How (not) to defend entrenched inequality

by John Quiggin on January 25, 2012


The endless EU vs US debate rolls on, but now with an odd twist. Although the objective facts about economic inequality, immobility and so on are far worse in the US than the EU, the political situation seems more promising. (I’m not talking primarily about electoral politics but about the nature of public debate.)

In the EU, the right has succeeded in taking a crisis caused primarily by banks (including the central bank, and bank regulators) and blaming it on government profligacy, which is then being used to push through yet more of the neoliberal policies that caused the crisis. And, as we’ve just seen, formerly social democratic parties like New Labour in the UK, are pushing the same line.

By contrast the success of Occupy Wall Street have changed the US debate, in ways that I think will be hard to reverse. Once the Overton window shifted enough to allow inequality and social immobility to be mentioned, the weight of evidence has been overwhelming.

This post by Tyler Cowen is an indication of how far things have moved. Cowen feels the need, not merely to dispute some aspects of the data on inequality and social mobility in the US, but to make the case that a unequal society with a static social structure isn’t so bad after all.

Update Cowen offers a non-response response here. Apparently, disliking arguments for inherited inequality, such as his point 3 (because of habit formation, social mobility reduces welfare) is a “Turing test” for reflexive leftism.

Cowen makes seven arguments, ranging from weak to risible. He is an able economist, and no fool, so the weakness of the case he makes reflects the difficulty of making bricks without straw. I’ll reorder his arguments from weakest to strongest and respond to them in turn.

3. For a given level of income, if some are moving up others are moving down.  Do you take theories of wage rigidity seriously?  If so, you might favor less relative mobility, other things remaining equal.  More upward — and thus downward — relative mobility probably means less aggregate happiness, due to habit formation and frame of reference effects.

This is an ancient argument against income redistribution (Bentham had a version of it, IIRC) but it’s surprising to see it extended to the case of intergenerational mobility.  Apparently, expensive tastes, once acquired in childhood, can’t be dispensed with without great suffering.

5. How much of immobility is due to “inherited talent plus diminishing role for random circumstance”?  Is not this cause of immobility very different — both practically and morally — from such factors as discrimination, bad schools, occupational licensing, etc.?  What are you supposed to get when you combine genetics with meritocracy?  I do not know how much of current American (or other) immobility is due to this factor, but I find it discomforting that complaints about mobility are so infrequently accompanied by an analysis of this topic.

A lot of handwaving here. The supposed genetic role is assumed, not supported by any evidence to produce a suggestion that declining mobility arises because the US has now become more meritocratic, and therefore more efficient at promoting people of high ability. There’s plenty of evidence going the other way, notably including the fact that class matters much more than it used to in getting admission to high-status colleges..


4. Why do many European nations have higher mobility?  Putting ethnic and demographic issues aside, here is one mechanism.  Lots of smart Europeans decide to be not so ambitious, to enjoy their public goods, to work for the government, to avoid high marginal tax rates, to travel a lot, and so on.  That approach makes more sense in a lot of Europe than here.  Some of the children of those families have comparable smarts but higher ambition and so they rise quite a bit in income relative to their peers.  (The opposite may occur as well, with the children choosing more leisure.)  That is a less likely scenario for the United States, where smart people realize this is a country geared toward higher earners and so fewer smart parents play the “tend the garden” strategy.  Maybe the U.S. doesn’t have a “first best” set-up in this regard, but the comparison between U.S. and Europe is less sinister than it seems at first.  “High intergenerational mobility” is sometimes a synonym for “lots of parental underachievers.”

Another version of the same argument.  The only notable point is the observation that “smart people realize this is a country geared toward higher earners”.

6. I am more than willing to hear arguments than a less mobile society is a less stable society, or otherwise a society which makes worse political decisions.  But I haven’t seen serious arguments here.  By “serious arguments” I mean those which take endogeneity into account and go beyond noting that Denmark is a better polity than Brazil, and so on.

Granted, there doesn’t appear to be a lot of hard statistical evidence here (commenters, please prove me wrong on this). But there is a ton of US political rhetoric from the past (right up to the last six months or so) that would suggest great social and political benefits from living in a ‘land of opportunity’.

2. Measured mobility in the United States does not seem to be falling, or at least not falling much, as shown by Scott Winship.

This is a general class of argument I find unimpressive. Although statistical evidence is hard to find after a point, it seems pretty clear that at some point in the past income mobility was greater in the US than in Europe. And the evidence is clear that the reverse is true now. So, arguments of this kind amount to picking particular subperiods where you get negative results. There’s a further problem in that Winship’s summary of the data is unreliable. For example, this study  shows that “transmission of high-income status significantly increased” but Winship only reports the finding that “he transmission of low-income status remained stable”.

1. If the general standard of living is rising (and I am more than willing to admit problems in this area for the United States), mobility takes care of itself over time.  I find it more useful to focus on slow growth, if indeed that is the case.  Just look at income growth for non-wealthy families and that is more useful than all the mobility measures put together.

Maybe so, but as Cowen admits, the evidence is in, and median household income has been falling for a decade. Lower down the scale, the poverty rate is rising. Over the last 40 years, income growth for non-wealthy families has been much weaker than for wealthy families, and much slower than in the postwar decades. As Cowen must surely remember, when this fact was pointed out, defenders of the US system used to claim that it didn’t matter because the US system allowed lots of economic mobility. Some, like Paul Ryan are still pushing this claim.,


7. I would like all measurements in this area to take into account the pre-migration incomes of incoming entrants.  Denmark, which doesn’t let many people in, is a much less upwardly mobile society once you take this into account.  Sweden deserves more praise, and in general this factor will make the Anglo countries look much, much more supportive of mobility.

This is about the only argument worth taking seriously. But, in previous debates of this kind, it’s turned out that taking migrants into account doesn’t change much. The US would be a particularly complicated case because of the large number of undocumented migrants, many (most?) of whom return home at some point.

To sum up, Cowen’s post is an exercise in defending the indefensible, and its weaknesses reflect that. As Mitt Romney’s tax returns show, wealthy Americans have the rules rigged in their favor from day one. And that’s assuming they obey the rules. Unlike the poor, they can mostly cheat with impunity. In these circumstances, it’s unsurprising that US inequality is so deeply entrenched. The only surprise is the suddenness with which the facts have become common knowledge.

It remains to be seen how this will play out electorally, but there are at least some promising signs. Eight months ago, the situation in the US, seemed if anything even worse than in Europe. Obama seemed determined to capitulate to the Repubs, with the support of the entire centrist establishment, still committed to the idea of bipartisanship. Political discussion was dominated by the claims of the Tea Party, essentially identical to those of the European Austerians. The debt-ceiling debacle, the success of Occupy Wall Street and the recent Romney revelations have changed that. First, the fact that the Repubs are extreme reactionaries, uninterested in any kind of bipartisan compromise, has finally sunk in to all but the most obtuse centrists.[1] Second, the point that the rich play by different rules from the rest of us has been made glaringly obvious.[2]

Given the weakness of the economy, and the absence of any real action from the Administration between the initial stimulus and last year’s Jobs Plan, Obama’s re-election can’t be taken for granted. But it’s looking increasingly likely, and his SOTU speech will hopefully make commitments that will be hard to retract after November.

fn1. I don’t buy the 11-dimensional chess version of this story, but the slapdown of Obama’s painfully sincere attempts to reach across the aisle was exactly what was needed

fn2. It would be great if we could see a similar transformation regarding civil liberties, the permanent War on Terror and so on, but I’m not holding my breath. SOPA and the TSA can provoke outrage, but NDAA not so much, at least for the moment.

