Timothy Noah’s *The Great Divergence*

The subtitle is America’s Growing Inequality Crisis and What We Can Do About It.  His policy conclusions are:

1. Soak the rich

2. Fatten government payrolls

3. Import more skilled labor

4. Universalize preschool

5. Impose price controls on colleges and universities

6. Reregulate Wall Street

7. Elect Democratic Presidents

8. Revive the labor movement

This book is well-written and it is a useful survey of left-democrat points of view on the problem.  I do not think most of these recommendations will much limit inequality (though they may have other virtues), but my main wish is that he had offered some additional possible solutions.  #1 on my list is “more innovations which benefit virtually everybody,” which is how the last great equalization (1870-1970 or so) came about.   Parts of his list, such as #3, get at this obliquely but it should be front and center of the entire book.  Let’s debate how we can make that happen.  If there were a new invention as important as the toilet, shareholders would not and could not appropriate most of the gains.  “Deregulate housing” and “deregulate medical care” also deserve a ponder, as does “abolish occupational licensing” and “subsidize basic science.”  That global inequality has fallen radically is understood and recognized but not emphasized.  It is culturally beyond the pale — on the left at least — to write “encourage conversions to Mormonism” but as a recommendation it is right on the mark.  This book needs more which is culturally beyond the pale.  How about “run some of the bad schools with lots of discipline, more like the KIPP academy?”


Does anyone could help me with the English?

What exactly does "Soak" means here ("Soak the rich"). Based on dictionary.com (http://dictionary.reference.com/browse/+Soak?s=t), it's hard to understand how it was used here. Any one kind enough to explain to me the usage of 'soak' here?

In this context it means "tax very heavily".

Bertrand looked quickly around the group, then went on: “But their home policy…soak the rich…I mean…” He seemed to be hesitating. “Well, it is that, pure and simple, isn’t it? I’m just asking for information, that’s all. I mean that’s what it seems to be don’t we all agree? I take it that it is just that and no more, isn’t it? Or am I wrong?”
Pretending not to notice Margaret’s warning frown and Carol’s expectant grin, Dixon said quietly: “Well, what’s wrong with it, even if it is that and no more? If one man’s got ten buns and another’s got two and a bun has to be given up by one of them, then surely you take it from the man with ten buns.”

Thanks guys! Based on the context (a left democrat argument), I guessed that it was something along the lines of taxing the rich, but wasn't unsure. In any case, is this use of 'soak' standard? As a non native speaker, should I try to use it?

It's a standard idiom, but a fairly restricted one.

It's pretty standard when speaking about placing high taxes on a group. It's generally said by people who think the high taxes are a bad idea or are imposed to punish a group (like when implying that people who want to tax the rich more highly are doing it to punish success/due to jealousy/bring down the rich instead of bringing up the poor/etc... It generally has denotes that the speaker thinks that those taxes are a bad idea; that is, if I want to tax a group highly, I'll say I'm 'raising' their taxes or I want to 'tax the rich'. If I'm complaining about the plan of someone else, I'll say they want to 'soak' the rich.

Sure. Be sure and use it this way:

"If you [insert: politician; tax-payer; abhorred 1%-er; or whomever], don't give me what I WANT, immediately, I will soak you in the chops!"

“more innovations which benefit virtually everybody,”


Pharmaceutical solutions to obesity.

The irony is that prolonged lifespans would almost certainly increase reported inequality, for a number of reasons.

I'm sure you're not implying it, but it is perverse how some of my friends on the left oppose life extension precisely because of of their speculations of its impact on inequality. Somehow they're intent upon confirming the worst stereotypes of the left as seeking to level downwards instead of upwards.

In fact, I think it's quite likely that these types of therapies would be extended to the bulk of the population, even if each new development is concentrated by income initially in the same pattern we see with other new technologies. There is a sense that even universal life extension would increase inequality irregardless, though, which is perhaps what you mean - the disparity between young and old in net worth will increase as a matter of course.

"prolonged lifespans would almost certainly increase reported inequality"

Then reported inequality isn't a fundamental problem.

Additionally, I'm responding to Tyler's prescription, not the author's who thinks inequality must be a huge crisis, which I don't.

Import skilled labor? Yeah right.

Clearly what we need is more unskilled labor, preferably the brown kind to add to "vibrancy," and also so I can feel high-minded about my racial openmindedness. We can welcome them by perpetuating and expanding the welfare state, in addition to affirmative action--luckily we have Asians around to punish for the low achievement of other population groups, so whites will be untouched.

Thankfully, our new friends will vote left too.

How about "reform ip laws"? It seems as though you could construct a reasonable argument that the current setup, in addition to holding back innovation, reduces tfp in favor of the return to capital.


'If there were a new invention as important as the toilet, shareholders would not and could not appropriate most of the gains'

see: Apple, cash on hand

You're right, I gained no value from my iPhone or Macbook.

Ah, but that's a consumer gaining value, not a shareholder.

(Of course, shareholders have a stock that is now worth around $600.

After a two splits and a $25 price at the start of 2000, the notional "long-term investor" would have turned his $25 into $2400 by buying Apple in 2000 and selling it today.

Two orders of magnitude is a pretty nice gain for 12 years.)

Exactly. Shareholders would not appropriate most of the gains because the consumer would get much of them.

Those aren't inventions or innovations, they're old tech in a stylish package surrounded by the RDF.

