We Don't Have An Income Inequality Problem, We Have An Ego Problem

In my recent piece at the Federalist I argued that we don't have an income inequality problem, we have a culture of entitlement problem.

A snippet:

Despite what we routinely read in the news, we do not have an income inequality problem.

First, as I’ve previously argued, we don’t refer to height differences as “height inequality.” Nor should we speak of income differences as “income inequality.” Doing so implies the deck is stacked for the “haves” and against the “have nots” before scrutinizing the facts.

Second, the statistics are often misleading.

A common tactic is to paint a dire economic picture by looking at statistical units— “households,” “families,” “income quintiles,” etc.—instead of individuals. For example, a headline from The New York Times reads: “Household Incomes Have Remained Flat Despite Improving Economy.”

Another article claims that, “after adjusting for inflation, U.S. median household income is still 8 percent lower than it was before the recession, 9 percent lower than at its peak in 1999, and essentially unchanged since the end of the Reagan administration.” Moreover, we are repeatedly warned that increasing shares of income go to the “top one percent” of earners while the rest stagnate or worse.

For the full piece, click here. 

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.