My favorite observation to troll progressives is to note that there actually isn't any correlation between a country's income inequality and its wealth inequality- and that the Nordics have some of the highest *wealth* inequality in the developed world. Some countries are high income inequality and low on the wealth side (I believe Italy), and the Nordics are the reverse, with 10% of the country holding 70% of the wealth as of about a decade ago. These two distinct concepts usually get handwaved into a vague 'inequality'. Not a commonly discussed talking point!
More seriously, on the wealth front- in America at least most of it was in the paper value that the stock market assigned someone's company. This was high in the 2010s, and recently has uh been not so high- Musk has lost $200 billion or so, I believe a collection of tech billionaires has lost over a trillion
It’s as if a modest state pension and single payer healthcare keep the proles from confiscating chateaus and portfolios while the rich go on being comfortably rich. Shocking!
I'm pretty sure Piketty (or someone similar) wrote about this. Sweden has been owned by the same aristocracy since forever. Probably true for Denmark and Finland too. Their wealth all stashed in Liechtenstein trusts.
No, it is because the statement is false. US wealth inequality is much more than most all countries in Europe and only exceeded by Russia, Sweden and Netherlands.
IIRC, though, this is kind of a fluke and it has to do with how inheritances work in the culture, which tends to concentrate familial wealth rather than distribute it.
No, I’m saying that the exact nature of inheritance can make generalization hard.
If, for example, the custom is to give the majority of it to a single child, this will tend to lead to more extreme concentrations of wealth over time versus a similar society which divides it more equally among the children.
When a particular custom is a driver of wealth inequality, that inequality has fewer relevant implications for people who don’t share it.
If the issue is inequality and wealth concentration, surely a large inheritance divided into 10 produces less wealth in the recipients than the same inheritance going to only one, or divided into 2 or 3?
Why does this long thread take the statement at face value and not look things up. My first inclination was thinking this wasn't true and it isnt. My go to is not to trust statements that dont specify the data source and include a link. It is not that hard to do . Here is my link
Ven, I dont know if I have a thesis, just noting that somebody made a statement, that wealth inequality is less in the US than elsewhere, what from my source is completely contradicted, where the US is very unequal to the degree that we are 166th out of 170 countries in wealth equality. The entailing discussion parses out reasons for the falsehood rather than anybody actually checking the data.
I guess my thesis is that given the public tendency towards confirmation bias it behooves people to look things up before feeding that bias. If you say something in a public forum you should look it up first.
You might be accurate in your trolling description because by this 2019 world bank listing of wealth inequality, you have missed the boat entirely, in that the US is the fourth most unequal country in the world in wealth only exceeded by Russia, Sweden, and Netherlands, which does include one Nordic but not Denmark, Finland, Norway, or every other country in Europe, Canada, Japan (one of the most equal), Australia, China.
As to the stock market, that changes things short terms but has little effect on the longterm and one of the reasons the stock market funnels money to the top is that gains made in the market are taxed at lower rates than business income.
I dont know where you get your data, but by this WIki citation you pretty much missed the boat.
The US is the fourth most unequal country in the world in wealth inequality only exceeded by Russia, Netherlands, and Sweden, and you might take the latter two of representative of the Nordics, but Denmark, Norway, Finland are more equal, and more important, every other European country, including the vast bulk of populations of UK, Germany, France., and every other country is more equal.
I wrote 'the Nordics have some of the highest *wealth* inequality in the developed world' and yes, that is completely true man. (Denmark is in the top 10 of the world's most unequal countries in your link?) 3 out of the 5- 60%, a supermajority- are much more unequal than the rest of the developed world, so I'm quite comfortable with what I wrote. Developed countries by 2019 Gini go (in order) the Netherlands, Sweden, the US, Denmark, Germany, Norway and then Ireland. Did you follow your own link?
>more important, every other European country... is more equal
Yes, I know, and that's why I..... didn't say anything about 'other European countries', and just mentioned the Nordics? I literally said nothing about the rest of Europe, you made that up.
I appreciate the uh enthusiasm that lead to you copy-pasting the same point I believe 5 times in 1 hour in this thread from 6 months ago. (Have some free time I take it?) But by fixating on one half of one sentence that I wrote, you completely missed the gist of the whole paragraph- that wealth and income inequality are separate things, that they don't really correlate, that some countries are high in 1 but not the other, etc. I'm not sure you processed that! That was the real point!
When you humorously are "trolling the progressives," their main complaint is the inequality in the US, so when you imply that the Nordics are very unequal, but fdont mention that the US is worse other than Sweden that seemed odd. I dont know why Sweden is so much more and Denmark is high but Iceland and Finland aren't and Norway is a little high but less so than Germany. S o I am not sure of the point. The piece is about the US which is higher in both income and wealth. I suspect if there is a big difference between wealth and income it is about savings habits or maybe because the social benefits are strong enough that people have to worry less about savings, for example if everyboy has a full retirement there is less of a need for having a lot of money in a retirement account. Any rate, if I missed your message I apologize as I thought you were implying these countries were worse than the US
Oh yeah, high wealth inequality in Sweden and Denmark is just a choice by poor people to not be wealthy. Seriously?
It's a complex issue that no one knows the complete answer to.
One theory, that you won't like, is that the policies adopted to reduce income inequality have actually further *cemented* wealth inequality. The countries in question apply very high marginal tax rates to top incomes. That makes it very hard to become wealthy if you are not already. Not only do you not get to keep the majority of money you earn, but the highest paying jobs tend to leave the country altogether. Go to tax havens like Singapore, Dubai, and Hong Kong and you will find far, far more Europeans than Americans.
On the other hand. Progressives in the USA focus their wrath entirely on the tax rates paid by high earners. In truth, top tax rates are already higher in the US than in Norway. The biggest difference is really that middle class taxes are much, much higher in the Nordics.
The actual bargain in Scandinavia is higher taxes on all, in exchange for more social services. American progressives childishly promise that we can have all the nice things and the 1% will foot the whole bill. Fantasy!
Michael the issue is the US and other than finding one Nordic country Sweden and one other OECD country Netherlands, the two representing 1% of the OECD population, with higher inequality what is the argument.
Yes, it is possible that people who have a guaranteed pension will save less, I dont know what the reason is, but it is the exception and the US clearly has the most unequal status with the exception of only two small OECD countries that represent maybe a few percent of that population and Russia which is understandable being a kleptocracy.
I am not a progressive so I am not going to defend that straw horse, but I would like to see the US be a more equal country, like we clearly were historically from about 1940-1980 when we did pretty well and all our wealthy did not move to Monaco.
Yes, if we wanted to emulate some huge amount of benefits we might need to go further down on the income scale, but to what ever degree we choose, and I favor shoring up social security, expanding healthcare subsidies enough to get everybody insured and cutting the deficit, I would like to mostly increase taxation on the upper quintile who in the last 40 years have made out much better than everybody else and whose post tax income will still likely rise more than the lower 80%, just less so. And I would do it inclemently, like rescinding the Trump tax cuts for the wealthy or increasing taxes on capital gains for stock sales, or increasing estate taxes, and raising the cap on social security taxes.
If that could not cover my goals, well I would just do as much as it allows without increasing taxes on the middle class.
I think of it as more returning to the fairness of 1940-80 when the economy did very well but that prosperity wasnt primarily concentrated at the top, than becoming Sweden.
"I would like to mostly increase taxation on the upper quintile who in the last 40 years have made out much better than everybody else and whose post tax income will still likely rise more than the lower 80%, just less so"
Does it matter that I'm only 38 years old? I have only ever worked during the last two decades when the poststax income of the bottom 50% has actually grown faster than the top 10%.
That is a poor analogy imo, cars are not as important as haveing money in the bank for emergencies. I would rather own my own house and have the 40K job. I would rather have a healthy retirement fund at age 60 than a nominally high income.
I think it is hard to make a qualitative statement about wealth vs income without knowing the particular situation particularly age and the exact numbers you are talking about. I'm 73 and moderately wealthy with a meager income and it gives me security, freedom, and peace of mind.
If you are nearing retirement you are much better to have a sufficient IRA than a higher income, if you are 20 maybe not, but wealth inequality is very important. If you haven't enough wealth to support your children's education then you are likely to have little generational social mobility.
I would argue that wealth is more important, but also the two parameters correlate pretty closely.
JSG, I guess the place I am coming from is that wealth is very important for people's well being and to quote ol Ben Franklin a penny saved is a penny earned, so that in terms of a persons well being- wealth which allows you to own your own home and pay for your children's education is quite important.
To split the difference, I would say if your concern is equality, both income and wealth are important in different ways, and they also correlate closely.
One practical manifestation of this, eg, is the issue that black families have tended to fall behind in wealth b/c homes in black neighborhoods have tended to appreciate much more slowly than white neighborhoods. Now two families might have the same income but if their major means of accruing wealth is home value, as it is for many middle class people, there is a serious problem for the black families, even as their incomes might be equal- their heirs will have less, their retirement will be less, and they are more likely to end up in foreclosure if adversity hits by virtue of having less equity. This was very important in the 2008 housing crisis. An interesting aside on this, is that recent gentrification has recently greatly increased home values in black neighborhoods, yet critics on the left tend to castigate it.
When I read "Income has been falling for a while now: Obama-Biden economics are accomplishing more than people realize" my first thought that Matt's Substack account had been hacked and somehow Ken in MIA had puckishly rewritten his headline and subhead.
Well, if income drops more for people on the high end of the distribution, that too would result in income inequality going down. That's what my first thought was, some sort of clever backhanded compliment instead of straightforward Good News.
The fallacious connection between economic hardship and inequality is misleading and counterproductive to addressing these hardships. I.e., the reason that so many have too little is because a few have too much. Particularly when inequality only focuses on the wealthiest.
I think we are led astray due to 1) a focus on dollars and 2) not differentiating between income and wealth; one being a rate and the other being a quantity. I.e., dollars/year vs. cumulative dollars. We should instead focus on tangible resources such as land, labor, and commodities.
If we took everything that billionaires consume—including their consumption of shelter by living in mansions and yachts—and reappropriated that to society's neediest, we’d barely make a dent in their standard of living. There just aren’t that many billionaires and their aggregate consumption is miniscule with respect to the tens of millions of low-income Americans.
If we expand inequality to include the top 10% or 20% of households, then we can start to see some significant tangible resource consumption that could be redistributed to address economic hardship. We can, and should, take a Western-European approach to restructuring our economy to increase public services at the expense of private consumption through higher progressive taxes. Particularly we need a labor restructuring; fewer bartenders and personal trainers, more childcare workers and primary care physicians.
But we can also address economic hardship through productivity growth. Afterall, our redistribution efforts will always be limited by the goods and services that we are actually capable of producing. If we improve productivity through technological advancement and targeted education, then we’ll simply be capable of generating far more goods and services. And we’ll get less political pushback due to a lower tax burden. Ideally everyone’s consumption can grow.
You say "[w]e can, and should, take a Western-European approach to restructuring our economy to increase public services at the expense of private consumption through higher progressive taxes. Particularly we need a labor restructuring; fewer bartenders and personal trainers, more childcare workers and primary care physicians."
But does public opinion support this course of action? Your phrasing seems to align you with the "political revolution" people of the Sanders/Warren wing of the Democratic party. A portion of the Democratic coalition that struggles mightily to win elections.
Sure, there's clearly some room for reforms that could have similar effects. For example, there are three clear mechanisms for increasing the supply of physicians: immigration, graduate medical funding reform, and scope of practice/regulatory changes. But these seem to me to not align with "taking a Western-European approach to restructuring our economy to increase public services at the expense of private consumption."
>>But does public opinion support this course of action?<<
By rights, all that's really relevant is revealed preference. In the US, of course, revealed preference is stifled preference, because we're maximally skeptical of democracy/.
Or how elastic is demand relative to incentives? If we had higher alcohol taxes, and greater tax-credits for child-care, wouldn't that impact the job distribution on the margin?
How many people working as personal trainers or bartenders, enjoy that much more than they would enjoy working in childcare or healthcare, for example?
Our economy offers people a wide range of career options, enough to suit every type of personality, including more creative, i.e. "frivolous", ones: fashion stylist, makeup artist, sports, etc.That is a good thing, isn't it?
How many people would be miserable being forced to work in healthcare or childcare "because it's better for society"? I know I would.
I am happy that I don't personally have to farm to feed my family. It was a pretty big societal achievement that farmers became so productive that many of us could go do something else.
One of Ezra Klein's biggest blind spots. He'll bring up incessantly what a waste of talent the objectively very small mgmt consulting industry is yet never what a waste (by his definition) it is that Natalie Portman types went into acting.
Film acting involves huge economies of scale. One actress can make tens of millions of people happy once or twice a year. OTOH, the starving artist reading scripts and going to hundreds of casting calls is being self centered
Eh - but the marginal value of all but the very, very, very, very best films are extremely small. If no one ever made a new movie ever again I would still not run out of movies and shows to watch over an entire lifetime
You could say the same about novels, books, magazine articles, etc.
So what? Only a few are best-sellers or mass circulation, but they all have their niche readers. The people writing them enjoy making a living doing what they love, and the people reading them enjoy reading them.
Sure. But I agree with David_in_Chicago's original point, which is that if you care so much about labor distribution that you regard management consulting as a waste of talent, then you might be reasonably expected to feel the same about novelists.
To be fair -- I said "Portman type". I was just using her as an example of someone with off the charts IQ+EQ who could probably do anything but chose acting.
Back on mgmt. consultants ... I actually don't think he does. Or at least not real ones (e.g., managing partner level) -- maybe someone who did 2 years at MBB early in their career and came away jaded. He only has a caricature of the work.
>>If we took everything that billionaires consume—including their consumption of shelter by living in mansions and yachts—and reappropriated that to society's neediest, we’d barely make a dent in their standard of living<<
Iirc, if we appropriated all the wealth from all the billionaires, it would only run the federal government at current levels for a month or two. Stealing is both wrong and ineffective in the long term.
I think perhaps more fundamentally, most "billionaire wealth" realistically translates into claims on *future* production (think about it). So, even if we were to appropriate 100% of the wealth of America's 700 billionaires, it would require many years to fully realize our "gains."
I think the main question about taxing billionaires in a punitive way is about whether you think they wield too much power given their wealth, not worries about their consumption. I tend to think that they do and a wealth tax would be a good lever, but it's not important enough to pay a political price for, so you have to find something that's broadly popular if you want to do it.
Which is why we need better estate taxes. I have no problem with the tech moguls enjoying their earned wealth, and even the influence it also provides them. But much larger 8 and 9 figure trust-fund class is much more problematic, and a much larger group that can peddle influence more silently
One of my pet peeves is that Americans refuse to define “rich” and “poor” and insist that everyone is middle class. This is how we get rhetoric about billionaires instead of the top 10%.