Given that overpriced Apple hardware is obviously a status good, it is rather obvious that the existence of Apple is on the aggregate welfare-decreasing.

What does that mean?

Doesn't matter. The problem of inequality is not about shareholders.

Number 4 has considerable merit in conjunction with teachers union reforms.

Number 4 would make teachers union reform harder.

The only thing that would make teachers union reform easier is a neutron bomb.

"If there were a new invention as important as the toilet, shareholders would not and could not appropriate most of the gains"

Elsewhere Tyler has argument the Internet can't be very important because ISPs aren't appropriating huge gains from it...

In the developing country that I live in, revealed preference is very much in favour of cell phones versus toilets.

I'm good with #3.

Instead of second-class workers called "H1-B visa holders", a high-skill worker should be permanent resident track from Day One.

However, I doubt that that is what Noah wants. Most lefties abhor the H1-B program.


Not just H1B. We should make the process of becoming a citizen much, much easier. I came here through the H1B program and it took me 8 years and thousand of dollars to become a citizen.

This sounds like a rent-seeking politicians wish list.

I don't like the implicit assumption that some people getting richer is a problem just because other, more numerous people aren't getting richer as fast.

A logical extension of this assumption is "we would be better off if everyone were getting poorer, as long as the rich lost proportionally more income than the poor" which seems clearly wrong.

I think the more useful question is: how do we get the poor to be more productive?

And perhaps we should also be asking: do we really need the poor to be more productive, or should be left to whatever income level they seem inclined to pursue absent gov't interference? I always hear these vague admonitions about how income inequality will doom us all, but they seem quite a stretch in a country where the poor have living standards as high as ours (e.g. plenty of food, general access to major appliances, our bottom 5% live better than India's top 5%, etc.).

Exactly. Absolute poverty is a problem. Income inequality is not. Very few people, if anyone, are worse off because Bill Gates and Warren Buffet are extremely wealthy. If tomorrow every rich person had half their wealth confiscated and burned, thus reducing income inequality, it wouldn't do a damn thing for the poor.

I am constantly baffled at why people can't see this. How does taxing the rich increase the lot of the poor? It doesn't boost anyone up, it knocks a group down.

The caution to not covet your neighbor's goods has been around for a long time, and for good reasons.
From Wikipedia: "Bertrand Russell said envy was one of the most potent causes of unhappiness".

"How does taxing the rich increase the lot of the poor?"

Because the money is spent on services that benefit you that you didn't pay taxes on, without burdening your descendants with debt.

And where is this working out?

It's not working out in the US: In 2001, the top 1% paid 28% of AGI in taxes and in 2008 paid 21% of AGI in taxes.

Let's soak the Poor instead.

That stat is still nonsense, Bill.

TallDave, You can go to the IRS database yourself to do computations, and recommend you do so.

The Tax Foundation, with some biases towards over reporting tax by income, nevertheless in their summary data (which has some inclusion biases, (see footnote 4), nevertheless shows that in 2001 the top .1% of paid 28.2% of AGI, and in 2008 paid 22.7% (this excludes SS taxes, healthcare insurance benefits, deferrals to retirement plans).

TallDave, This is from the WSJ:

"The top 400 U.S. individual taxpayers got 1.59% of the nation’s household income in 2007, according to their tax returns, three times the slice they got in the 1990s, according to the Internal Revenue Service. They paid 2.05% of all individual income taxes in that year.

In its annual update of the taxes paid by the 400 best-off taxpayers, who aren’t identified, the IRS also said that only 220 of the top 400 were in the top marginal tax bracket. The 400 best-off taxpayers paid an average tax rate of 16.6%, lower than in any year since the IRS began making the reports in 1992.

To make the top 400, a taxpayer had to have income of more than $138.8 million. As a group, the top 400 reported $137.9 billion in income, and paid $22.9 billion in federal income taxes.

About 81.3% of the income of the top 400 households came in the form of capital gains, dividends or interest, the IRS data show. Only 6.5% came in the form of salaries and wages."

Oh look, 1% became .1%.

The true effective tax rate is closer to 50% for both years, because a large portion of their income is taxed as corporate taxes. (The BEA typically attempts to assign groups corporate income for this reason.)

And it's nonsense anyways. The avg tax rate of the top .1% has far too much variability, esp. in a recession year, for a trend between two cherry-picked years to be meaningful.

TallDave the full incidence of the corporate profits tax does not fall on the owners some falls on the customers and some on the employees.

Floccina: As a practical matter, it may be true that costs are passed on, but if so it is true for all income taxes on business, not just C Corps.

As a matter of principle, it is the owners who earn the income and pay the tax. Making an LLC into a C Corp does not magically transfer costs to employees and customers, just as it does not magically reduce the owners' income tax to zero.

TallDave, The 1% number, and not the .1% number is not much different: 28.2 to

..continuing, to 22.7. Please note that income from tax exempt bonds is not included, nor is income put away in a deferred income program, like 401k or restricted or deferred bonuses.

As to the shareholder incidence of tax: you might want to think about this further: because you are claiming that a foreign shareholder of US securities is now paying US income taxes.

Way to go.

Again, so what? All that statistic tells us is that there was a recession in 2008.