{ 160 comments }

1

Matt 01.25.12 at 3:23 am

large number of undocumented migrants, many (most?) of whom return home at some point.

I don’t know that this is very important to your over-all point, which I essentially agree with, but this claim about undocumented migrants is much less correct than it was in 1997, when the paper you link to was written. This is so, however, mostly due to a perverse and unintended side-effect of the huge increase in border enforcement put in place in the 90′s and growing ever since. (Path dependence comes into play after some point, too, so it’s not clear that the trend could be easily reversed.) Undocumented Mexican migrants are not much, much less likely to return than they were before the increase in border enforcement. The huge increase in the undocumented population is mostly a result of increased enforcement, ironically enough. (Doug Massey at Princeton is the main person to read on this stuff.)

I don’t mean to take the threat off-topic, but that bit is probably at least not nearly as strong as it once was, and quite possibly false now.

2

john b 01.25.12 at 3:26 am

fn1 seems to be missing a referent.

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Gene O'Grady 01.25.12 at 3:47 am

My father was certainly a high earner (I’ve heard $125,000 per annum ca. 1964 from somebody who probably knew what he was talking about), but I suspect he would have spat in the face of anybody who said “smart people realize this is a country geared to high earners.”

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christian_h 01.25.12 at 3:53 am

I’m not a fan of pushing for policies that increase mobility (as opposed to those that decrease inequality in a full sense of the word) since it is a concept fundamentally geared towards a class society – it basically says “you may be lorded over by your bosses but your kids have a good chance of being the bosses lording it over others one day”.

However, this suggests that social mobility is ideologically much more important in a highly unequal society than in a more equitable one. If I was a defender of US capitalism, I would be very concerned indeed that the myth of social mobility might come undone.

5

Brett 01.25.12 at 4:14 am

Maybe so, but as Cowen admits, the evidence is in, and median household income has been falling for a decade. Lower down the scale, the poverty rate is rising.

Cowen said “standard of living”, which is not the same thing as “wages”. I think we also need to look at costs of living. If Costs-of-Living are rising at the same time that median household income is falling, then we truly are poorer off. If they’re falling at the same time that median household income is falling, then we could conceivably be better off even if the actual income figure isn’t as good.

When you look at the Consumer Price Index for the past ten years, it’s not horrible. Prices have gone up, but not at a particularly high rate except in 2007. I’ve also seen conservative and/or libertarian economists make a qualitative version of this argument, arguing that the poor of today are better off than the poor of 30 years ago, even with lower household income.

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John Quiggin 01.25.12 at 4:31 am

Fortunately, Brett, I anticipated and responded to excuses like this a few months ago
http://crookedtimber.org/2011/09/14/running-out-of-excuses/

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Matt McIrvin 01.25.12 at 4:58 am

I actually find another aspect of Cowen’s argument #4 fascinating. He’s saying right out that Europeans have better lives than Americans do, yet doesn’t see this as a comparison in favor of Europe; if anything he seems to think it’s a defect, because it inhibits the striving of the genetically superior.

8

shah8 01.25.12 at 6:02 am

Hmmmm…

Well, Cowen’s a kind of idiot, isn’t he?

He can look over there and see that Europe is a pretty hidebound society at times. Far more class and race conscious than we are in many contexts. They haven’t gotten more meritocratic. It’s mostly a sheer reflection of the lack of social goods, and their expense when we do provide it here in the US. I bet you that the sum of the difference is social provision of health care, social provision of K-12 education, and much less malignant neglect of crime in bad neighborhoods. All that means that there is a crop of irrepressible young talent showing up every year in the workforce in Europe.

I also think Cowen is whistling past the grave here. The primary soci0-economic crisis is about lack of growth. This lack of growth is impairing class mobility throughout the world. That lack of growth is really seen in the shocking levels of youth under and unemployment, even in high growth China. The general underlying problem is socialism for the rich and capitalism for the poor, and the world just doesn’t work that way. People who are bad at being rich still gotta be culled. Middle managers who can’t manage still gotta be fired. Creative Destruction, ya know? Anyways, there are huge classes of entrenched older people who aren’t very productive the world over, but who still command huge chunks of the world’s productive assets, and only young people who successfully utilizes their connections with such elders can get jobs. So, not only do we have C level people, they’re hiring D and E level youth–regardless of what that curriculum vitae sez. Greece and Portugal are going down the tubes not least because untalented and lazy connected people have all the power. China isn’t going to be a power, more or less because of the same. And all of us unconnected folks have to wait until defaults sends people to the ledges and armies patrol city streets before those bums are thrown out.

As for Cowen’s points, my own rebuttal:

1) General standard of living cannot rise in the absence of class mobility. That’s idiotic. You can give a black sharecropper 400 acres and a mule, but you can’t stop his white neighbors from taking it all. A rising standard of living happens when people are empowered by law, economics, technology, and social customs. It’s not a zero sum game. There doesn’t have to be 100 formerly rich to make 100 new rich. There just have to be 100 fewer desperately poor people. Class mobility is not about money. It’s about having more power to hold money. It’s about having more power to access talent and government programs. It’s about a growing sense of identity and place within the society. It’s not about TVs and refrigerators. It’s about expectations and greater security among the various axises.

2) The issue is stagnation. If class mobility was falling as a whole, it’s a tremendous disaster, obvious to anyone who really thinks about what that really means. The mere threat is bad enough, and vigorous energy needs to be exerted to shove class mobility upwards again. The US is still massively poor in many places, that doesn’t need to be.

3) This was stupid from the start, and probably the heart of the whole stupid line of thinking. Tyler Cowen thinks class mobility is zero sum. The very essence of what capitalism is, and of market effects, is that pareto efficiency is a real phenomenon. The very social acceptance of capitalism hinges on the concept that a society can systematically hunt for pareto optimal situations, capture gains, and store in concrete benefits to society, like bridges and canals that people can use every day. Tyler Cowen effectively believes that people shouldn’t get used to working bridges, after all, they might be unhappy when it falls down into the river while they’re driving on it!

4) An incoherent argument, argued with the premise having essentially no evidence or logic for us to hang our thoughts on. Parental underacheivers, what? Cowen is essentially damning a civilized society because it allows lower class people to not be underpaid for labor. It’s great in the US! Either you’re a Master of the Universe or you’re a Just Another Moist Hole! Work really really hard to be MotU!

5) Sane people don’t talk about genetics and meritocracy because sane people in the know understand that across the balance of human norms in ability, genetics are shuffled quite a bit. Smart people can have dumb kids, and dumb people have smart kids. More than that, success in society is about navigating tremendous complexity that doesn’t really reward intelligence so much as it does *talent* and *persistence*, which are *really* ephemeral and non-genetic in nature. Only racist people need to think of their own essential goodness.

