Digging through some older posts with "inequality in the news...
The Inequality Bogeyman
By Thomas Sowell - January 28, 2014
http://www.realclearpolitics.com/articles/2014/01/28/the_inequality_bogeyman_121379.htmlDuring a recent lunch in a restaurant, someone complimented my wife on the perfume she was wearing. But I was wholly unaware that she was wearing perfume, even though we had been in a car together for about half an hour, driving to the restaurant.
My sense of smell is very poor. But there is one thing I can smell far better than most people -- gas escaping. During my years of living on the Stanford University campus, and walking back and forth to work at my office, I more than once passed a faculty house and smelled gas escaping. When there was nobody home, I would leave a note, warning them.
When walking past the same house again a few days later, I could see where the utility company had been digging in the yard -- and, after that, there was no more smell of gas escaping. But apparently the people who lived in these homes had not smelled anything.
These little episodes have much wider implications. Most of us are much better at some things than at others, and what we are good at can vary enormously from one person to another. Despite the preoccupation -- if not obsession -- of intellectuals with equality, we are all very unequal in what we do well and what we do badly.
It may not be innate, like a sense of smell, but differences in capabilities are inescapable, and they make a big difference in what and how much we can contribute to each other's economic and other well-being. If we all had the same capabilities and the same limitations, one individual's limitations would be the same as the limitations of the entire human species.
We are lucky that we are so different, so that the capabilities of many other people can cover our limitations.
One of the problems with so many discussions of income and wealth is that the intelligentsia are so obsessed with the money that people receive that they give little or no attention to what causes money to be paid to them, in the first place.
The money itself is not wealth. Otherwise the government could make us all rich just by printing more of it. From the standpoint of a society as a whole, money is just an artificial device to give us incentives to produce real things -- goods and services.
Those goods and services are the real "wealth of nations," as Adam Smith titled his treatise on economics in the 18th century.
Yet when the intelligentsia discuss such things as the historic fortunes of people like John D. Rockefeller, they usually pay little -- if any -- attention to what it was that caused so many millions of people to voluntarily turn their individually modest sums of money over to Rockefeller, adding up to his vast fortune.
What Rockefeller did first to earn their money was find ways to bring down the cost of producing and distributing kerosene to a fraction of what it had been before his innovations. This profoundly changed the lives of millions of working people.
Before Rockefeller came along in the 19th century, the ancient saying, "The night cometh when no man can work" still applied. There were not yet electric lights, and burning kerosene for hours every night was not something that ordinary working people could afford. For many millions of people, there was little to do after dark, except go to bed.
Too many discussions of large fortunes attribute them to "greed" -- as if wanting a lot of money is enough to cause other people to hand it over to you. It is a childish idea, when you stop and think about it -- but who stops and thinks these days?
The transfer of money was a zero-sum process. What increased the wealth of society was Rockefeller's cheap kerosene that added hundreds of hours of light to people's lives annually.
Edison, Ford, the Wright brothers, and innumerable others also created unprecedented expansions of the lives of ordinary people. The individual fortunes represented a fraction of the wealth created.
Even those of us who create goods and services in more mundane ways receive income that may be very important to us, but it is what we create for others, with our widely varying capabilities, that is the real wealth of nations.
Intellectuals' obsession with income statistics -- calling envy "social justice" -- ignores vast differences in productivity that are far more fundamental to everyone's well-being. Killing the goose that lays the golden egg has ruined many economies.
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The Redistribution Recession:How Labor Market Distortions Contracted the Econom
« Reply #282 on: February 08, 2014, 06:40:47 AM »
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The Redistribution Recession:How Labor Market Distortions Contracted the Economy
(bringing a couple of posts over here by request)
3rd post regarding economist Casey Mulligan, someone getting it right. Buy his book:
http://www.amazon.com/The-Redistribution-Recession-Distortions-Contracted/dp/0199942218The Redistribution Recession: How Labor Market Distortions Contracted the Economy Hardcover
by Casey B. Mulligan
Redistribution, or subsidies and regulations intended to help the poor, unemployed, and financially distressed, have changed in many ways since the onset of the recent financial crisis. The unemployed, for instance, can collect benefits longer and can receive bonuses, health subsidies, and tax deductions, and millions more people have became eligible for food stamps.
