It’s not the inequality, it’s the mobility

My latest column for The Upshot, at the NYT, is here.  Here is one excerpt:

Data from the Economic Report of the President [p.34] suggests that if productivity growth had maintained its pre-1973 pace, the median or typical household would now earn about $30,000 more today. Those higher earnings would constitute a form of upward mobility. For purposes of comparison, if income inequality had maintained its pre-1973 trend, the gain for the median household would be about $9,000 in income this year, a much smaller figure.

Those changes in productivity and inequality trends aren’t entirely separate, but accelerating the growth of productivity has the potential to do more for upward economic mobility than redistributing money from the top 1 percent.

And this:

In the book “Equality for Inegalitarians,” George Sher, a professor of philosophy at Rice University, argues that the equality we should care most about is giving everyone a chance to “live effectively.” Most of all that means ensuring that people have enough for their daily needs. We can tolerate many of the inequalities that arise above this minimum income level, provided there is protection on the downside and plenty of opportunities for those who are economically ambitious.

Read Sher, Harry Frankfurt’s excellent forthcoming book On InequalityDerek Parfit on equality and priority (pdf) and Huemer on Parfit (pdf).  Read about prioritarianism more generally.  I come away from these writings with the view that the current moral focus on inequality is a flat-out mistake in moral philosophy, analogous to how the philosophers sometimes make mistakes in economics.  That’s right, not a difference in values but a mistake.  (The difference in values, to the extent there is one, should be over the strength of our obligations to those at the bottom.)

This discussion of education provides another good example of how all this matters: if we successfully elevate people at the bottom, we don’t have to “fix” inequality.

A number of Twitter (and other) responses to my column are confusing several kinds of mobility: a) how many people from the bottom are elevated by how much, with b) what is the chance of people rising further quintiles?, and c) what is the intergenerational transmission of income and other variables?  It’s a) that matters, as b) and c) run into many of the same problems that inequality notions do.

I also am not impressed by the “Gatsby Curve” observation that inequality and mobility (some kinds, some of the time) are correlated.  Lots of things are correlated, but the question is what matters practically and morally.

By the way, here are estimates on how immigration might affect the Gini coefficient (pdf).  I find that egalitarians have a hard time developing consistent intuitions about immigration.

Interfluidity offers a very different view from mine.  Alex has much to say as well.  Here is Schneider and Winship on the Gatsby Curve.

Here is my conclusion:

It is quite possible the future will bring higher levels of income inequality, which will undoubtedly distress many commentators. But we are likely to be better off if we keep our eye on the ball, identify what really helps people the most and do whatever we can to increase economic mobility. That is a practical program that we all should be able to endorse.

Comments

Here's my review of Robert D. Putnam's "Our Kids," which compares the book to the fairly similar "Coming Apart" by Charles Murray. As I point out, when it comes to long term inequality and poverty, whether Putnam is right and nurture is everything, or whether Murray is right and nature and nurture both play roles, both analyses imply the same policy proposal for reducting the number of poor Americans in future generations:

http://takimag.com/article/one_and_done_steve_sailer/print#axzz3WK1aQK6S

Steve,

Let's not get ahead of ourselves here. As The Last Psychiatrist quipped: "The longer we delude ourselves that biology controls behavior, and not the other way around, the longer we'll have to live with the same behaviors."

See his overview of a paper about the influence of parenting style and the development of child personality disorders. http://thelastpsychiatrist.com/2006/05/parenting_and_personality_diso.html

That parents who exhibit poor parenting have children who exhibit poor behavior is not a demonstration of biology controlling behavior. If the behavior itself is genetic then obviously it will pass from parent to child. You need to consider adoption studies or twin studies both of which show that parental behavior, including parenting style, has either no effect or at best a very small effect on children's behavior. In fact in this case SS's position that both genetic and environmental factors influence outcomes for children is pretty mainstream and in line with the view of liberal researchers like Eric Turkhiemer or Robert Plomin.

"In fact in this case SS’s position that both genetic and environmental factors influence outcomes for children is pretty mainstream ..."

But then why is The Bell Curve the most hated book of our lifetime? Here's the climax of Herrnstein and Murray's infinitely denounced Chapter 13:

"If the reader is now convinced that either the genetic or environmental explanation has won out to the exclusion of the other, we have not done a sufficiently good job of presenting one side or the other. It seems highly likely to us that both genes and the environment have something to do with racial differences. What might the mix be? We are resolutely agnostic on that issue; as far as we can determine, the evidence does not yet justify an estimate."

http://takimag.com/article/obama_and_emthe_bell_curve_em_steve_sailer/print#ixzz3WUcNyP00

Re: But then why is The Bell Curve the most hated book of our lifetime?

Because Murray did not limit his analysis to individuals outcomes. He had to drag the mythical beast of race into it.

Anon, did you even bother reading the posted link? Your claims that parenting style has no effect is downright bogus.

By the way, "Putnam" has been a relatively high-achieving family name since the days of the Salem Witch Trials

I'm on board with increasing immigration and improving educational opportunities, and I agree that a if-it-increases-the-Gini-coefficient-it's-bad approach is misguided.

However, I was recalling Russ Roberts's interview with Thomas Piketty, who put forward the idea that sky-high CEO compensation was a function of too-low marginal tax rates on the very wealthy. Other arguments about "Capital" aside, do you feel our top rates (especially the effective rates, once you roll in capital gains as compensation) are appropriate?

Ha - you're joking right? You expect someone here to ever agree that tax rates are too low?

Tax rates can never be too low for our 'job creators' (hedge fund managers are the best job creators I know!)

So make the argument. Especially the one where targeting hedge fund managers won't end up affecting lots of other people who do create jobs.

I’m on board with increasing immigration and improving educational opportunities

Right. Because a paltry million immigrants a year doesn't do anything for anybody. Also, we should provide public education, K thru 12. And build colleges, and student loans and grants.

Tyler says:

"I find that egalitarians have a hard time developing consistent intuitions about immigration."

In other words, it's utterly illogical for his employers at the NYT to demand less inequality and more immigration.