People perceive who's rich and poor the similar way as George Carlin accurately noted that anyone driving slower than you is an idiot, and anyone driving faster than you is a maniac.
Because realistically much of the top 10% is "middle class" in the sense that they have to actively hold down fulltime jobs (often with both adults in a two-parent household working) to maintain their present standard of living and would be at risk of homelessness/severe immiseration if even just one of the breadwinners was unemployed for a prolonged period of time and/or required major medical care.
Debatable. I think a strong case can be made that billionaires who *inherit* their wealth shouldn't exist. I also think there's a very strong case we should tax truly stratospheric incomes with confiscatory rates (ie, the hedge fund bro who makes a correct bet and sees a ten figure income in a single year; this has happened before).
But a lot of billionaires got that way because they had really good ideas and worked hard and created genuinely useful things that help us all live better. And so so the equity they hold is just worth a ton of money. In other words, the fact that Jeff Bezos is worth $100 billion doesn't seem like a huge problem to me. Amazon has been pretty useful (you may personally not be a fan, but millions of people vote with their wallets every day). It does seem a problem, though, if his *kid* is worth a hundred billion the day Mr. Bezos passes away.
There was a good book "Dream Hoarders" that focused on this - that while it is fun to poke at the top sliver of the population, the bigger concern is how the top 20% control great wealth, income, political power, and pass their benefits to their children creating an entrenched class system.
Couldn't genetics be a confounding variable here? Like, the richest and most powerful people are likely to be intelligent and have the personality matrix (ambition, discipline etc.) that would make their children more likely to have similar outcomes? If two tall parents have a kid we assume it'll be tall, I don't know why intelligence or ambition wouldn't also have some percentage of heritability along with whatever came from environmental factors.
Checkout Yglesias's Oct 2021 interview of Kathryn Paige Harden that covers her relevant research and book, "The Genetic Lottery". This fragment of her answer to a question seems particularly relevant.
> When people think about genetics, they so often think about it purely in the vein that we've been talking about it so far, which is how are parents like their kids, right? How are kids like their parents? But half of the genetic variability is within families. Right. Genetics is also about difference and the way that differences play out. How are my kids different from me, how are my kids different from one another? And so, you know, often when people kind of back up to a very strong you know, “there is no way that genetics influences something like education or intelligence or personality.” I really am like, have you ever spent time with children before? Like, have you been around them? Because I think if you are around them, particularly if you're around, you know, siblings or cousins, you have this front row seat to see how genetic difference plays out, very early in development. Like my children as infants felt very, very different to me in terms of their temperament. And then also like what they elicited from me in terms of my maternal behavior.
This analysis of adopted children shows something even wilder! It confirms that IQ and personality are strongly inheritable, but NONETHELESS it shows adopted family's background overpowers those effects!
Intuitively doesn't that make sense? Do we not encounter plenty of successful people in our lives who are not godly intellects, but just reliable performers who had the right opportunities and education? Also growing up with more resources enables better interventions - the well-off kid who is slipping in math gets a private tutor from his parents. We do it for our kids, in fact!
If you believe any of the interventions can matter, you have to accept that access to resources can help patch up weaknesses. Oh, it might not get you into Harvard or Yale, but it can help precisely with the kind of kid who has the aptitude for corporate middle-management and just needs the proper preparation....
That is more-or-less what Robert Plomin says in his book Blueprint.* He finds striking correlations between polygenic scores and all sorts of outcome-driven metrics like wealth and educational attainment. It's a short book that is worth reading if you are at all curious about these types of genetic correlations.
* But not really, because it is way more nuanced and grounded in data. It really comes down to how much faith you have in polygenic scoring.
Sounds interesting! I don't think that genetics explain everything but I've become more open to the idea that they are more influential than I had accepted previously. This line of thought opens up a whole can of worms about "meritocracy," if that "merit" is massively heritable then you have no more reason to pride yourself on being clever than you do to pride yourself on being tall or having green eyes.
ah, see my concern is that there is a low-key eugenic attitude that shows up from time to time in the rationalist-type threads online... Instead of taking your line of reasoning, it gets more fatalistic about "well some of us are just born winners", so we shouldn't feel bad & there's really nothing to be done.
Maybe! But also maybe not so much. It really helps to be raised by good people. "Good" will take many forms there, often with correlations around income, education, resources to help you, nutrition, interventions when you get off-track, etc... Surely it matters who raises you. (Though yes of course there are individual exceptions who overcome crazy adversity. And there are lottery winners too - not relevant to the overall numbers.)
That's not at all what the book says, but it is how people who either haven't read it or didn't understand it often characterize it. I'm not accusing you of either, but usually when people have heard of Robert Plomin it is in the context of a rant about eugenics and the intellectual dark web or whatever.
The main takeaway is that polygenic scores are often better predictors of personality traits than the environmental in which someone is raised. But, since most people are raised by their parents, it doesn't matter much in practice.
The book is really nuanced and digs into effect sizes versus strengths of correlations, etc. to make the point that denying that mental traits are, to some degree, hereditary is to reject decades of very strong and reproducible scientific evidence.
Plomin characterizes Gattaca as a cautionary example that keeps him up at night. He suggests that polygenic scores could be used to tailor education better, increasing the value of public education for everyone; that they could supplement the kind of test-based assessment and placement that is prevalent outside of the US (he lives in the UK) as a way to provide opportunities for people that aren't correlated to income or social status. (Not entirely unlike how athletic talent is scouted.)
American taxes are generally much more progressive than European taxes though, in that the very rich pay a much larger share of government revenues. European taxes, while progressive on net, have much higher rates for middle class and poor people than in the US.
It's not very informative to talk about tax incidence. Much better to look at the effects of tax *and transfer* policy as a whole. (And indeed "economic" policy as a whole including so-called "pre"-distribution: minimum wage regulations, labor union laws, etc)
Pretty clearly, when looked at as a systemic whole, the richest parts of Europe (and Canada, too) suffer from less inequality than the USA does.
You may regard this as a "win" for America. That's your right! But be clear about what you're referring to, please.
My point was it is not possible to build a very generous welfare through only taxing the rich, which is what we basically do in America. To build a generous welfare state we need to heavily tax the middle class and even poor people.
Why is the response to income inequality arguments always about how billionaires don't actually have that much money in aggregate, that's totally irrelevant.
Billionaires are a small sliver of society. Income Inequality / gini coefficient is looking at the full pie, all 100%. It's a completely different argument, so when you rebut inequality arguments by talking about what billionaires have or don't have, it's missing the point.
Billionaires might not consume enough goods snd services to drive inflation beyond narrow niches like high end condos and yachts. Yet they control enough paper wealth that redistributing it could solve many accounting problems that bedevil the welfare state. The real question is whether it’s more politically and technically feasible to a) tax paper wealth or b) print money.
Taxing wealth and directing the proceeds to people with a higher marginal propensity to consume than billionaires would be inflationary
Only the change would be inflationary, not the (edit removed "taxes") redistribution itself. In other words, if you transitioned from untaxed billionaires to taxed billionaires over a long enough time window you could limit the resultant inflation to any value you chose. (mind you, I don't think that this is a particularly good idea)
I find stuff like the Gini coefficient to be occasionally interesting, but almost always a terrible metric of policy success. It's entirely too easy to reduce inequality by imposing invisible, opportunity-cost losses to GDP growth that do vastly greater harm than the impacts of disparate wage distribution. It's not fundamentally what the government should concern itself with. I'm supportive of roughly 3 major socio-economic government projects; maximizing the overall productive capacity of the free market, setting a basic floor of welfare services for the poor and programs that work to maximize the lifetime economic capacity of young people born without resources. Nowhere on that list is a goal of compressing the overall scale of income distributions. That is a fundamentally dangerous and misguided endeavor.
Meh, there’s a long line of failures in the “let us change human nature” column. Color me unconvinced that we should add another entry.
I think the stability of our political and social institutions require, among other nurturing efforts, a degree of income compression, “irrational” though it may be.
The people who could perform above median, but are being rubber-banded back to median by “compression” policies, are themselves going to be a stability problem. No?
Personally I think taming our primitive impulses is fundamental to what makes government/civilization important in the first place. It’s why you don’t get stomped on merely because you look weak, why your neighbor doesn’t shoot you over a noise complaint, and why you can save or start a business without someone simply taking it all from you and running.
Finally, I think it’s important that the most aggravating forms of inequality are the smallest. If we think minimizing envy is an important policy goal then billionaires or even Californians are not the target; you want to make sure no one else on the block buys a nicer car than you, none of your kids’ friends get an iPhone, none of your Instagram follows go on a cooler looking vacation, etc.
In what fantasyland are a more strongly progressive income tax, extremely high rate of inheritance tax, fewer tax breaks for consumption goods like large houses in expensive areas, and potentially a VAT to fund healthcare provision... going to "rubber-band" a bunch of 80th percentile folks back to the median of the income distribution?
I'm in the bloody 95th percentile of the income distribution and feel entirely unthreatened by all of those things.
The Founders and the generations immediately following rightly regarded the accumulation of vast amounts of wealth in individual private hands as just as much a threat to the project of republican governance as that posed by a potentially tyrannical government. They were right to do so, and we should make preventing that outcome a fourth "major socio-economic government project" coequal to the three mooted by the OP to which I replied.
Well for starters, we have an established class of people with good lifestyles by virtue of their multimillion-dollar home equity, but it is still possible (if very difficult) to occasionally win homes from these people on the back of mere labor income, if you are ambitious and successful enough at it. By limiting the wealth it is possible to amass through labor, we create an essentially permanent wall between those who already have the home equity to live in NY, CA, etc., and those who will never be allowed to earn it.
If the owner of $2 million 2BR condo is a threat to the Republic, that applies whether they already own it or are earning a salary that would allow them to own it in the future.
I'm not suggesting we change human nature. I'm suggesting this is a place for some of our rightly countermajoritarian constitutional structures to constrain the popular will.
I think you're overly cavalier about the strength and longevity of those structures in and of themselves, and their long-term maintenance requires us to accept a degree of popular pandering in our economic policy-making.
Nor am I as convinced as you of the innate rationality of your views on the matter.
If well-being is only relative, then there's no point to any of this beyond perhaps making sure people don't starve or freeze. People will be miserable if their neighbors are millionaires but they only make 6 figures. If they are millionaires they'll be miserable if their neighbors are billionaires.
The answer would seem to be to compress all income down to pure equality, communist state-style, but then of course people will be miserable because there's no longer any opportunity to become the billionaire next the millionaire.
The point of this being relative matters but only to a point, and I would argue a small one. The 3 "absolute wealth" projects in the OP seem like better goals to me than ensuring that the relative scale is compressed.
But seriously, has anything I've ever said here indicated to you that I believe economic growth, supply-side innovation, R&D, regulatory tweaks, and sector-specific reforms to be unimportant?
I'm merely pushing back against an OP who seems to regard both the transfer state and any attempt to restrain the accumulation of wealth and power by individuals as illegitimate.
Do I really need to muddy the waters by adding a paragraph-long caveat that, yes, his three goals are *also* important when I have an 18-month track record of saying exactly that, Wigan?
> I'm merely pushing back against an OP who seems to regard both the transfer state and any attempt to restrain the accumulation of wealth and power by individuals as illegitimate.
At least half of that is wrong. The OP explicitly endorses "setting a basic floor of welfare services for the poor and programs that work to maximize the lifetime economic capacity of young people born without resources", which amounts to endorsing "the transfer state", if that means what I think it does.
As for the other half, saying someone thinks "any attempt to restrain the accumulation of wealth and power by individuals [is] illegitimate" makes it sound like they think it's incompatible with the constitution or something. "Illegitimate" is not a synonym for "unwise", which is more of the vibe I get. You've made your case that the opposite is true, but I don't think the quoted phrasing adds anything.
Exactly. My objection isn't to transfers entirely. It's to using the state to redistribute wealth for the purpose of ameliorating class envy and cultural grievance. For example, a huge part of Trump's pitch is using federal power to prop up marginal forms of labor on the basis that they conform to a preferred cultural aesthetic.
The existence of a monopoly on violence is one of the best arguments for the existence of a government and is primarily why I am not an anarchist. We commonly accept the idea that the government should arrest the human capacity for violence. The government should also arrest the human desire to flatten everyone to be just like them.
What would that even mean in practice? If you're the majority shareholder of a company you're legally obligated to sell yourself out of control of your company if the stock value exceeds 2 billion one day? Because that's how it works at that level, it's not like it's income, it's ownership. You're effectively proposing a kind of soft nationalization of every corporation that exceeds a set valuation.
It is really hard for me to take anything from these graphs without a link to the methodology, would love for that to become standard practice for graphs like this.
In particular I am worried about including health insurance as part of income.
I'd also like to see the median house cost in 1999 next to the median income, then repeat for 2019.
Tangentially, when I am thinking of myself as 'having it better' I really want to see something like a PPP comparisons with the past, I 'had it better' when I was living in China, despite a slightly(or significantly if you include the 'value' of my health insurance) lower total income, because my cost of living was about 1/4th of what it is in the states.
To add some context/corrections to my own comment. I understand that in theory inflation adjustment is supposed to be doing a lot of the things I am asking for and embarrassingly it is basically a PPP comparison. I still have the basic feelings though that I don't like taking these kinds of numbers at face value, without clear explanation of the limitations of the metric.
For example, we can look at the appliance price inflation index time series and conclude that dishwashers cost less now than they did in 1978, but personally, I feel like dishwashers and dish detergents have both gotten significantly worse during my lifetime. I suspect because of EPA regulations. I have no idea how to tease that out when comparing the inflation adjusted price but I would happily pay twice as much for a dishwasher that actually worked.
The median income (not adjusted) in 1999 was 42,000 according to the CB(Census Bureau), and it was 69,000 in 2019. The median house cost (not adjusted) in Q1 1999 was 157,000 again from the CB, and it was 313,000 in Q1 of 2019. 64% vs 99% increase, roughly. Maybe the difference here is being eaten up with 'quality' improvements, or something, I am not sure, and I am skeptical that anyone can be sure about this kind of stuff.
Based on the quality of the numbers we are working from, It seems to me that a 5% increase in real median household income might not be a precise enough measure to say with confidence that people are living 'better' lives because of it.
I realized recently that while I knew that housing prices were impacted by interest rates, I didn't really understand how much. In 1999, the fed was raising interest rates, but the year started just under 7% and end right above 8% for an average of about 7.5%
For comparison, a house that costs 240k at 7.5% interest rate has the same monthly payment of about $1,700 as a house that is 375k at 3.5%. (Average rate % for the 2020s so far).
That's a 36% increase in "housing price" without a change in "house cost" to the buyer which just so happens to work out as the difference between median income change. Also explains why the % of income dedicated to housing hasn't changed that much over time and has been primarily a transfer of wealth from bond buyers to homeowners.