Economist Casey B. Mulligan argues that while many of these changes were intended to help people endure economic events and boost the economy, they had the unintended consequence of deepening-if not causing-the recession. By dulling incentives for people to maintain their own living standards, redistribution created employment losses according to age, skill, and family composition. Mulligan explains how elevated tax rates and binding minimum-wage laws reduced labor usage, consumption, and investment, and how they increased labor productivity. He points to entire industries that slashed payrolls while experiencing little or no decline in production or revenue, documenting the disconnect between employment and production that occurred during the recession. The book provides an authoritative, comprehensive economic analysis of the marginal tax rates implicit in public and private sector subsidy programs, and uses quantitative measures of incentives to work and their changes over time since 2007 to illustrate production and employment patterns. It reveals the startling amount of work incentives eroded by the labyrinth of new and existing social safety net program rules, and, using prior results from labor economics and public finance, estimates that the labor market contracted two to three times more than it would have if redistribution policies had remained constant.
In The Redistribution Recession, Casey B. Mulligan offers hard evidence to contradict the notion that work incentives suddenly stop mattering during a recession or when interest rates approach zero, and offers groundbreaking interpretations and precise explanations of the interplay between unemployment and financial markets.
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DougMacG
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Economics: Marginal tax rates including forgone subsidies
« Reply #283 on: February 08, 2014, 06:42:23 AM »
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Marginal tax rates for Heads of Households and spouses with median earnings potential including forgone subsidies.
Note that the beginning of 2007 was when unemployment was at its low point (and when Democrats took control of Congress).
Tax something more, work in this case, and you will get less of it.
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Economics: Income Inequality and Income Mobility
« Reply #284 on: February 08, 2014, 08:50:19 AM »
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I am sorry to inform President Obama and his team of pretend economists that inequality and specifically the rich getting richer does not correspond with the poor getting poorer or having fewer opportunities to move up. It simply isn't true.
http://www.economics21.org/commentary/great-gastby-curve-revisited-part-1"Neither measure of inequality nor the size-of-middle-class measure has a correlation with any of the mobility measures that is statistically different from zero."
http://www.nationalreview.com/agenda/288748/guest-post-scott-winship-offers-his-closing-argument-great-gatsby-curve-wonk-fight-201http://www.equality-of-opportunity.org/http://www.u.arizona.edu/~lkenwor/2013thedangeroffrontloadingincomeinequality.pdfhttp://www.russellsage.org/sites/all/files/Bloome%20Inequality%20&%20mobility%20April%202013.pdfModify message
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Economics: Growth, Inequality, Redistribution debate
« Reply #285 on: February 10, 2014, 10:06:28 AM »
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For anyone interested in the inside-baseball debate of Economics, this is interesting stuff, IMO. Links are to pdfs.
Greg Mankiw, Chair of the Harvard Economics Dept, who recently wrote, 'Defending the One Percent':
http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.27.3.21From the article: Optimal redistribution centers on the elasticity of labor supply
Using the force of government to seize such a large share of the fruits of someone else’s labor is unjust
No amount of applied econometrics can bridge this philosophical divide.
Redistibutionist Robert Solow, Nobel winner, MIT, takes issue and Mankiw responds:
http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.28.1.243Journal of Economic Perspectives, 2013-2104
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Re: Economics - Recent Trends in Intergenerational Mobility
« Reply #286 on: February 26, 2014, 08:59:18 AM »
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According to a recent study of mobility (see Figure 1), the correlation between parent's income rank and children's income rank is about 0.3.
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Von Mises
« Reply #287 on: March 24, 2014, 04:55:27 PM »
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Ludwig von Mises, "Nation, State, and Economy" (1919):
One of the great ideas of [classical] liberalism is that it lets the consumer interest alone count and disregards the producer interest. No production is worth maintaining if it is not suited to bring about the cheapest and best supply. No producer is recognized as having a right to oppose any change in the conditions of production because it runs counter to his interest as a producer. The highest goal of all economic activity is the achievement of the best and most abundant satisfaction of wants at the smallest cost. . . .
Preferring the producer interest over the consumer interest, which is characteristic of antiliberalism, means nothing other than striving artificially to maintain conditions of production that have been rendered inefficient by continuing progress. Such a system may seem discussible when the special interests of small groups are protected against the great mass of others, since the privileged party then gains more from his privilege as a producer than he loses on the other hand as a consumer; it becomes absurd when it is raised to a general principle, since then every individual loses infinitely more as a consumer than he may be able to gain as a producer. The victory of the producer interest over the consumer interest means turning away from rational economic organization and impeding all economic progress.
