“there is no clear evidence of a sustained and significant increase in inequality since 1988 by any other measure. I very carefully did not say there was no such evidence about 1981-87.

But if you go to the census data you find that from in 1988 the top 5% of the populatin received 18.3% of income. In 2001 this share was 22.4% if you use the actual data and 20.3% if you throw out the 1993 jump he complains about.

Now it looks to me like Reynolds is using the technique of describing the actual data in a way that is very misleading under the assumption that it is safe to do so because noo ne will actually check the data.

Do you agree that an increase from 18.3% in 1988 to 22.4% in 2001 as compared to an increase from 16.5% in 1981 to 18.3 in 1987—over 4% vs under 2%—is not evidence of an increase in inequality?

Of course this is also inconsistent with census data that shows the share going to the middle three quantiles falling from 49.8% in 1987 to 46.3 in 2001.

If you’d bothered to actually look at the figures, you’d find that Mr Prescott was going out of his way to be charitable by cherry-picking the fastest years of the Clinton expansion. Depending on whether you pick 1992 or 1993 as your base year, Mr Clinton’s full term—all of which took place during the recovery, which started in 1990—averaged either 3.45% growth, or a hair under 3.7%.

The problem is that the figures he’s using aren’t annual, but total. they look smaller because he’s referring only to growth above trend, which is positive.

What that means is that a longer boom will have a bigger number. So the fact that he included the whole of the 80s boom and only the last 4 years of the 90s boom makes the 90s boom look smaller for no justifiable reason. If you include the first 4 years (92-95) as well, you probably get a boom of about the same magnitude as in the 80s, maybe a litttle bigger. But there were no significant tax cuts in 91 or 92 either.

You can’t use aggregate numbers when you’re looking at periods of radically different length and expect comparable results, but that’s exactly what Prescott did. Only one year in the 1982-89 period outpaced any of the last 3 years of the 90s.

That’s either dissembling or a very amateurish error on Prescott’s part. I vote for the former.

Indeed.”

The standard inequality storyline is that it has been increasing (and alarmists suggest greatly increasing) as a function of some underlying phenomenon in the way that the US currently does things. I would say that no evidence from 1988 to present (18 years) suggests that the standard inequality storyline is incorrect. Do you disagree?

I don’t quite trust economists with the topic of inequality, income or economic more generally. Partly because economists aren’t trained to see it. Theoretically, income inequality is assumed natural – as in the natural distribution of skill or whatnot. And theory becomes a moving target. Inequality is no big deal insofar as it represents just reward, productive incentive, and the workings of competition. Wasn’t there an AER article some years ago defending inequality? And economists do theory smoke and mirrors and let policy talk pass as professional econ talk – as in inequality isn’t the problem so long as no one is worse off. So inequality isn’t the issue so much as it is poverty. And of course poverty is about what people bring to the market (see above).

brandon – I did say in the post that Reynolds follows with a defence of the periodization. But the point I was making is that even on his own terms the stats don’t do what he assiduously implies that they do – i.e. provide evidence that inequality hasn’t increased since 1980. A half-sentence qualification in the original piece – something along the lines of “Although inequality may have increased between 1980 and 1987 because of the recession” – would have made the article substantially less hackish. But he didn’t do that, and I don’t think that it’s at all unreasonable to question his motives in not so doing. As the BdL post that I link to demonstrates, he has a long track record of making bogus and mutually contradictory claims about the statistical evidence in order to suggest that inequality isn’t increasing. When someone’s basic claims are fixed, but the purported empirical justifications for those claims are sometimes nonsensical, and swing wildly back and forth, there’s strong ex ante reason to suspect that this person isn’t committed to evidence-based reasoning but instead, as the Krugman book suggests, to using the evidence (and where necessary abusing it) to support a predetermined position in a rather hackish manner. Which is all to say that I might have been prepared to take his defence of the periodization as a bit of justified special pleading if it had been referenced in some way in the original article, or even if it had come from someone who was committed to figuring out the truth, albeit with clear ideological commitments. But when it comes from someone who demonstrably (and I don’t see how one can easily defend some of his antics in the past) doesn’t have such an interest, it’s so much camouflage and persiflage.