With interest rates now rising, it will be interesting to see how that plays out.
This is an excellent point that I had not considered, and after a quick google searching, I still don't have a great idea how this cashes out in the numbers.
Is the real median household income derived by comparing the total cost of a 30 year fixed rate mortgage started in the current year against some previous year? The total amount actually spent in this year, or just the house cost? What percentage of mortgages are adjustable rate and how could you possible get the total cost for a house purchased in 2020 with a 20 year adjustable rate, before 2040?
The inflation measure (the way they deflate to calculate real household income) isn't based on either the actual cost of mortgage payments for incumbent homeowners OR the cost of mortgage payments for new owners... it is based on a measure called "owner's equivalent rent" which is basically a survey question where homeowners are asked how much they think their house would rent for.
There are flaws in this metric but the idea is basically to separate the "investment" component of the mortgage payment from the "shelter" component. Of course real homeowners do not actually experience a rise in local rents as a decline in their living standards as is implied by the OER metric so it is a bit odd.
I guess I'll try to share an opinion that I'm guessing is quite unpopular on this site: I have just never been able to get upset about *per se* income/wealth inequality. I know there are people that are vastly richer than I could ever imagine to have, and...it's just never bothered me.
What concerns me more is to be continually striving to raise the baseline of basic standards of living for those most at need, and to continually strive to provide abundance in society to make that happen. That would likely have the side effect of reducing income/wealth inequality, but that would not be driving my desire, but instead to increase abundance and basic standards of living--which are very good!
The problem is twofold. First, whether the riches r are getting an unfair share. Here’s an easy example. We’re both perform the same work but I get a million dollars and you get a thousand. Why should you be upset? We are both better off . Standards of living rose.
Second aspect is whether people can get so rich that their political or social power undermines the basic equality under the law that is the basis of democracy or allows them undue political power. Put differently, there is an idea that democracy is a system of government built by and for the middle class, its erosion, including by having too powerful rich people , risks destabilizing the system.
To the extent that money buys power, it’s because it buys attention (TV ads, think tanks, lobbying, etc). As long as the underlying attention is still available, limiting the amount of money people throw around for it will simply lower the price, or at best displace the competition for attention to another form. But there are always going to be winners and losers in the competition for attention, and the winners are going to be better able to influence policy. I also don’t think it’s the worst that being able to get political attention is associated with having done things in the real world… I’m not sure I’d like to see basement shitpoasters displace the Ford Foundation.
Also, I think there’s kind of a misconception going on where we compress billionaires and professional-managerial class families. Raising taxes on wage incomes over $250,000 is not going to materially diminish the influence of a Murdoch or a Soros. It doesn’t take money to show up and NIMBY, it takes time. Perhaps if you want to diminish the influence of PMC families, you should embrace RTO and long hours.
I think you are vastly underestimating the power billionaires have, above and beyond election campaign donations. Bill Gates watched a tv show when running on his treadmill and next thing we know tens of thousands of public schools kids or more are educated based on his whim… and you’re right, the argument agaisnt billionaires is separate from the argument for genera redistribution policies to fund the welfare state. Arguably making sure there aren’t any trillionaires around is an end of itself, to be pursued by specific means, which may or may not overlap with the means used to fund the welfare state and redistribution. No individual should be able to hire their own literal army, for example. Money is power and too much power in one individual (or family, or corporation even) is dangerous to freedom, especially when that power is totally unaccountable.
Ok, but, how many Bill Gates are there? I'm not sure how many B's he has but it's many times what whoever #100 on the wealth list has. The number of people who could pull off Gate's treadmill stunt is pretty small and might be in the dozens. And as far as I can tell the majority use their power for "good" in the form of charities or at least productive ideas. My point being this doesn't seem like a particularly important problem.
P.S. prioritzation is a second order question. City of Trees argued that there is no problem with extreme wealth per se. I’m arguing that there is, or could be, a problem. If we agree that it *is* a problem (or potential one) then we disagree with the OP argument, regardless of how “urgent”/“important” we deem that problem to be.
Thinking about it “constitutionally” even one person powerful enough to shake the system is one too many, and the fact the person currently in that position currently doesn’t seem inclined to do so (through sheer luck , it would seem) is small comfort.
N.B. I’m not saying Gates is necessarily in that position. Nor do I think he is the worst of his kind (think musk, thiel). However the question needs to be addressed. How much wealth is too much , ie giving someone this dangerous *potential*? Surely we ought to guarantee such potential is eliminated , or at the very least have some mechanism to control who gets this egregious power, rather than the current de facto lottery-like system?
Regarding the second point, it seems to me that for every Koch or Thiel there's a Gates or Soros.
Of course, it's not as if the only danger is that a rich right-winger will buy elections or parties: all four of them likely share interests and therefore subtly exert pressure on our politics. Furthermore, one might point out that, without support from their like, a viable candidacy of any sort is difficult.
But in the end, those are hypotheticals, and my priors say the existence of trillionaires doesn't constrain our political options in a meaningful way, except, perhaps, as a counterweight against certain kinds of abuses. I don't think you need to be an acute paranoid to want a partially constrained government*: a brief survey of global affairs should do the trick. Or, for the progressively-inclined, a look back at the Trump presidency.
* To clarify, I think our governmental gridlock is bad - I'm not talking about that. I'd be much happier to see governing majorities get a chance to enact their policies.
I don't think giving a huge amount of an accountable power to random unelected individuals is a good or effective way to keep the government in check. It rather seems like a growing element of chaos in the system, not a sound check or balance. At the end of the day we can debate how serious of a problem it is or is likely to be in the near future, but so long as we agree that there could be a theoretical point of gini coefficient and/or absolute level of wealth where it *becomes* a problem and democracy becomes seriously endangered or unsustainable then we agree - in principle - that OP's argument is incorrect, at least in theory.
I didn't mean to hide my position here & come across as concern trolling. I'm mostly with City of Trees and Dave Coffin on this. I'm in favor of providing a relatively high floor, but I don't think it's a good idea to compress wealth and income for its own sake.
Regarding the point you were responding to, I think we probably have different intuitions about how much we can engineer large-scale social systems, which is an interesting topic, but not one I have much time to dive into at the moment!
Elected Democrats do not need to moderate their economic positions to win elections, they just need to avoid going off the rails culturally and environmentally.
I have developed a bad habit of hate-reading the post-Trump NY Times. There are themes that run through their articles that appear to align perfectly with the worse instincts of elected Democrats, I guess because they read the NY Times.
One is a persistent view that we are all doomed no matter what and that the only way to delay the inevitable climate catastrophe is to stop flying, driving, eating, using electricity or engaging in commerce. In the explicitly environmental reporting, this logic prescribes going very much off the rails. But this amalgam of bad cultural values and dumb environmental policy is pervasive and pops up in many contexts that presuppose doing less of basically everything is 'good for the environment' even though we're doomed anyway. In the last couple of days: Krugman bragging about the fact that he still drives a 2004 Jetta or a column extolling the virtues of being short, because you have a smaller environmental footprint.
When I see this general vibe reflected in Democratic messaging it most definitely does not motivate me to vote Democrat. (Nor does my state senate majority leader blaming the shoddy electrical grid on solar energy generation make me want to vote Republican.)
It was in the context of New Yorkers buying Teslas for no other reason than to flaunt wealth, rather than people who have a 30 minute commute by car or whatever. Maybe not the perfect example, but still ground my gears.
that wasn’t krugman’s point. his point was that teslas are a good status symbol for rich new yorkers because they display both wealth and green politics.
I know and it isn't the best example (even though it still bugs me) but the point is also that they aren't explicitly making a point, it just seeps in because of a particular ethos. There, Krugman does imply that buying an EV is just a (wasteful) status symbol and does nothing to help the cause, so why not just drive a 2004 Jetta.
I think the focus on inequality really obscures the supply-side issue in the fields we talk about all the time. Housing, various types of care and education.
Like if we formally rationed these on a lottery system or something like that people would see that we just don’t have enough of these. Because Lines would mean that. But since we prefer to ration based on price it obscures the shortages and makes it shortages and expensive.
We haven’t done enough to combat inequality, but a lot of that is that making more money just doesn’t make it much easier to get the good things in life unless it’s a lot more in relative terms.
'there's not a shortage of housing, there's a shortage of Affordable Housing' -- that kind of thing which i hear a lot (especially in the UK where NIMBYism is worse). when in reality the two things are extremely interconnected!
Median income was growing rapidly at the end of Obama’s second term and yet Hillary lost to an historically unpopular opponent. Hillary may have been a shitty candidate, but she certainly wasn’t that much worse than Trump. This has uncomfortable implications. Either delivering broad prosperity isn’t that politically useful or else the quirks of the electoral college add such a huge, chaotic variable to the equation that it’s very difficult to trace cause and effect and nigh impossible to predict the best path forward.
This strikes me as more evidence that the "do good policy, the wins will follow" school of thought is missing a big piece of the reality. It might be that vibes easily overwhelm personal experience. We all remember Trump describing the economy as "American carnage," and apparently some significant number of voters agreed with him in spite of improvements in their personal situation.
But it might also be that people just fundamentally care more about other, non-economic stuff (i.e. immigration, sexuality, abortion, etc.) more than they care about economics, at least under particular circumstances. I tend to be a materialist, but if you want the darkest version of this, it seems reasonable to me that increases in material prosperity might free people up to rebalance their concerns away from economics, precisely because they are doing okay. Maybe the land where no child goes hungry is lit by the burning tire fires of Culture War?
A big problem is, superficially, changes in one’s economic situation appear to be drive. by things that have little to do with macroeconomic conditions. My prosperity increased when I found a good web designer and then my progress stalled out when I had trouble keeping a good assistant. Every worker and business owner has a narrative about bosses and customers that explain most of his economic condition. Why give Obama the credit for a good job you got in 2014 and can keep as long as you get along with your boss and the company does ok?
I think that is right, but it gets at what I see as the problem of vibes. Like, if you were a Trump voter, you didn't just say, "Yeah, I don't give Obama any credit for how I'm doing well." Rather, you listened to Trump say, "Our economy is a disaster!" and cheered at the rally before going back to the new truck you recently bought with your raise. And it wasn't like you were in on some kind of secret plan to lie about your personal situation. There's just a lot going on, and people get that the economy is separate from their personal experience, and it's easy to just get a bit hand-wavy.
I think this pairs with what we know about people's general sense of the macroeconomic situation, which is that partisans adjust their optimism or pessimism about the economy based on who wins the election. And that's not a completely insane thing to do, in some sense, given that the winner will alter economic policy (Trump's win really did hurt my personal economic situation because of some particular policies that his administration pursued). But it's pretty clear that what public figures SAY about the economy is only loosely tied to the actual reality.
So given all that, I think the prospects for good policy get a lot more difficult, given the weakness of the reward mechanism and the strong incentives pulling in other directions. Not impossible, and I still think people should pursue good policy and hope for the best, but I think we have to be honest that it's operating in a space of perverse incentives. And that sucks.
I think it's true that non-economic issues matter a lot, perhaps especially when the economy is doing OK (it's the nature of politics for the parties to fight about *something*). That said - absent severe shocks like the Great Recession or Covid - I think it takes a while for changes in macro circumstances to filter through into vibes.
That's not to say that vibes are completely disconnected from economic or material realities, just that a) there's a lag, sometimes a big one and b) other stuff also matters. (The vibe of the late 2010s was quite bad, for example, even though the economy was doing well. You could say a similar thing about the late 1960s, I think.)
All that said, I think Trump actually won the 2016 election for mostly quite banal reasons related to thermostatic politics - three terms are hard to win - Obama's generally 'meh' approval ratings, and Hillary's shortcomings.
Don't overcomplicate things. Many voters (enough to act as a thumb on the electoral scale) like to give the other team a chance after eight years (yes, often irrationally so). This trend has likely weakened in recent years, but it hasn't vanished.
Agree. This seems likely, and grappling with this means, among other things, autocrat- and idiot-proofing the presidency. Getting serious about finding ways to revitalize Congress, shifting power from the West Wing staff to the Speaker's and Senate Majority Leader's offices and staff, etc.
Actually I think the combination of Sanders mounting a solid challenge AND Trump ultimately winning should tell us that Hillary WAS INDEED a shitty candidate! (to use your words) She was the most unpopular Dem candidate in my lifetime. Then in 2020 Sanders got shut down easily and Trump lost despite the advantages of incumbency, so I don't think those two were miracle workers.
Listen, I liked Hillary - and still do - but she was a terrible choice as a presidential candidate. And because of that terrible choice these kooky populist extremists got a toehold - and because people pretend she WASN'T a terrible candidate, they think the kooks are a stronger force than they are. NO! She was bad, and nutty extremism is bad.
It's quite clear that Hillary was bad at running for President, and should have been clear in 2016. She lost once already, despite considerable advantages.
That said, Trump was *also* a bad candidate, even though he narrowly prevailed, and I remain quite unconvinced that Sanders would have won. It was just a weak year.
An interesting counterfactual is what would happened in, say, a Rubio-Biden election? My guess is it actually would have looked an awful lot like Clinton-Trump.
but a Rubio-Biden election doesn't exactly test anything. Both parties run not-crazies and we get a not-crazy president...
If 2016 had been Biden-Trump, the crazies in the GOP might have been nipped in the bud, Goldwater style. When an irregular candidate loses to a normal candidate, it has usually routed the irregular movement quite thoroughly. Instead Clinton's weakness led people to think they should "learn something" from Trump's victory. Yuck.
> but a Rubio-Biden election doesn't exactly test anything
It tests the fundamentals. An election with two reasonably popular normies would have defaulted to the fundamentals. Which, actually, is what I think the Clinton-Trump election did, more-or-less, because they were both highly unpopular (though Clinton was a normie).
I care less about party labels and more about the center vs the radicals. I want the old-fashioned politics where everyone tries to avoid extreme positions in the primary so they can scramble to the center for the general election.
There are big, structural changes that would be egalitarian and popular-- they just aren’t exactly what Bernie or Warren have proposed. Raise the minimum wage. Tax capital gains like labor income. Reduce the inheritance tax exclusion by half or more. Create good blue collar jobs through tax subsidies. Lower tuition at public colleges to the equivalent of what the boomers paid. Preempt state and local laws that make it difficult to build solar and wind farms.
Matt sets the bar way too low. Other than George W Bush, every full-term President after WWII ended his term with record high median household income. This is because per capita GDP grows by an average of 1.5-2% a year, so new records are inevitable unless there is a recession or regressive changes to the labor market swamp productivity gains.
If Matt’s idea of realpolitik is “stop performing on Twitter and waiting for the great expropriation and try governing,” I’m sold. But if he thinks I should be content with a 5% reduction in the GINI coefficient, I dissent.