Yes, obviously anyone who owns a piece of a C corp paying U.S. taxes is, in effect, paying U.S. taxes themselves, irrespective of citizenship -- just as they would if they owned a partnership or an LLC. And again that's why the BEA treats it that way when they look at overall taxation. I don't know why you would find that strange.

It doesn't. But with record budget deficits and Republican's vowing to never, ever raise taxes, it's a relevant topic to put on the table.

If the Rich can pay less, then those who want money may be more focused on catering to the Poor, and may have more of an incentive work to to provide them with cheap goods. Money has relative value.

That might be worth a decreased quantity of wealth to the Rich and a slightly decreased shine to trying to become Rich as an individual rather than working to lift everyone up. Presuming the Rich as a class and meritocrats who are really just the beneficiaries of genetics and random life events aren't privileged in your worldview.

The framing is off. Taken without consideration for anything else, income inequality suggests a possibility, not a problem. (The possibility of being better off).

When it looks like people waste their money, it becomes conceivable to think of pursuing that possibility by means of zero-sum redistribution. (Whether in the vein of Malthus - the poor just spend their money on vice - or Veblen - the rich just spend their money on vice.)

Such thoughts are reinforced by the notion that decreasing vice raises all boats. Perhaps what we need, then, is an account of the marginal propensity to consume viciously.

It's not quite that simple. The argument assumes that rich people and poor people both produce as much as their incomes would suggest. Low tax rates for the rich also gives the rich more money after taxes to lobby Congress with which earns more regulatory capture. After getting regulatory capture, the low tax rates allow yet more money for lobbying and even more regulatory capture. And so on.

Low tax rates may also harm the equality of opportunity. With lower tax rates, the rich have more money to send their kids to private schools and the rich now have a big reason to lobby for defunding public schools and seeing their taxes go down even further.

I don't necessarily subscribe to these views. For example, it's silly for liberals to say we haven't funded schools enough due to low tax rates, when we've done nothing but throw money at schools. The real issue there is teacher's unions preventing real reform. But I do think there is an issue with the rich earning more regulatory capture, including regulatory capture making it impossible afford housing in places like San Francisco unless you are super-rich. That leaves so many things like decent housing and health care as extraordinarily expensive, even as technological products get cheaper.

With regard to regulatory capture, it's not as if all rich people are on the same side -- Warren Buffet loudly professes that he doesn't pay enough in tax. Income inequality isn't the problem here, it's regulatory capture, which is a good argument for limited government rather than handing over more money from the rich to politicians to spend as they desire, all in the name of good government.

As for schools, I have a hard time seeing this play out. Here in DC we have plenty of rich people who send their kids to private school, including our president. I am not aware, however, of any big anti-tax movement here which favors defunding public schools. I imagine this is at least partially because there is little chance politicians would respond, as there are far more poor voters than rich ones. But if you can point to this dynamic playing out elsewhere I'd be curious to see it.

The day may not be soon, but eventually we'll have to realize that even the most rigorous screening system for good teachers will have contend with an American student-age population of diverse abilities and talents. We could abolish the teacher's unions tomorrow and privatize every last elementary school, but the same sort of inequality we see in income will be replicated in educational results.

"I don’t like the implicit assumption that some people getting richer is a problem just because other, more numerous people aren’t getting richer as fast."

Consider the flip side of that equation. Suppose that the richest 1% appropriate 100% of the weealth that they create. Why should the rest of society care about encouraging them to be successful? The rich are afforded conditions that make it possible for them to create wealth in exchange for sharing some of it.

"Suppose that the richest 1% appropriate 100% of the weealth that they create."

That'd be near impossible, unless the rich were employed by each other or only purchased stuff from each other. Still, then the rest of society would be creating nothing of value. Which is the greater issue.

You mean to say nothing of value to the 1%. That is an important distinction.

No, they could create things that had value to each other.

Suppose that the richest 1% appropriate 100% of the weealth that they create.

That is truly magical thinking.
(You sound like a 1L.)

Nice house ya got there...

Suppose they did. It still wouldn't hurt anyone else, and they would pay taxes on it. So why would it be a problem?

You are right that the rich are afforded conditions that make it possible for them to create wealth in exchange for sharing some of it. So are the middle class and the poor. It's called a market economy. Buyers get consumer surplus and producers get producers surplus. If both parties don't benefit from the trade, in a free economy they don't trade.

What parties is this "exchange" between?

Suppose that a Chinese farmer appropriates 100% of the wealth he creates. How does this affect you?

It doesn't. And neither does the 1% appropriating what they make.

Great points Dave. Too bad that Mr. Cowen implies that he has a problem with some people getting richer, i.e. that he thinks there's something inherently wrong with people freely trading things they value less for things they value more. As to his comments bout the book, I'm not sure what Mr. Cowen means when he says, "this book is well-written." Perhaps he means that there were no spelling or grammatical errors. Given the subtitle, "what we can do about (the inequality in America)" and Mr. Cowen's own observation that he does "not think most of these recommendations will much limit inequality", it's hard to imagine that he thinks the book effectively addresses the very questions it means to answer. That the book's purported solutions "may have other virtues" is irrelevant. If I'm drowning in a lake, having a bystander blow me kisses may have certain virtues, but it does nothing to solve the problem.

Unlike many here, I'm in favor of greater equality (or at least reversing the trend towards greater inequality) and think its an important issue. I'm not sure about this list.