6) No you’re not. Super-stable societies are generally a function of booms. I.e., stability should be thought of in terms of homeostatic functions, and understood that growth has to be fed into that stability. However, as soon as the gold ran out, the knives comes out, and this hasn’t ever *not* been true. You want class mobility because you want your citizens to gain wealth and use it to create more wealth–which nourishes the political system. You also want fools to be separated from their money, and their resources redirected to more productive ends. Thereby creating your own growth that makes your polity much less vulnerable to, say, Spartan society. And as for bad decisions, the Russian people could tell Cowen all sorts of tales about what no class mobility does to their political system’s ability to carry out needed social functions.

7)**snickers** Eh, legal or illegal immigrants, Cowen?

9

faustusnotes 01.25.12 at 6:25 am

I would like all measurements in this area to take into account the pre-migration incomes of incoming entrants.

Shouldn’t that be turned around just a little, and all measurements in the US take into account the particular circumstances of black Americans?

Cowen seems to hint towards this problem in Europe a few times in the quotes you give, but surely if we’re going to do that we also need to consider how social mobility changes for black compared to white Americans?

10

reason 01.25.12 at 8:48 am

christian_h, @4,
just to agree and point to this excellent blog post from Chris Dillow on the topic:
http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2006/10/against_equalit.html

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reason 01.25.12 at 9:01 am

P.S. A corollory of my post @10 is that this is all besides the point.

Lets make a few reasonable assumptions:
1. Growth rates will inevitably fall in the future because of demographics and resource shortages;
2. We don’t actually want a society that punishes failure too hard, because such a society will be extremely risk averse;
3. Creaters of value don’t allways end up capturing that value. In fact the less they do so, the more value they are to everybody else.

What conclusions can we possibly make that don’t lead to the NEED for redistribution?

12

Phil 01.25.12 at 9:25 am

For a given level of income, if some are moving up others are moving down.

This is very carefully worded, so as to suggest that social mobility is zero-sum without ever actually stating it. Let’s suppose instead that one (1) person with an annual income of 1,000,000 has 10% of that income deducted at source, and redistributed equally to 50 people with an income of 20,000. Bingo: 50 go up, 1 goes down.

Of course, I’m talking more about reducing inequality than social mobility as such; as far as I’m concerned social mobility can only ever be a means to an end, and an imperfect one at that. But, as christian says, belief in social mobility is an important fig-leaf for a society of large and entrenched inequality; if it’s fraying, that’s a significant development.

13

Henri Vieuxtemps 01.25.12 at 9:25 am

What christian_h said, @4. Only the first paragraph, actually.

What’s the point of this ‘social mobility’ thing anyway, why does it come up so often? It’s meaningless. If the prince becomes pauper and a pauper prince every 10 years, there’s still one prince and one pauper at any given time. What you want is no princes and no paupers.

14

Claudia 01.25.12 at 9:36 am

What bothers me about this whole discussion – and what bothered me about Cowen’s post when I initially read it – is that this is not a question for economics but for moral philosophy.

15

John Quiggin 01.25.12 at 9:37 am

I’ve been going on about the outcome/opportunity distinction for a decade or so

http://johnquiggin.com/2003/12/17/outcomes-and-opportunity/

16

reason 01.25.12 at 10:05 am

JQ @15

Yes, but both here and there you are not very explicit about your own position. Chris Dillow doesn’t beat around the bush about it.

17

John Quiggin 01.25.12 at 10:35 am

Chris ends with “I’m not sure if this means equality of opportunity is merely insufficient as an ideal for the left, or whether it’s entirely the wrong ideal” which seems at least somewhat bush-beating.

I say “a position supporting equality of opportunity while accepting highly unequal outcomes is not sustainable” which seems to me to be a pretty clear statement of the position implicit in Chris’ post, and, for that matter, in what Christian says.

18

J. Otto Pohl 01.25.12 at 10:38 am

Isn’t there a lot of generational downward mobility in the US in the last fifty years? My impression is that on average educated people born after 1970 in the US have considerably lower real wages then their parents or even grandparents in some cases did when they were the same age. Or maybe this is just my personal experience and is not true statistically? However, my gut feeling is that almost any White American male with a PhD in 1961 would have a lot higher salary than I do in 2011.

19

Platonist 01.25.12 at 11:40 am

Henri@13

It would be nice if the social mobility thing were meaningless, since as you say, what we (should) want is no princes or paupers. But it comes up in the US frequently because many do not (or think they do not) want that. They want (a truly meaningless term that comes up too often) “equal opportunity” to be either a prince or a pauper. They want paupers in order to be princes. So, measuring social mobility is the most effective way of demonstrating that their mythical meritocracy does not exist and that, consequently, their key argument for fairness of inequality fails.

Another reason it’s not meaningless is that many who do want a princeless, pauperless world are not in favor of radical political measures and know that moderate political measures will only very slowly realize such a world. In the meantime, letting some decent people have a more decent life, and letting fewer indecent people keep decent life to themselves, makes the long haul toward real justice a bit more bearable. While we do have 1 prince and 1 pauper at any given time, it’d be nice if a decent guy got to be the prince.

20

reason 01.25.12 at 12:07 pm

JQ – well yes and no – that quote from Chris could only be selected by someone who hasn’t read him much (it is very much tongue in cheek – as he often is). But either way – he doesn’t think equality of opportunity is sufficient. And saying something is unsustainable (so is life on the planet in the VERY long term) doesn’t seem a very strong contrary position to me.

21

reason 01.25.12 at 1:14 pm

Platonist,
yes, but I can think of perfectly reasonable (not so radical) steps that would start the world moving in the right direction, instead of in the wrong direction.

22

Matt McIrvin 01.25.12 at 1:21 pm

Henri Vieuxtemps @13: There’s an argument in the US, which I remember hearing a lot during the 1990s boom but which I still hear from time to time, that high inequality is just the price we pay for a dynamic society with little permanent social stratification, that generally enriches everyone and allows even the poor the opportunity to get rich. If everyone’s better off, and there’s a lot of turnover, why worry that some people have a lot more than others? Most Americans, if they think about this at all, have a belief somewhere in the back of their minds that social mobility is higher in the US than elsewhere, and that this is a good thing.

So all the talk of various negative social indicators being correlated with high inequality, and of low social mobility in the US, is an attempt at puncturing that myth. And now people like Cowen, who have at least some respect for facts, have to pivot to actually defending low American social mobility, which is very hard to do.

23

Henri Vieuxtemps 01.25.12 at 1:22 pm

it’d be nice if a decent guy got to be the prince

That is not possible, logically. To become prince and to hold on to the status one has to a crafty and ruthless son of a bitch.

24

Henri Vieuxtemps 01.25.12 at 1:52 pm

@22, but what’s the myth? Of course everyone has the opportunity to become rich: a lottery ticket only cost $1 (or whatever), pick the right numbers and tomorrow you’re a multimillionaire. It just seems surprising that this kind of stuff can be the topic of a serious discussion, with numbers, statistics, concepts, the whole nine yards.

25

Zamfir 01.25.12 at 1:53 pm

@ Henri, that’s only true in dynamic societies with little permanent social stratification.