I think you are looking at this through the wrong moral lens. We know there is no "real" morality. Our instincts and intuitions about fairness and justice are almost certainly evolved and thus inconsistent and irrelevant for society-wide issues. Thus we must ask what society we want and what world we want to live in and think about how to get there. If you want human beings to flourish (live happy, healthy, long, rich, meaningful, sustainable lives) then reducing the discussion to how much money each person has comes across as missing most of the point in a rich country where we have been perfectly able to meet everyone's basic needs for decades. To be a-very-serious-person you would need to discuss the human condition, the effects of power relations and people's visions of the future, the impact of policy on culture and the effects of all of these elements on the quality of human relationships (just off the top of my head).

We know there is no “real” morality.

How do you know that. And yes, I did read your next sentence.

For example, you seem to hint that you want "human beings to flourish (live happy, healthy, long, rich, meaningful, sustainable lives)".

Why?

Moral philosophy has been a failure. After 2,500 years the only arguments anyone agrees about are sceptical ones. Moral psychology, in contrast, has been very fruitful in showing that our moral intuitions are prior to our reasoning about them, that other primates and even mammals like elephants share them, and that they are not universal.

Why flourishing? It's a preference but one which most people, reflective or not, share. Those that have no time for it are welcome to offer other alternatives. There is no correct answer.

For the record, the non-existence of objective morality is one of those things that is totally obvious to me (the universe is physicalist, ain't it?) and yet is very unpopular even among people who should know better. I say this because I think you will likely get pushback from moral realists.

Only in an economist's world is "real" mobility higher because we are importing rich people.

oops mispost.

things I can't see don't exist.

@eric Things you cannot sense or infer from things you can sense, you have no justification for believing exist (is how I would put it).

A true skeptic realizes that he also does not know of the non-existence of objective morality. This is the "straussian" meaning of pascal's wager.

Perhaps an analogy will help get my point across. We now know, or think we know, that there is no such thing as an objective disgustingness quality. Which is to say, when I feel a sense of disgust from encountering vomit or feces or a rotting corpse, that is an evolutionary adaptation. Natural selection favors people with a visceral negative reaction to substances that are poisonous, infectious, etc. We don't need to bring in mysterious normative disgustingness qualities into our model of the universe to explain this.

Similarly, we should recognize that there is no such thing as objective "good" and "bad." When I feel moral outrage when a person is murdered, I understand that this is a reaction that has been selected for, rather than me deducing its objective badness by means of my reason. The universe does not care, and there's no cosmic notebook keeping tabs on what everyone is doing.

We don't need to be afraid of this. I'm not going to start eating vomit because my sense of disgust is not objective, nor am I going to be go murder people because my sense of moral outrage is not objective.

Most people will agree with paragraph #1 above but will object strongly to #2. I don't know why.

That's a lot of words and argumentation from someone who doesn't believe in reason or truth.

Maybe the people who came up with the moral strictures were actually smarter than you. I don't consider murder disgusting, in fact I can think of a number of people the world would be better off without. But I would prefer a world where violence and might are not the rule, and where it is necessary it be carried out under control and well thought out reasons.

So I think murder is wrong for that reason. Really smart people have learned that abstraction of problems is a very successful way to distribute skills and make advancements. If I want to write an app for the iPhone I don't have to worry about stuffing video device registers because the function is abstracted. That knowledge needs to be maintained, new devices are created that needs someone to implement, but generally and widely, the abstraction works very well. In fact if you wanted to teach someone how to write apps you would teach them the abstraction. Because it works very well.

So you are saying that you know that there are video device hardware registers and that the API calls are just a simplification, and smart people ignore the API and write to the metal.

Except that isn't very smart.

derek,

Actually yes, I do think the people who "came up with" moral strictures were very smart. We as humans tend to believe what is useful rather than what is true. I believe that moral realism is a useful but untrue belief, much like belief in organized religion.

I really really hate getting bogged down in semantics, but your argument for moral realism has nothing to do with morality. Murder is wrong because you prefer to live in a world in which violence is applied for well-thought out reasons? The one really doesn't follow from the other. You haven't presented an objective case for why a rational agent must follow such rules.

I am always open to new ideas on this topic, but I've never seen an argument for moral realism that wasn't woefully inadequate at bridging the is-ought gap.

We know there is no “real” science. Our instincts and intuitions about scientific truth and theoretical goodness are almost certainly evolved...

The above contention about morality is every bit as nonsensical as mine about science!

The only thing objective about morality is the observation that people have different moral senses. This doesn't mean anything goes, but still.

No Gene it really isn't. Science and objective morality are not just different, they are different kinds of things. Science is a process. Objective morality, were it to exist, would be a very peculiar metaphysical property indeed. This is not really a controversial distinction.

Bow before your faith's alter, king of skeptics.

That's silly. If I said there was a dragon outside the room and you asked for evidence and I had none except my inner feelings, would it make your disbelief in me faith-based?

Mistake is right. The inequality meme is a classic sectarian rhetorical device. It's a lot easier to ignite factionalism by being against something than it is by being for something. It's poison in our political discourse. In every instance there is a more productive but less factionally satisfying way of framing the issue.

We live in a society in which the Tim Cooks get to push around the small town Indiana pizza bakers.

That inequality in freedom is probably inevitable, but it is unseemly.

blink...blink...

Tim Cook is certainly not going to try to push around places like China or Saudi Arabia, he has lots of gold smart watches to sell and China/Saudi Arabia are going to buy a lot more then Indiana.

Really, all we need is a strong leader figure to explain this to the masses, possibly in a sort of big brotherly way? A leader figure with the breadth of vision to truly ensure that everyone can claim victory over their false beliefs, and truly love inequality, in an average is over world. Aware that 'In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.'

"Really, all we need is a strong leader figure to explain this to the masses, possibly in a sort of big brotherly way? "

Well Germany certainly has plenty of experience with that approach.

a nudgegiver must arise.

What about the argument that: more inequality -> more concentrated economic power -> more concentrated political power -> risk to institutions?

A highly relelvant and too-often-ignored issue.

Concentrated power is dangerous to institutions when those institutions stand in the way of a powerful person or group's goal. Both the possession and use of wealth can be a source of power. Concentrated wealth can be concentrated power.