Obviously #1 and #8, though I would specify "private sector labor movement", strengthening the public sector labor movement we have now would effectively increase inequality. Also #6, though there are better reasons to do this that have nothing to do with inequality.

On #4, I'm skeptical of the impact on inequality but there are other good reasons to do this. On #2, government payroll should me an issue of the level of competency and expertise the public wants in government employees and how much they are willing to pay for it.

On #3, I can't understand if this is "import more skilled labor and less unskilled labor" or "import more skilled and the same amount of unskilled labor". If you expand the labor force, the price of labor drops and capital has the advantage. On #5, price controls tend to backfire, and on #7, the actual record of the last two Democratic administrations argues against this.

Not to be snarky, but really you could just say "look at what the federal government of Brazil has been doing since 1994. Imitate that." Or "look at what the federal government of the U.S. has been doing since 1994. Do the opposite."

No offense to you Ed, but I notice that when people point to a government to imitate these days, it's usually one rich in natural resources (Canada, Brazil, Australia).

In my lifetime -- and I'm 40 -- I've seen the Left hold up for us to emulate: Vietnam, China (Mao), Yugoslavia, Cuba, Albania (yep!)... That's the far Left, though.

Good to see some of the fanatics are now saying we should emulate Canada, Brazil, Australia...

The US is rich in natural resources, too.

But we're a consumer more than a seller.

"If there were a new invention as important as the toilet, shareholders would not and could not appropriate most of the gains."

I'm not so sure about that. These days Big Toilet would probably keep getting Congress to expand intellectual property rights into a perpetual ban on toilet copying.

True. However, you used "Big Toilet" and "Congress" in a sentence as two distinct entities. This is confusing to me.

So this is the competing list?

A. Import More Skilled Labor,

B. Invent Toilet 3.0,

C. Deregulate Housing,

D. Deregulate Medical Care,

E. Abolish Occupational Licensing,

F. Subsidize Basic Science,

G. Convert to Mormonism, and

H. Make Schools Like KIPP Academy

* I suppose I excluded the truly insightful option, "more innovations which benefit virtually everybody," from the list.

I guess I'll leave it to others to decide whether or not, 'invent things which help people' qualifies as a 'solution,' or as pablum.

"Invent Toilet 3.0"

Too late.

I like these:


Thanks. I don't think you are allowed complain that "soaking the rich won't increase equality" when you propose deregulated medical care instead, but such are the mysteries of this blog.

How would deregulating medical care increase inequality?

Uneducated people would choose worse options than educated people.

Or, just stop going backwards with the low flow shit.

Btw, if your solution is to take the money from the rich because they have money then you don't really have any solution.

Deregulating medical care would increase inequality because current regulations require that hospitals provide emergency care to all comers.

Absent those regulations, many for-profit hospitals would turn away sick or injured patients with no insurance and inadequate financial resources (as they did before those regulations).
So deregulating medical care would certainly increase inequality because of large numbers of the poor who would not receive medical care for sickness and injury.
And of course the absence of medical care for the poor would result in public health problems such as contagious disease outbreaks also, which would affect everybody except the very wealthy, who could shelter themselves in their gated enclaves.

Medical care is regulated in every civilized country on the planet, for reasons that are so obvious that nobody except an ideologue would need them detailed. (Would you want to be operated on by a non-credentialed, self-declared "doctor" using drugs, tools and procedures that had no FDA or other government approval system?? No country in the world has answered yes to that question, and pretending that one will suddenly do so is foolish). So deregulation of medical care will never happen, and is just a red herring to throw into the discussion. Reduction and re-evaluation of medical regulation should be a continuous effort, but "deregulated" medicine does not exist in any democracy, and is less likely to ever exist than pink unicorns floating on rainbows.
But libertarians will keep dreaming and writing about it anyway.

"But libertarians will keep dreaming and writing about it anyway."

This is the gist of libertarian uselessness. They are mostly moral, intelligent people who spend as much time being useful as stoned sophomores in a dorm room yakking at 1AM about remaking society.

OK Maybe TommyVee if you completely deregulated health care (that is you could significantly deregulate but still make emergency room take care of the poor. You would also still have medicaid), but it is also likely that you would make care more plentiful, accessible and affordable. To me it seems that gauntlet that one has to run to be allowed to prescribe medicine is excessive.

+1 to Floccina. Nursing types should be able to handle 80% of primary care, but because of the current liability situation that's hard to fathom happening.

The literature on inequality needs to be read at least partly from a sociological perspective.

Inequality damages society because it creates status anxiety, it alienates lower income people from the social institutions that make transactions possible, and it creates feedback loops of alienation which prevent a democracy (so dependent on coordiation) from being able to make sensible political decisions (witness the polarization of the past 12 years).

Your claim that new technologies can reduce inequality doesn't work if we say that the costs of inequality stem not from the quality and quantity of goods that we all have access to, but rather from the capacity of some to command more PERCEIVED power than others (so yes, even if the power is never realized).

In other words, the consumption perspective is inadequate. We need to consider the psychological and cultural costs of inequality that more consumption of better goods by everyone cannot ever address. Toilets don't equalize people. A perceived sense of fairness, unity, and understanding do.

So all this talk about inequality from OWS and the Left actually makes the 99%'s lives worse? By reminding them of how unequal things are, and how upset they should be? By telling them to perceive others as having more power, even if that is "not realized?"

