Tuesday, January 04, 2011
Inequality
Ezra Klein has some useful and fairly balanced questions (with interesting accompanying graphs) about income inequality and its relationship to economic performance. Worth reading, bearing a couple of observations in mind.
First, there is an enormous body of academic work on this subject, and Ezra -- smart as he may be -- is not expert in it. This is not a criticism -- I certainly declaim on subjects about which I know little all the time -- but it is a fact. I suspect that Ezra's thinking has been explored at depth by academic economists, but probably with long equations and professional jargon that none of us are likely to understand.
Second, Ezra seems to assume that there is something wrong with inequality compared to some random historical baseline. Well, the baseline is an artifact of the availability of the data, not a normative judgment about what level of inequality is good. Of course, if you are a "progressive" you think that any inequality is inherently bad unless there is a utilitarian justification for it. Me, I say that just as one may never derive "what ought" from "what is," we cannot assert that inequality is bad simply because it exists.
But still worth reading.
23 Comments:
By 
, at
Tue Jan 04, 12:15:00 PM:
No real expertise here, but I was thinking about this a bit over the holidays. I ended up at this point:
Economic (income) inequality is desirable.
I think that because I consider the human economic stew to be a natural process, an ecosystem of sorts. We all want wealth, just as we all want food and security. Or, if the notion that they are fixed states doesn't sit well, we all want more wealth, food and security than we have. "All" doesn't have to be 100% of us to be essentially correct in my view.
What we know about natural processes or ecosystems, is not that they are static, but that they are always changing. Random events cannot be wished away and they bring inevitable change. So there will be winners and losers, some deserving, others fortunate or unfortunate.
Ecosystems and economic systems can fail or die. But our instincts for survival and our social nature conspire to give us the desire for success, for survival, to win more than we lose, and to propagate for the future.
So what would be a key requirement for success fellow conservatives? In my opinion diversity.
If everyone got one dollar every morning, how long do you think everyone would have the same wealth? Economic equality is the unnatural state. Inequality is the irritant that feeds invention, rewards initiative, and leads us to find new roads to success.
M.E.
By , at
Tue Jan 04, 12:25:00 PM:
Why are "we" leading with an Ezra Klein link, if not for traffic trading?
By 
Greg Toombs, at
Tue Jan 04, 12:56:00 PM:
"any inequality is inherently bad unless there is a utilitarian justification for it."
Well, every year we keep permitting more poor people to immigrate to the US, legally and illegally.
Makes for an inherent contradiction (I know, I know) in progressive's arguments attempting to defeat "inequality".
By daniel noe, at
Tue Jan 04, 01:29:00 PM:
How boring it would be if we were all the same...
By , at
Tue Jan 04, 01:32:00 PM:
How far up your ass do you need to push your head to take Ezra Klein seriously on equality?
You're both profoundly ignorant of most of America.
I've posted here for over two years in the hopes that the ruling class might get it. It aint't go well.
You have more to lose than I do. Think on that.
By , at
Tue Jan 04, 01:35:00 PM:
Like Ed, I also think that income inequality signifies something good. I'm no expert in income distributions over time, but I'll bet you that over the course of history one would find income disparity growing in times of rapid economic advancement and declining in bad times. Think about it this way: the advent of the industrial age introduced huge income disparity, as did the growth of oil companies, the introduction and widespread marketing of electronic products based upon CPU's etc etc.
Conversely, terrible times (like TH-pere's periods of interest, the spread of plague in Europe) brought a great leveling of incomes. In mideavil times, knights- while better off than lackeys-- still lived relatively miserably.
Progressives hate income inequality; it might even be the central, core social "evil" they seek to end. But perhaps it's really much more benign, even intrinsicly good: the "worst" disparities are historical markers of periods of great importance for humanity.
By , at
Tue Jan 04, 02:05:00 PM:
If one is worried about inequality, it should be about inequality of opportunity, not inequality of results. While there is inherent inequality of opportunity in any economy, one question you might ask in measuring inequality is whether it's the same 1% who are at the top.
