Alan Reynolds’s *Income and Wealth*

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.


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