As Cowen reminds us, in a society like the US you don’t have this problem of the vulgar rising to the top. The superior people are already born as princes and people know their place. So the good people can afford to shower their benevolence on the lesser people.

26

Matt McIrvin 01.25.12 at 2:01 pm

More specifically, the myth is: either I or my kids are personally headed for better things, because we’re good people and we work hard, unlike all those other losers who are getting what they deserve.

27

AcademicLurker 01.25.12 at 3:18 pm

@7
He’s saying right out that Europeans have better lives than Americans do, yet doesn’t see this as a comparison in favor of Europe; if anything he seems to think it’s a defect

It’s interesting how conservative rhetoric has shifted during my lifetime. Conservatives used to claim that they had the same end goals as liberals (stable prosperous society, best outcomes for the largest number of people & etc.) but that they disagreed on the best way to reach those goals.

More recently, they’ve tended to really let their sociopath flag fly and come right out and admit that they actively want bad outcomes for large numbers of people.

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nick s 01.25.12 at 3:25 pm

my gut feeling is that almost any White American male with a PhD in 1961 would have a lot higher salary than I do in 2011.

Although that would have been a much more exclusive group — and real salary, in this respect, is less of an issue than the proportion of it spent servicing tuition debt, which, outside a few professions, is significant enough to provide an ongoing impediment to social mobility.

As for Cowen, the problem still remains that he’s both a tenured academic economist and a tenured wingnut welfare lackey. Perhaps he could use a different font on MR to indicate which role is operative for each post, and spare us the brief requirement to deduce it?

29

Zach 01.25.12 at 4:44 pm

“This is a general class of argument I find unimpressive.”

The primary issue here is that Winship’s argument, which was the subject of Cowen’s point #2, doesn’t actually address what Obama is saying when he complains about mobility. He links to a speech in which Obama complains both of increased mobility down and out of the middle class, and decreased mobility up and into the middle class. Studies looking at mobility between quintiles or some other arbitrary division do not address this issue; by definition, the number of things entering some quintile equals the number of things leaving it… there’s zero flux.

So, Obama must be talking about moving in and out of the middle class in a way in which the number of people/families at or above some middle class threshold is decreasing. There are plenty of statistics that back this up perfectly well. For example, around a third of Americans are classified as “low income” by having incomes less than twice the poverty limit… a pretty reasonable definition of having enough to get by and maybe save a little or build home equity. From the beginning of the Great Society to 2000, this fraction decreased by 0.2% per year. Since 2000, it’s increased by 0.5% per year. That’s a net deficit of 2 million people per year.

One can look at the poverty line, the extreme-poverty line, or the fraction of people below the mean income (or some fraction of it) and see exactly the same trend.

30

Watson Ladd 01.25.12 at 4:46 pm

Funny: I would Cowen expected him to argue that since inequality is the result of people making choices it doesn’t matter. Henri’s wrong as usual: capitalism is far better then aristocracy, even if the richest king could not aspire to the wealth of a neurosurgeon, precisely because we don’t have a caste system in which some are from birth denied opportunities open to others. Then again, he seems to be the last person to have heard the news of 1789 anyway.

One question: what policies are the biggest contributors to income inequality? Is this educational attainment, availability of financial support, or other things?

31

Daniel S. Goldberg 01.25.12 at 4:53 pm

John said:

“Granted, there doesn’t appear to be a lot of hard statistical evidence here (commenters, please prove me wrong on this). “

Actually, it really depends on which dimension of well-being you are interested in measuring. If you work, as I do, on the relationships between inequality and health, there is an enormous amount of high-quality data suggesting that inequality is bad for the health of a society, with the greater the wealth inequalities, the worse off the overall health of the society and of course the greater the health inequalities. Wilkinson, of course, and Pickett most recently, along with others on the North American side like Kawachi and Subramanian (U.S.) and Raphael (Canada) have argued that everyone does worse from a health perspective in a society which features greater inequalities, even those at the very top of the social gradient.

Usual caveats apply here: the existence of a robust connection between inequality and adverse health does not automatically produce normative implications about what we ought to do — although there a lot of very good theorists working on exactly this — and of course even if the inequality-health connection turns out to be mistaken we might still think rapidly expanding inter and intra global wealth inequalities are bad.

But one of the easiest ways to begin a robust argument about whether “a less mobile society is a less stable society” is to consider the truly impressive evidence with a lineage of over 150 years (go back to Virchow, Engels, W.P. Alison, etc.) showing that a less mobile society with greater wealth inequalities is one in which people get sicker and die quicker. Some of this, if you take Wilkinson’s work, might also be attributable to the fact that large inequalities and low mobility seem to be a nice recipe for violence at all levels of the social gradient (although Sen has a nice paper cautioning that the deprivation-violence connection is probably not universal or linear).

JMO.

32

Bruce Wilder 01.25.12 at 5:06 pm

Is the Prince, a prince, because the pauper is a pauper?

What bothers me most about about increasing inequality as a concept is its bloodless abstractness. What bothers me about increasing inequality as a phenomenon, is its causal relation to increasing economic predation.

There was a time, when commercial banking and thrift institutions were oriented toward enabling people to own their homes; now, its all a game, oriented to enable a few to make millions or billions, and millions to enjoy the nightmare of foreclosure. There was a time, when state and local governments subsidized their colleges and universities, and wealthy people endowed private institutions, with the aim of enabling young people to get advanced education; now, advanced education is an opportunity to sink millions into debt peonage.

There was a time, when free trade promised higher quality and greater variety of goods, available to the mass of consumers. Now, it is an opportunity to exploit and defraud workers, globally.

The overton window may have shifted a bit to the left, but I’d say Tyler Cowen is still defending well within his own territory, when he doesn’t have to answer for his own parasitic existence as the well-paid apologist of the Koch empire, a complex of enterprises dedicated to depleting the earth’s resources and destoying its climate.

33

Bruce Wilder 01.25.12 at 5:13 pm

@30

The adverse implications for health and violence might have something to do with the pervasive control fraud, exploitation of externalities and perverse distribution of risk necessary to generate the kind of large inequalities of wealth we see developing in the U.S.

And, of course, highly concentrated income means highly highly concentrated effective demand, which, itself, creates poverty.

34

fs 01.25.12 at 5:41 pm

I’m increasingly worried about the tone of people like Tyler. Too much talk of zero marginal productivity people – reminds me too much of the khmer rouge: to keep you is no benefit, to destroy you no loss. Best way of upping the average income? I used to read marginal revolution with interest but stopped.

35

Freddie 01.25.12 at 5:48 pm

Particularly strange is the fact that recent educational and sociological have, in aggregate, made a more powerful case that individual success is the product entrenched inequalities.

36

Uncle Kvetch 01.25.12 at 5:51 pm

Cowen feels the need, not merely to dispute some aspects of the data on inequality and social mobility in the US, but to make the case that a unequal society with a static social structure isn’t so bad after all.

The parallels with climate change are almost eerie.

1) It’s not happening.
2) It’s happening, but there’s nothing we can do.
3) OK, maybe there are things we could do, but the proposed cures would be worse than the disease.
3) It’s happening, and it’s good! (Who doesn’t like warm, sunny weather?)