Seems to be that this group changes quite a bit over a time series of 60+ years, at least in the US and other economies that are most free.
And, of course, having an estate tax and a progressive income tax make it easier to change who are in the top 1% as well.
By , at
Tue Jan 04, 02:06:00 PM:
Perhaps a good measure of the real attitude of progs such as Ezra Klein towards reducing inequality would be to ask them if they would have consented to having their college admissions rescinded (UCLA, in the case of Mr. Klein) in favor of admitting someone with lower grades and SATs.
By Cassandra, at
Tue Jan 04, 03:02:00 PM:
Every time I see yet another wealthy progressive NYT columnist yammering on about the horror of income inequality I think, "So how does your annual income compare with that of the average taxpayer? Maybe if we redistributed some of that excess income, it would make your soul less sad".
And every time I see a chart of household income over time that accounts for neither the average decline in HH size nor the number of wage earners per HH, I want to scream.
By Dawnfire82, at
Tue Jan 04, 03:13:00 PM:
Well, I made a post earlier that says what Cassandra just said, though in more detail, with links, and making fun of the idea that Klein is a 'Wunderkind' who deserves to be listened to seriously by serious people on economic matters, but despite Blogger's assurances it seems to have failed to stick.
Ah well.
By Cassandra, at
Tue Jan 04, 04:45:00 PM:
Dang. I would have enjoyed reading that :p
By , at
Tue Jan 04, 05:14:00 PM:
There's a plethora of MSM-promoted pundits who are profoundly ignorant of all things historic, scientific and economic.
But even among this crew, Ezra Klein stands out for (A) his amazing ignorance and (B) the odd disconnect between his being promoted by (1) the Washington Post and (2) the likes of our own Fearless Leader. I get why #1 ... but I'm not sure about #2 ( I hope it's not just about driving traffic or looking cool).
On things economic, I've previously called Ezra a child playing with matches. But it's just in the last week that Ezra has started to piss ion the Constitution. The Brat's a cancer.
We're borrowing 10% of GDP in the hopes that we'll get 4% GDP growth and not have official unemployment go over 10%. It ain't working. Folks like Ezra are an impediment to dealing with it.
What's a mother to do. I'd start with a solid spanking. TH too (my grammar school nuns would call TH an "instigator", an equally punishable offense).
By Coach Morgan, at
Tue Jan 04, 06:20:00 PM:
Tiger, Ezra is puzzled as to what happened to cause income in the upper 1% to accelerate beginning in 1987. That was the first year affected by the 1986 tax reform, which lowered the highest marginal rate from 50% to 28%.
Remember that income trends and quintiles are usually calculated from IRS data - they are almost always based on total declared and Adjusted Gross Income.
The rich have options about how much to work and earn but also how to take their income. When taxes on the rich are high, they take their income in forms that generate lower taxes, such as leisure (working less) but also in health and other benefits and in deferred compensation.
The tax reform act of 1986 provided an enormous incentive relative to previous years for the rich to take their income in taxable form. Consequently their declared income to the IRS - the source of the statistics - went up sharply.
Raising taxes on the rich would indeed lower income inequality as defined in Ezra's statistics because the rich would move their income off their 1040 form. They'll still be rich, but they'll be earning and declaring less taxable income.
Raising taxes on the rich won't reduce income inequality, it will just reduce the inequality that the IRS forms capture.
By , at
Tue Jan 04, 10:54:00 PM:
Progressives like to bang the drum about inequality because it gives them a reason about how to reorder society. Of course, when it actually comes time to do something, they never let go of their own status or income--it's always someone else's that they want to redistribute.
Of course inequality is rising. In a global economy, innovation touches hundreds of millions of people, if not billions. For example, I bet there is an Ipod in every country on earth.
By JPMcT, at
Tue Jan 04, 11:01:00 PM:
Somebody remind me exactly WHY we are agonizing about income inequality?
It's a little like agonizing about IQ inequality, isn't it?
...or creativity inequality.
...or work ethic inequality.
We are a free nation. That, until recently, meant you were free to succeed and free to FAIL.
The opportunities for both were fairly evenly distributed.