It's certainly my main concern relatiing to inequality (the second being at what point those on the short end of the stick decide to smash the whole machine).

"Concentrated power is dangerous to institutions when those institutions stand in the way of a powerful person or group’s goal."

Institutions are always secondary to personalities, in fact they're the creation of personalities to further their own interests and when those interests are no longer served the institutions are either changed or ignored.

So who pushed the notion that the commerce clause describes almost every human activity imaginable so it could be regulated and caught in the net of political influence?

The focus on inequality is the expression of the desire to meddle deeply in the lives of everyone in pernicious and evil ways. It is no coincidence that economic freedom improves the living standards of people; is sin is that it doesn't match the neuroses of Utopians

Your second arrow goes both ways, and your direction is the less important one.

An official can easily live the high-life on favours from lobbyists; but in return for millions spent lobbying, the buyer merely shifts policy in one particular area a bit. That's enough to rake in tens of milllions, but not enough to control a great republic.

And as below note, the very fact that this kind of process is possible, is down to the fact that officials can control the real fortunes of economic actors. It is an effect of statism.

I'm having troubles distinguishing Parfit's moderate egalitarians and prioritism. It seems like both principles end up collapsing into each other, with someone being better off always being good, but it's better to help those who are worse off. Maybe because the underlying logic is different it affects how other competing moral principles interact with moral distribution principles?

Booooooring... As a member of the 1%, I find this conversation almost as boring as Obamacare. Simply put, I don't care.

Pffft, unless you're a member of the 0.1% like me, you're just another peasant.

Unless your servant's chauffeur's cook read it for you, you don't have enough leisure time.

Ray, as a member of the .001% I couldn't care less how you feel. Now get to work shining my shoes.

You do realize that there are possibly hundreds of millions of people who if possible would shine your shoes in exchange for what you consider a pittance, when in fact it would double their income, put them in contact with prosperous people, probably mean that their children would live long and satisfying lives.

But my moral preening is far more important than actually improving people's lives.

True enough Derek. But in all honesty I was more concerned with giving Ray a hard time than with the moral amd societal implications of getting my shoes shined.

Well we agree then.

Yes, Derek, pick one of them and let inequality grow. A billion people can't shine one's shoes.

Cowen is correct, today's focus on the moral view of inequality is a flat-out mistake. The focus should be on the economic view: is excessive inequality an economic problem and, if so, what are the causes and the consequences. In the Upshot essay, Cowen mentions the decline in the investment in productive capital. As to why the decline in investment in productive capital, a very good explanation is a falling rate of return (r). Yes, r has been falling for roughly the same period as inequality has been rising, a point Cowen made when he was interviewed by the NYT last Fall regarding Piketty's book on inequality. So where is all that surplus savings going (the world is awash in capital)? Speculation, primarily in financial assets but also in real estate, as owners of capital seek higher returns. But are the returns from speculation in financial assets any higher if risk is taken into account? What is the risk if the Fed has signaled that it will intervene with aggressive monetary stimulus and support the prices of financial assets; in his book, Piketty states unequivocally that central banks and governments will always intervene in a financial crisis and adopt the kind of measures, primarily monetary stimulus, that will actually restore and preserve the excessive inequality that contributes to financial instability. Cowen, if he were to respond to this comment, would likely say that there is no "proof" that excessive inequality "causes" financial instability, even if there is an historical correlation between the two. My response is to focus on speculation, for it's the speculation that is the bane of our existence, both because it deprives us of investment in productive capital (which lifts all boats) and because it can lead to bubbles and financial and economic instability. [An aside, in their dialogue, Cowen and Thiel agreed that globalization isn't the solution to stagnation, which came as a surprise to me since Cowen had previously stated that owners of capital would respond to a falling r in the developed world by investing their capital in the undeveloped world where r is higher. Maybe I misunderstood Cowen and Thiel, but if I didn't, speculation is even worse than what I had supposed. For readers of this blog who are unlikely to read The General Theory, Keynes' views on speculation are as applicable to today as to the 1930s.]

Where's the division point between "investment" and "speculation"?

You looked like you were going to ask the right question, but then you stayed within the free lunch economics theory set, what HW called voodoo economics in 1980.

You continued the same one hand waving that Cowen and Krugman do.

If only supply increased faster than income inequality would not matter? How?

What drives GDP growth?

Isn't it demand that drives GDP growth.

When Tim Cook got the big pay bump after he replaced Jobs as CEO, did his demand for GDP increase in direct proportion to the increased demand that a minimum wage workers demand for GDP increases with a $1 increase in the minimum wage?

Highly doubtful.

As income inequality increases, GDP demand increases more slowly.

Double the income of the top 10% and keep the other 90% at the same income, and you will not see the top 10% paying labor twice as much do produce stuff the 10% consume, plus the durables like houses and boats, plus the productive capital assets like factories, at least not within the country they earn twice as much.

As income inequality has increased in the US, the US trade deficit has increased. The 10% have invested in paying labor in Asia to build factories and skilled labor to produce more, as a way to get into the Asian economy, but without the safety net, that production is not consumed in Asia, but flows into the US.

When it has come to energy in the US, the top 10% has invested in job killing energy import because pillage and plunder and burning natural capital is cheaper than paying labor in the US to build wind and solar harvesting capital assets in the US, which would create demand for US production because the millions of factory and construction workers would spend all the money they were paid buying food, clothing, cars, houses, etc. Plus paying taxes.

Since the adoption of free lunch economics, financial innovation has meant spending other people's money without any way to repay it Conservatives embraced endless government deficits to fund their favorite programs. But they also promoted the idea that you should be constantly mortgaged to the hilt as a corporation or individual, because if you own "stuff" you are "creating wealth" because stuff always goes up in price, and price defines value in all cases.

That 50 year old bridge is more valuable because the price of the bridge falling would be in the tens of millions in added costs to businesses that depend on the bridge. As the other older more decayed bridges are closed, that old decaying bridge becomes more valuable every day is comes closer to failing. Thus, no need to hike the gas tax to wastefully spend on government jobs building a new bridge.

Of course, the "out" proposed in response to "the private sector invests more wisely" of privatizing the bridges so private sector investors would build the bridge and charge tolls is now called a crony capitalist hidden tax hike.

