Manufacturing Inequality

I’ve been arguing for a long time that the dire claims of vastly increased income inequality, and particularly the claim that only the super-rich have made any gains since 1980, are wildly exaggerated at best and complete bunk at worst. James Pethokoukis has a post at Enterprise Blog making this case and citing academic papers supporting it.

On the claim that only the rich have gained, he links to a 2006 column on Brad DeLong’s cite by Jason Furman, now deputy director of Obama’s National Economic Council, making among others the point that all we have to do is use our eyes and our common sense to realize that, yes, we are all better off, with better standard of living than we had thirty years ago. Economic analyses purporting to show that the middle class has made no gains in thirty years plainly are at odds with reality. Believe what your eyes tell you, not the statistical magic tricks of (consistently) committed liberals invested in “rising inequality.” To pat myself on the back, I made this argument many times in the comments at PL, to the great outrage of “fact-based” liberals–great outrage but never any effective answer.

Similar statistical hanky panky underlies most of the claims of wildly increased disparities in wealth, like the now ubiquitous alarm that “400 people own more wealth than the bottom 150,000,000!” These measures almost invariably arrive at a predetermined conclusion by counting only the kinds of “wealth” that are most concentrated among the wealthy. But I’ll revisit that one later.

H/T Glenn Reynolds

18 Responses

  1. With this, I'm off.I thought about appending this to K's morning post, but decided it should probably be separated.

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  2. Or you could just look at the wage statistics from last year and draw your own conclusions.

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  3. What should we conclude from that?

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  4. "Or you could just look at the wage statistics from last year and draw your own conclusions."I think QBs point is that such statistic only tell part (or a distorted portion) of the the picture. The amount of federal assistance usually isn't included in those figures, for example. This may, but that's not clear to me. However, to quote QB: "making among others the point that all we have to do is use our eyes and our common sense to realize that, yes, we are all better off, with better standard of living than we had thirty years ago". When your average low-income housing project is wired for both cable and satellite TV. A few bullet points from Heritage:Forty-three percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.Eighty percent of poor households have air conditioning. By contrast, in 1970, only 36 percent of the entire U.S. population enjoyed air conditioning.Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)Nearly three-quarters of poor households own a car; 31 percent own two or more cars.Ninety-seven percent of poor households have a color television; over half own two or more color televisions.Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.Eighty-nine percent own microwave ovens, more than half have a stereo, and more than a third have an automatic dishwasher.This is not to say that we cannot or should not want to do better, or that the rich can't pay more in taxes (especially to fund infrastructure repair and the space program and super colliders, because the government has carte blanche to spend all sorts of money on things I support). The conclusion I would draw is that there are good reasons why messages of income inequality and wage stagnation don't resonate as much with some as perhaps they should.

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  5. Also, poverty metrics are in part an aspect of immigration policy. A great deal of the working poor are recent immigrants and, statistically, their children are highly likely to be middle class. Should we shut our doors to new immigrants as so to make our numbers look better? And the poor don't always stay poor . . . at least, not in Canada. It's nice to see that, even in Canada, income inequality is considered to be a pressing problem. Which makes one suspect that no matter how rich the super-wealthy are, they would always be too rich for someone's taste.

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  6. I can't help but notice that Heritage report is from 2007. Perhaps those numbers have since changed.

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  7. I thought conservatives wanted to promote an ownership society were through the virtue of working hard & taking care of one's self a person could achieve the American dream. Liberals are pointing to income as the metric by which to measure progress towards that goal. If that's not the correct one to use, what is?

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  8. "I can't help but notice that Heritage report is from 2007. Perhaps those numbers have since changed."I'm sure they have, and, no doubt, it's worse than it was for the poor. But it's also not as if complaints about income inequality are unique to 2011. I'd be very interested in seeing 2010 numbers. More data from Heritage, some of it more current. Alas, haven't found anything yet in the way of accessible 2010 numbers. Slate on the same report.While even less current (it came out in 2004), I recommend The Progress Paradox, by Gregg Easterbrook. Get it at your local library or buy it for a penny (plus shipping) from Amazon.He proposes some possible explanation as to how, as things improve materially for more and more people, we collectively tend to feel worse about our individual and collective situations. It's not a bad read, even if you don't end up agreeing with his conclusions. Another guy to look to when discussing improving conditions, generally, is Hans Rosling. While this is much broader, covering many things, I recommend the BBC documentary The Joy of Stats, but also check out his TED talks to experience the vast improvement in income and longevity enjoyed by the vast majority of people on the planet, even as populations increase. This doesn't address first-world income gap issues, but it's still nice to see.

