter of basic liberty. But it’s not. In a free society, you don’t have the freedom to steal your neighbor’s property. And that should include intellectual property. Moreover, it is the function of the state to enforce those rights. We don’t leave it up to civil litigation to protect property rights (although that is part of the solution). We give the state substantial powers to stop theft. Just as owners of tangible personal property have good cause to call for a police force and a system of criminal courts, owners of intellectual property have good cause to ask the state to stop those who would infringe on their rights.

It’s like he doesn’t understand the difference between copying and theft. If I have a book and someone copies it, they do not deprive me of the book (except for the time spent copying it). If they steal the book, I never see it again. If I write a song and someone decides to copy it, they do not deprive me of my ability to play it. On the other hand, if I have an apple and someone takes it, then they deprive me of what belongs to me. As Thomas Jefferson once said, “He who receives an idea from me receives it without lessening me, as he who lights his candle at mine receives light without darkening me.

Also note that the supreme law of the land (the constitution, for MIT economics professors too stupid to familiarize themselves of the law under which they live) never refers to intellectual property in terms of theft. In fact, they refer to it primarily in terms of special monopoly privilege. Incidentally, this is why the constitution prescribes “exclusive Right” for authors and inventors for “limited times.” The founders never believed thoughts were real property, which is why they allowed these rights to expire.

Thus, Mankiw’s assertion, which is nothing more than pious posturing, is verifiably false. SOPA is not a matter of preventing theft or protecting property rights. It is, like all other forms of intellectual property law, just another form of government-enforced monopoly. And like all other monopolies before it, it is just another way to reduce freedom.

Best and Highest Value Use

Christopher Briem — Mon, 30 Jan 2012 15:10:08 +0000

So this is interesting and no, this isn’t really about assessments. I mean, it is about assessments, but there are so many bigger issues rolled into this new legal development.

In the new litigant a week merry-go-round in Judge Wettick’s courtroom (it really must be getting crowded), the latest is the (collective) property owner of one R.J. Casey Industrial Park who has a slew of issues.

One of many points is a contention that it is against Pennsylvania’s uniformity clause to assess commercial property differently than residential property which is indeed how it is done here and most everywhere else. Problem with that is that commercial properties across the state have been assessed different than residential properties for decades. So I will let the attorneys fight over that one, it is just one of the issues.

Then they seem to point out the dearth of information on the assessment. Here are points 16 and 17 in their filing:

16. Regarding commercial properties, the Property Record Cards available for purchase on the Third Floor of the County Office Building, do not contain any information on the New Assessments.

17. Accordingly, unlike residential property owners, commercial property owners evaluating their New Assessments have no access to any information that the County used to determine the New Assessments.

Lots of capitals in that, but to be sure I feel their pain. Though I do get a chuckle of someone really digging up (and dusting off) a property record card and expecting to find much relating to the latest machinations written down in ink. Are those things still written in cursive? For the record, the online information is just a small part of what what went into determining new residential values. I see no reduced form from any of the many regressions that were used. ‘Comps’ are at most part of the equation and many overinterpret their role in the assessment I am pretty sure. There is a funny story back from when the original 2001 Sabre numbers came out which didn’t really used comps the same way CLT did. The county web site did not list any ‘comps’ for a property, but people so expected to see them that eventually the web site was altered to show a few comparable properties that were picked ex post… though the properties listed really had no specific input into setting a particular property value becuase of the way the Sabre Systems algorithms worked. (that is a very short version of a very very long story.. but I digress).

To be fair I should go back to point 15 in the filing which is clearer and shows they did start out digitial:

15. Regarding Commercial Properties, the county provides no information online regarding the comparable sales used to determine New Assessments or even the gross square footage of an improvement on a commercial property. The County does provide this information online for residential properties.

Well, some information at least. Otherwise ditto.
Nonetheless, the motivation in the end must be to get a lower assessment and a lower tax bill. First off realize that for commercial property across the nation the standard for property assessment is not market valuation that it commonly is for residential values but “Highest and Best Use of the real property”. For a lot of properties that distinction may not be such a big deal, but for some in certain unique locations it could be a big deal.

So here the property owner is upset having seen their assessment for 6 properties jump from $2.7 million to $11.3 million. A scary 340% increase in nominal value. Even with our notional revenue neutrality it works out to a potential tax increase of 280%, so more than enough to be upset. So.. is the increased assessment some gross error on the part of the assessors, or is something else going on? Could it be the highest and best use for the property has changed?

