Brad DeLong, the grasping hands guy, with whom I have previously tussled on a number of occasions, recently ran a piece, Is America Today Really No More Unequal Economic Class-Wise than It Was in 1960?, attempting to sort out recent claims regarding prior claims regarding an alleged increase in economic inequality in the world today. Brad’s post begins with a run-down of the rival claims in a sort of shorthand that may not be too intelligible to the uninitiated, but, basically, all the names Brad rattles off are rival economic researchers. So here’s Brad:
As I understand things, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman (PSZ) have corrected some errors they made in calculating the top 1% after-tax-and-transfer income share that were pointed out by Gerald Auten and David Splinter (and others).
PSZ now think the top 1% post-fisc share has risen from 9%→15% over 1960→2019.
But Auten and Splinter are not satisfied, and claim the post-tax-and-transfer income share rose only from 8%→9%.
Now come Gale, Sabelhaus, and Thorpe (GST) to keep score. And I am here to score their score…
My conclusion: The numbers to keep in your head for the top 1% are: 9%→14.2%.
Sporting dude that I am, I have plugged in the links to the three papers in question, getting two of them from the often reliable (when he isn’t demanding war with China) Noah Smith while tracking down the third all by myself.
Brad says a number of “funny” things in the course of his analysis before coming to his rather predictable conclusions that 1) income inequality has increased dramatically since 1960 and 2) this has been a very bad thing (both of which I, rather predictably, disagree with) that strike me as exceptionally stupid—too many for me to make fun of, really, since I’m feeling lazy—but I will make fun of some of them, including this one, to wit:
Given all the non money-flow things that have happened to American society over the past 60 years, I would say that:
Progress toward racial equality has substantially lessened the magnitude of the increase.
Progress toward gender equality has somewhat lessened the magnitude of the increase.
Sociological factors related to class and culture have substantially amplified the magnitude of the increase.
Do those three add to a plus or a minus? I really do not know, but I also know that their properly-weighted sum is unlikely to be small.
Uh, shouldn’t that be “unlikely to be large”? If Brad can’t decide if the combined impact (“X”) of the three has lessened or increased the deleterious (presumably) impact of an increase (presumably) in economic inequality, why would he think that the absolute value of “X” would have to be large, even though we don’t know whether it’s a plus or a minus?
Brad also goes through a long list of “things for us to be concerned about”, but I will only pick on one of them:
The feeling by some that those who behave badly ought to be poor, and suffer.
I guess that Brad isn’t claiming that we ought to provide a generous guaranteed annual income to rapists, but what does he mean? He (probably) means that there are people like me who believe that people who refuse even to look for work even though they are capable of holding down full-time employment should not receive government benefits other than in exceptional cases. Well, Brad talks a great deal about the slow growth of productivity in the U.S. We can’t have much productivity in a country where people are paid not to work. I also believe that extended long-term unemployment is likely to lead to social disengagement, increased alcohol and drug abuse, and other unhealthy and anti-social behaviors. If Brad thinks I’m “wicked” for thinking this way, well, so be it.
Okay, that’s scarcely more than a quibble. Let’s get to the real bottom line: Even if economic inequality has increased substantially since 1960, as Brad, Piketty, et al. so vociferously argue, so what? Life has improved significantly since 1960 for almost everyone. In 1960, there was no Medicare, no Medicaid, no Food Stamps, no Disability Act, No Affordable Care Act, no welfare benefits for “unwed” mothers. According to the U.S. Federal Reserve in St. Louis, in 1960 real disposable personal income per capita, in 2017 dollars, stood at $13,441in January 1960 and $50,360 in November 2023. Sounds like a pretty good 63 years. According to the Pew Research Center, in 2022 the average income for lower income families rose 45% from 1970 to 1920, from $20,604 to $29,963, although it should be noted that the percentage of the population in the lower income tier rose, from 24% to 29%—though, as the Auten and Splinter guys point out, programs targeting low income Americans expanded substantially over the same period of time.
In 1960 the high school graduation rates for black students in states like Mississippi and South Carolina stood at approximately zero, by design. Now, about 25% of black women and about 17% of black men between the ages of 25 and 35 have at least four years of college. Descending to the anecdotal, one might ask who, in 1960, lived in an air conditioned house and drove to work in an air conditioned car? Millionaires! In 1950 my grandmother had an operation for cataracts. She had a full anesthetic (of course), quite dangerous, and lay in a hospital for a week, totally blind, while she recovered. She was then given glasses, which allowed her to see. When she took her glasses off, of course, she was blind once more. I recently had a cataract operation. I had a local anesthetic (a hell of a lot safer), had my “natural” lenses removed and artificial ones installed. I went home that day wearing dark glasses and went to bed. When I woke up the next morning I could see perfectly.
Walter Scheidel, in his recent book The Great Leveler, argues convincingly that it was only the massive disasters of the first half of the 20th century—the two world wars, the Great Depression, and the Cold War—that both reduced the great fortunes of the rich and increased the incomes of the poor. Now things are returning to “normal”. But, as I have argued, so what? As long as virtually everyone has a decent standard of living and access to modern health care, we are far indeed from the “new Gilded Age” of which Professor DeLong so often, and so loudly complains.
The real complaint that Drs. DeLong and Piketty have about things these days is that it is people like Elon Musk and Mark Zuckerberg seem to be running things in the world and not, well, “intellectuals”—economics professors in particular, it seems—even though Elon, obnoxious though he is, made his pile by making things, like cars and rockets, that people wanted to buy, at lower costs, thus improving, I suspect, productivity, and even, in the case of the Tesla, making something that Brad, I suspect, felt that people ought to want to buy, at the same time giving cachet to a product that previously had appeared about as sexy as a kelp milkshake. And, frankly, I don’t think Brad et al. could build a Tesla even if you gave them the cash to do so.
I am, unfortunately, just curmudgeonly enough to believe that academics would not do a good job running the world. When it comes to income inequality, aren’t the records of New York and California, our most liberal states, an embarrassment? Aren’t environmental laws used far more often to protect property values rather than to defend Mother Nature? And isn’t that a major contributary cause to homelessness, rather than “capitalism”? I wish people like Professor DeLong would try lecturing the choir rather than forever preaching to it, and I find no particular reason to trust the arguments of social “scientists” like Brad and Tom who “massage” the data so vigorously as to make it say whatever they please.
Afterwords
I was going to bitch about Noah Smith’s China Syndrome, but, well, my fingers are getting tired, so that will have to be a bitch for another time. Here’s a sample of Noah’s brand of The Chinese are coming! The Chinese are coming! prose, and here’s an indication that the “threat” may not be as dire as Noah wishes us to believe. According to Bloomberg, Chinese President Xi Jinping has been “purging” his military for such misfires as “missiles filled with water instead of fuel and vast fields of missile silos in western China with lids that don’t function in a way that would allow the missiles to launch effectively”. Bummer!