To put it another way – I had a conversation with a prominentish right of center blogger recently where he suggested that we had a broadly similar approach to understanding the world, but disagreed strongly about the evidence. The implication of this, as I understood it, being that if he demonstrated to me that one of my beliefs was empirically unfounded, I would change my belief accordingly (and the converse would be true too). I hope that’s right – clearly it’s always hard to change beliefs in practice, but it is possible. But I don’t think it would be right for Reynolds – if past practice is anything to go by he would stick to his position, and try to find another empirical justification, however bogus, for maintaining it.

1) The trough-to-peak measures for Reagan give him extra credit, because the 1982 recession was the most severe since the Great Depression (imagine what the first two terms of FDR would look like!).

2) Reagan did what he did through increasing the national debt by amounts thought preposterous. Molly Ivins said that she figured, way back when, that the one good thing about electing Reagan was that a Republican would take care of that nasty $70 billion deficit. And he did. Being able to incur debts of 1-3% of the GDP each year certainly helps one look better. Meanwhile, George HW Bush and Clinton had to take the hit of reducing the defict – note, with the vociferous opposition of the econopundit wing of the GOP. If Megan McArdle had been writing back during 1992-3, she, rather than Phil Grahm, might have come up with the saying ‘this budget is a one way ticket to a recession’.

1980: -0,2
1981: 2,5
1982: -1,9
1983: 4,5
1984: 7,2
1985: 4,1
1986: 3,5
1987: 3,4
1988: 4,1
1989: 3,5
1990: 1,9
1991: -0,2
1992: 3,3
1993: 2,7
1994: 4
1995: 2,5
1996: 3,7
1997: 4,5
1998: 4,2
1999: 4,5
2000: 3,7
2001: 0,8
2002: 1,6
2003: 2,7
2004: 4,2
2005: 3,5

If you’d bothered to actually look at the figures, you’d find that Mr Prescott was going out of his way to be charitable by cherry-picking the fastest years of the Clinton expansion. Depending on whether you pick 1992 or 1993 as your base year, Mr Clinton’s full term—all of which took place during the recovery, which started in 1990—averaged either 3.45% growth, or a hair under 3.7%.

OK, I bothered to look them up. The numbers for US annual real GDP growth 1980-2005 from The Economic Report of the President 2006:

1980-0,2
19812,5
1982-1,9
19834,5
19847,2
19854,1
19863,5
19873,4
19884,1
19893,5
19901,9
1991-0,2
19923,3
19932,7
19944
19952,5
19963,7
19974,5
19984,2
19994,5
20003,7
20010,8
20021,6
20032,7
20044,2
20053,5

In terms of which president presided over which record when, in average annual growth:

Reagan I (1981-1984): 3,075
Reagan II (1985-1988): 3,775
Bush Sr. (1989-1992): 2,125
Clinton I (1993-1996): 3,225
Clinton II (1997-2000): 4,225
Bush Jr. I (2001-2004): 2,325
Bush Jr. II (2005- ): 3,5
—-
For reference:

Reagan I+II: 3,425
Clinton I+II: 3,725
—-

Of course, GDP growth is only a very partial story. To see whether the growth is healthy and macroeconomically sustainable, you need to factor in unemployment, inflation and, notably, the budget and the current account deficits. In that light, the Clinton terms outperform the others by a wide margin. The Republican record of the last three decades is one of borrow-and-spend. This goes emphatically for the current president whose economic policies are borderline disastrous.

I know you linked to the post and all, but I still think it’s bad form to quote that sentence, which sounds rather weaselly in isolation, without quoting the sentence immediately following it.