Again, like the Mt. Washington parking space, we may have found the most exceptional case out there. Is there anything unique about this property?
So where is this property? All of the properties at issue in the filing are located in the otherwise depopulated Chateau neighborhood (why we still call it a neighborhood is another issue since literally no more than 10 people live there.. likely a lot less.. unless you count folks sleeping under the slots machines I guess). The properties in question are all along the riverfront a helf mile from the edge of a property recently redeveloped and otherwise known as 777 Casino Dr. Nice new bike trail cuts through the properties in question and there are some nice marinas there it looks like.

So lets ponder the ‘old’ assessment values which everyone likes to refer to as 2011 values which they really are not. They are, again, base year assessments based on what circumtance were in 2002, if not prior. Yes, the 2002 base year assessment really means that the ‘old’ values were based on what the market would bear for a property in 2002. Back then the idea of a casino was not yet really formed, and even if it was there was no thought the casino would be placed over on the North Shore there where the Rivers Casino wound up. Remember Don Barden really came in with a somewhat unexpected bid and was clearly not expected to beat out the Penguins backed project slated for the Lower Hill District, nor the Station Square locations that everyone was focusing on. The location on the North Shore and the big empty plot of land on the North Shore there was fallow and without anyone really expecting much to be made of it anytime soon. I am pretty sure that was a big drag on all nearby real estate. Even the North Shore Connector was so far from completion, and opposition so loud, that it would not have been reasonable for it to have had any impact on real estate values at the time. Now it is on the verge of opening. Could it not have some positive impact on land values anywhere near it.

So now, 10 years later.. it is not to say there is any vast demand for land over there and I am unclear was nearby development the casino has wrought… but would it really be reasonable to think there has not been any impact on nearby property which. In this case the 5 properties in question are add up to either 5 or 10 acres (I am confued because the itemized parce 22-J-67 is listed as being owned by the URA?? even though there is no mention of the URA in the filing??) of land all effectively riverfront parcels though I am not sure if they own all the way to the river itself.

Someday when we ever really see data out of all this I will work up a map of the value per acre along all of Pittsburgh’s rivers before and after the reassessment. It might be interesting to see how the price gradient moving away from the river has changed over time. It would be an interesting factoid at least to see if any of the vast efforts to redevelop our riverfronts have had any meaningful impact capitalized into real estate values of real estate close to the riverfront. Just imagine the counterfactual if they did not and what that would mean?

So there is a bit of Henry Georgism in the highest and best use construct. It is certainly true that the parcels might not currently be ‘worth’ the new higher assessments placed on them.. but if assessments stay low, and taxes stay low, there will that much less incentive to ever fully develop those properties to the “highest value” use. There is only so much riverfront property near the Casino (and the stadia and the science center) to be had. I think that is the core reason commercial properties are assessed differently to begin with.

I’m thinking there is a future casino-annex hotel latent in the geography there. Best and highest value use?

The Technology Gap

Simon Grey — Wed, 25 Jan 2012 14:55:05 +0000

A while back I theorized that government intervention in the market causes labor disruptions in that it pulls demand for technology forward in order to reduce the costs of unskilled labor. It turns out that I may be on to something:

Parlier earns about $13 an hour. She’d like to become one of the better-paid workers in the plant, but, in today’s factories, that requires an enormous leap in skills. It feels cruel, Davidson writes, to mention all the things Parlier would have to learn to move up. She doesn’t know the computer language that runs the machines. “She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.”

A good attitude and hustle have taken Parlier as far as they can. It’s hard, given her situation, to acquire the skills she needs to realize the American dream.

But skills aren’t always necessary. A dumbed-down UI can serve as a substitute for knowledge, particularly if a firm can hire a technician to know the technical aspects of the technology in use so other workers don’t have to. In fact, the trend of technology has generally been to serve as a substitute for knowledge and ability. Why learn Trig if you can run a fairly simple program on a computer?

Anyhow, this story is evidence of my claim of a technology gap. If labor were allowed to compete freely in a deregulated economy, technological growth would be slower and technological innovations implemented less frequently. This in turn ensures that labor is not stagnant or regressive, and also gives less intelligent laborers a chance to remain on the market longer as technology remains relatively expensive. In order to make technology more appealing, then, technological innovators will find it useful to dumb down the UI to make the device more readily accessible by lower-intelligence labor.

The point in all this, then, is that the government has basically set policies in place that pulls demand for technology forward, leaving less-intelligent laborers in the lurch. And since less-intelligent laborers tend to also be poor, it can be said that the government hates poor people.