So the solution is to shut up. Or at least stop talking about how much money Lebron James and Justin Bieber make.

You are arguing not that inequality makes things worse but that /talking about inequality makes things worse./

I hope by "literature" that you are not referencing The Spirit Level, which has already been comprehensively debunked: http://super-economy.blogspot.com/search?q=spirit+level

As for status anxiety, I don't buy it. How many people out there really compare themselves to the upper 1%? Seems most people compare themselves to their friends, family and neighbors, not the guy living in a gated community who they have never met or heard of. And if income inequality is so terrible, why do people move from third world countries to the US where they are likely to be *relatively* poorer than where they came from? And why do so many people oppose such immigrants? After all, each dirt poor immigrant improves the relative standing of most Americans.

But you don't even have to look at the third world. Just ponder why people move to big cities (greater inequality) from small towns (less inequality) if this is such a big consideration.

Are you seriously contending that people move to big cities to revel in the inequality?

No, I am saying that it doesn't deter them. Seems that their absolute, rather than relative, income is more important.

You're absolutely right, the vast majority of the 99% don't compare themselves whatsoever to the upper echelons of the 1%. In fact people are much more likely to compare themselves to their neighbors, both geographically and socioeconomically. 50th percentile Joe Schmoe's status anxiety is being driven by his wife's sister's husband, who just made manager at Target and is now in the 56th percentile.

In fact pretty much the only people who are getting a serious case of "status anxiety" induced by new money hedge fund and Internet cent-millionaires are those who run in the same circles and come from the same backgrounds as them. Yet feel threatened by their overwhelmingly dominating economic success. You know the type of people with wealthy parents, who went to prep school and ivy league universities, who are conventionally successful as, say a leading journalist at Slate, but still make 1/1000 the amount of money of say Harvard 1980 graduating classmate John Paulson.

These are the type of people who are getting status society from the the 1%: pretty much the 2-3%. They might even be driven so far as to write books advocating the regulation and taxation of people like John Paulson. They might even give their book a snappy title like "The Great Divergence" and couch their personal insecurities in broad sociological terms. Such is their "status anxiety" induced plight.

As for John Russell, aluminum sliding salesman in Akron, Ohio, I very much doubt whether Mark Zuckerberg's net worth is $10 or $20 billion is going to do much for his "status anxiety." However an invasive tax audit of that son-of-a b---- Neil Penderson's business might make him smile. How the hell does a contractor pull in a hundred and thirty grand a year anyway?

> The vast majority of the 99% don’t compare themselves whatsoever to the upper echelons of the 1%

While you are quite correct, I suspect that the media saturation of how the wealthy lives makes a huge impact on perceptions of inequality. Now almost everybody has somebody living vastly better than they are in their living room, den and bedroom each and every day.

Technological changes mean that the rest of us have daily exposure to what we don't have, and I can certainly say that for many, they are less happy as a result. (and whining about whether they *should* be is completely immaterial to the fact.)

In other words, the existence of the wealthy *does* do some harm to the majority.

In the most raw terms, paying a larger proportion of taxes is a cost we bear for living at the sufferance of the majority, despite the pain they feel at our existence :-).

It seems to me most people compare themselves to the people on television.

They do spend, after-all, an average of 4 hours per day staring at those people.

I have status anxiety ... now see this fist / protest sign? It is signalling "give me some damn money!"

(My more mature point, of course, is the question: why shouldn't we ignore status anxiety? What do I care if my hard-earned dollars have bought me a car that induces status-anxiety in you, who gets up at noon?)

It's funny how I heard little about inequality until inequality plummeted, during the recession.

Actually, the recession was over long before OWS. The more likely cause was the rise of the Tea Party, the battle over the Bush tax cuts and especially the battle over the government shutdown. The GOP put a stake in the ground that even $10 of cuts for $1 of taxes was too much. A lot of people found that unreasonable.

"Inequality damages society because it creates status anxiety, it alienates lower income people from the social institutions that make transactions possible, and it creates feedback loops of alienation which prevent a democracy (so dependent on coordiation) from being able to make sensible political decisions (witness the polarization of the past 12 years)."

You're speaking of inequality as if it is a sentient thing. Inequality does this, inequality does that.


Those things may very well happen, but you should apportion the blame where it belongs, not a nebulous anthropomorphised version of the wealth distribution.

1. This has never worked in the history of man, however, since reducing income inequality isn't the goal we can move to step two.
2. The actual goal creating a new class of overpaid government employees can be accomplished by taxing the old rich to fatten government payrolls thereby creating the new rich.
3. Importing more skilled labor is only useful to companies that won't invest in their own employees. Odd that a lib is supporting stronger unions, but not better trained members.
5. As long as they are run as a for profit industry I don't see any meaningful change. State colleges are run to maximize profit, so the problem is not limited to dubious online universities.
6. We could just start treating Wall Street as a casino and not as a measuring stick for our economy.

I think I miss the apprenticeship system.

You can no longer learn on the job if your productivity on Day One is less than the minimum wage, even if you are destined to become a very productive worker, because an employer and employee cannot agree that the employee will stay with the employer for two years, the first six months of which will be relatively unproductive.


Or, if you really want to improve education, drop KIPP and follow what Finalnd does-they showed much greater improvement than vouchers or charter schools-and the teachers are 95% unionized! There system doesn't get mentioned in libertarian tracks on schools.