37

burritoboy 01.25.12 at 6:03 pm

Watson,

I’m not so certain that we can so easily assert that capitalism is necessarily superior to aristocracy. We can readily imagine a situation where a capitalist economy becomes so stratified that the upper levels of the capitalist elite do become, in effect, hereditary.

This is what in fact happened to the medieval city-states – the upper levels of their proto-capitalist elites eventually became first de-facto hereditary and highly stratified and, over long periods of time, eventually became titled aristocrats simply. In medieval Frankfurt, for instance, the upper house of the city legislature was initially merely the city’s commercial elite in a situation of comparatively high mobility. By the 18th century, the upper house of the city legislature was almost entirely composed of a hereditary elite, a majority of whom by that time had gained formal titles of nobility and many of whom were simply indistinguishable from landed aristocracy (and had f0r many generations not actually been engaged in substantial commercial activity at all, but were primarily owners of urban and rural real estate).

In those instances (which is a common chain of events for the city-states of Europe), it’s quite plausible to argue that a stratified and hereditary commercial elite is worse than the pre-1789 model of king+landed military aristocracy.

38

Henri Vieuxtemps 01.25.12 at 6:24 pm

I don’t see any difference whatsoever whether your lord carries the title of ‘marquis’ or ‘hedge fund manager’. And, as Zamfir hinted above, the hereditary mechanism is definitely preferable to “the most vicious predator around” one.

39

chris 01.25.12 at 6:31 pm

What are you supposed to get when you combine genetics with meritocracy?

A heck of a lot more regression to the mean than we actually see in the US? I realize Cowen is an economist, not a biologist, but he could at least take five minutes to study genetics before pontificating about it.

I find it more useful to focus on slow growth, if indeed that is the case.

Doesn’t this require the assumption that the phenomena are unrelated? ISTM that there’s a very plausible link between rising inequality and the combination of more capital looking for a good place to be invested with stagnant or declining consumer spending and demand, which in turn leads to speculation, creative financial products, and fraud because the straightforward investments aren’t going anywhere.

Pretty much all you need to get that result is two assumptions: (1) MPC declines as income rises (standard) so inequality puts more dollars in the hands of people who want to invest them and fewer in the hands of people who want to spend them and (2) it’s harder to profitably invest in means of production when there is a weak consumer market for the product (seems pretty obvious to me, but I don’t have an economics degree).

Some of the economic activity we have in a saturated economy consists of repeatedly re-breaking the same window — small business starts up, small business creates jobs, small business either displaces an existing competitor or fails to do so, small business goes bankrupt (either the same one or the competitor), jobs are destroyed (Republicans always forget to mention this part when they talk about small businesses as job creators). Great news for the people who keep remodeling the storefront and making new signs, I guess (unless they don’t get paid for it because the business went bankrupt).

Most of the competition we actually have is zero-sum competition between basically identical products (or even literally identical products sold by different retailers), except for marketing, which is actually negative-sum (resources spent on it are wasted from an overall-society perspective, but no individual company can opt out because marketing can outweigh product quality).

Overall sales in the industry (whatever industry it is) can’t increase until more people who want the industry’s products can afford to buy more of them more often.

(Responses to comments on Obama suppressed to avoid sidetracking the thread.)

40

chris 01.25.12 at 6:38 pm

Is the Prince, a prince, because the pauper is a pauper?

Pretty much yes. You aren’t much of a prince with no servants. Ditto CEO — it’s an empty title without actual underlings whose activities you can (a) command and (b) profit from.

If a CEO moves the economy further than others, it’s because he stands on the shoulders of — well, someone. But he’ll be damned before he admits *they’re* the giants.

41

Martin James 01.25.12 at 7:27 pm

A lot of this depends on what part of the income distribution you are interested in. There is a tremendous amount of mobility around the middle income quintile where over 75% of children from the middle quintile are not in that quintile as adults. The numbers are slightly biased downward with 39.5% moving downward and 36.5% moving upward.

For all the talk of the lack of income mobility, there seems to be a tremendous risk of downward mobility for children of the middle class. I think the numbers are also quite high for the percentage of children in the top quintile falling out of that quintile.

I think the Overton window on the right has shifted more with candidates like Ron Paul who are actually getting votes and part of the major party debates where ideas like abolishing the Fed, social security and even child labor are acceptable topics.

The whole concept of the Overton window seems obsolete given the extremes that are legitimate discussions in each of the two major parties.

42

Bruce Wilder 01.25.12 at 7:29 pm

chris @ 38

Given that the Prince and the Pauper are enmeshed together in a system of social cooperation, is it a positive-sum game? is it mutually beneficial? does the Prince contribute to production in anything like the proportion he claims in consumption?

Or, is the Prince simply dominating and exploiting the Pauper? Is the Prince’s outsized consumption reducing what’s available to feed the Pauper? Are the Prince’s outsized claims reducing total production?

Watson’s militarized landed aristocracy — William the Conqueror, the technology of motte and bailey castle, and the autarky of manorial agriculture — was exploitive, destructive, and inefficient. It’s only economic virtue, in retrospect, was that its internal contradictions, its instability, its need to expand and to find legitimacy produced a kind of dynamism.

The increase in American inequality has been correlated, shall we say, to political policies aimed at reducing the institutional constraints on large, private corporate businesses and their executives. One of the most salient features of increasing inequality has been the soaring incomes of top corporate executives and elite financial managers.

Simple arithmetic suggests that soaring incomes from executive power and financial control might not be drawn from benign sources. The money has to come from somewhere, as a conservative might be wont to say. The most logical candidates are various ways and means of exploiting control, power and the distribution of risk, eroding the efficiency of market exchange and corrupting political and legal institutions.

And, lo and behold, we gaze out upon the landscape, and we see rampant corruption in banking and finance, undermining the security of real property. We see a wildly inefficient medical services sector, bankrupting ordinary families. We see an outsized military-industrial complex, which cannot seem to win an endless war in the poorest country on earth. We see a growing threat of ecological collapse met with demands that the water supply be poisoned, to create jobs.

43

burritoboy 01.25.12 at 7:48 pm

As Henri argues, it’s quite possible that a titled landed aristocracy built on politics (receiving wealth and honors from military or political service to the state) is superior to a de-facto aristocracy built upon commerce.

For one, in the titled aristocracy, everybody in that regime correctly recognizes that politics is primary above economics. In the de-facto commercial aristocracy, that relationship is intentionally obscured by that regime’s propaganda. The de-facto commercial aristocrats are actually created by, or sustained by, their control of politics but they claim to be both apolitical but yet also have great virtue (through their claims of hard-work or sober living) as well as great expertise. Thus, in the de-facto commercial aristocracy, the political realm is undermined in favor of the economic realm, reversing the true nature of these two realms.

Even worse, the de-facto commercial aristocracy gradually undermines all understanding of virtue. In the landed titled aristocracy, the elite has power because of the truly heroic things they and their ancestors have done for the public good – obviously, this is usually untrue but it remains as an ideal. In the de-facto commercial aristocracy, members of the elite have power due to their individual excellence in gaining private wealth. But gaining private wealth has at best a very tangential relationship with the public good.

