King for a Day, Reconsidered

A couple of weeks ago, I critiqued a number of David’s pieces on the topic of income inequality. In those pieces, David seemed to accept that income inequality had grown over time, but claimed that it was no big deal because people move up and down the income distribution over the course of their lives—what economists call ‘income mobility’. I pointed out that one of the main sources for David’s claims—a study conducted by the U.S. Treasury in 2007—seemed to 1) confirm the notion that income mobility is low in the U.S., yet still managed to 2) overstate the amount of income mobility we actually have. David promptly composed a follow-up post responding to the former but ignoring the latter, arguing that

A deeper look at economic mobility

I recently wrote several posts on the issue of income differences. My central argument is that, to meaningfully measure the economic gap, one must observe individuals and how they fare over time.

Regrettably, most studies instead take a snapshot of statistical categories in time—such as the “top one percent” and the “bottom 99 percent”. Problem is, categories are not people, which is why major studies that track individuals over time contradict the popular studies.

My counterpart Tim differs with me, and in a recent post he makes his case in large part by critiquing a study from the U.S. Treasury, which shows high income mobility. There are a few points he raises that are worth further reflection.

King for a Day

Over the past few months, David has posted several times on the topic of income inequality (for example, see here, here, and here), which he deems to be a non-issue. To support his case, a recurring point of his is that comparing percentiles of the income distribution—such as the ‘top one percent’ and the ‘bottom 99 percent’—is fallacious. In a recent column, David explains that

"The late economist Joseph Schumpeter compared income groups to hotel rooms: just as the former ranges from high to low, so the latter ranges from high-end to low-end. But the different categories fail to reflect who occupies them and whether occupants move to higher categories over time." 

In other words, if we have high income mobility—that is, lots of movement up and down the income distribution—then comparisons between different portions of the distribution are meaningless. But unfortunately, we don’t have high income mobility.

Income inequality: Households are not people

Distinguished Harvard economist Martin Feldstein penned a recent column in the Wall Street Journal making the point that economic differences are less drastic than advertised.

He writes:

The Federal Reserve recently estimated total household net worth in the U.S. to be about $80 trillion, including real estate and financial assets. And data from the Fed’s Survey of Consumer Finances imply that the top 10% of households by net worth hold about 75%—or $60 trillion—of this total. The bottom 90% of households therefore have a net worth of about $20 trillion.

But, as he notes, this picture “leaves out the large amount of wealth held in the form of future retirement benefits from Social Security and Medicare”:

'The most honest three and a half minutes on television, ever'?

A few years ago, an anti-American television tirade went viral. Typically, such a rant would not escape the boundaries of Hollywood, but this one has collected millions of YouTube views and has been hailed as the “most honest three and a half minutes on television, ever.” But it’s propaganda.

The harangue aired on the popular TV series, “The Newsroom.” Will McAvoy, fictional news anchor, is asked by a college student, “What makes America the greatest country in the world?” Here is his response:

What's wrong with democracy?

My piece on the problems of democracy is up at the Daily Caller.

A few snippets:

America is a democratic republic. But today, any mention of the republican nature of our democracy has all but disappeared from the public square. Indeed the very idea of a republic has fallen into disrepute. 

Why? 

Misinformation on economic inequality

A recent piece of mine titled "Bernie Sanders’ Inequality Fallacies" created confusion among readers. Typically, those who disregard an argument and reply with misinformation can be ignored. But given the pervasiveness of misinformation among the intelligentsia and general public, it merits a response.

My article pointed out that a widespread fallacy about economic inequality is drawing conclusions based on statistical categories rather than human beings. This point seemed to escape many commenters:

“So the fact that real wages have been flat or declining while GDP triples and productivity doubles in the past four decades are meaningless?”  

“Wages have been frozen since 1969, but actual physical productivity has increased approximately 90 % over that time period.” 

“The result of more than forty years of conservative driven economic policies is that wages have stagnated for forty years, not six. That is just a fact.”