In otherworkds, we are not a country of HAVES and HAVE NOTS.
We are a country of DIDS and DID NOTS!!
As more succeed, create and work...so UP goes their income drastically, followed by an increase in the "average" income becasue of the beneficial economic effects of wealth and job creation.
It's pretty damn obvious to me. I guess not so obvious to Ezra klein.
Hey...great idea...lets redistribute income so that there is no inequality. That way, t he hard working, creativeand gifted among us...the ones who are "pulling the cart"...can hop on the cart with the rest of us and watch the ENTIRE economy slide into chaos. Let's do it!!!
By , at
Wed Jan 05, 01:47:00 AM:
My theory is "follow the money" This statement is always meant to explain a why. Money flows toward power. There is an income distribution problem because there is a power problem. There are 3 types of power. The power of ability (education, athletics, etc.) The power to persuade (media, salesmen, etc.) and the power to decide (politicians, capital owners, etc.) The more the decisions the masses make and the more educated and skilled the masses are the more money flows their way either by wages or lower cost of goods and services. Seems fairly simple to me. Re-distribute power not money and all will be well. Why is it that the equality folks are so down on greed for money, but not so on greed for power. Of course I am one of those simpletons like Sarah Palin. Just a mother and small business owner.
By Don Cox, at
Wed Jan 05, 06:06:00 AM:
"Somebody remind me exactly WHY we are agonizing about income inequality?"
I think the problem is not that very rich people have too much money, but that it gives them too much power. It allows unelected people to control and bully others, which is a loss of freedom.
Provided this can be prevented, inequality of income is both inevitable and desirable.
Some people are worth more than others.
By Georg Felis, at
Wed Jan 05, 07:59:00 AM:
In other words, the Elite people with power in Washington are threatened by the ability of rich people (i.e. anybody with a 401K) to actually make their own darned decisions, and something has to be done to fix that darnit! Don't they know they're not smart enough to make good decisions on where to put their money, how to buy health insurance, what public radio stations to fund, etc... Now Mommy will take all that nasty money away from you and go put it to good use, you just go play with your toys. Which I've given away to other children.
Ugg. Need more coffee.
By , at
Wed Jan 05, 09:42:00 AM:
Somebody remind me exactly WHY we are agonizing about income inequality?
SILENCE, OR I'LL CHOP OFF YOUR LEGS!
By PD Quig, at
Wed Jan 05, 06:57:00 PM:
Income inequality is neither good nor bad: it is a f*cking arithmetic identity! How could it be otherwise? Think about it: over a 20 year period for somebody making $20K per year to keep pace with somebody making $100K per year who gets annual 3% raises, the $20K'er needs to get 8.5% raises. How rational is that? Not very.
The class warrior idiots never seem to get it that most of the lowest earning quintile are the young and immigrants--they're inexperienced or otherwise handicapped. As they age they migrate upwards into higher quintiles. Klein seems to assume (like so many others) that there is a stasis at play wherein low income people remain so all their lives. Not so.
I'm so freaking annoyed at this tired old line of attack by the Left. They will not be happy until nobody is happy.
By Jeanne Patterson, at
Thu Jan 06, 11:47:00 PM:
I've never been on this blog before and whoever linked me here is gonna pay.
"Ezra Klein has some useful and fairly balanced questions"
"This is not a criticism"
"worth reading"
I bet your good buddy has a lot of good insights into the Constitution too. Then again, I guess you just think he's a misunderstood genius.
Next time get a room.
By JPMcT, at
Sat Jan 08, 10:59:00 PM:
Actually most of us realize that Ezra Klein is a buffoon.
But, having said that...it's OK for Tigerhawk to have his guilty pleasures.
On the whole, I learn something every time I visit this blog.
That's a rare event. Hang in there.
By , at
Sun Jan 09, 07:41:00 AM:
This discussion reminded me of a theme running through Will Durant's Story of Civilization - which I admit to being a bit hazy about, having read it several decades ago. That theme is the cycle of concentration of economic and political power into an ever smaller group, until finally the great mass of powerless poor has off with their heads.