Yes, the richest people in the world taking a massive haircut as a result of a variety of easy money bubbles popping will certainly narrow the gap between the richest and poorest on average... And why is equality the measure that anyone cares about in the first place? Rate of improvement in standard of living seems much more important unless you are super envious of what the wealthiest have.
Doesn't the answer lie in the second half of your last sentence? An awful lot of progressive economic policy in the last 20 years has become pretty openly about hurting the rich to a greater extent than it's been about helping the poor. (Just as progressive views on antitrust have in the last 10 to 15 years become primarily focused on hurting companies that progressives disapprove of rather than actually trying to make things better for consumers.)
> Instead, the Reagan administration’s policies led to stagnant average wages through the 1980s, with household incomes rising only because of women’s increased labor force participation.
Did Reaganism cause this? Specifically, I don’t think he ever succeeded in cutting government spending on welfare. Reagan just cut taxes and funded the massive deficit through debt financing. If anything, that should’ve been a large economic stimulus, although it may have only stimulated suboptimal parts of the economy. E.g., finance.
It could be argued that the failure was in not continuing the expansion of the welfare state though continuation of initiatives like the New Deal and Great Society. But there also were many broad changes in the economy due to technology and globalization. War-torn Europe and Japan had recovered and entered the world markets with innovative and superior products. Information technologies started automating aspects of production and administration, which increased productivity by capital-labor substitution.
In many ways, I think the post-war era up through the 60s was the exception. We were in an unusual environment with America as the sole industrial power and that is not something that we can recreate. We also still had a primitive production system that required massive quantities of unskilled labor. The world has changed, largely for the better in my opinion, and we need to consider that in analyzing historical developments.
I think there might be a reason that personal income started dropping in the 70s and it's something Matt notes in the sentence you quoted; "women's increased labor force participation".
The early to mid 70s was when women's labor force participation started to really increase rapidly at the same time that de-industrialization and decline in manufacturing jobs started to take off. I think this is important; given realities of gender dynamics and sexism of the era*, the jobs open to this new cohort of workers was going to be unfortunately quite a bit more narrow compared to men. Given this reality of a huge influx of potential labor that was concentrated in only particular types of jobs, it seems like this should have had some impact on wages; especially in particular types of professions.
It seems possible that given the realities of college graduation rates by gender and barriers continually being removed regarding which jobs women can get, that this "gender shock" (to borrower from the phrase "china shock") has played out and this might be part of the story (along with the "china shock" finally possibly running it's course) as to why wages have started tick up for bottom 80% and inequality has dropped slightly.
If there are some economics papers that debunks my theory, by all means share. It's a hypothesis with some scattered thoughts about why it might be true. Not a fully fleshed out thesis statement. But thought it worth putting it out there.
*well aware that sexism and gender inequality still very much exists in the workplace. I'm pretty certain the female readers and commentators on here can 100% tell stories of getting passed over for promotions to clearly less qualified men or finding out a male colleague is making much more money for the same job or some other clearly sexist outcome at a job. Or just dealing with piggish co-workers or bosses. But I also feel pretty confident that (just like with racism) it's improved considerably since the 70s, even if there is still work to do.
I have wondered for a while what the effects of discarding the Bretton Woods system did to the economy? Not the gold standard part, but the "currencies pegged to the USD" part. Moving immediately to freely-floating currency exchange rates had to have had a major effect on the global economy right? And maybe at America's expense?
Okay, but wouldn't that have affected trade balances, and more importantly currency and capital flows, especially over the long term? If over time it becomes more desirable to invest in Europe and Japan while at the same time their exports become cheaper, shouldn't that have an effect on America's economy?
Yes, that's exactly what caused it to collapse. The dollar's value could only have maintained at the value it was set at with incredible effort that the US was not willing to do. As a result, the pressure on the set rates became increasingly stressed until they benefits of keeping them were outweighed by allowing them to float.
Excellent piece. I tend to agree more progress was made under Obama than the consensus. But still, a major issue is the geographical distribution of the recovery and the resentments they caused.
Where rich people live and therefore major investment is made...drives so much of our politics and economy and just doesn’t get as much attention as a million other factors. But it appears to me ‘forgotten zones’ become a major source of misunderstood political tension and instability.
I see it especially in the S Jersey area which is far more like a West Virginia rust belt area than most understand. And the mirror image in Philly, which experienced white flight on steroids then a major renaissance when wealth came pouring back in slowly starting in the early 90s. But by 2010, S Jersey was like a microcosm of the whole nation, with heavily populated “coasts” the shore and Philly burbs, and a post-industrial mess of “driveover” country in between. Welp, not hard to guess which area supports Trump, feeling like our system has rejected them. But hopefully, Covids effects of Getting wealthy people out of city centers and spread more broadly will make for more widespread development and investment, fewer “forgotten zones” or perhaps at least some new pockets of fresh development that can seed recovery in those areas.
Biden's Infrastructure bill and the Chips, both take a pretty good swing at the geographic issue. Even the climate part of the IRA, because of the buy American part of it, leans in that direction.
And to give Obama his due, the auto rescue, which arguably saved his reelection started to lean that way a bit.
Good point. I thought this was a good article and highlighted a positive top-line, big picture trend I wasn't aware of, and that should get more attention. But as with big picture, aggregate gains from free trade policy under Clinton, even though Obama's technocratic policies may hold up better in the aggregate than commonly said, there are still winners and losers and that matters a lot too. Failure to focus sufficiently on making sure the losers are attended to can create toxic politics that overwhelm the good.
Yes, globalization and commodification of investment is really a major issue for rural communities.
On a micro scale, our economy tends to create huge winners locally, business owners are heavily rewarded for creating their businesses. Often, such wholesome healthy organic business is now sold to a private equity firm, who then takes every penny of excess out to repackage the company according to “best practices.” They are really just making very short term minded decisions to goose metrics other private equity firms use to value companies. In the process they sell off employee interests, company culture and long term strategic advantages for ownership cash now.
In effect, this totally milks rural communities dry while offering little/no investment back. Private equity ownership generally makes very little capital-heavy real investment (they are interested in trading and shuffling assets more than building them, which is hard of course.) Old ownership and private equity take their proceeds from company sales to global investment markets in order to diversify and protect their wealth. Little if anything gets reinvested in local communities. Maybe a second home gets
built, but the gravy is stashed in mutual funds and bond portfolios etc, not so much job-creating LOCAL business development that underlies the LOCAL economy.
Yes, to a certain degree its differential population mobility. Many with the resources had freedom to move to opportunity or appealing locales but others are forced to stay (or relocate) where they can afford. Still other attempt a risky move to the city they can’t afford and end up in one of these tent cities at great risk for becoming addicted to heroin.
I'd only clarify a point about the urban renaissance. I don't think wealth come "pouring back in" even caveated with slowly. Poor young adults came pouring back in and then became wealthy following standard income lifecycles. Which I think illustrates a larger point that gets missed in all these inequality discussions. The vast majority of people are both poor and wealthy at different points in time. Long-term sustained poverty is exceedingly rare.
Perhaps thats a large part of the picture but so is the movement of generational wealth, which at least here locally in my experience, very much followed this pattern. as the city revitalized and became appealing once more, nearly all the wealthy families left to be either in the city itself or closer to it. Property values decline and a vicious cycle sets in.
How do we know immigration fell? I would guess it's fallen, but I find it very hard to verify with timely legal immigration numbers, and nearly impossible to find numbers on changes in illegal immigration.
This would contradict most of the information we have about the effects of immigration. Any quick perusal of the economic literature will show that immigrants have a pretty small, and often positive impact, on wages, including on the low-end. I think a better explanation is that high household savings, enabled by stimulus payments and lower spending gave a lot of people a cushion that allowed them to not accept crappy wages or working conditions.
The lit on immigration is not that clearcut. The farther you go down the scale wrt both the immigrants and the natives the more mixed the evidence becomes.
I can't cite a source but one was cited for me here just a few weeks ago by a person arguing for your position almost exactly. They linked a recent meta-study on the available econ lit which generally shows a net positive mean impact on natives. But the authors were quite clear in pointing out that downscale natives sometimes appear to be hurt, especially by downscale immigration. The picture was more mixed than negative, but it leaves open the possibility that BronxCobra's hypothesis is correct.
TL/DR version: once again, a progressive pearl-clutching narrative of the past 2 decades is undermined by empirics.
Shocker....which one is next up:
1. America is the most racist country, like ever.
2. Or, racism/sexism/homophobia is at its all-time high ever in America, like right now!
3. Or, the world is going to burn/melt/drown if we don't all abandon civilization in 5 years, no wait, 10 years, no wait, 15 years?
4. We can replace fossil fuels with wind and solar.
5. Veganism/electric vehicles are LESS resource intensive.
6. Nuclear power is worse than climate change.
Answer: none of them because these are useful political narratives, not reality. Except that the unrelenting catastrophism is making our fragile tennagers mentally ill and drug-addled.
I agree with most of what you say, but how is veganism not less resource intensive than meat eating? Trophic levels: only 10% of the biomass at one trophic level is converted into biomass at the next trophic level. I.e., if you feed a cow 100 kcal worth of plants, you get only 10 kcal worth of cow biomass (and said cow biomass will include inedible parts like hooves and skin). Eating plants directly is much less resource intensive.
And #4. Obviously it is possible to replace fossil fuel with wind and solar (although not today). After all, crude oil was created from solar energy in the first place (phyto and zooplankton)...
In fairness to idonttrollonshobbas, he/she probably meant "we can't replace ALL fossil fuel use with wind and solar" due to intermittent availability and declining marginal utility. Going from 0% to 20% solar is much cheaper, easier, and more efficient than going from 60% to 80% solar.
If veganism is strictly local, then yes it can be less resource intensive. But, I live at the 45th parallel in a blue coastal city that is regaled as Vegan-central. These self-righteous dear ones eat nothing but bananas and avocados all year long that are air freight delivered from the tropics.
Most of vegan meat substitutes are soy-based. Soy beans are genetically modified and require fertilizers to avoid deforestation and other soil degradations. They also use a lot of water. Non-dairy milks have similar issues.
EV's are more resource intensive to build and dispose of.....and besides the tax subsidies required to make them affordable take away revenue from public transport.
There are no free lunches. Trade-offs are the key to meaningful distinctions and yet the political zealots in my blue district reject persuasion and viewpoint pluralism for ideological bromides that often are in contrast to stated goals. It's the "defund the police" phenomenon that is rampant where I live.
Thanks for clarifying my point on solar and wind. If battery technology advances then fine....but in Italy & Spain, cultural institutions and tourism industries are pushing back on wind and solar farms as destructive uses of landscape and unaesthetic. France avoids this by beng 70% nuclear. Germany allowed Putin to knee-cap their economy based on ecophilia. The lessons are out there to be learned, but one's mind must be open to trade-offs and honest empirical data.
Veganism is less resource intensive in just about any normal set of circumstances. You'd have to compare odd extremes to find otherwise.
To the extent soy is problematic, that just means it is better to eat tofu or veggie burgers than pigs or chickens, whose metabolisms waste most of the soy that they are fed.
In FL and TX the issue isn't just that it's purple enough that Dems think a regular Dem can win. It's that the primary electorate is full of the same sort of cosmpolitan liberal that controls the party everywhere else, and that electorate simply will not tolerate a person who says stuff like "I think abortion is morally wrong in most cases, but I also think the government has no business making that sort of decision for people," or "I love guns, watch me shoot some guns, look at me throw a dozen bones to conservative aesthetics and say I just want to help honest hard working laborers with Medicaid expansion."
Another aggravating factor is that Texas (and indeed, most of the non-Medicaid expansion states) don't grant ballot initiative power, which would be a way to disarm the partisan chum that gets associated, and place the single issue all by itself to a vote. Florida has initiatives via constitutional amendment, but it looks like that requires a supermajority vote, and even then, as we saw with the effort to end felon disenfranchisement there, the legislature was motivated to find a way to run over that vote.
Democrats have not won a statewide election in Texas in nearly 30 years, so a big part of the problem is just that they are flying blind there. They do not have any successful roadmap for how to crack the code in that state. Combine this with how expensive it is to compete in such a large state, they have a very short list of high-quality candidates who are even willing to run a serious statewide campaign. So their options are rather limited to begin with.
My favorite observation to troll progressives is to note that there actually isn't any correlation between a country's income inequality and its wealth inequality- and that the Nordics have some of the highest *wealth* inequality in the developed world. Some countries are high income inequality and low on the wealth side (I believe Italy), and the Nordics are the reverse, with 10% of the country holding 70% of the wealth as of about a decade ago. These two distinct concepts usually get handwaved into a vague 'inequality'. Not a commonly discussed talking point!
More seriously, on the wealth front- in America at least most of it was in the paper value that the stock market assigned someone's company. This was high in the 2010s, and recently has uh been not so high- Musk has lost $200 billion or so, I believe a collection of tech billionaires has lost over a trillion
It’s as if a modest state pension and single payer healthcare keep the proles from confiscating chateaus and portfolios while the rich go on being comfortably rich. Shocking!
I'm pretty sure Piketty (or someone similar) wrote about this. Sweden has been owned by the same aristocracy since forever. Probably true for Denmark and Finland too. Their wealth all stashed in Liechtenstein trusts.
No, it is because the statement is false. US wealth inequality is much more than most all countries in Europe and only exceeded by Russia, Sweden and Netherlands.
https://en.wikipedia.org/wiki/List_of_sovereign_states_by_wealth_inequality
IIRC, though, this is kind of a fluke and it has to do with how inheritances work in the culture, which tends to concentrate familial wealth rather than distribute it.
inheritances are not a fluke. they are practically the keystone of the structure
No, I’m saying that the exact nature of inheritance can make generalization hard.
If, for example, the custom is to give the majority of it to a single child, this will tend to lead to more extreme concentrations of wealth over time versus a similar society which divides it more equally among the children.
When a particular custom is a driver of wealth inequality, that inequality has fewer relevant implications for people who don’t share it.
Or when people have fewer children, each will inherit more wealth than if it has to be divided amongst many?
Should be neutral, generally, since what matters is how evenly you divide it, not how many parts it’s divided into.
If the issue is inequality and wealth concentration, surely a large inheritance divided into 10 produces less wealth in the recipients than the same inheritance going to only one, or divided into 2 or 3?
Why does this long thread take the statement at face value and not look things up. My first inclination was thinking this wasn't true and it isnt. My go to is not to trust statements that dont specify the data source and include a link. It is not that hard to do . Here is my link
https://en.wikipedia.org/wiki/List_of_sovereign_states_by_wealth_inequality
What’s your thesis, though?