That's interesting if you think that inner city kids and Finnish kids are fungible.

OK, I know what fungible is , but that sentence is creepy.

Finnish kids in the U.S. do better than Finnish kids in Finland, if I recall correctly.

Ooh! Ooh! Mister Kotter! I know, I know! Let's realign our educational system to be just like a nation that's 1/60th our size (we've got ~ 25 metro areas that are larger than Finland ferfuxsake) and is something like 90% ethnically homogeneous. That's a sure ticket for success.

Am I just too dense to see how #s 3 and 8 can coexist in a political context?

Does #8 exclude skilled labor?

“subsidize basic science.” But physics has been stuck for 30 years. The golden age of medicine ended ca 1975. It's not money that's lacking.

One way to find out: return public funding for R&D to levels respective to GDP that they were in the 1960's and/or provide tax incentives or deregulatory reforms to make private R&D easier.

Note that the Golden Age of medicine occurred not long after the industry was regulated in the wake of Thalidomide.

"Note that the Golden Age of medicine occurred not long after the industry was regulated in the wake of Thalidomide"

That's probably the best example of government front-running there is. They get credit for regulation and the small molecule revolution.

Perhaps so, but it's a data point that shows government regulation at least did little harm in this case. There are many just like that.

The toilet was invented long before it was implemented across the nation. It didn't reach the South until the Civil War and its economic aftermath during Reconstruction, killed the Plantation system of farming.

Ha! In your face, Obama (btw you're welcome for the whole freeing the slaves thing).

You know, you wouldn't have had to free the slaves if you hadn't held humans as property in the the first place.

+1 for a great sock puppet.

"It is culturally beyond the pale — on the left at least — to write “encourage conversions to Mormonism” but as a recommendation it is right on the mark."

Tyler has just discovered his latest post hoc.

"4. Universalize preschool"

So they can start the brainwashing earlier? No thanks.

LOL. Those eeevil Manchurian preschool teachers...

“abolish occupational licensing”

How are more lawyers going to help *anything*?

Well they certainly won't help my income! Lower the pass rates to Japanese levels! Everyone gets what they want, right?

More lawyers no, but how about more paralegals being able to do what lawyers charge way to much to do?

And then there's more doctors which we definitely need.

I'm no libertarian but in many professions guild-like over-licensing seems like some deadweight we can remedy.

Okay, I just called an attorney friend, and he said that you don't have to be certified to work as a paralegal, but some clients won't pay, or will only pay a lower rate, for someone who is not certified. Sounds like the market's already on that one.

Can someone fill me in on the "conversions to Mormonism" thing? And even though I'm not sure what Tyler is getting at here (is it that Mormons give more of their money away than non-Mormons?), I'm pretty sure the right would find it just as beyond the pale as the left would, if not more so.

There was apervious post on the good habits of Mormons.
"I’m pretty sure the right would find it just as beyond the pale as the left would, if not more so"
The right already give away (to charities) twice what the left does.

Only if you include church donations, like the massive tithing Mormons do for example. Not saying this shouldn't 'count' as charity, but it's a notable detail.

I was saying the right would find the whole "conversions to Mormonism" thing beyond the pale, not that the right doesn't donate to charity or finds charitable donations beyond the pale. Anyway, thanks for the clarification.

Would you "deregulate medical care" before "abolishing occupational licensing?" Not sure you could do both.

Isn't abolishing (some) occupational licensing part of deregulating medical care?

“More innovations which benefit virtually everybody”. Yes, but doesn't TGS imply that the relative cost of this vs other ways to reduce inequality is now very high?

I believe the LDS church is working on that conversion idea.

“more innovations which benefit virtually everybody,”

Yes, that sounds great, but what more does one do than what we currently do to increase the probability of this?

Also, if someone comes up with an innovation that doesn't benefit everyone, do we shun them? Make them scrap that and go back and work on something new?

A thought experiment. If there was a great idea that came along, would it happen in the US? Even if it originated here?

I would suggest that right now great ideas are being implemented, invented, manufactured and distributed, but elsewhere. In my industry, long standing US manufacturers are being bought up by foreign interests as distribution systems for their new ideas built somewhere else, invented somewhere else.

I think the line about encourage more conversions to Mormonism seems like extremely bizarre "advice" and there is good reason that it is "beyond the pale." Maybe in terms of developing social capital, it sometimes makes sense to join some religious group or another. But most people would probably agree you should not join a religion unless you actually believe in it.

This reminds me of the point by Noah Smith regarding economists and there desire to build "social cred" in their profession by saying socially unacceptable thing. The problem with the Mormonism idea is not that it is "beyond the pale" so much as that it is completely impracticable.

Economists need to start thinking like rational agents they hypothesize humans to be. Proposing or discussing totally impractical ideas in the realm of public policy is not a value maximizing use of your time. "Oh, if only there were more Mormons..." Huh?!? Even if this highly debatable proposition could be shown to be true (and it would be an extremely steep uphill argument to try to establish), there are not many policy implications. High costs and low returns. Why are we even talking about this???

How about "slightly favored immigration status for long-time Mormons" as a possible policy implication? That doesn't seem too utopian, too impractical, to be worthy of discussion. The USA might not do it, but some other human capital maximizing country might implement it, either formally or (more likely) informally.

Maybe some countries have already implemented it....

