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
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.
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.
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.
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!
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 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.
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.
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.
> 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.
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.
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.
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."
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
i assume "inequality" should be in the title?
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.
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.
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.
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!
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 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.
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.
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.
> 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.
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.
Thoughts on the rise in wages among the bottom 20% being largely due to the fall in immigration?
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.
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."