Thus, investing in the US is always bad because the return is always too low. Privatizing government is a bad investment because the public opposes paying enough to generate a good return on investment. Building energy independence and high speed Internet every where in the US is just more crony capitalism, because coal and cable are more profitable because coal needs to be allowed to harm others and cable needs to be slow so they don't need to invest in fiber.

Basically, labor cost is seen as bad, especially paying labor to build capital assets because the free lunch economic model treats labor costs as money vanishing into a black hole.

I grew up when profit was the sign of a poorly functioning economy (profit, not return on invested capital which was tied to labor cost of capital), and labor cost equalled GDP demand. Every dollar paid in wages flowed back into demand for goods produced by labor - labor paid labor and nothing else.

The illusion of growth has been created by half of Americans spending other people's money - debt that no one intends or can repay. The conservative "starve the beast" argument is what is holding back GDP growth - the high debt has reached a limit and thus no one can buy more GDP, so it can't grow.

Only higher pay will drive GDP growth.

Cowen is correct, today’s focus on the moral view of inequality is a flat-out mistake. The focus should be on the economic view:

How about the practical view of inequality: like, at some point the have-nots so outnumber the haves that there are revolutions, and people getting strangled in their beds or kidnapped for ransom by their own household staff.

Re: " I also am not impressed by the “Gatsby Curve” observation that inequality and mobility (some kinds, some of the time) are correlated. Lots of things are correlated, but the question is what matters practically and morally."

It seems that what you want to ignore is initial conditions and the effect on mobility.

You may not like the fact that initial conditions matter, but you cannot simply dismiss this by saying "I am not impressed". I frankly don't care if you are impressed or not.

You just dodged the issue.

And, initial conditions do matter, both for inequality and mobility.

Read the comment section to the article as well.

Here is one:
"economists Isabel V. Sawhill and John E. Morton compared inter-generation mobility in a variety of countries, and found the US next to last. The issue was how likely one's relative economic status - income quintile - would be the same as one's parents. It turns out that one's relative income level is determined by one's parents income level to a greater degree in the US than in any other developed country except the UK.
http://www.brookings.edu/research/papers/2007/05/useconomics-morton

For example, there is much more economic mobility in Canada, France, Germany, Denmark or Sweden.

Cowan's comment that economic mobility has not gotten worse in the last 20 years may be true, but misleading. By that point, it was already pretty bad, and the fact that it has not gotten even worse is little comfort.

The US economy thus has both the greatest inequality and nearly the least economic mobility among developed nations. Nothing to be proud of."

Which is why all this talk of immigration restriction is moot, because no one wants to live in a country with such inequality!

"For example, there is much more economic mobility in Canada, France, Germany, Denmark or Sweden."

Well they do have less far to go in order to move.

"For example, there is much more economic mobility in Canada, France, Germany, Denmark or Sweden."

That's complete hyperbole. There is some evidence that economic mobility is somewhat higher in other countries. Furthermore, the data is based upon relative income distribution, not absolute income.

The unfortunate detail about Canada is that the best way to get a very good wage is to work in Alberta creating greenhouse gases.

And by the way, if native Americans, our chronic underclass, were close to 20% of the population the numbers here would probably be far worse than the US. You should have picked your own godamn cotton.

It's also true that US economic mobility for the upper 2/3 of the income distribution is not particularly worse than it is for similar people in other advanced economies. America's problem is with people in the lower third of the distribution. In other words, middle class people do about as well here as in any other country; poor people in the US are stuck.

Just last month you made an excellent post about how you tried to instill in your children the idea that "wealth can be inherited, but income cannot." [Assuming this is the same Bill].

I think TC is correct in focusing on how the push the "bottom half" up, and as a practical matter, I don not know of anyone who is pushing for decreasing "inequality" just by leveling down. But most things that one might think of the "level up" need to be paid for and that implies some redistribution. I sense in the policy debate a real hostility of any progressive redistribution whatever and indeed some policies that are regressive. A good example is the minimum wage. The push back for it is NOT that there are other, more efficient ways to redistribute income, but just "no."

The problem is income redistribution decreases upward mobility by incentivizing earning less. The great benefit of welfare reform in the '90s shows the effect of doing the opposite.

"I don not know of anyone who is pushing for decreasing “inequality” just by leveling down"

Obama said he'd raise tax rate even if it didn't raise revenue out of 'fairness'

He isn't anyone. I'm planning front row seats to watch the coming erasure of everything he did and said after he is out of power.

when did he say that?

Obama took this position numerous times during the 2008 presidential campaign. One example was in the Democratic Party primary debate on April 16th, 2008 hosted by Charlie Gibson. Partial transcript of the relevant verbal exchange:

http://taxfoundation.org/blog/obama-and-gibson-capital-gains-tax-exchange

Fair enough [hah!], but he doesn't say "even if it wouldn't raise revenue," which is the part I found difficult to believe in the first place.

I believe Tyler argued for the more highly targeted EITC. And I agree. Raising the minwage puts more money in the hands of rich teenagers, EITC does not.

Also I think the framing of this a "mobility" rather than "inequity" is incorrect. "Mobility" might take the (unlikely) form of every child having an equal chance to land up in the top X% of the income distribution. Increasing mobility is also desirable, but a separate kind of issue.

Summers et al. recently investigated similar territory. They seem, however, to believe it's about inequality and mobility.

Brad Hershbein, Melissa S. Kearney and Lawrence H.Summers | March 31, 2015 2:15pm

http://www.brookings.edu/blogs/up-front/posts/2015/03/31-what-increasing-education-will-and-wont-do-for-earnings-inequality-hershbein-kearney-summers

Our analysis leads to three main takeaway points:

Increasing the educational attainment of men without a college degree will increase their average earnings and their likelihood of being employed.
Increasing educational attainment will not significantly change overall earnings inequality. The reason is that a large share of earnings inequality is at the top of the earnings distribution, and changing college shares will not shrink those differences.
Increasing educational attainment will, however, reduce inequality in the bottom half of the earnings distribution, largely by pulling up the earnings of those near the 25th percentile.
...
...additional and separate measures will be needed to address rising levels of overall inequality, which, as we have shown, is mostly driven by changes at the top of the distribution. These are distinct, albeit interrelated challenges, and the public discourse would be much improved if it stopped conflating them.