44

John Quiggin 01.25.12 at 8:05 pm

For all the talk of the lack of income mobility, there seems to be a tremendous risk of downward mobility for children of the middle class. I think the numbers are also quite high for the percentage of children in the top quintile falling out of that quintile.

I think this is an illusion arising from the fact that the consequences of dropping a quintile, or two, were once moderate and are now cataclysmic. One way of looking at this is to consider the [inverses of] 90-50 ratio (move from the middle of the top quintile to the middle of the third) and 50-10 ratio (move from the middle of the third quintile to the middle of the bottom). These ratios have increase a lot

http://voxeu.org/index.php?q=node/1245

And I suspect the income numbers tend to understate what is going on in terms of class stratification.

45

burritoboy 01.25.12 at 8:05 pm

Bruce,

Can we be so sure that the militarized landed aristocracy actually was radically more inefficient? Remember, the militarized landed aristocracy and the commercial city-state co-existed for almost a thousand years. And, in general, the commercial city-states were not inordinately very successful against the militarized landed aristocracy.

Many of the sharpest minds of those times believed that the commercial city-states were less efficient than the militarized landed aristocracy. And that’s not an implausible conclusion: most of the city-states never expanded much beyond a few miles past their core city. It’s not clear that rural peasants preferred being ruled by an urban commercial elite rather than the militarized landed aristocracy, for another example.

46

Bruce Wilder 01.25.12 at 8:07 pm

bb @ 41

A landed aristocracy and a commercial aristocracy will both have a self-flattering mythos and heaps of hypocrisy. What’s your point?

47

Britta 01.25.12 at 8:11 pm

Absolutely agreed with Christian_h and Henri (and JQ and others). I’m not quite sure why we should accept the premisses of the argument that mobility is a self-evident good, rather than over all equality or relatively high standard of living. (I’d rather be the average Dane than the average American, even if (and this is a big IF), we buy Cowan’s argument that Denmark has lower social mobility.) Again…I’m not sure why having most of your society being materially comfortable, with relatively equal access to social goods and services, and having free time to cultivate hobbies is worse than a society where large groups of people struggling with the off chance of hitting it big while a tiny minority are filthy rich. Of course, I’m afraid that for those who disagree, to draw from Charles Taylor our value systems are so different conversation is impossible. It’s hard to respond to people who see vast social suffering as an inherent good, much like it’s hard to argue with people who are unabashed racists, etc.

On another point, conservatives love to substitute material goods for wealth or prosperity, so they can point out that most people in the US own a TV or refrigerator or what have you. Of course, what really separates the poor from the middle and upper classes is access to services and opportunities, and this is where wealth really lies (i.e., not what you own, but what you have access to). Cheap, Chinese-made TVs are a dime a dozen, but health insurance and quality education, probably the two most important services in a society that supposedly guarantees equal opportunity, are rapidly being priced out of even middle class access and getting more expensive each day.

Finally, J Otto Pohl, this is mostly anecdotal (well, anecdata), but it definitely feels like people my age (under 30) are worse off than our parents (of course, we’re children of baby boomers, who reaped the benefits of postwar social welfare). Not across the board, but in general people I know face a more precarious job situation, long periods of being uninsured, and a general feeling of diminished opportunity.

48

shah8 01.25.12 at 8:17 pm

Successful militarized landed aristocracy depends on captive labor working land. Give *anyone* lots of captive labor, and they’d be hard to remove from power. Commercial aristocracy captures labor by hoarding needed resources like transportation, health, land, marriage prospects, etc, etc. Many softer handcuffs. In the end, it’s just rock, paper, scissors. You beat landed aristocracy with innovative tech and tactics. You beat bankers with propaganda that delegitimize their rent-seeking. So forth and on.

49

shah8 01.25.12 at 8:21 pm

Class mobility is a good, because it will eventually match quality resources to quality people. Churn is an important part of healthy societies.

In a highly unequal society, class mobility is not zero sum and is a primary means of rebalance. In an relatively flat society, being poor doesn’t absolutely suck and the rich are productive, making society as a whole richer.

50

burritoboy 01.25.12 at 8:22 pm

BW@46,

Well, a possible point could be the following:

It’s possible that all economic forms stagnate over time. Further, it’s also possible they spend more time in stagnation than in growth over the long-term. Thus, capitalism could be viewed as merely another iteration of the commercial medieval city-state simply mirrored on a much bigger scale.

If that’s true, then it may be that the true choices are between types of aristocracy or oligarchy. And, over the long-term, it’s quite possible that the landed militarized aristocracy may be factually preferable over other forms of aristocracy or oligarchy.

51

Zamfir 01.25.12 at 8:37 pm

burritoboy, what would a truly modern equivalent of militarized aristocracy look like? North Korea comes to mind, and that’s not an advertisement. Even if poverty and isolation make that look worse, then Saudi Arabia is still not a really convincing case.

52

Bruce Wilder 01.25.12 at 8:45 pm

bb: “Can we be so sure that the militarized landed aristocracy actually was radically more inefficient?”

“more inefficient”? We are talking about societies in which the state was run by and for violent sociopaths, who contributed nothing to total production, but claimed a massive share of the available surplus, and in which the surplus was constrained by an inability to trade or invest, in large part because of the violence and greed and lawlessness of competing aristocratic states.

bb: “the militarized landed aristocracy and the commercial city-state co-existed for almost a thousand years. And, in general, the commercial city-states were not inordinately very successful against the militarized landed aristocracy.”

Which proves what? I’m lost as to what your argument might be.

If your argument is some species of “survival of the fittest”, do I really have to remind you that “fittest”, even in its Darwinian context, implies no merit?

In an economic context, unregulated competition can be expected to promote inefficiency as violence and the usual catalog of “market failures” trump mutually beneficial trade. The most reasonable assessment of extremes of inequality is that the rich are making the poor, poor, and profiting by it. Stealing is easier than creating value for trade, and if the state cannot effectively curtail theft and other forms of inefficient exploitation, than the result will be an impoverished society.

bb: “It’s not clear that rural peasants preferred being ruled by an urban commercial elite rather than the militarized landed aristocracy, for another example.”

The verb, “ruled by”, implies that their preferences did not matter much, though I would acknowledge that there were various classes of peasants and laborers and serfs and servants, and their “bargaining position” may have varied from time to time and place to place.

53

Stephen 01.25.12 at 8:45 pm

Thought from a very tired mind (bad day at work): re difference between European and American approaches to life. Possible explanation, experiences in calamitous first half of C20, averted calamitous second half, beginning of C21.

American experience: glorious, triumphant, not very expensive and extremely profitable victories, going from strength to strength (minor hiccup in SE Asian War Games, 1945-75: US second place, but whathehell).

European experience: agonising defeats, often catastrophic, or victories only somewhat less disastrous (with benefit going largely to US).

Consequence: different beliefs about futility of extreme effort.

Yes, I realise Russia is a different case. I did say European.

54

burritoboy 01.25.12 at 8:47 pm

Shah8,

I’m not at all certain that commercial aristocracy’s handcuffs are, in fact, softer. In fact, one could argue that the commercial aristocracy’s handcuffs are significantly harder.

