Lunch at the Labs

Inequality (and Piketty)

Some pointers to discussion on the hot topic of income inequality and social mobility.

• Thomas Piketty's book Capital in the 21st Century is being discussed everywhere
  (and these are just some early ones):
  • Are We Destined to Wealth Inequality?
    Ross Pomeroy gives a fairly balanced view of Piketty's ideas.
  • Thomas Piketty - Taking on Adam Smith (and Karl Marx) (New York Times)
  • Piketty findings undercut by errors   -- But see next link
    Chris Giles in the Financial Times
  • Piketty Rejects "Ridiculous" Allegations of Data Flaws
    Thomas Piketty rejected allegations that data behind his best-selling book
    on inequality are flawed as fellow economists spoke up in his defense.
  • Are There Problems with Piketty's Data? Of Course
    A fairly balanced discussion of the criticism, from National Review!
  • A Plea for Calm in the Debate Over 'Capital'
    A nice summary of the arguments for both sides.
  • Be Skeptical of Both Piketty And His Skeptics
    Statistics maven Nate Silver gives some broad perspective
    about data collection, publication and analysis.
  • The Economist Was a Rock Star (The New Republic)
    Thomas Piketty isn't just a brilliant economist; he's a fantastic storyteller
  • The Conservative Case Against Piketty Is Shockingly Weak (The New Republic)
  • Living with Inequality (Reason.com)
    Has Thomas Piketty really found "the central contradiction of capitalism"?
  • Thomas Piketty's Path to Poverty For the Masses (Real Clear Markets)
  • Inequality and the Fate of Capitalism (National Review)
  • Tyler Cowen's book review in Foreign Affairs
    Why a Global Tax on Wealth Won't End Inequality
  For the most part there is a rather predictable pattern in the reviews from the left and the right.
  In the above link from Nate Silver, he sums it up:

  The closest thing to a solution is to remain appropriately skeptical, perhaps especially when the research finding is agreeable to you.

• We need a new conversation about inequality

  Democrats are scared of class. But issues like inequality are why liberals exist, and talk can't be left to elites.

  When President Obama declared in December that gross inequality is the "defining challenge of our time," he was right, and resoundingly so. As is his habit, however, he quickly backed away from the idea at the urging of pollsters and various Democratic grandees.

• Don't Give Money To Fancy Colleges

  A student at one of America's most-selective universities is fourteen times more likely to be from a high-income family than from a low-income family.

  Meanwhile, the demographics of highly selective institutions reveal that highly selective institutions remain what they always have been -- mechanisms for the perpetuation of inequality and hierarchy.

• Income Growth and Income Inequality: The Facts May Surprise You

  Gary Burtless at The Brookings Institution offers a slightly contrarian point of view.

  CBO's newest estimates confirm the long-term trend toward greater inequality, driven mainly by turbo-charged gains in market income at the very top of the distribution. The market incomes of the top 1% are extraordinarily cyclical, however. They soar in economic expansions and plunge in recessions. Income changes since 2007 fit this pattern. What many observers miss, however, is the success of the nation's tax and transfer systems in protecting low- and middle-income Americans against the full effects of a depressed economy. As a result of these programs, the spendable incomes of poor and middle class families have been better insulated against recession-driven losses than the incomes of Americans in the top 1%. As the CBO statistics demonstrate, incomes in the middle and at the bottom of the distribution have fared better since 2000 than incomes at the very top.

• Income Inequality in America - Fact and Fiction

  The extent of inequality differs with the measure used.

  This pre-tax, pre-transfer measure of inequality is, however, misleading because it fails to properly measure well-being. Upper-income individuals cannot spend the money that is taken away in taxes, so it gives them no benefit (other than, perhaps, higher social status). On the other hand, lower-income individuals clearly benefit from more spending power with, among others, the Supplemental Nutrition Assistance Program, Medicaid, housing vouchers, and unemployment insurance. As such, it would be inaccurate not to include the latter in measures of their well-being.

  [Added 07/14/2014]

• Ten Ways to Get Serious About Rising Inequality
  1. Establish a guaranteed minimum income for all American households.
  2. Abolish the payroll tax.
  3. Replace the payroll tax with a consumption tax.
  4. Raise the top rate of income tax.
  5. Tax wealth properly.
  6. Give ordinary Americans "homestead" grants.
  7. Nationalize the public-education system.
  8. Copy the Germans and greatly expand technical education.
  9. Abolish private schools and legacy admissions to private universities.
  10. Introduce a financial-transactions tax.

• Social Mobility Hasn't Fallen: What It Means and Doesn't Mean

  Our estimates are still too imprecise to rule out modest trends in either direction. For the most part, though, our results for the cohorts born between 1952 and 1975 suggest that intergenerational income mobility in the United States has not changed dramatically over the past two decades.

  and

  We find that all of these rank-based measures of intergenerational mobility have not changed significantly over time. For example, the probability that a child reaches the top fifth of the income distribution given parents in the bottom fifth of the income distribution is 8.4 per cent for children born in 1971, compared with nine per cent for those born in 1986.