OK, "[i]ncreasing educational attainment will...[pull] up the earnings of those near the 25th percentile. But they don't seem to address *why* "additional and separate measures will be needed to address rising levels of overall inequality, which...is mostly driven by changes at the top of the distribution."

I like how its so easy peasy to increase educational attainment for people - Good Luck!

If you've not seen it, this brief video on mobility is worth a look. Reeves concludes we should be less concerned with the inequality and more concerned with the mobility.

http://www.brookings.edu/blogs/social-mobility-memos/posts/2014/08/21-data-behind-saving-horatio-alger-reeves

Horatio Alger had to work to feed himself.

Quite a motivator.

What happens when we discover the bottom 10% includes swathes of people who really are indifferent to work - at least as long as they can get by without it?

I'm not blaming them or assigning defect, either, many people don't like work, but we all have different acceptable living arrangements.

No doubt there are some people like that-- I've known a couple. There are also a lot of "damaged" people with problems (physical, mental and substance related) that keep them from being very productive.
But there are also a lot of people who are not very bright, but who could (and in past eras their kind did) work productively. Now that job openings and applications are mostly done online we don't see this so much, but until a few years ago any time there were job openings paying even a modest salary above the minimum and taking in-person applications, people would line up for blocks and blocks for those jobs. Those are not lazy people.

Oh, and Summers et al. have an Upshot this morning covering their thoughts.

http://www.nytimes.com/2015/04/01/upshot/why-more-education-wont-fix-economic-inequality.html?rref=upshot&smid=tw-upshotnyt&abt=0002&abg=1

My god prioritarianism is insane.

A) because utilitarianism wasn't totalitarian and socialist enough?

B) totally unnecessary as utilitarians can already assign as much negative utility as they want to the worst situations

Socialist dictators (ie, university lefties) are creative monarchs, give them that.

Got to keep anyone from focusing on why GDP growth is so sluggish....

Can't let anyone realize that stagnant incomes for 90% translates into stagnant GDP because wages determine production, except in a commie central planning economy where production is set without regard to buying power.

Scarcity in a commie economy is only scarcity of desirable goods - goods no one wants are in abundance. The Soviets pumped out lots of tanks and missiles that were better than what the US did, because the US was pumping out cars and microwaves and stereos instead.

Bull crap. The lineups were for meat and bread.

Venezuela has attempted this again. Still lines for toilet paper and food.

So Mulp thinks he know a bit or two of finances, eh? Are you in debt, Mulp?

The unspoken truth is that if you really want to help the underclasses you are going to have to give them more than education opportunities. E.g. integrating cognitive behavior therapy at an early age will be critical.
Skinner's Walden Two will be making a comeback in education circles as the power of the teacher's union weakens and more evidence based methods are brought into education.

If everyone has a college degree, everyone will be rich.

How do you get someone earning $15K per year to save $15K for retirement, pay $15K on a $30K car, pay $15K on a $300K house, and spend $15K on dining and entertainment with cognitive therapy?

You are getting to the fundamental mysteries of life after the Great Recession. I myself don't know the answer.

It seems that many people think this can be done, however. I wish they'd explain how. Better yet, I'd like them to do this themselves and document it.

"It seems that many people think this can be done, however. I wish they’d explain how. Better yet, I’d like them to do this themselves and document it."

I actually did it. It's fucking easy. You don't need American Marriage, children you can't afford, credit cards, mortgages, etc.

Odd. Marriage is usually cited as one thing the poor need more of. I'm a bit skeptical of those arguments, but I certainly don't see marriage as a detriment to an increase in one's economic fortunes. (And please, no hackneyed stereotypes of spendthrift wives running amok with credit cards)

"And please, no hackneyed stereotypes of spendthrift wives running amok with credit cards"

That sounds like a Standard American Marriage. I see some of these slaves... err, husbands making $120k a year with long hours. Not because they want to, but because they have to finance the awful financial habits of their wives or else. And even then, the wives would spend more than $120k a year of their husband's money. After all that trouble, the wives would file for divorce anyway and take their husbands to the cleaners.

Screw that system. I'm glad I didn't get suckered into these financial black holes. "You 'need' $300k houses and $30k cars", is a nonsense statement. I say, bah humbug!

"How do you get someone earning $15K per year to save $15K for retirement, pay $15K on a $30K car, pay $15K on a $300K house, and spend $15K on dining and entertainment with cognitive therapy?"

Oh, that's easy.

Spend less than $15k per year... You'll end up saving $15k for retirement, come to think of it, it'll be a lot more than $15k.

You don't need to buy $30k cars if you have $15k annual income. $500 on a piece of junk will suffice.

You don't need $300k houses. Only idiots and retards put down mortgages on $300k houses with a $15k annual income. Paying cheap $300 rent as a roommate in a flop house or a shitty apartment will work.

Dining and entertainment on a $15k annual income? Cheap cheese steak sandwiches, green beans and rice will be sufficient. As for entertainment, video games are cheap. You don't need fancy restaurants and European vacations.

Re: Spend less than $15k per year

How, exactly? Freeload off some friend or relative? Live on the street and eat out of trash cans? If you get sick, just die and get it over with?

Even on the most frugal income life is expensive.

"Even on the most frugal income life is expensive."

Bullshit. Didn't you even read what I posted?

Cheap cheese steak sandwiches, green beans and rice will be sufficient. As for entertainment, video games are cheap. You don’t need fancy restaurants and European vacations. Paying cheap $300 rent as a roommate in a flop house or a shitty apartment will work.

Come to think of it, I started with less than $15k a year income. A little more than $12k to be exact... With a 25% savings rate.

This 20 minute interview with Putnam dovetails very nicely with the It's-the-mobility theme. Starts two minutes in.

http://www.brookings.edu/research/podcasts/2015/04/robert-putnam-american-dream

I'm impressed with your diligence in pretending that the people who complain about incoming inequality actually care about income inequality.

Well, they care about the lack of profit from the lack of GDP growth caused by the poor who aren't really poor because they can buy cell phones and wide screen TVs and cars with GPS, but that don't buy enough with cash and don't save for retirement.