Ven, I dont know if I have a thesis, just noting that somebody made a statement, that wealth inequality is less in the US than elsewhere, what from my source is completely contradicted, where the US is very unequal to the degree that we are 166th out of 170 countries in wealth equality. The entailing discussion parses out reasons for the falsehood rather than anybody actually checking the data.
I guess my thesis is that given the public tendency towards confirmation bias it behooves people to look things up before feeding that bias. If you say something in a public forum you should look it up first.
You might be accurate in your trolling description because by this 2019 world bank listing of wealth inequality, you have missed the boat entirely, in that the US is the fourth most unequal country in the world in wealth only exceeded by Russia, Sweden, and Netherlands, which does include one Nordic but not Denmark, Finland, Norway, or every other country in Europe, Canada, Japan (one of the most equal), Australia, China.
As to the stock market, that changes things short terms but has little effect on the longterm and one of the reasons the stock market funnels money to the top is that gains made in the market are taxed at lower rates than business income.
https://en.wikipedia.org/wiki/List_of_sovereign_states_by_wealth_inequality
I dont know where you get your data, but by this WIki citation you pretty much missed the boat.
The US is the fourth most unequal country in the world in wealth inequality only exceeded by Russia, Netherlands, and Sweden, and you might take the latter two of representative of the Nordics, but Denmark, Norway, Finland are more equal, and more important, every other European country, including the vast bulk of populations of UK, Germany, France., and every other country is more equal.
https://en.wikipedia.org/wiki/List_of_sovereign_states_by_wealth_inequality
That the market is in not doing so well, will affect them, but that is transient, and the market rises reliably over time.
I wrote 'the Nordics have some of the highest *wealth* inequality in the developed world' and yes, that is completely true man. (Denmark is in the top 10 of the world's most unequal countries in your link?) 3 out of the 5- 60%, a supermajority- are much more unequal than the rest of the developed world, so I'm quite comfortable with what I wrote. Developed countries by 2019 Gini go (in order) the Netherlands, Sweden, the US, Denmark, Germany, Norway and then Ireland. Did you follow your own link?
>more important, every other European country... is more equal
Yes, I know, and that's why I..... didn't say anything about 'other European countries', and just mentioned the Nordics? I literally said nothing about the rest of Europe, you made that up.
I appreciate the uh enthusiasm that lead to you copy-pasting the same point I believe 5 times in 1 hour in this thread from 6 months ago. (Have some free time I take it?) But by fixating on one half of one sentence that I wrote, you completely missed the gist of the whole paragraph- that wealth and income inequality are separate things, that they don't really correlate, that some countries are high in 1 but not the other, etc. I'm not sure you processed that! That was the real point!
When you humorously are "trolling the progressives," their main complaint is the inequality in the US, so when you imply that the Nordics are very unequal, but fdont mention that the US is worse other than Sweden that seemed odd. I dont know why Sweden is so much more and Denmark is high but Iceland and Finland aren't and Norway is a little high but less so than Germany. S o I am not sure of the point. The piece is about the US which is higher in both income and wealth. I suspect if there is a big difference between wealth and income it is about savings habits or maybe because the social benefits are strong enough that people have to worry less about savings, for example if everyboy has a full retirement there is less of a need for having a lot of money in a retirement account. Any rate, if I missed your message I apologize as I thought you were implying these countries were worse than the US
Oh yeah, high wealth inequality in Sweden and Denmark is just a choice by poor people to not be wealthy. Seriously?
It's a complex issue that no one knows the complete answer to.
One theory, that you won't like, is that the policies adopted to reduce income inequality have actually further *cemented* wealth inequality. The countries in question apply very high marginal tax rates to top incomes. That makes it very hard to become wealthy if you are not already. Not only do you not get to keep the majority of money you earn, but the highest paying jobs tend to leave the country altogether. Go to tax havens like Singapore, Dubai, and Hong Kong and you will find far, far more Europeans than Americans.
On the other hand. Progressives in the USA focus their wrath entirely on the tax rates paid by high earners. In truth, top tax rates are already higher in the US than in Norway. The biggest difference is really that middle class taxes are much, much higher in the Nordics.
The actual bargain in Scandinavia is higher taxes on all, in exchange for more social services. American progressives childishly promise that we can have all the nice things and the 1% will foot the whole bill. Fantasy!
Michael the issue is the US and other than finding one Nordic country Sweden and one other OECD country Netherlands, the two representing 1% of the OECD population, with higher inequality what is the argument.
Yes, it is possible that people who have a guaranteed pension will save less, I dont know what the reason is, but it is the exception and the US clearly has the most unequal status with the exception of only two small OECD countries that represent maybe a few percent of that population and Russia which is understandable being a kleptocracy.
I am not a progressive so I am not going to defend that straw horse, but I would like to see the US be a more equal country, like we clearly were historically from about 1940-1980 when we did pretty well and all our wealthy did not move to Monaco.
Yes, if we wanted to emulate some huge amount of benefits we might need to go further down on the income scale, but to what ever degree we choose, and I favor shoring up social security, expanding healthcare subsidies enough to get everybody insured and cutting the deficit, I would like to mostly increase taxation on the upper quintile who in the last 40 years have made out much better than everybody else and whose post tax income will still likely rise more than the lower 80%, just less so. And I would do it inclemently, like rescinding the Trump tax cuts for the wealthy or increasing taxes on capital gains for stock sales, or increasing estate taxes, and raising the cap on social security taxes.
If that could not cover my goals, well I would just do as much as it allows without increasing taxes on the middle class.
I think of it as more returning to the fairness of 1940-80 when the economy did very well but that prosperity wasnt primarily concentrated at the top, than becoming Sweden.
Love your socialist logic.
"I would like to mostly increase taxation on the upper quintile who in the last 40 years have made out much better than everybody else and whose post tax income will still likely rise more than the lower 80%, just less so"
Does it matter that I'm only 38 years old? I have only ever worked during the last two decades when the poststax income of the bottom 50% has actually grown faster than the top 10%.
https://realtimeinequality.org/
Read it and weep.
Why should I pay higher taxes today because 20 years ago some other high earning person had more income growth than some lower earning person?
Local taxes in NY, CA, etc. are also very high, such that all-in taxes in the highest-earning US states are already pretty much on par.
The big difference is middle class taxes. Sorry.
That is a poor analogy imo, cars are not as important as haveing money in the bank for emergencies. I would rather own my own house and have the 40K job. I would rather have a healthy retirement fund at age 60 than a nominally high income.
I think it is hard to make a qualitative statement about wealth vs income without knowing the particular situation particularly age and the exact numbers you are talking about. I'm 73 and moderately wealthy with a meager income and it gives me security, freedom, and peace of mind.
If you are nearing retirement you are much better to have a sufficient IRA than a higher income, if you are 20 maybe not, but wealth inequality is very important. If you haven't enough wealth to support your children's education then you are likely to have little generational social mobility.
I would argue that wealth is more important, but also the two parameters correlate pretty closely.
JSG, I guess the place I am coming from is that wealth is very important for people's well being and to quote ol Ben Franklin a penny saved is a penny earned, so that in terms of a persons well being- wealth which allows you to own your own home and pay for your children's education is quite important.
To split the difference, I would say if your concern is equality, both income and wealth are important in different ways, and they also correlate closely.
One practical manifestation of this, eg, is the issue that black families have tended to fall behind in wealth b/c homes in black neighborhoods have tended to appreciate much more slowly than white neighborhoods. Now two families might have the same income but if their major means of accruing wealth is home value, as it is for many middle class people, there is a serious problem for the black families, even as their incomes might be equal- their heirs will have less, their retirement will be less, and they are more likely to end up in foreclosure if adversity hits by virtue of having less equity. This was very important in the 2008 housing crisis. An interesting aside on this, is that recent gentrification has recently greatly increased home values in black neighborhoods, yet critics on the left tend to castigate it.
i assume "inequality" should be in the title?
Milan on strike to decrease income inequality
Wifi was out
calling in sick strike, otherwise known as a sick out, nice move comrade
When I read "Income has been falling for a while now: Obama-Biden economics are accomplishing more than people realize" my first thought that Matt's Substack account had been hacked and somehow Ken in MIA had puckishly rewritten his headline and subhead.
I thought the Yglesias-to-conservative move that Twitter has long prophesied is upon us!
They're both excellent posts drawing different implications from the same general trend.
Right it should say “inequality” rather than “income”
Well, if income drops more for people on the high end of the distribution, that too would result in income inequality going down. That's what my first thought was, some sort of clever backhanded compliment instead of straightforward Good News.
The fallacious connection between economic hardship and inequality is misleading and counterproductive to addressing these hardships. I.e., the reason that so many have too little is because a few have too much. Particularly when inequality only focuses on the wealthiest.
I think we are led astray due to 1) a focus on dollars and 2) not differentiating between income and wealth; one being a rate and the other being a quantity. I.e., dollars/year vs. cumulative dollars. We should instead focus on tangible resources such as land, labor, and commodities.
If we took everything that billionaires consume—including their consumption of shelter by living in mansions and yachts—and reappropriated that to society's neediest, we’d barely make a dent in their standard of living. There just aren’t that many billionaires and their aggregate consumption is miniscule with respect to the tens of millions of low-income Americans.
If we expand inequality to include the top 10% or 20% of households, then we can start to see some significant tangible resource consumption that could be redistributed to address economic hardship. We can, and should, take a Western-European approach to restructuring our economy to increase public services at the expense of private consumption through higher progressive taxes. Particularly we need a labor restructuring; fewer bartenders and personal trainers, more childcare workers and primary care physicians.
But we can also address economic hardship through productivity growth. Afterall, our redistribution efforts will always be limited by the goods and services that we are actually capable of producing. If we improve productivity through technological advancement and targeted education, then we’ll simply be capable of generating far more goods and services. And we’ll get less political pushback due to a lower tax burden. Ideally everyone’s consumption can grow.
You say "[w]e can, and should, take a Western-European approach to restructuring our economy to increase public services at the expense of private consumption through higher progressive taxes. Particularly we need a labor restructuring; fewer bartenders and personal trainers, more childcare workers and primary care physicians."
But does public opinion support this course of action? Your phrasing seems to align you with the "political revolution" people of the Sanders/Warren wing of the Democratic party. A portion of the Democratic coalition that struggles mightily to win elections.
Sure, there's clearly some room for reforms that could have similar effects. For example, there are three clear mechanisms for increasing the supply of physicians: immigration, graduate medical funding reform, and scope of practice/regulatory changes. But these seem to me to not align with "taking a Western-European approach to restructuring our economy to increase public services at the expense of private consumption."
>>But does public opinion support this course of action?<<
By rights, all that's really relevant is revealed preference. In the US, of course, revealed preference is stifled preference, because we're maximally skeptical of democracy/.
Or how elastic is demand relative to incentives? If we had higher alcohol taxes, and greater tax-credits for child-care, wouldn't that impact the job distribution on the margin?
I agree in general, but with one caveat.
How many people working as personal trainers or bartenders, enjoy that much more than they would enjoy working in childcare or healthcare, for example?
Our economy offers people a wide range of career options, enough to suit every type of personality, including more creative, i.e. "frivolous", ones: fashion stylist, makeup artist, sports, etc.That is a good thing, isn't it?
How many people would be miserable being forced to work in healthcare or childcare "because it's better for society"? I know I would.
I am happy that I don't personally have to farm to feed my family. It was a pretty big societal achievement that farmers became so productive that many of us could go do something else.
One of Ezra Klein's biggest blind spots. He'll bring up incessantly what a waste of talent the objectively very small mgmt consulting industry is yet never what a waste (by his definition) it is that Natalie Portman types went into acting.
Film acting involves huge economies of scale. One actress can make tens of millions of people happy once or twice a year. OTOH, the starving artist reading scripts and going to hundreds of casting calls is being self centered
Eh - but the marginal value of all but the very, very, very, very best films are extremely small. If no one ever made a new movie ever again I would still not run out of movies and shows to watch over an entire lifetime
You could say the same about novels, books, magazine articles, etc.
So what? Only a few are best-sellers or mass circulation, but they all have their niche readers. The people writing them enjoy making a living doing what they love, and the people reading them enjoy reading them.
Sure. But I agree with David_in_Chicago's original point, which is that if you care so much about labor distribution that you regard management consulting as a waste of talent, then you might be reasonably expected to feel the same about novelists.
You can literally measure the marginal value by the profits they make. A lot of people are willing to pay to get new media because they value it
To be fair -- I said "Portman type". I was just using her as an example of someone with off the charts IQ+EQ who could probably do anything but chose acting.
Back on mgmt. consultants ... I actually don't think he does. Or at least not real ones (e.g., managing partner level) -- maybe someone who did 2 years at MBB early in their career and came away jaded. He only has a caricature of the work.
>>If we took everything that billionaires consume—including their consumption of shelter by living in mansions and yachts—and reappropriated that to society's neediest, we’d barely make a dent in their standard of living<<
This. A thousand-fold.
Iirc, if we appropriated all the wealth from all the billionaires, it would only run the federal government at current levels for a month or two. Stealing is both wrong and ineffective in the long term.
I think perhaps more fundamentally, most "billionaire wealth" realistically translates into claims on *future* production (think about it). So, even if we were to appropriate 100% of the wealth of America's 700 billionaires, it would require many years to fully realize our "gains."
I think the main question about taxing billionaires in a punitive way is about whether you think they wield too much power given their wealth, not worries about their consumption. I tend to think that they do and a wealth tax would be a good lever, but it's not important enough to pay a political price for, so you have to find something that's broadly popular if you want to do it.
Which is why we need better estate taxes. I have no problem with the tech moguls enjoying their earned wealth, and even the influence it also provides them. But much larger 8 and 9 figure trust-fund class is much more problematic, and a much larger group that can peddle influence more silently
One of my pet peeves is that Americans refuse to define “rich” and “poor” and insist that everyone is middle class. This is how we get rhetoric about billionaires instead of the top 10%.
People perceive who's rich and poor the similar way as George Carlin accurately noted that anyone driving slower than you is an idiot, and anyone driving faster than you is a maniac.
Because realistically much of the top 10% is "middle class" in the sense that they have to actively hold down fulltime jobs (often with both adults in a two-parent household working) to maintain their present standard of living and would be at risk of homelessness/severe immiseration if even just one of the breadwinners was unemployed for a prolonged period of time and/or required major medical care.
Debatable. I think a strong case can be made that billionaires who *inherit* their wealth shouldn't exist. I also think there's a very strong case we should tax truly stratospheric incomes with confiscatory rates (ie, the hedge fund bro who makes a correct bet and sees a ten figure income in a single year; this has happened before).
But a lot of billionaires got that way because they had really good ideas and worked hard and created genuinely useful things that help us all live better. And so so the equity they hold is just worth a ton of money. In other words, the fact that Jeff Bezos is worth $100 billion doesn't seem like a huge problem to me. Amazon has been pretty useful (you may personally not be a fan, but millions of people vote with their wallets every day). It does seem a problem, though, if his *kid* is worth a hundred billion the day Mr. Bezos passes away.