Just a thought experiment: modern capitalism is strongly based upon an extreme version of property rights. This, in effect, means – among other things – that wealthy extreme challengers to the state’s very existence cannot be stripped of their wealth, no matter what their political crimes have been. We see this in play in situations like Rupert Murdoch, the Yeltsin government’s inability to deal with the Russian oligarchs, the Kochs, Henry Ford, William Hearst, Lord Beaverbrook, Alfred Hugenberg, Berlusconi and many other examples. Meanwhile, such figures can easily undermine any political figures they wish to. A great example is Hugenberg: the man had a significant hand in undermining the Weimar government. Even after two changes of regime, after WWII, the Allies returned Hugenberg’s property to him. Admittedly, Hugenberg had little political influence after WWII, but that’s partially because of his old age and lack of heirs.

The political is really subordinated to the economic – and, in most modern regimes, it is considered wildly unacceptable to re-arrange the economic realm.

55

Stephen 01.25.12 at 9:00 pm

Further thought from a very tired mind (bad day at work, valued colleague diagnosed with liver metastases, consolation attempted but impossible). Re social mobility: far too tired to look up references, but have distinct impression that in Ottoman empire and maybe other Muslim states, social mobility at all levels below Sultan fairly high. Ascent from barber to vizier quite possible, ascent to pashalik from bandit not unknown, stable dynasty of viziers/pashas unlikely and temporary. Compare contemporay military-aristocratic European states, less mobility greater innovation greater prosperity.

Would welcome comments from those better-informed than I.

56

Bruce Wilder 01.25.12 at 9:00 pm

Britta @ 47: “. . . health insurance and quality education, probably the two most important services in a society that supposedly guarantees equal opportunity, are rapidly being priced out of even middle class access and getting more expensive each day.”

Health insurance and education have become conduits by which the Rich become richer. Saying that they are “getting more expensive” doesn’t quite capture that part of the dynamic.

I can imagine, counterfactually, a society in which some people get rich, because they happen to have opportunities to create enormous value, because of accidents of genetic luck and technology. A beautiful actor, a talented musician, a gifted athlete can sell their performances to millions, because of the enormous amplication of mass communication technologies. I love my i-Phone. I really don’t have a problem with inequality, per se, and I accept that inequality of talents and the accidents that make small, peculiar margins of excellence extremely valuable. Pay-day lending, on the other hand, seems a different case.

57

burritoboy 01.25.12 at 9:02 pm

“We are talking about societies in which the state was run by and for violent sociopaths, who contributed nothing to total production, but claimed a massive share of the available surplus, and in which the surplus was constrained by an inability to trade or invest, in large part because of the violence and greed and lawlessness of competing aristocratic states.”

Is a de-facto commercial aristocracy much different?

“In an economic context, unregulated competition can be expected to promote inefficiency as violence and the usual catalog of “market failures” trump mutually beneficial trade. The most reasonable assessment of extremes of inequality is that the rich are making the poor, poor, and profiting by it. Stealing is easier than creating value for trade, and if the state cannot effectively curtail theft and other forms of inefficient exploitation, than the result will be an impoverished society.”

Where I would question this statement is that it elides too easily the actual political work of curtailing theft and other forms of inefficient exploitation. It is by no means obvious what theft is. Did the Russian oligarchs steal their wealth? Didn’t the US steal assets from the Native Americans? etc. Deciding what is theft is a political, not economic activity.

Even worse, your statement assumes what you’re trying to prove. We don’t know that the militarized landed aristocracy was an inefficient exploitation as opposed to the other possibilities of that moment.

58

Stephen 01.25.12 at 9:17 pm

bruce wilder @52:
“We are talking about societies in which the state was run by and for violent sociopaths, who contributed nothing to total production, but claimed a massive share of the available surplus, and in which the surplus was constrained by an inability to trade or invest, in large part because of the violence and greed and lawlessness of competing aristocratic states.”

Interpreting this would be easier if you could make it clear where, and when, you are talking about.

It does not seem to me an adequate description of much of European history.

C19 American South, or 1920s-30s Chicago, well yes, for some values of “aristocratic”.

59

Watson Ladd 01.25.12 at 9:28 pm

burritoboy and others: The militarized aristocracy had no place for foreigners. Commercial society is a society of equality: everyone’s money is good. Capitalism is freedom: the expression of bourgeois consciousness has a heroic aspect. Inequality is nothing more then the bourgeois dream become unstable and transforming itself in more monstrous ways.

60

liberal 01.25.12 at 9:30 pm

The real enemy here is economic rent, aka legalized theft. I’d claim that that drives inequality, and it also retards economic growth.

61

RW 01.25.12 at 9:33 pm

Alan Krueger’s talk (available http://tinyurl.com/6vfyjuu) laid out a compelling economic case why we should fear growing income inequality.

Winship’s attempt to discredit Krueger is taken out to the woodshed here at http://tinyurl.com/82g5ms3 (I won’t link to Winship but Noah supplies a link).

De Tocqueville understood the multiple ways hereditary aristocracy could poison a society and hoped America would avoid “the European disease” viz “No great change takes place in human institutions without involving among its causes the law of inheritance. …No sooner was the law of primogeniture abolished [in the Southern US] than fortunes began to diminish and all the families of the country were simultaneously reduced to a state in which labor became necessary to existence …The prejudice that stigmatized labor was …abandoned …” (Democracy in America, Chapter 18)

62

js. 01.25.12 at 9:45 pm

What christian_h said. And what Uncle Kvetch said: that analogy is stunning.

63

Michael 01.25.12 at 9:46 pm

Cowen’s a libertarian. He’s here to hurt women and poor people. I’m glad he’s being more honest about it.

64

L2P 01.25.12 at 9:54 pm

“A lot of this depends on what part of the income distribution you are interested in. There is a tremendous amount of mobility around the middle income quintile where over 75% of children from the middle quintile are not in that quintile as adults. The numbers are slightly biased downward with 39.5% moving downward and 36.5% moving upward.

For all the talk of the lack of income mobility, there seems to be a tremendous risk of downward mobility for children of the middle class. I think the numbers are also quite high for the percentage of children in the top quintile falling out of that quintile.”

This seems like two different ways of saying the same thing: there is still some income mobility. If nothing’s changed, then great; however, the evidence seems to show a trend towards stagnation and stratification.

In any event, based on income and buying power the difference between being in the 2nd, 3rd, and 4th quintiles aren’t nearly as great, relatively or absolutely, as they were 40 years ago. Unless I’m badly missing things, it’s no longer that important to rise or fall from one to the other. All the big action is getting into the top quintile, and even there into the upper 2%.

65

burritoboy 01.25.12 at 10:05 pm

“The militarized aristocracy had no place for foreigners.”

To the contrary, it was comparatively common for military aristocrats to serve “foreign” princes or to work in “international” partnerships in such efforts as crusades, military religious orders and so on.

“Commercial society is a society of equality: everyone’s money is good.”

Except when everyone’s money isn’t equally good, which happens frequently in commercial societies. Try being Jewish (and comparatively wealthy) and trying to get an Ivy League education in the early to mid twentieth century, for example. Or a woman in much of that time frame, for that matter. Try being an African-American insurance executive in 1900, for another example. This stuff is (usually more subtly) reflected all over commercial societies.

