I'd promised readers an analysis of this book, but I didn't have enough space in my column on inequality. Here are two main points...
1. I don’t agree with the most notorious claim of the book, namely that income inequality hasn’t gone up over the last few decades. Gary Burtless has a good, non-polemical look at the data. See also Bruce Bartlett. Personally I am struck by what I know about philanthropy, art markets (booming prices, driven by wealth) and academic salaries. At the micro-level each of these areas appears to reflect a trend of rising income inequality. Even before I had heard of Piketty and Saez, I felt I was seeing their result right before my eyes. In terms of more formal data, I also was much influenced by the Thomas Lemieux piece I cited earlier today (Reynolds cites it too, I might add, approvingly, though without considering this angle), which shows that composition effects virtually require income inequality to be rising. Reynolds would have had a better book if he simply stated that income inequality isn’t going up as much as some people have claimed.
2. The book is of course polemical in style, so it is no surprise it would occasion polemical responses. Nonetheless I have been disappointed by much of the critical reaction to the book, most typically Jonathan Chait at NR. With any book, whether you like its attitude or not, the first questions are what the book gets right and what we can learn from it. (I am someone who had GMU economics Ph.d. students read Barbara Ehrenreich’s Nickle and Dimed.) Many of the critics aren’t asking these questions but rather they are using debating points, or attacks against Reynolds, to dismiss the book altogether. On many issues Reynolds is correct or at least he makes arguments worth considering. Often he is simply a massive tonic of common sense when countering the fuzzier-minded of egalitarian arguments.
Neither Reynolds nor the critics try hard enough to get at the real issues, namely which kinds of inequality are present, which are problems, and which are worth worrying about. The Reynolds book would have done better to try to give us a deeper understanding of the actual problems, whatever they may be, and less to respond to the critics number-by-number; the latter approach rarely convinces many people.
On specific points, the critics are too dismissive of consumption data, and Reynolds defends them too passionately. And what about happiness? Are there special problems concerning unequal health care? Just how bad is emergency room care relative to gold-plated insurance plans? Is the biggest problem of the poor, as one MR commentator points out, simply having to hang around other poor people?
Overall both philosophy (a rigorous treatment of which complaints are exactly complaints about inequality) and sociology are badly needed in this debate. On both sides of the fence I yearn for just a bit more Amartya Sen. The numbers, one way or the other, taken alone, aren’t going to convince very many people.
“With any book, whether you like its attitude or not, the first questions are what the book gets right and what we can learn from it.” – words to live by. Or at least to read by.
As an economist, I would have thought that the first question you would ask would be “is the marginal benefit of reading this book greater than the marginal cost” taking into consideration opportunity costs. The first question isn’t merely “what can I learn from this” but rather, “can I learn enough from it to make it worth allocating scarce time to reading it, when there are more books out there than I could possible read and not only that, other things competing for my time besides books.”
I am not going to be reading this book. Not because I think it has nothing to offer, but because I am convinced that Reynolds is a hack who apparently didn’t even finish his masters degree in economics at Sacramento State. It is not that hacks or people who don’t finish their degrees have nothing to offer, it is that, it is a good rule of thumb that they do not have enough to offer, compared to other things you could read.
I do agree with you that his critics have made a mistake. They have actually been wasting their time reading and responding to anything he writes, instead of just totally ignoring him.
I fully agree with Scott W’s argument. The misunderstanding Scott refers to is obvious in Tyler’s analysis. To make things worst Tyler attempts to extend the discussion to the evolution of happiness’ inequality; if he had taken into account the evaluation of the huge research on social capital, he would have known how difficult it is to agree on what we are talking about and especially on a measure of happiness over time. Tyler, why do you want to extend the analysis to happiness when we can hardly understand inequality by using income and consumption?
Although I agree with Ragerz’s approach, he ignores the problem of how to implement it. From his post I conclude that his reading choices are determined by his many biases, but I wonder if he often considers how wrong he may have been.
We have an economy saturated with corporate rent-seeking and other privilege. So why be surprised if inequality is increasing? It can hardly be the free market’s fault. Those who have a knee-jerk response to reports of inequality seem to forget that.
Ragerz: Alan Reynolds has answered your question. Too often the problem is not what you choose to read but what you choose “to learn” from your reading.
I don’t read people who fail to finish their master’s degree from a second-rate college.
In other words, you don’t care about actual accomplishment, only about accreditation, and even then you have your irrational biases about which institutions “properly” grant accreditation.
That attitude invariably leads to missing new ideas and concepts, and so therefore you must possess a second-rate mind.
Alternatively, perhaps you’re doing a clever parody of Paris Hilton.
“I don’t read people who fail to finish their master’s degree from a second-rate college.”
Since Abraham Lincoln never finished a high school of any rating whatever, I reckon I won’t read anything he wrote. Thanks for the nifty time-saving filter!
Burtless’ paper linked above is interesting and effective. What strikes me about it, however, is how elastic the definition of income equality/inequality seems to be. Throughout the paper, he uses many different comparisons to show income inequality rising. Personally, when I think of income equality rising or falling, I’m not thinking about the top 0.01% versus the median. If that ratio was falling, but the ration of the bottom 20% to each of the higher 20% slices was rising, I would think of that as rising income inequality. So in my mind, at least, from his paper I reach the conclusion that income inequality rose in the 80s much higher than it did since 90. And if income inequality has been declining among the lower 99% of incomes since 1990, and the real median wage has increased since then, that sounds like good news to most of us, no matter what is happening in the top 1% of incomes; doesn’t it?
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