There was a good book "Dream Hoarders" that focused on this - that while it is fun to poke at the top sliver of the population, the bigger concern is how the top 20% control great wealth, income, political power, and pass their benefits to their children creating an entrenched class system.
https://www.brookings.edu/book/dream-hoarders/
Edit: better excerpt/review: https://www.bostonreview.net/articles/dream-hoarders/
Couldn't genetics be a confounding variable here? Like, the richest and most powerful people are likely to be intelligent and have the personality matrix (ambition, discipline etc.) that would make their children more likely to have similar outcomes? If two tall parents have a kid we assume it'll be tall, I don't know why intelligence or ambition wouldn't also have some percentage of heritability along with whatever came from environmental factors.
Checkout Yglesias's Oct 2021 interview of Kathryn Paige Harden that covers her relevant research and book, "The Genetic Lottery". This fragment of her answer to a question seems particularly relevant.
> When people think about genetics, they so often think about it purely in the vein that we've been talking about it so far, which is how are parents like their kids, right? How are kids like their parents? But half of the genetic variability is within families. Right. Genetics is also about difference and the way that differences play out. How are my kids different from me, how are my kids different from one another? And so, you know, often when people kind of back up to a very strong you know, “there is no way that genetics influences something like education or intelligence or personality.” I really am like, have you ever spent time with children before? Like, have you been around them? Because I think if you are around them, particularly if you're around, you know, siblings or cousins, you have this front row seat to see how genetic difference plays out, very early in development. Like my children as infants felt very, very different to me in terms of their temperament. And then also like what they elicited from me in terms of my maternal behavior.
Transcript, https://www.slowboring.com/p/interview-with-kathryn-paige-harden
Audio, https://www.slowboring.com/p/kathryn-paige-harden-on-the-genetic
This analysis of adopted children shows something even wilder! It confirms that IQ and personality are strongly inheritable, but NONETHELESS it shows adopted family's background overpowers those effects!
https://digitalcommons.iwu.edu/cgi/viewcontent.cgi?article=1101&context=econ_honproj
Intuitively doesn't that make sense? Do we not encounter plenty of successful people in our lives who are not godly intellects, but just reliable performers who had the right opportunities and education? Also growing up with more resources enables better interventions - the well-off kid who is slipping in math gets a private tutor from his parents. We do it for our kids, in fact!
If you believe any of the interventions can matter, you have to accept that access to resources can help patch up weaknesses. Oh, it might not get you into Harvard or Yale, but it can help precisely with the kind of kid who has the aptitude for corporate middle-management and just needs the proper preparation....
That is more-or-less what Robert Plomin says in his book Blueprint.* He finds striking correlations between polygenic scores and all sorts of outcome-driven metrics like wealth and educational attainment. It's a short book that is worth reading if you are at all curious about these types of genetic correlations.
* But not really, because it is way more nuanced and grounded in data. It really comes down to how much faith you have in polygenic scoring.
Sounds interesting! I don't think that genetics explain everything but I've become more open to the idea that they are more influential than I had accepted previously. This line of thought opens up a whole can of worms about "meritocracy," if that "merit" is massively heritable then you have no more reason to pride yourself on being clever than you do to pride yourself on being tall or having green eyes.
ah, see my concern is that there is a low-key eugenic attitude that shows up from time to time in the rationalist-type threads online... Instead of taking your line of reasoning, it gets more fatalistic about "well some of us are just born winners", so we shouldn't feel bad & there's really nothing to be done.
Maybe! But also maybe not so much. It really helps to be raised by good people. "Good" will take many forms there, often with correlations around income, education, resources to help you, nutrition, interventions when you get off-track, etc... Surely it matters who raises you. (Though yes of course there are individual exceptions who overcome crazy adversity. And there are lottery winners too - not relevant to the overall numbers.)
That's not at all what the book says, but it is how people who either haven't read it or didn't understand it often characterize it. I'm not accusing you of either, but usually when people have heard of Robert Plomin it is in the context of a rant about eugenics and the intellectual dark web or whatever.
The main takeaway is that polygenic scores are often better predictors of personality traits than the environmental in which someone is raised. But, since most people are raised by their parents, it doesn't matter much in practice.
The book is really nuanced and digs into effect sizes versus strengths of correlations, etc. to make the point that denying that mental traits are, to some degree, hereditary is to reject decades of very strong and reproducible scientific evidence.
Plomin characterizes Gattaca as a cautionary example that keeps him up at night. He suggests that polygenic scores could be used to tailor education better, increasing the value of public education for everyone; that they could supplement the kind of test-based assessment and placement that is prevalent outside of the US (he lives in the UK) as a way to provide opportunities for people that aren't correlated to income or social status. (Not entirely unlike how athletic talent is scouted.)
> Particularly we need a labor restructuring; fewer bartenders and personal trainers, more childcare workers and primary care physicians.
This statement edges way too close to a centrally planned economy for my taste.
American taxes are generally much more progressive than European taxes though, in that the very rich pay a much larger share of government revenues. European taxes, while progressive on net, have much higher rates for middle class and poor people than in the US.
It's not very informative to talk about tax incidence. Much better to look at the effects of tax *and transfer* policy as a whole. (And indeed "economic" policy as a whole including so-called "pre"-distribution: minimum wage regulations, labor union laws, etc)
Pretty clearly, when looked at as a systemic whole, the richest parts of Europe (and Canada, too) suffer from less inequality than the USA does.
You may regard this as a "win" for America. That's your right! But be clear about what you're referring to, please.
https://www.theguardian.com/commentisfree/2018/jan/24/fairest-europeans-inequality-surged-us-europe
My point was it is not possible to build a very generous welfare through only taxing the rich, which is what we basically do in America. To build a generous welfare state we need to heavily tax the middle class and even poor people.
Why is the response to income inequality arguments always about how billionaires don't actually have that much money in aggregate, that's totally irrelevant.
Billionaires are a small sliver of society. Income Inequality / gini coefficient is looking at the full pie, all 100%. It's a completely different argument, so when you rebut inequality arguments by talking about what billionaires have or don't have, it's missing the point.
And income inequality - the proper focus - does have a big impact on growth. (mostly through gutting the resilience of the middle class) https://www.oecd.org/newsroom/inequality-hurts-economic-growth.htm
+ see other papers people are posting here.
Billionaires might not consume enough goods snd services to drive inflation beyond narrow niches like high end condos and yachts. Yet they control enough paper wealth that redistributing it could solve many accounting problems that bedevil the welfare state. The real question is whether it’s more politically and technically feasible to a) tax paper wealth or b) print money.
Taxing wealth and directing the proceeds to people with a higher marginal propensity to consume than billionaires would be inflationary
Only the change would be inflationary, not the (edit removed "taxes") redistribution itself. In other words, if you transitioned from untaxed billionaires to taxed billionaires over a long enough time window you could limit the resultant inflation to any value you chose. (mind you, I don't think that this is a particularly good idea)
I find stuff like the Gini coefficient to be occasionally interesting, but almost always a terrible metric of policy success. It's entirely too easy to reduce inequality by imposing invisible, opportunity-cost losses to GDP growth that do vastly greater harm than the impacts of disparate wage distribution. It's not fundamentally what the government should concern itself with. I'm supportive of roughly 3 major socio-economic government projects; maximizing the overall productive capacity of the free market, setting a basic floor of welfare services for the poor and programs that work to maximize the lifetime economic capacity of young people born without resources. Nowhere on that list is a goal of compressing the overall scale of income distributions. That is a fundamentally dangerous and misguided endeavor.
This would seem to ignore the reality that we’re social animals and well-being is relative, not absolute.
Not ignoring, I just think crabs in a bucket thinking is bad and government should moderate such social/tribal instincts rather than pander to them.
Meh, there’s a long line of failures in the “let us change human nature” column. Color me unconvinced that we should add another entry.
I think the stability of our political and social institutions require, among other nurturing efforts, a degree of income compression, “irrational” though it may be.
The people who could perform above median, but are being rubber-banded back to median by “compression” policies, are themselves going to be a stability problem. No?
Personally I think taming our primitive impulses is fundamental to what makes government/civilization important in the first place. It’s why you don’t get stomped on merely because you look weak, why your neighbor doesn’t shoot you over a noise complaint, and why you can save or start a business without someone simply taking it all from you and running.
Finally, I think it’s important that the most aggravating forms of inequality are the smallest. If we think minimizing envy is an important policy goal then billionaires or even Californians are not the target; you want to make sure no one else on the block buys a nicer car than you, none of your kids’ friends get an iPhone, none of your Instagram follows go on a cooler looking vacation, etc.
In what fantasyland are a more strongly progressive income tax, extremely high rate of inheritance tax, fewer tax breaks for consumption goods like large houses in expensive areas, and potentially a VAT to fund healthcare provision... going to "rubber-band" a bunch of 80th percentile folks back to the median of the income distribution?
I'm in the bloody 95th percentile of the income distribution and feel entirely unthreatened by all of those things.
The Founders and the generations immediately following rightly regarded the accumulation of vast amounts of wealth in individual private hands as just as much a threat to the project of republican governance as that posed by a potentially tyrannical government. They were right to do so, and we should make preventing that outcome a fourth "major socio-economic government project" coequal to the three mooted by the OP to which I replied.
Well for starters, we have an established class of people with good lifestyles by virtue of their multimillion-dollar home equity, but it is still possible (if very difficult) to occasionally win homes from these people on the back of mere labor income, if you are ambitious and successful enough at it. By limiting the wealth it is possible to amass through labor, we create an essentially permanent wall between those who already have the home equity to live in NY, CA, etc., and those who will never be allowed to earn it.
If the owner of $2 million 2BR condo is a threat to the Republic, that applies whether they already own it or are earning a salary that would allow them to own it in the future.
I'm not suggesting we change human nature. I'm suggesting this is a place for some of our rightly countermajoritarian constitutional structures to constrain the popular will.
I think you're overly cavalier about the strength and longevity of those structures in and of themselves, and their long-term maintenance requires us to accept a degree of popular pandering in our economic policy-making.
Nor am I as convinced as you of the innate rationality of your views on the matter.
I think the strength of the constitutional order is more threatened by the capacity to excessively redistribute incomes than by the constraints.
If well-being is only relative, then there's no point to any of this beyond perhaps making sure people don't starve or freeze. People will be miserable if their neighbors are millionaires but they only make 6 figures. If they are millionaires they'll be miserable if their neighbors are billionaires.
The answer would seem to be to compress all income down to pure equality, communist state-style, but then of course people will be miserable because there's no longer any opportunity to become the billionaire next the millionaire.
The point of this being relative matters but only to a point, and I would argue a small one. The 3 "absolute wealth" projects in the OP seem like better goals to me than ensuring that the relative scale is compressed.
My turn to trot out the "Why not both?" meme!
:p
But seriously, has anything I've ever said here indicated to you that I believe economic growth, supply-side innovation, R&D, regulatory tweaks, and sector-specific reforms to be unimportant?
I'm merely pushing back against an OP who seems to regard both the transfer state and any attempt to restrain the accumulation of wealth and power by individuals as illegitimate.
Do I really need to muddy the waters by adding a paragraph-long caveat that, yes, his three goals are *also* important when I have an 18-month track record of saying exactly that, Wigan?
> I'm merely pushing back against an OP who seems to regard both the transfer state and any attempt to restrain the accumulation of wealth and power by individuals as illegitimate.
At least half of that is wrong. The OP explicitly endorses "setting a basic floor of welfare services for the poor and programs that work to maximize the lifetime economic capacity of young people born without resources", which amounts to endorsing "the transfer state", if that means what I think it does.
As for the other half, saying someone thinks "any attempt to restrain the accumulation of wealth and power by individuals [is] illegitimate" makes it sound like they think it's incompatible with the constitution or something. "Illegitimate" is not a synonym for "unwise", which is more of the vibe I get. You've made your case that the opposite is true, but I don't think the quoted phrasing adds anything.
Exactly. My objection isn't to transfers entirely. It's to using the state to redistribute wealth for the purpose of ameliorating class envy and cultural grievance. For example, a huge part of Trump's pitch is using federal power to prop up marginal forms of labor on the basis that they conform to a preferred cultural aesthetic.
The existence of a monopoly on violence is one of the best arguments for the existence of a government and is primarily why I am not an anarchist. We commonly accept the idea that the government should arrest the human capacity for violence. The government should also arrest the human desire to flatten everyone to be just like them.
What would that even mean in practice? If you're the majority shareholder of a company you're legally obligated to sell yourself out of control of your company if the stock value exceeds 2 billion one day? Because that's how it works at that level, it's not like it's income, it's ownership. You're effectively proposing a kind of soft nationalization of every corporation that exceeds a set valuation.
It is really hard for me to take anything from these graphs without a link to the methodology, would love for that to become standard practice for graphs like this.
In particular I am worried about including health insurance as part of income.
I'd also like to see the median house cost in 1999 next to the median income, then repeat for 2019.
Tangentially, when I am thinking of myself as 'having it better' I really want to see something like a PPP comparisons with the past, I 'had it better' when I was living in China, despite a slightly(or significantly if you include the 'value' of my health insurance) lower total income, because my cost of living was about 1/4th of what it is in the states.
To add some context/corrections to my own comment. I understand that in theory inflation adjustment is supposed to be doing a lot of the things I am asking for and embarrassingly it is basically a PPP comparison. I still have the basic feelings though that I don't like taking these kinds of numbers at face value, without clear explanation of the limitations of the metric.
The FRED graph is getting it's information from the Census Bureau (https://www.census.gov/topics/income-poverty/income/guidance/current-vs-constant-dollars.html) who in turn are getting it from the Bureau of Labor Statistics (https://www.bls.gov/cpi/research-series/r-cpi-u-rs-home.htm) who are deriving the unit from the Consumer Price Index (https://www.bls.gov/cpi/#:~:text=The%20Consumer%20Price%20Index%20(CPI,U.S.%20and%20various%20geographic%20areas.) and after reading all of these I still don't have a great idea of their methodology, but I am okay assuming they are trying their best. My problem is that this seems like an area where this might be the best number we have, and it is still not good enough to actually draw meaningful conclusions from.
For example, we can look at the appliance price inflation index time series and conclude that dishwashers cost less now than they did in 1978, but personally, I feel like dishwashers and dish detergents have both gotten significantly worse during my lifetime. I suspect because of EPA regulations. I have no idea how to tease that out when comparing the inflation adjusted price but I would happily pay twice as much for a dishwasher that actually worked.