I think that policy would probably violate the First Amendment.

You are going to favor some people because of their religion? That obviously would be politically impossible, even if you thought it was Constitutional.

I think it would be nice if economists stopped trying to be so "pure" in bring up every heretical idea because they like saying things that are unpopular for its own sake and started focusing on the practical.

I would be curious as to a study of lds church membership and income that diffrentiated between mormons in the Jello belt (ie. Utah, Nevada, Idaho) and in places where mormons are very thin on the ground. Also the whole wealth effect of mormonism seems pretty much a side effect that to keep good standing as a mormon requires almost constant activity and your bishop knows your income so he can asses your tithe.

You might as well suggest everyone has to join a conservative synagogue and make every JCC meeting mandatory.

You might as well suggest everyone has to join a conservative synagogue and make every JCC meeting mandatory.

Anyone know if the food is better at JCC or Mormon Temple?

The wealth effect of Mormonism is that having tight social bonds (for example, members are expected to visit each other in their homes each month to teach and check up on them) and teaching self-sufficiency (including avoiding addictive habis like coffee and tobacco) are associated with community wealth creation.

Also, people that don't have the self-control to meet the "high moral standards" self-select out of the church. Grossly oversimplifying, these are also the people most likely to fail in wealth creation.

" But most people would probably agree you should not join a religion unless you actually believe in it."

A religion is a social construct, an abstraction, that an individual may have been immersed in from birth or joined at some later point in life, pretty much like a system of government. There are plenty of people living under representative democracy that don't believe in it, yet go along with the gag because of the possibility of excommunication, which in the case of the US means exile to federal prison. Accepting the opinion of a majority of 9 attorney/priests in black robes as gospel in daily social relationships is religion with a capital R. We even put the images of previous messiahs on our money and postage stamps. hang their pictures in public buildings and carve their visages on the side of South Dakota mountains.

Hal Jordan's review of this book on Amazon.com:

1. "Soak the rich" That is to say, raise taxes to very high levels on high-income people. There is a reasonable argument to made -- and I agree with it -- that tax revenues have to be raised substantially if the federal government is to meet its obligations in the long run. But Noah glides over the fact that taxes have very little to do with increasing income inequality. Top tax rates have gone up and down over the years, while income inequality has continually increased. In addition, raising rates to the very high levels he proposes will turbo charge the efforts of tax lawyers and accountants to shield the incomes of the rich, resulting in wasted resources and a smaller increase in tax revenues than he expects.

2. "Fatten Government Payrolls" By this he seems to mean the federal government should enact a WPA-type program as an employer of last resort. Maybe, but if he wants it to be taken seriously, this proposal needs more consideration than the two paragraphs he gives it.

3. "Import More Skilled Labor" A proposal that Bill Gates and many others have long campaigned for. The usual argument is that skilled immigrants will raise U.S. productivity and economic growth. Noah doesn't appear to care about that aspect of the issue; he supports immigration because he hopes it will provide competition for skilled native workers, thereby reducing their incomes! Evidence -- of which there is much more in the book -- that Noah has come to view all policy questions through the lens of income inequality.

4. "Universalize Preschool" The only one of his proposals that gets ay what many people believe to be a key cause of inequality: The disintegration of traditional family life and traditional values among low-income people. I'm not a huge fan of Charles Murray -- I think he has a tendency to cherry-pick data and exaggerate trends -- but the issues he raises have to be addressed in any even-handed account of rising income inequality. Noah fails to come to grips with them other than to urge an increase in the availability of preschool.

5. "Impose Price Controls on Colleges and Universities" Apart from the fact that this proposal doesn't have a snowball's chance in Hades of being enacted, it is an extraordinarily wrong-headed approach to the issue of increasing access to college.

6. "Reregulate Wall Street" Whether Dodd-Frank will have much effect in deterring future financial crises is a debatable point. The chances that it or more stringent regulation will have any significant impact on income inequality is effectively zero.

7. "Elect Democratic Presidents" After briefly summarizing the work of a Vanderbilt political scientist, Noah concludes that: "The hoary cliche that Republicans are the party of the rich and the Democrats the party of the working class and the poor is thereby quantified and proven true." The work he is citing is controversial, to say the least. And, as he should know, particularly on the two coasts, the over-$200,000 crowd has strongly supported Obama. In the 2008 election, he beat McCain 52%-46% among people earning (consuming?) more than $200,000 per year.

8. "Revive the Labor Movement" Noah waxes nostalgic for what Mickey Kaus has usefully labeled "Wagner Act" unionism. That is, big unions of the UAW type that take a strongly adversarial relationship to management and work to impose stringent work rules, an iron-clad seniority system, substantial pension payments, and so on. I would have thought by now it had become clear that U.S. firms that are saddled with those types of unions have no hope of being able to compete in a global market place. Noah has a solution to this glitch: U.S. unions should extend their organizing efforts to other countries! He literally says (tongue-in-cheek, of course), "Workers of the world, unite!" By the way, he advocates repealing the Taft-Hartley Act and doing away with secret-ballot elections in certification votes because secret-ballot elections "are easily manipulated by management." Hey, why not get rid of the secret-ballot in political elections, as well? Might help with his proposal 7.

Honestly, the new material in the book seems to have been written by someone with an IQ about 30 points lower than the person who wrote the material reproduced from Slate

"In the 2008 election, he beat McCain 52%-46% among people earning (consuming?) more than $200,000 per year."