All but the most insignificant purchases are made with plastic, which may or may not represent actual cash on hand. Nevertheless, amounts in accounts are debited and credited. Saving for retirement, a concept generally less than a century old, has been deliberately displaced by Social Security and 401K programs engineered by government bureaucrats and financial wizards who couldn't care less if grandma eats cat food for lunch as long as some of the money she earned mopping floors pays the bureaucrats' retirement benefits and buys a moderately gaudy Rolex for a Goldman Sachs junior executive.

"Well, they care about the lack of profit from the lack of GDP growth caused by the poor who aren’t really poor because they can buy cell phones and wide screen TVs and cars with GPS, but that don’t buy enough with cash and don’t save for retirement."

The stupid shall be punished.

Those who cynically or hypocritically complain about income inequality may persuade some others, who are sincere though simple-minded, that it is a serious issue. It is these sincere, simple-minded people that Tyler is trying to enlighten.

Tyler,

Your assumption is that productivity gains would feed directly into wage gains. This has not been the case the last few decades. We have an institutional problem where some very highly paid people are actually quite unproductive. In this latter category I would place a large percent of those working in the financial services and those working in the public sector. Unfortunately due to their growing economic power these folks continue to influence the political system to shunt more and more wealth their way.

See "college administrators".

+1

GDP would be higher if public workers had less income to spend buying GDP?

Yes. Next question.

What do you think they are doing as they get paid other than get in the way of economic activity?

mulp should really shut up about economics. mulp in an earlier comment assumed people "needed" $30k cars and $300k houses! What nonsense.

Yeah, Tyler, I see how much you like income mobility. I mean, increasing worldwide enforcement of state monopolies through the TPP is a great way to increase income mobility here in the US and throughout the world. And it'll make people around the world really, really like us when we destroy their economic freedom, so it's also great foreign policy. That's brilliant, Tyler.

The reason they talk about inequality more than absolute poverty is because the middle class does not benefit from "anti-poverty" programs, they would, theoretically, benefit from less inequality. The White Ohio steelworker(the guy who decides US elections) is going respond much better to a message of reducing inequality than one of reducing poverty.

The biggest welfare program directly benefits the "White Ohio steelworker" the most: Social Security and Medicare.

Conservatives talk a lot about ending welfare, but your "White Ohio steelworker" does not understand Social Security and Medicare to be welfare, and if he clearly understood the Republicans intended to end Social Security and Medicare, he would be voting for socialists who call Bernie Sanders a conservative.

It's not the delta.
It's that the people at the bottom don't have enough to live well and productively.

Yes it is remarkable that Bill Gates is so rich.
But if people at bottom were getting better then the delta diminishes in importance.

(I am putting aside the problem of political power of campaign donations etc much less the delta coming from outright theft as in Russia, Saudi Arabia etc)

More importantly, those at the bottom don't have the money to drive GDP growth, and Bill Gates long ago stopped driving GDP growth because he already all the houses and cars he needs, but not enough in proportion to his income to drive GDP growth.

The data is interesting but not especially persuasive. The pre-1973 productivity growth pace was from a much lower base. Surely there's always something we could have done better, and surely growth is generally better for the poor than redistribution, but that's not really any argument against addressing addressing inequality.

In my mind there are two main issues that need to be separated.

One is the falling value of US citizenship and residency due to globalization. That's mainly responsible for the widening gap between upper and lower middle classes. That can't be addressed with tax policy. The US tax burden already falls heavily on the well-off professional class and it would be unfair and damaging to skew that burden further.

The other is the relatively low taxation of the capitalist class, due to the various loopholes available to them and the dominant role VHNWIs play in our political process especially up to the primaries. That's a failing of democracy that can only be solved with more democracy.

So how is that economic mobility for people at the bottom working out so far?

I'd say quite excellent. How many millions of people have been lifted out of poverty in China, or the rest of Asia?

What are you comparing it to?

A decade ago? Pick any number.

The ' problem' of inequality in the US is that an ever increasing number of workers are no longer competitive. Every initiative that is purportedly introduced to fix the problem increases the price of their labor. Making it even more certain that they will lose out and someone somewhere else improves their lives.

How about making their offerings competitive? How about making it less expensive to operate a business, less risky from a bureaucratic standpoint. Intel said a few years ago that it cost a billion dollars more to locate one of their fabrication plants in the US.

Cost of living in the U.S. guarantees U.S. labor can't compete on price without being subsidized. I'd be up for subsidizing it, purely to create more opportunity for folks at the low end of the productivity scale. That said, if the subsidy were large enough our trading partners might freak out.

The US is different from China in this way: We have much smaller reserves of true talent amongst our poor people, because in the US, meritocracy has been active much longer, so our wealth classes are much better sorted according to merit than China's. In this they are catching up, and might actually overtake us, because we have no counterpart to the Gaocao standardized test for college admission. Now even the children of Chinese subsistence farmers who ace the test are going to a college, which is basically a guarantee of a huge class promotion. Two generations of this and social mobility in China will slow down to US levels, and stay there. But for now, China still has huge reservoirs of undiscovered human talent amongst its poor. The US has some, but much less, because that talent that once was there was had likely been promoted out of the lower classes already.

"It’s not the delta. It’s that the people at the bottom don’t have enough to live well and productively."

Ergo, we should be concentrating on maximizing GDP growth. Not re-slicing up the pie at the cost of lower growth.

Who is going to buy all the added GDP?

How many more burgers is Buffett and Gates going to be required to buy every day?
1000? 100,000?

How many new cars per year? 5? 10? 50? 500?

How many houses per year? 5? 10?

Wages determine GDP in the long run.

This is coming from a dolt who thinks people "need" $30k cars and $300k houses. I bet mulp also thinks people "need" credit cards, student loan debt for useless degrees and mortgages too.