The median income (not adjusted) in 1999 was 42,000 according to the CB(Census Bureau), and it was 69,000 in 2019. The median house cost (not adjusted) in Q1 1999 was 157,000 again from the CB, and it was 313,000 in Q1 of 2019. 64% vs 99% increase, roughly. Maybe the difference here is being eaten up with 'quality' improvements, or something, I am not sure, and I am skeptical that anyone can be sure about this kind of stuff.
Based on the quality of the numbers we are working from, It seems to me that a 5% increase in real median household income might not be a precise enough measure to say with confidence that people are living 'better' lives because of it.
I realized recently that while I knew that housing prices were impacted by interest rates, I didn't really understand how much. In 1999, the fed was raising interest rates, but the year started just under 7% and end right above 8% for an average of about 7.5%
For comparison, a house that costs 240k at 7.5% interest rate has the same monthly payment of about $1,700 as a house that is 375k at 3.5%. (Average rate % for the 2020s so far).
That's a 36% increase in "housing price" without a change in "house cost" to the buyer which just so happens to work out as the difference between median income change. Also explains why the % of income dedicated to housing hasn't changed that much over time and has been primarily a transfer of wealth from bond buyers to homeowners.
With interest rates now rising, it will be interesting to see how that plays out.
This is an excellent point that I had not considered, and after a quick google searching, I still don't have a great idea how this cashes out in the numbers.
Is the real median household income derived by comparing the total cost of a 30 year fixed rate mortgage started in the current year against some previous year? The total amount actually spent in this year, or just the house cost? What percentage of mortgages are adjustable rate and how could you possible get the total cost for a house purchased in 2020 with a 20 year adjustable rate, before 2040?
Where is my Slow Boring Explainer?
The inflation measure (the way they deflate to calculate real household income) isn't based on either the actual cost of mortgage payments for incumbent homeowners OR the cost of mortgage payments for new owners... it is based on a measure called "owner's equivalent rent" which is basically a survey question where homeowners are asked how much they think their house would rent for.
There are flaws in this metric but the idea is basically to separate the "investment" component of the mortgage payment from the "shelter" component. Of course real homeowners do not actually experience a rise in local rents as a decline in their living standards as is implied by the OER metric so it is a bit odd.
The average mortgage rate for a 30-year fixed rate mortgage in Q1 1999 was 7%; in Q1 2019 it was 4%. Not that hard to explain housing price increases.
I guess I'll try to share an opinion that I'm guessing is quite unpopular on this site: I have just never been able to get upset about *per se* income/wealth inequality. I know there are people that are vastly richer than I could ever imagine to have, and...it's just never bothered me.
What concerns me more is to be continually striving to raise the baseline of basic standards of living for those most at need, and to continually strive to provide abundance in society to make that happen. That would likely have the side effect of reducing income/wealth inequality, but that would not be driving my desire, but instead to increase abundance and basic standards of living--which are very good!
The problem is twofold. First, whether the riches r are getting an unfair share. Here’s an easy example. We’re both perform the same work but I get a million dollars and you get a thousand. Why should you be upset? We are both better off . Standards of living rose.
Second aspect is whether people can get so rich that their political or social power undermines the basic equality under the law that is the basis of democracy or allows them undue political power. Put differently, there is an idea that democracy is a system of government built by and for the middle class, its erosion, including by having too powerful rich people , risks destabilizing the system.
To the extent that money buys power, it’s because it buys attention (TV ads, think tanks, lobbying, etc). As long as the underlying attention is still available, limiting the amount of money people throw around for it will simply lower the price, or at best displace the competition for attention to another form. But there are always going to be winners and losers in the competition for attention, and the winners are going to be better able to influence policy. I also don’t think it’s the worst that being able to get political attention is associated with having done things in the real world… I’m not sure I’d like to see basement shitpoasters displace the Ford Foundation.
Also, I think there’s kind of a misconception going on where we compress billionaires and professional-managerial class families. Raising taxes on wage incomes over $250,000 is not going to materially diminish the influence of a Murdoch or a Soros. It doesn’t take money to show up and NIMBY, it takes time. Perhaps if you want to diminish the influence of PMC families, you should embrace RTO and long hours.
I think you are vastly underestimating the power billionaires have, above and beyond election campaign donations. Bill Gates watched a tv show when running on his treadmill and next thing we know tens of thousands of public schools kids or more are educated based on his whim… and you’re right, the argument agaisnt billionaires is separate from the argument for genera redistribution policies to fund the welfare state. Arguably making sure there aren’t any trillionaires around is an end of itself, to be pursued by specific means, which may or may not overlap with the means used to fund the welfare state and redistribution. No individual should be able to hire their own literal army, for example. Money is power and too much power in one individual (or family, or corporation even) is dangerous to freedom, especially when that power is totally unaccountable.
Ok, but, how many Bill Gates are there? I'm not sure how many B's he has but it's many times what whoever #100 on the wealth list has. The number of people who could pull off Gate's treadmill stunt is pretty small and might be in the dozens. And as far as I can tell the majority use their power for "good" in the form of charities or at least productive ideas. My point being this doesn't seem like a particularly important problem.
P.S. prioritzation is a second order question. City of Trees argued that there is no problem with extreme wealth per se. I’m arguing that there is, or could be, a problem. If we agree that it *is* a problem (or potential one) then we disagree with the OP argument, regardless of how “urgent”/“important” we deem that problem to be.
Thinking about it “constitutionally” even one person powerful enough to shake the system is one too many, and the fact the person currently in that position currently doesn’t seem inclined to do so (through sheer luck , it would seem) is small comfort.
N.B. I’m not saying Gates is necessarily in that position. Nor do I think he is the worst of his kind (think musk, thiel). However the question needs to be addressed. How much wealth is too much , ie giving someone this dangerous *potential*? Surely we ought to guarantee such potential is eliminated , or at the very least have some mechanism to control who gets this egregious power, rather than the current de facto lottery-like system?
Regarding the second point, it seems to me that for every Koch or Thiel there's a Gates or Soros.
Of course, it's not as if the only danger is that a rich right-winger will buy elections or parties: all four of them likely share interests and therefore subtly exert pressure on our politics. Furthermore, one might point out that, without support from their like, a viable candidacy of any sort is difficult.
But in the end, those are hypotheticals, and my priors say the existence of trillionaires doesn't constrain our political options in a meaningful way, except, perhaps, as a counterweight against certain kinds of abuses. I don't think you need to be an acute paranoid to want a partially constrained government*: a brief survey of global affairs should do the trick. Or, for the progressively-inclined, a look back at the Trump presidency.
* To clarify, I think our governmental gridlock is bad - I'm not talking about that. I'd be much happier to see governing majorities get a chance to enact their policies.
I don't think giving a huge amount of an accountable power to random unelected individuals is a good or effective way to keep the government in check. It rather seems like a growing element of chaos in the system, not a sound check or balance. At the end of the day we can debate how serious of a problem it is or is likely to be in the near future, but so long as we agree that there could be a theoretical point of gini coefficient and/or absolute level of wealth where it *becomes* a problem and democracy becomes seriously endangered or unsustainable then we agree - in principle - that OP's argument is incorrect, at least in theory.
I didn't mean to hide my position here & come across as concern trolling. I'm mostly with City of Trees and Dave Coffin on this. I'm in favor of providing a relatively high floor, but I don't think it's a good idea to compress wealth and income for its own sake.
Regarding the point you were responding to, I think we probably have different intuitions about how much we can engineer large-scale social systems, which is an interesting topic, but not one I have much time to dive into at the moment!
Elected Democrats do not need to moderate their economic positions to win elections, they just need to avoid going off the rails culturally and environmentally.
I have developed a bad habit of hate-reading the post-Trump NY Times. There are themes that run through their articles that appear to align perfectly with the worse instincts of elected Democrats, I guess because they read the NY Times.
One is a persistent view that we are all doomed no matter what and that the only way to delay the inevitable climate catastrophe is to stop flying, driving, eating, using electricity or engaging in commerce. In the explicitly environmental reporting, this logic prescribes going very much off the rails. But this amalgam of bad cultural values and dumb environmental policy is pervasive and pops up in many contexts that presuppose doing less of basically everything is 'good for the environment' even though we're doomed anyway. In the last couple of days: Krugman bragging about the fact that he still drives a 2004 Jetta or a column extolling the virtues of being short, because you have a smaller environmental footprint.
When I see this general vibe reflected in Democratic messaging it most definitely does not motivate me to vote Democrat. (Nor does my state senate majority leader blaming the shoddy electrical grid on solar energy generation make me want to vote Republican.)
> that the only way to delay the inevitable climate catastrophe is to stop flying, driving, eating...
You can still eat! It just has to be bugs.
how is driving an old car good for the environment when a new one would be more fuel efficient and might even be a hybrid
It was in the context of New Yorkers buying Teslas for no other reason than to flaunt wealth, rather than people who have a 30 minute commute by car or whatever. Maybe not the perfect example, but still ground my gears.
that wasn’t krugman’s point. his point was that teslas are a good status symbol for rich new yorkers because they display both wealth and green politics.
I know and it isn't the best example (even though it still bugs me) but the point is also that they aren't explicitly making a point, it just seeps in because of a particular ethos. There, Krugman does imply that buying an EV is just a (wasteful) status symbol and does nothing to help the cause, so why not just drive a 2004 Jetta.
Wow, finally an upside to my height-challenged status! I'm sooooooo green!
(I only read the food section of the Times and even that is barely tolerable at this point)
This, especially when "going off the rails environmentally" means doing things that are *bad* for the climate
I think the focus on inequality really obscures the supply-side issue in the fields we talk about all the time. Housing, various types of care and education.
Like if we formally rationed these on a lottery system or something like that people would see that we just don’t have enough of these. Because Lines would mean that. But since we prefer to ration based on price it obscures the shortages and makes it shortages and expensive.
We haven’t done enough to combat inequality, but a lot of that is that making more money just doesn’t make it much easier to get the good things in life unless it’s a lot more in relative terms.
'there's not a shortage of housing, there's a shortage of Affordable Housing' -- that kind of thing which i hear a lot (especially in the UK where NIMBYism is worse). when in reality the two things are extremely interconnected!
Median income was growing rapidly at the end of Obama’s second term and yet Hillary lost to an historically unpopular opponent. Hillary may have been a shitty candidate, but she certainly wasn’t that much worse than Trump. This has uncomfortable implications. Either delivering broad prosperity isn’t that politically useful or else the quirks of the electoral college add such a huge, chaotic variable to the equation that it’s very difficult to trace cause and effect and nigh impossible to predict the best path forward.
+1
This strikes me as more evidence that the "do good policy, the wins will follow" school of thought is missing a big piece of the reality. It might be that vibes easily overwhelm personal experience. We all remember Trump describing the economy as "American carnage," and apparently some significant number of voters agreed with him in spite of improvements in their personal situation.
But it might also be that people just fundamentally care more about other, non-economic stuff (i.e. immigration, sexuality, abortion, etc.) more than they care about economics, at least under particular circumstances. I tend to be a materialist, but if you want the darkest version of this, it seems reasonable to me that increases in material prosperity might free people up to rebalance their concerns away from economics, precisely because they are doing okay. Maybe the land where no child goes hungry is lit by the burning tire fires of Culture War?
A big problem is, superficially, changes in one’s economic situation appear to be drive. by things that have little to do with macroeconomic conditions. My prosperity increased when I found a good web designer and then my progress stalled out when I had trouble keeping a good assistant. Every worker and business owner has a narrative about bosses and customers that explain most of his economic condition. Why give Obama the credit for a good job you got in 2014 and can keep as long as you get along with your boss and the company does ok?
I think that is right, but it gets at what I see as the problem of vibes. Like, if you were a Trump voter, you didn't just say, "Yeah, I don't give Obama any credit for how I'm doing well." Rather, you listened to Trump say, "Our economy is a disaster!" and cheered at the rally before going back to the new truck you recently bought with your raise. And it wasn't like you were in on some kind of secret plan to lie about your personal situation. There's just a lot going on, and people get that the economy is separate from their personal experience, and it's easy to just get a bit hand-wavy.
I think this pairs with what we know about people's general sense of the macroeconomic situation, which is that partisans adjust their optimism or pessimism about the economy based on who wins the election. And that's not a completely insane thing to do, in some sense, given that the winner will alter economic policy (Trump's win really did hurt my personal economic situation because of some particular policies that his administration pursued). But it's pretty clear that what public figures SAY about the economy is only loosely tied to the actual reality.
So given all that, I think the prospects for good policy get a lot more difficult, given the weakness of the reward mechanism and the strong incentives pulling in other directions. Not impossible, and I still think people should pursue good policy and hope for the best, but I think we have to be honest that it's operating in a space of perverse incentives. And that sucks.
I think it's true that non-economic issues matter a lot, perhaps especially when the economy is doing OK (it's the nature of politics for the parties to fight about *something*). That said - absent severe shocks like the Great Recession or Covid - I think it takes a while for changes in macro circumstances to filter through into vibes.
That's not to say that vibes are completely disconnected from economic or material realities, just that a) there's a lag, sometimes a big one and b) other stuff also matters. (The vibe of the late 2010s was quite bad, for example, even though the economy was doing well. You could say a similar thing about the late 1960s, I think.)
All that said, I think Trump actually won the 2016 election for mostly quite banal reasons related to thermostatic politics - three terms are hard to win - Obama's generally 'meh' approval ratings, and Hillary's shortcomings.
Don't overcomplicate things. Many voters (enough to act as a thumb on the electoral scale) like to give the other team a chance after eight years (yes, often irrationally so). This trend has likely weakened in recent years, but it hasn't vanished.
Agree. This seems likely, and grappling with this means, among other things, autocrat- and idiot-proofing the presidency. Getting serious about finding ways to revitalize Congress, shifting power from the West Wing staff to the Speaker's and Senate Majority Leader's offices and staff, etc.
we could just have a parliamentary system under the benevolent rule or King Charles III. That would be ideal
Actually I think the combination of Sanders mounting a solid challenge AND Trump ultimately winning should tell us that Hillary WAS INDEED a shitty candidate! (to use your words) She was the most unpopular Dem candidate in my lifetime. Then in 2020 Sanders got shut down easily and Trump lost despite the advantages of incumbency, so I don't think those two were miracle workers.
Listen, I liked Hillary - and still do - but she was a terrible choice as a presidential candidate. And because of that terrible choice these kooky populist extremists got a toehold - and because people pretend she WASN'T a terrible candidate, they think the kooks are a stronger force than they are. NO! She was bad, and nutty extremism is bad.
It's quite clear that Hillary was bad at running for President, and should have been clear in 2016. She lost once already, despite considerable advantages.
That said, Trump was *also* a bad candidate, even though he narrowly prevailed, and I remain quite unconvinced that Sanders would have won. It was just a weak year.
An interesting counterfactual is what would happened in, say, a Rubio-Biden election? My guess is it actually would have looked an awful lot like Clinton-Trump.