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  9. "Liberals are pointing to income as the metric by which to measure progress towards that goal. If that's not the correct one to use, what is?"Income is an extremely important metric to use. Also, things like home ownership (down) and small business ownership (also down). Equity in real property. Quality of life are good metrics, too, however. Certainly, when 32% of people had home air conditioning in 1970 and 85% do now, that's progress. When access to information has multiplied by a factor of ten for the population as a whole, that's clearly a good thing. There are lots of things that should be addressed, but we're clearly very well off, even the poorest among us, when compared not only to the 3rd world, but to America in 1980. Far better off than American in 1950. Which is not an argument against moving forward, it's an argument for putting our current circumstances in an informative context.

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  10. Regarding the poor staying poor, the last time I saw a report on the subject, class mobility had fallen in the US & risen in 'socialist' Europe. In other words, in the US, the class you're born into is more highly correlated with the class you'll be in as an adult than in other countries. Shouldn't we be more of a meritocracy, where hard work is rewarded?

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  11. .6% of people considered poor in the united states have a Jacuzzi. I don't have a Jacuzzi. I've never had a Jacuzzi. I've never been able to justify the expense. But still, .6%, that's not much. 27% have more than one VCR, 22% have more than one DVD player, 9% have more than one refrigerator. Over 50% have cellular phones, over 80% have microwaves. Clearly, if conservatives value an ownership society, there is a great deal of ownership going on. 😉 Which is not to say being poor doesn't suck and things couldn't be better, but when we talk about the devastation caused by rich people having a lot of money, I think it should be discussed in context.

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  12. "Shouldn't we be more of a meritocracy, where hard work is rewarded?"Indeed, and one that encourages hard work, and makes education accessible and even mandatory. You (should) get to pick what you learn, but you (should) have to learn something. And not just what it takes to get to 11th grade.And Europe is quasi-socialist–people can start businesses and own private property, and can access the equity in their property for entrepreneurship. There may be obstacles, and a great deal of debt tied up in entitlements, but it is possible. Not sure how Greece is going to fare at the end of the day, however.I don't have the numbers, but I believe I've seen that class mobility in the US is still excellent and upward for new immigrants (please, correct me if I'm mistaken). So, clearly, we do reward hard work, if someone shows up and does it. : )

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  13. "The amount of federal assistance usually isn't included in those figures, for example."That is true. Someone might have mentioned this in the comments at the link (some of which are interesting, some of which are nutso). One guy there also brought up a point I've raised before: given that there is a floor to poverty but none to wealth, it isn't clear to me that a widening range isn't to some degree just a law of nature or mathematics."This is not to say that we cannot or should not want to do better, or that the rich can't pay more in taxes …"Not sure what doing better means, and don't want taxes raised, but, yes, this just says, claims of 30 years of all the increase going to the richest are wildly exaggerated at best."I can't help but notice that Heritage report is from 2007. Perhaps those numbers have since changed."I don't know off hand, but it isn't terribly relevant, because the widespread claim of the left is that the income disparity opened over the past 30 years (neatly to indict the Devil Reagan).

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  14. "I thought conservatives wanted to promote an ownership society were through the virtue of working hard & taking care of one's self a person could achieve the American dream. Liberals are pointing to income as the metric by which to measure progress towards that goal. If that's not the correct one to use, what is?The main point being made by the critiques is that income gains are mismeasured in the studies touted by the inequality alarmists. There are other ways, too, such as the fact that household size and composition have changed. Single mothers are poor, for example, and there are many more of them now.

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  15. Pres Reagan popularized the idea of 'trickle down' economics. When would be a good time to analyze whether that's worked as advertised?

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  16. I'm not as concerned about poor, single mothers so much as for their children. Kids born in such circumstances are statistically likely to spend their entire lives in poverty. I'd prefer that we find a way to utilize them as an asset (productive contributor to GDP) rather than as liabilities (prison, food stamps, etc.).

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  17. "Pres Reagan popularized the idea of 'trickle down' economics. When would be a good time to analyze whether that's worked as advertised?"He pursued policies of cutting taxes and reducing growth of government. Two decades of prosperity followed the stagflation that preceded. But if you want to look at some other time, I suppose you'd have to say what it is.

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  18. "I'm not as concerned about poor, single mothers so much as for their children. Kids born in such circumstances are statistically likely to spend their entire lives in poverty. I'd prefer that we find a way to utilize them as an asset (productive contributor to GDP) rather than as liabilities (prison, food stamps, etc.)."I don't know of anyone who would disagree with that goal. But my point was merely descriptive: the bottom end of the distribution is more populated with single mother households than 30 years ago. Those tend to be really poor households, not because of growing income disparity but because of being single.

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