It is a rather attractive program to "do whatever we can to increase economic mobility"--that is, *to look with favor upon economic mobility*, for in practical terms we as an individuals are going to do almost nothing to promote either economic mobility or economic immobility. But what social scientists usually call "mobility" is actually *motion*; *mobility* is *opportunity to move* rather than, as the social scientists would have it, *actual movement*. Lack of actual movement is not troubling. We should not assume that it implies lack of mobility, for many people who could move up economically are not interested, at least not interested enough, in making the sacrifices that would be required: They have mobility, but they don't actually move. (Admittedly, some people are even unwilling to do what it takes to avoid *downward movement*, so their lack of economic motivation *contributes to* movement, albeit in the "wrong" direction!)

My point is that, while true mobility is good, actual movement is nothing to be concerned about.

I have actively considered getting out of my business and working for the government: more leisure time, far less stress, etc.

The distinction between mobility and actual movement is useful, and I agree that mobility is the one we should shoot for. But I'm troubled by your assumption that the difference between mobility and movement is to be explained by different degrees of "wanting it". I think that's almost certainly not the real explanation.

The way I picture it, the perfectly mobile society would be one where social standing is determined entirely by merit (a combination of talent, grit, "wanting it", etc.). A meritorious person born in the lower class would frictionlessly rise to the standing commensurate with her merit, and vice versa. In such a society, the amount of actual movement would depend on the heritability of merit. To the degree that it is passed from parent to child through social, cultural and genetic mechanisms, then we should expect less actual movement, even in a society with perfect mobility. Now the question is: Is such an outcome "nothing to be concerned about"? I am certainly concerned about it. Lack of movement - class ossification - is something that requires a social response, and an increase of meritocracy ("mobility") might not be of much help. If that's the case, the situation calls for - gasp! - charity, kindness, empathy and benevolence.

A Rawlsian view would be that the absolute standard of living of the poorest in society should be improved. This is not the same thing as inequality, which I also believe is the wrong target - and therefore dangerous given the almost universal history of hitting targets but missing the rationales that prompted them.

One popular inequality-like statistic is the fraction below 60% of median income - mentioned by http://www.poverty.ac.uk/analysis-poverty-measurement-life-chances-government-policy/redefining-poverty, although even that campaigning article admits that it has flaws "Thus, relative poverty in the UK fell during the recessions of the mid-1970s, the early 1980s and the early 1990s even though real incomes among the poor fell on average so that absolute poverty rose. This is because median incomes fell, and the poverty line followed suit."

"The Spirit Level" is often referenced by inequality campaigners. I suspect that evidence about (lack of) health changes in lottery winners in Sweden argues against it. Standardized low level service staff (e.g. McDonalds or workers in chain hotels) will perceive different levels of inequality between themselves and their customers depending on location. I wonder what a confidence level for some measure of damage due to inequality would show?

It sounds good in theory to help the "absolute poorest," but think about it, who are these people? They include the hobo you passed on your way to work but didn't give a cent to. The drug addict who lives in his mother's basement and makes 0$ a year in income. They don't tend to be very sympathetic people.

Above that you still have problematic cases: the guy with 35 kids who makes minimum wage and is asking the state to help him pay his child support.

You don't knock up 4 women in one year unless you are putting a lot of effort in finding and talking up women.

Imagine if that drive had been applied to work. He's be store manager for sure.

The women have no choice in the matter?

Single mothers come to mind. Not all are sympathetic; many are. Disabled elderly living off SS. Working poor, e.g. two parents, dad works a low-paying job, mom cares for young kids. But, again, maybe these cases don't represent the "absolute poorest".

How about this: instead of focusing on improving the situation of the "absolute poorest" we should focus instead on the situation of the poorest individuals who are "doing everything right", with the caveat that individuals' past mistakes aren't held against them. If we end up helping some individuals who are less sympathetic as "collateral damage" then so be it, but that's not the overarching goal.

One extra caveat: children should almost always be treated as if they're "doing it right" regardless of how their parents are behaving.

So would you deny that they deserve to live with dignity and security? I think it's just blindingly obvious that they do, even if it's hard to muster up some sort of a heartfelt sympathy for them. I mean, sympathy is valuable and worth cultivating, but it's not necessary in order to discover what is morally right. When I try to muster up sympathy for society's losers, I picture something that I'm very bad at as being the essential ingredient to success. So if the capacity to sing beautifully were the thing that distinguishes the haves and have nots, then I would be one of the losers, completely incapable of supporting myself. I would be at the mercy of the charity of others, probably dwelling in some basement and completely without income. People like you would write scornfully about how I'm "not very sympathetic".

The people without income had the bad luck that their talents did not line up with market demand. That's all. If your traits are in demand these days, count yourself lucky. Had things been different, you could have been the basement dweller. OK, it's not a perfect analogy, but I find that it does help me fire up my sympathy for the "not very sympathetic people" you describe.

"So would you deny that they deserve to live with dignity and security?"

Imbeciles and morons deserve to live with the fruits of their retarded decision-making.

"I think it’s just blindingly obvious that they do"

Blindingly obvious? More like, "My religion tells me that the poor are 'sacred' even when they make retarded decisions, therefore I must worship them... oops, I mean help the poor live with 'dignity' and 'security.'"

"It sounds good in theory to help the “absolute poorest,” but think about it, who are these people? They include the hobo you passed on your way to work but didn’t give a cent to. The drug addict who lives in his mother’s basement and makes 0$ a year in income. They don’t tend to be very sympathetic people."

Indeed, many of them are just plain stupid. The stupid shall be punished.

To respond to one paragraph from your piece (which I largely agreed with):

"For instance, while we have talked incessantly about the disproportionate gains of the top 1 percent, the wage slowdown in the United States in recent decades is a bigger problem for most people. Since 1973, for workers as a whole, wages have stagnated largely because of a severe productivity slowdown."

People concerned about the lack of wage growth focus on the disproportionate gains of the top 1 percent because they consider the former to have been caused by the latter. That is, if we hadn't had disproportionate gains among the top 1 percent then we'd have had more robust wage growth.

That may be 100% wrong, but I'd guess it's many people's working assumption.

What's magic about 60% of median income? Wouldn't the sensible Rawlsian measure be like what is done for finding the poorest in Africa - whose house has a sound roof, who has a motorbike?
So we could ask - how many people don't have sound dwelling, sound personal transportation, some kind fo telematic contact with the rest of the world, hot and cold runnng water, and so on.