The biden-rubio hypothesis is interesting, the problem is it’s impossible to gather data to test it.
but a Rubio-Biden election doesn't exactly test anything. Both parties run not-crazies and we get a not-crazy president...
If 2016 had been Biden-Trump, the crazies in the GOP might have been nipped in the bud, Goldwater style. When an irregular candidate loses to a normal candidate, it has usually routed the irregular movement quite thoroughly. Instead Clinton's weakness led people to think they should "learn something" from Trump's victory. Yuck.
> but a Rubio-Biden election doesn't exactly test anything
It tests the fundamentals. An election with two reasonably popular normies would have defaulted to the fundamentals. Which, actually, is what I think the Clinton-Trump election did, more-or-less, because they were both highly unpopular (though Clinton was a normie).
I care less about party labels and more about the center vs the radicals. I want the old-fashioned politics where everyone tries to avoid extreme positions in the primary so they can scramble to the center for the general election.
There are big, structural changes that would be egalitarian and popular-- they just aren’t exactly what Bernie or Warren have proposed. Raise the minimum wage. Tax capital gains like labor income. Reduce the inheritance tax exclusion by half or more. Create good blue collar jobs through tax subsidies. Lower tuition at public colleges to the equivalent of what the boomers paid. Preempt state and local laws that make it difficult to build solar and wind farms.
Matt sets the bar way too low. Other than George W Bush, every full-term President after WWII ended his term with record high median household income. This is because per capita GDP grows by an average of 1.5-2% a year, so new records are inevitable unless there is a recession or regressive changes to the labor market swamp productivity gains.
If Matt’s idea of realpolitik is “stop performing on Twitter and waiting for the great expropriation and try governing,” I’m sold. But if he thinks I should be content with a 5% reduction in the GINI coefficient, I dissent.
Yes, the richest people in the world taking a massive haircut as a result of a variety of easy money bubbles popping will certainly narrow the gap between the richest and poorest on average... And why is equality the measure that anyone cares about in the first place? Rate of improvement in standard of living seems much more important unless you are super envious of what the wealthiest have.
Doesn't the answer lie in the second half of your last sentence? An awful lot of progressive economic policy in the last 20 years has become pretty openly about hurting the rich to a greater extent than it's been about helping the poor. (Just as progressive views on antitrust have in the last 10 to 15 years become primarily focused on hurting companies that progressives disapprove of rather than actually trying to make things better for consumers.)
> Instead, the Reagan administration’s policies led to stagnant average wages through the 1980s, with household incomes rising only because of women’s increased labor force participation.
Did Reaganism cause this? Specifically, I don’t think he ever succeeded in cutting government spending on welfare. Reagan just cut taxes and funded the massive deficit through debt financing. If anything, that should’ve been a large economic stimulus, although it may have only stimulated suboptimal parts of the economy. E.g., finance.
Additionally, looking at the growth in Real Disposable Personal Income, it looks like the slowdown started in the 70s, following a boom in the 60s, https://fred.stlouisfed.org/series/A067RL1A156NBEA
It could be argued that the failure was in not continuing the expansion of the welfare state though continuation of initiatives like the New Deal and Great Society. But there also were many broad changes in the economy due to technology and globalization. War-torn Europe and Japan had recovered and entered the world markets with innovative and superior products. Information technologies started automating aspects of production and administration, which increased productivity by capital-labor substitution.
In many ways, I think the post-war era up through the 60s was the exception. We were in an unusual environment with America as the sole industrial power and that is not something that we can recreate. We also still had a primitive production system that required massive quantities of unskilled labor. The world has changed, largely for the better in my opinion, and we need to consider that in analyzing historical developments.
I think there might be a reason that personal income started dropping in the 70s and it's something Matt notes in the sentence you quoted; "women's increased labor force participation".
The early to mid 70s was when women's labor force participation started to really increase rapidly at the same time that de-industrialization and decline in manufacturing jobs started to take off. I think this is important; given realities of gender dynamics and sexism of the era*, the jobs open to this new cohort of workers was going to be unfortunately quite a bit more narrow compared to men. Given this reality of a huge influx of potential labor that was concentrated in only particular types of jobs, it seems like this should have had some impact on wages; especially in particular types of professions.
It seems possible that given the realities of college graduation rates by gender and barriers continually being removed regarding which jobs women can get, that this "gender shock" (to borrower from the phrase "china shock") has played out and this might be part of the story (along with the "china shock" finally possibly running it's course) as to why wages have started tick up for bottom 80% and inequality has dropped slightly.
If there are some economics papers that debunks my theory, by all means share. It's a hypothesis with some scattered thoughts about why it might be true. Not a fully fleshed out thesis statement. But thought it worth putting it out there.
*well aware that sexism and gender inequality still very much exists in the workplace. I'm pretty certain the female readers and commentators on here can 100% tell stories of getting passed over for promotions to clearly less qualified men or finding out a male colleague is making much more money for the same job or some other clearly sexist outcome at a job. Or just dealing with piggish co-workers or bosses. But I also feel pretty confident that (just like with racism) it's improved considerably since the 70s, even if there is still work to do.
That's a very interesting theory! Would also be interested if there is any research in this area.
I have wondered for a while what the effects of discarding the Bretton Woods system did to the economy? Not the gold standard part, but the "currencies pegged to the USD" part. Moving immediately to freely-floating currency exchange rates had to have had a major effect on the global economy right? And maybe at America's expense?
We dropped it because it was unsustainable for the US, not at the behest of other countries.
Okay, but wouldn't that have affected trade balances, and more importantly currency and capital flows, especially over the long term? If over time it becomes more desirable to invest in Europe and Japan while at the same time their exports become cheaper, shouldn't that have an effect on America's economy?
Yes, that's exactly what caused it to collapse. The dollar's value could only have maintained at the value it was set at with incredible effort that the US was not willing to do. As a result, the pressure on the set rates became increasingly stressed until they benefits of keeping them were outweighed by allowing them to float.
Excellent piece. I tend to agree more progress was made under Obama than the consensus. But still, a major issue is the geographical distribution of the recovery and the resentments they caused.
Where rich people live and therefore major investment is made...drives so much of our politics and economy and just doesn’t get as much attention as a million other factors. But it appears to me ‘forgotten zones’ become a major source of misunderstood political tension and instability.
I see it especially in the S Jersey area which is far more like a West Virginia rust belt area than most understand. And the mirror image in Philly, which experienced white flight on steroids then a major renaissance when wealth came pouring back in slowly starting in the early 90s. But by 2010, S Jersey was like a microcosm of the whole nation, with heavily populated “coasts” the shore and Philly burbs, and a post-industrial mess of “driveover” country in between. Welp, not hard to guess which area supports Trump, feeling like our system has rejected them. But hopefully, Covids effects of Getting wealthy people out of city centers and spread more broadly will make for more widespread development and investment, fewer “forgotten zones” or perhaps at least some new pockets of fresh development that can seed recovery in those areas.
Biden's Infrastructure bill and the Chips, both take a pretty good swing at the geographic issue. Even the climate part of the IRA, because of the buy American part of it, leans in that direction.
And to give Obama his due, the auto rescue, which arguably saved his reelection started to lean that way a bit.
Good point. I thought this was a good article and highlighted a positive top-line, big picture trend I wasn't aware of, and that should get more attention. But as with big picture, aggregate gains from free trade policy under Clinton, even though Obama's technocratic policies may hold up better in the aggregate than commonly said, there are still winners and losers and that matters a lot too. Failure to focus sufficiently on making sure the losers are attended to can create toxic politics that overwhelm the good.
Yes, globalization and commodification of investment is really a major issue for rural communities.
On a micro scale, our economy tends to create huge winners locally, business owners are heavily rewarded for creating their businesses. Often, such wholesome healthy organic business is now sold to a private equity firm, who then takes every penny of excess out to repackage the company according to “best practices.” They are really just making very short term minded decisions to goose metrics other private equity firms use to value companies. In the process they sell off employee interests, company culture and long term strategic advantages for ownership cash now.
In effect, this totally milks rural communities dry while offering little/no investment back. Private equity ownership generally makes very little capital-heavy real investment (they are interested in trading and shuffling assets more than building them, which is hard of course.) Old ownership and private equity take their proceeds from company sales to global investment markets in order to diversify and protect their wealth. Little if anything gets reinvested in local communities. Maybe a second home gets
built, but the gravy is stashed in mutual funds and bond portfolios etc, not so much job-creating LOCAL business development that underlies the LOCAL economy.
Someone who felt like really poking the bear might play a trolly devil's-advocate role and frame this as a dark side of increased population mobility.
Yes, to a certain degree its differential population mobility. Many with the resources had freedom to move to opportunity or appealing locales but others are forced to stay (or relocate) where they can afford. Still other attempt a risky move to the city they can’t afford and end up in one of these tent cities at great risk for becoming addicted to heroin.
I'd only clarify a point about the urban renaissance. I don't think wealth come "pouring back in" even caveated with slowly. Poor young adults came pouring back in and then became wealthy following standard income lifecycles. Which I think illustrates a larger point that gets missed in all these inequality discussions. The vast majority of people are both poor and wealthy at different points in time. Long-term sustained poverty is exceedingly rare.
Perhaps thats a large part of the picture but so is the movement of generational wealth, which at least here locally in my experience, very much followed this pattern. as the city revitalized and became appealing once more, nearly all the wealthy families left to be either in the city itself or closer to it. Property values decline and a vicious cycle sets in.
Thoughts on the rise in wages among the bottom 20% being largely due to the fall in immigration?
How do we know immigration fell? I would guess it's fallen, but I find it very hard to verify with timely legal immigration numbers, and nearly impossible to find numbers on changes in illegal immigration.
As best we can tell, net migration to the US has been falling since 2015.
https://econofact.org/the-decline-in-u-s-net-migration
That’s probably a big part of it
This would contradict most of the information we have about the effects of immigration. Any quick perusal of the economic literature will show that immigrants have a pretty small, and often positive impact, on wages, including on the low-end. I think a better explanation is that high household savings, enabled by stimulus payments and lower spending gave a lot of people a cushion that allowed them to not accept crappy wages or working conditions.
The lit on immigration is not that clearcut. The farther you go down the scale wrt both the immigrants and the natives the more mixed the evidence becomes.
I can't cite a source but one was cited for me here just a few weeks ago by a person arguing for your position almost exactly. They linked a recent meta-study on the available econ lit which generally shows a net positive mean impact on natives. But the authors were quite clear in pointing out that downscale natives sometimes appear to be hurt, especially by downscale immigration. The picture was more mixed than negative, but it leaves open the possibility that BronxCobra's hypothesis is correct.
TL/DR version: once again, a progressive pearl-clutching narrative of the past 2 decades is undermined by empirics.
Shocker....which one is next up:
1. America is the most racist country, like ever.
2. Or, racism/sexism/homophobia is at its all-time high ever in America, like right now!
3. Or, the world is going to burn/melt/drown if we don't all abandon civilization in 5 years, no wait, 10 years, no wait, 15 years?
4. We can replace fossil fuels with wind and solar.
5. Veganism/electric vehicles are LESS resource intensive.
6. Nuclear power is worse than climate change.
Answer: none of them because these are useful political narratives, not reality. Except that the unrelenting catastrophism is making our fragile tennagers mentally ill and drug-addled.
I agree with most of what you say, but how is veganism not less resource intensive than meat eating? Trophic levels: only 10% of the biomass at one trophic level is converted into biomass at the next trophic level. I.e., if you feed a cow 100 kcal worth of plants, you get only 10 kcal worth of cow biomass (and said cow biomass will include inedible parts like hooves and skin). Eating plants directly is much less resource intensive.
And #4. Obviously it is possible to replace fossil fuel with wind and solar (although not today). After all, crude oil was created from solar energy in the first place (phyto and zooplankton)...
There's probably a good galaxy-brain meme in there about all energy already coming from fusion.
In fairness to idonttrollonshobbas, he/she probably meant "we can't replace ALL fossil fuel use with wind and solar" due to intermittent availability and declining marginal utility. Going from 0% to 20% solar is much cheaper, easier, and more efficient than going from 60% to 80% solar.
If veganism is strictly local, then yes it can be less resource intensive. But, I live at the 45th parallel in a blue coastal city that is regaled as Vegan-central. These self-righteous dear ones eat nothing but bananas and avocados all year long that are air freight delivered from the tropics.
Most of vegan meat substitutes are soy-based. Soy beans are genetically modified and require fertilizers to avoid deforestation and other soil degradations. They also use a lot of water. Non-dairy milks have similar issues.
EV's are more resource intensive to build and dispose of.....and besides the tax subsidies required to make them affordable take away revenue from public transport.
There are no free lunches. Trade-offs are the key to meaningful distinctions and yet the political zealots in my blue district reject persuasion and viewpoint pluralism for ideological bromides that often are in contrast to stated goals. It's the "defund the police" phenomenon that is rampant where I live.
Thanks for clarifying my point on solar and wind. If battery technology advances then fine....but in Italy & Spain, cultural institutions and tourism industries are pushing back on wind and solar farms as destructive uses of landscape and unaesthetic. France avoids this by beng 70% nuclear. Germany allowed Putin to knee-cap their economy based on ecophilia. The lessons are out there to be learned, but one's mind must be open to trade-offs and honest empirical data.
Veganism is less resource intensive in just about any normal set of circumstances. You'd have to compare odd extremes to find otherwise.
To the extent soy is problematic, that just means it is better to eat tofu or veggie burgers than pigs or chickens, whose metabolisms waste most of the soy that they are fed.
In FL and TX the issue isn't just that it's purple enough that Dems think a regular Dem can win. It's that the primary electorate is full of the same sort of cosmpolitan liberal that controls the party everywhere else, and that electorate simply will not tolerate a person who says stuff like "I think abortion is morally wrong in most cases, but I also think the government has no business making that sort of decision for people," or "I love guns, watch me shoot some guns, look at me throw a dozen bones to conservative aesthetics and say I just want to help honest hard working laborers with Medicaid expansion."
Another aggravating factor is that Texas (and indeed, most of the non-Medicaid expansion states) don't grant ballot initiative power, which would be a way to disarm the partisan chum that gets associated, and place the single issue all by itself to a vote. Florida has initiatives via constitutional amendment, but it looks like that requires a supermajority vote, and even then, as we saw with the effort to end felon disenfranchisement there, the legislature was motivated to find a way to run over that vote.
Democrats have not won a statewide election in Texas in nearly 30 years, so a big part of the problem is just that they are flying blind there. They do not have any successful roadmap for how to crack the code in that state. Combine this with how expensive it is to compete in such a large state, they have a very short list of high-quality candidates who are even willing to run a serious statewide campaign. So their options are rather limited to begin with.