How do you get from this fact to the statement that the $200,000+ group "strongly" supported Obama? That's close to an even split. It also may well be an abberation driven by the financial crisis -- there was a left-ward shift across the electorate that led to Obama's victory. Compare to 2004 where 63% of this group went for Bush compared to 35% for Kerry -- no other income group in 2004 voted for Bush by such a large margin.

According to you guys, voters mark the box next to the name of the guy that promises them the most stuff. That's not how it actually works. A candidate like Kerry, for instance, was so repellent to the average American that it didn't matter what party he represented, what economic theories he espoused, how highly paid his gigolo services were or if he had promised every unemployed person a job polishing the teak decks on his yacht, he wasn't seen as the man to lead the country. Why is it that all these politicos that are so concerned about the little guy are filthy rich?

Who is "you guys"? My only point is that it is simply false to say that wealthy people "strongly" supported Obama. There was about an even split in 2008.

As for 2004, you again need to look at the data before making these kinds of sweeping statements about what "average Americans" do or don't think. See here, for instance. Kerry was quite "repellent" to those earning over $200,000 per year but less so among blacks, Jews, Asians, Hispanics and people who earn less than $50,000. Overall, Kerry got 48% of the vote compared to Bush's 51% -- that hardly suggests "repellence" among "average Americans." I suspect that when you talk about "average Americans", you mean to say middle-class-to-wealthy, non-Jewish whites. As time goes on, such people are becoming less and less average.

Can't argue with Tyler's point and the point of others to massively subsidize basic R&D with tax dollars. You just don't want that to soak up science talent entirely, therefore you loosen up post graduate STEM immigration and make the top %50 of seats in STEM programs in colleges free. Market based economies can't alone provide for innovation.

I can summarize the gist of his proposals in a single sentence - "We do not have enough government, please give us some more." I must give the author credit that he understand that making everybody equal can not be achieved by making everyone equally rich so therefore proposes policies that will make everyone equally poor.

It's only among libertarians that the words "more government" cause nausea. Try logic.

Its true, only libertarians believe that coercion is evil.

Only libertarians believe having a society with a system for governing that society is intolerably coercive. It is why libertarians are correctly characterized as immature and selfish.

Do you really believe that all government is about governing society? There are epithets for that world view, too. But that doesn't really get us anywhere, either.

Depends upon how you define coercion.

The Left seems to have run out of steam if this is the best on offer.

If Noah had been alive in the 1920s he could have come up with the same list.

All except #5 are asinine. #5 is just dumb.

Seems hard to believe that universal preschool is "asinine".

Why is raising taxes on upper income people to historical levels "asinine"?

I understand how you can disagree with such a proposal based on the usual rhetoric about "job-creators" and "high productivity", but calling it "asinine" with no supporting argument seems quite "asinine" to me.

Was the entire US population, including the Republican party, "asinine" when they voted for high marginal tax rates under Eisenhower and Nixon?
The concept of progressive tax rates, that rates increase with ability to pay, is settled law in almost every country.
The claim that the wealthy are productive in proportion to their wealth does not bear a moment's scrutiny.

The Walton heirs have wealth equivalent to 30% of US citizens, yet they did not "produce" anything, they simply won the sperm lottery, through no effort of their own.

"There’s been a constant stream of headlines about the widening gap between rich and poor for months now, but this is pretty remarkable: Just six members of the Walton family, heirs to the Walmart fortune, possess wealth equal to that of the entire bottom 30 percent of Americans."

Well, for sake of anticipating libertarian whining, one might be better served arguing that Sam Walton was not productive in proportion to his wealth. His heirs can be swept under the rug as the sage investment decisions of the original Walton.

But then, he was not productive in proportion to his wealth and income either.

Suggestions like “encourage conversions to Mormonism” help reveal exactly why "the left", "liberalism", and "progressive secular liberalism" are not synonyms. Some on "the [economic] left" may in fact be supportive of such a suggestion, but those who care about other kinds of [social] progress (like creating post-religious societies) are going to be very hostile to them (and for good reason.)

"... those who care about other kinds of [social] progress (like creating post-religious societies) are going to be very hostile to them (and for good reason.)"

If a "post-religious society" is going to be created, it will have to be created by somebody. Who is that somebody going to be and how do we know that we're going to be satisfied with that creation?

Boy I do not think that he has looked at the data on these 3:
4. Universalize preschool
5. Impose price controls on colleges and universities
7. Elect Democratic Presidents

How about getting rid of copyright and patent, would that increase or decrease inequality and/or innovation?

Speaking as an engineer who spent many years working at start-ups, abolishing patents and copyrights would not increase innovation. Companies would not devote the millions(sometimes billions) of dollars needed to develop new technologies if they knew their competitors could swoop in and copy an innovative product with no protection for the original innovators and investors.
Although libertarians have a religious belief that removing laws and regulations always makes things better, the truth is that the crazy patchwork quilt of laws and regulations that the US currently has was developed in response to real problems (air pollution killing thousands, lead poisoning damaging millions of children's brain function, etc.,etc.). So while our laws and regulations are by no means optimum, removing them wholesale would just result in re-creating the problems that prompted regulation in the first place.


you say "That global inequality has fallen radically is understood and recognized but not emphasized."

Which studies support this point?


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