But that won't still the political noise, which seems to be largely about a kind of jealousy....

Also, while Rawls seems to write about how the world "should be" - my cynical self observes that it's never actually been that way. Which makes me very suspicious indeed that the real social order of the US will allow a real change.

Consider the following (on point to this) - people (well, politicians) whinge about affordability of housing all the time. While instituting long lists of rules the main effect of which is to set a high minimum price. And any move that lowers the effective minimum price brings generally unbearable blow back from the existings neighborhoods. One wonders how long it will before either boycotts or violence result. Soooo - somebody can with a straight face say "we need affordable housing!" and people can sort of vote for and support it, so long as it's nowhere near them. But the real economic and social forces are clearly aimed at massive housing stratification, and if those who can't get good jobs can't afford decent housing in the city, well, tough sh****it.

I claim this kind of double-talk is in fact the norm, and the results are unlikely to change much. Rawls or not, occupy movement or not. Stephan Randy Waldman or not.

Here is an instance where I think that Tyler is perfectly wrong. Regarding mobility: I suppose we could just assign wealth entirely by lottery, which would cure inter-generational wealth correlation. But we won't. Capitalism is a kind of meritocracy, and whatever it takes to succeed is likely to be passed down from parent to child through a combination of culture and biology. You combine this with assortative mating, and you get a recipe for decreasing mobility. We just have to suck it up. We can't fix it without destroying capitalism.

It takes much less to fix wealth inequality - basically, just taxes, and wiser welfare spending. The reason why we should do it is that the immobility dynamic has separated us into a nation of the blessed and cursed in terms of capacity to succeed in the great capitalist meritocracy. The blessed turn out fine. It's the cursed that I'm worried about. So far, our narrative has been that the only kind of charity that we can show them is opportunity-charity. Basically, we shower them with resources like education, job training, counseling and the like, with the hopes that afterwards, they'll actually do fine in the meritocracy market, that they "lift themselves out of poverty" and promote themselves into a higher class. But if I'm right, we shouldn't expect this to succeed very often. Generations of meritocracy and class-assortative mating has sorted society into strata of human economic capacity. The structure of the strata is bound to ossify more over time. My prescription of what must be done is that we have to change our focus on making the lives of the poor more dignified, comfortable and secure, and to not make our generosity conditional on their "effort" or whatever. Even if they can't hold down a job, form stable families or master trigonometry, they deserve to live with dignity. What we have in the wealth gap today is a huge dignity gap, and I think that we can substantially close it through wise interventions, without destroying society or rewriting human nature. But I think the first step is to accept that low social mobility will be here at least as long as capitalism, and will probably decrease further. The birth lottery is real, and to many people, it's very cruel. It's the government's job to cushion that cruelty with kindness, not with strings attached. Many people are simply never gonna learn how to fish, so for fuck's sake, stop it with your patronizing fishing lessons and give them some fucking fish!

"You combine this with assortative mating, and you get a recipe for decreasing mobility. We just have to suck it up. We can’t fix it without destroying capitalism."

Increasingly meritocratic hiring coupled with assortative mating probably puts a ceiling on how much mobility we can have without, as you say, destroying capitalism, but we can enact policies that try to push mobility as close to that ceiling as possible. That is, if you're intelligent and motivated but happen to have been born into a low-income family, insofar as is possible we should endeavor to ensure you're not hamstrung by your circumstances. Generally speaking we're all better off when every individual's productivity is maximized.

Yeah, I'm not against efficient meritocracy. But increasing the efficiency of meritocratic sorting only means that the ossification of merit-strata happens faster. It guarantees that every spark of talent that appears anywhere amongst the lower classes will instantly be "promoted" out of there. This means that things get progressively more hopeless for those left behind in the lowest stratum, in terms of their economic competitiveness. This is just the inevitable outcome of capitalism plus human nature, and we need to own up to it. Capitalism has brought us great prosperity, and we should use a portion of that prosperity to make life nice for the lowest class, which is basically doomed without redistributive charity.

I agree (about redistributive charity). The trick is, and this is going to sound prickish, it's all about the optics. It can't seem like charity or you ding peoples' dignity and any incentive they have to realize even their productivity (limited though it may be). Maybe something like wage subsidies would work, paid to employers, who then roll the subsidy up into an employee's paycheck. It's charity, but it doesn't look like charity. Think EITC but with more psychological "oomph" in terms of creating motivation to work. Then again, maybe the devil's in the details and wage subsidies are entirely unfeasible. But, at least in theory, they seem useful.

We've always had assortive mating, though the fact that women did not generally have their own income makes it harder to see in the past. Still words like "mesalliance", "gold-digger" and "fortune hunter" testify to what our ancestors thought about people marrying outside their class.

Men were selected based on outward signs of productivity. Wealth, class. Women, generally, were not, since women were not generally expected to be productive. So you only had one half of the assortative equation working. Now we have both halves. Men seeking productive, intelligent women (to an extent) and women seeking productive, intelligent men. At least that's what I would suspect is true. So, yes, we've always had assortative mating, but now it's ratcheted up a level.

Things I don't understand about inequality and how it is measured:

When LBJ started the war on poverty, the definition of poverty made me very poor as a grad student living with 3 people in a shack, while scrapping by at UCLA. I then moved into "Joe Median" range with a family. Then over a decade, I moved into the top 20%. Creating my own business, I ranged from the bottom 1% (near zero income -- several years) to one year year in the top 1% (when I sold the building my business was in) with an average somewhere in the top 20-30% range.

The nature of the business required high liquidity, which meant no significant retirement accounts that restrict liquidity, so now I have SSI for income with a paid for house with a fair amount of savings earning negative real interest (return - inflation) while paying tax on any nominal returns.

Inequality statistics look at a snapshot of this life and what you get depends upon which year you consider. Am I impoverished or rich? Living on SSI and savings am I richer or less wealthy than people I know living on fat government COLA-protected guaranteed pensions with high annual incomes but less "wealth" (aka savings)? If you took an actuarial value of the government pension plus lifetime health care, the retired government worker would be far more "wealthy" that I, but the statistics insist I am wealthier with lower income.

Nice To Read , Thanks Admin.

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