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Re: Economics
« Reply #288 on: April 10, 2014, 03:30:30 PM »
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“After theology—economics is the most important science to study because the two things that impact everyone are God and the market.”
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Pravda on the Hudson: Marx rises again
« Reply #289 on: April 20, 2014, 09:13:34 AM »
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IN the season of resurrection, it’s fitting that he’s with us once again — bearded, prophetic, moralistic, promising to exalt the humble and cast down the mighty from their thrones.
Yes, that’s right: Karl Marx is back from the dead.
Not on a Soviet-style scale, mercifully, and not with the kind of near-scriptural authority that many Marxists once invested in him. But Marxist ideas are having an intellectual moment, and attention must be paid.
As Timothy Shenk writes in a searching essay for The Nation, there are two pillars to the current Marxist revival. One is the clutch of young intellectuals Shenk dubs the “Millennial Marxists,” whose experience of the financial crisis inspired a new look at Old Karl’s critique of capitalism. The M.M.’s have Occupy Wall Street as a failed-but-interesting political example; they have new-ish journals (Jacobin, The New Inquiry, n + 1) where they can experiment and argue; they are beginning to produce books, two of which Shenk reviews and praises.
What they lack, however, is a synthesis, a story, of the kind that Marx himself offered. This is where the other pillar rises — Thomas Piketty’s “Capital in the Twenty-First Century,” a sweeping interpretation of modern economic trends recently translated from the French, and the one book this year that everyone in my profession will be required to pretend to have diligently read.
Piketty himself is a social democrat who abjures the Marxist label. But as his title suggests, he is out to rehabilitate and recast one of Marx’s key ideas: that so-called “free markets,” by their nature, tend to enrich the owners of capital at the expense of people who own less of it.
This idea seemed to be disproved in the 20th century, by the emergence of a prosperous, non-revolutionary working class. But Piketty argues that those developments were transitory, made possible mostly by the massive destruction of inherited capital during the long era of world war.
Absent another such disruption, he expects a world in which the returns to capital permanently outstrip — as they have recently — the returns to labor, and inequality rises far beyond even today’s levels. Combine this trend with slowing growth, and we face a future like the 19th-century past, in which vast inherited fortunes bestride the landscape while the middle class fractures, weakens, shrinks.
Piketty’s dark vision relies, in part, on economic models I am unqualified to assess. But it also relies on straightforward analysis of recent trends in Western economies, and here a little doubt-raising is in order.
In particular, as the Manhattan Institute’s Scott Winship has pointed out, Piketty’s data seems to understate the income gains enjoyed by most Americans over the last two generations. These gains have not been as impressive as during the post-World War II years, but they do exist: For now, even as the rich have gotten much, much richer, the 99 percent have shared in growing prosperity in real, measurable ways.
Winship’s point raises the possibility that even if Piketty’s broad projections are correct, the future he envisions might be much more stable and sustainable than many on the left tend to assume. Even if the income and wealth distributions look more Victorian, that is, the 99 percent may still be doing well enough to be wary of any political movement that seems too radical, too utopian, too inclined to rock the boat.
This possibility might help explain why the far left remains, for now, politically weak even as it enjoys a miniature intellectual renaissance. And it might hint at a reason that so much populist energy, in both the United States and Europe, has come from the right instead — from movements like the Tea Party, Britain’s UKIP, France’s National Front and others that incorporate some Piketty-esque arguments (attacks on crony capitalism; critiques of globalization) but foreground cultural anxieties instead.
The taproot of agitation in 21st-century politics, this trend suggests, may indeed be a Marxian sense of everything solid melting into air. But what’s felt to be evaporating could turn out to be cultural identity — family and faith, sovereignty and community — much more than economic security.
And somewhere in this pattern, perhaps, lies the beginnings of a more ideologically complicated critique of modern capitalism — one that draws on cultural critics like Daniel Bell and Christopher Lasch rather than just looking to material concerns, and considers the possibility that our system’s greatest problem might not be the fact that it lets the rich claim more money than everyone else. Rather, it might be that both capitalism and the welfare state tend to weaken forms of solidarity that give meaning to life for many people, while offering nothing but money in their place.
Which is to say that while the Marxist revival is interesting enough, to become more relevant it needs to become a little more ... reactionary.