To take a more current example, you can’t invest in the current fund the most successful venture capital funds are raising unless you’ve already been an investor with them (they do make exceptions here and there, but many quite wealthy investors simply can’t get into funds they want to get into). Which is to say: merely having an amount of money does not make you equal in getting access to an economic opportunity. You have to have had that money for a length of time. Which isn’t conceptually different than a commercial aristocracy or even a landed militarized aristocracy.

“the expression of bourgeois consciousness has a heroic aspect.” Even if we agree, the problem is that this heroism is really about seeking one’s own private good. But one’s private good is only a small part of the public good. Being expert in one’s own private good may not translate well to being expert in increasing the public’s good – indeed, the two things are often at odds, often in subtle ways.

66

burritoboy 01.25.12 at 10:27 pm

L2P,

Absolutely. Imagine an large American corporation in 1955. Each layer of management gets paid some relatively small percentage more than the next lower layer. The salaries increase, of course, as you approach the summits, but the growth is quite gradual.

Further, the large American corporation in 1955 generally does not like to hire executives from other firms. The primary way to move up the income ladder in 1955 is to gradually get promotions within one firm over long periods of time. Especially as you move up, there are only very limited possibilities of being laid-off or fired. Thus, if you’re moving up from one income quintile to another, there is little likelihood of moving down. Further, it’s a sign that you’re moving up the ranks, which takes quite a while.

In the large American corporation of 2012, there’s this huge chasm in salaries. At the EVP level (roughly), you will be getting some multiple more (2-5 times more) than the people you’re supervising. Once you get into that stratosphere (but ONLY in that stratosphere), you have only limited risk of downward mobility. It’s all about getting into the top stratosphere – anything beneath it means you get paid a fraction of the people above you, and all the lower ranks are considered more or less indistinguishable. There’s not that much point in getting promoted except as insofar as it will move you closer towards the stratosphere. Obviously, lower-ranked people like the promotions and the marginally more money their new positions bring but the real action is either getting into that top two or three layers or not.

67

John Quiggin 01.25.12 at 10:28 pm

“All the big action is getting into the top quintile, and even there into the upper 2%.”

There’s plenty of action at the bottom as well. The bottom 30 per cent or so are going backwards in absolute terms. It’s true, I think, that there were social distinctions in the 30-80 range that used to matter more than they do now in reality, though of course the appeal of the Repubs to non-college whites in this range suggests they matter a lot in perception.

68

Watson Ladd 01.25.12 at 10:54 pm

burritoboy, Jews weren’t allowed to do anything in medieval Europe. They were not protected by the laws of man or god, could not be knights, nor serfs, nor lords. How you remembered that Jews were excluded from what was an educational backwater at the time (the US lagged behind Germany in education at the time) but forgot the entire exclusion of a people from society on the basis of religion for over a thousand years is beyond me. There is no equal rights in feudalism: only commercial society, where everyone has property has a notion of right that makes exclusions based on status seem antiquated.

69

slim's tuna provider 01.25.12 at 11:02 pm

i think it’s a very big deal that almost the only way you can achieve status in the U.S. and almost the only way to leave a legacy to your kids is through money. this has the effect of turning EVERY person’s competitive instinct towards increasing inequality. lots of people are very competitive, and when they all are only working for money, they naturally pull apart the wealth distribution. if you could achieve status through study, or public service, or community leadership, the world would look very different, i think. though it’s probably a necessary condition, not a sufficient one. for example if i could become a pious monk that everyone visited to ask for wisdom and learning — it’s wouldn’t be so bad. but there’s no option like that nowadays (orthodox jews excepted).

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John Quiggin 01.25.12 at 11:07 pm

I think Watson’s point has derailed the thread long enough. There are more serious issues here than a comparison between capitalism and feudalism

71

John Quiggin 01.25.12 at 11:08 pm

Watson, I’d appreciate it if you would take a 24-hour break from commenting. Everyone else, nothing more on this topic please.

72

Gerard MacDonell 01.25.12 at 11:10 pm

I do not understand why people who consider themselves intellectual are so eager to embarass themselves defending the existing order against common sense. Does doing so really enrich Tyler Cowen somehow?

His pose is that of a free thinker, but what he actually does seems plainly reactionary. I swear this guy is GA at a too-big bank. Can anybody explain how he gets paid by this? Or is Quiggin’s premise that Cowen is no fool just false?

Cowen’s paper arguing that reasonable people cannot disagree was fun. But he increasinlgy sounds like David Brooks. And this is remarkable because his business is not really supposed to be just to fool the unwitting. Who does he eat with? Doesn’t it get awkward when he or she brings up the blog?

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Doctor Slack 01.25.12 at 11:15 pm

Jesus Christ, that point 5. Cowen really wants everybody to be talking about how poor people just might be genetically inferior? Really? Is he deliberately attempting the racial dog-whistle here or just spectacularly ignorant of what it looks like?

74

LFC 01.25.12 at 11:51 pm

HV may accuse me of being hysterical or something, but his view that social mobility does not matter is preposterous. (and if someone has already said what follows, I apologize)

In any society which is not perfectly egalitarian, which is every society except perhaps (and I emphasize perhaps) for some tribe(s) somewhere in Papua New Guinea or other remote locations (yes, this is a horribly politically incorrect way of putting it, sorry), social mobility matters. It is just a way of saying what chances, on average, are available to those in the bottom socioeconomic strata to move up (and vice versa — probability of moving down). One need not be an economist or sociologist (I am neither) to get this. Of course how equal the society is also matters — a lot. The two are directed at different (albeit not unrelated) questions. This strikes me as so obvious that I fail to see how anyone can not get it.

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gordon 01.26.12 at 12:07 am

AcademicLurker (at 27) “…they actively want bad outcomes for large numbers of people”. I’m glad you raised this. I sometimes wonder about what kind of world the right-wingers actually want. I think you’re right that a world of high general welfare isn’t it. My best guess so far is a world with a social structure approximating that of the novels of Jane Austen – or possibly Sir W. Scott. Maybe this reflects childhood reading?

Daniel S. Goldberg (at 31) “…large inequalities and low mobility seem to be a nice recipe for violence at all levels of the social gradient…”. The enormous prison population of the US is certainly a good example of social violence associated with high inequality, and I would guess that in the US they have risen together.

Lane Kenworthy has been looking at the data on inequality and policy responses to it for quite a while now. Here is a recent summary of his thinking:

http://www.stanford.edu/group/scspi/_media/pdf/pathways/fall_2011/PathwaysFall11_Kenworthy.pdf

(Note: .pdf. Linked from this post: http://lanekenworthy.net/2011/12/11/how-rich-countries-lift-up-the-poor/).

I quote the caption from Kenworthy’s Fig. 2: “Government transfers and taxes have been the chief mechanism through which economic growth reaches the poor”. Not a popular conclusion in the US, I suppose.

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bob mcmanus 01.26.12 at 12:29 am

A reflection on seeing Daumier’s “Bourgeois and Proletarian” (1848) inside Harvey’s book on Paris, soon followed by Danton ” “After bread, education is the primary need of the people.” Wrong.

What distinguishes the rich is their sense of entitlement, of ownership. They own things, they own or should own everything, and loan or give it at their pleasure. It’s all theirs.

Education can’t fight that, has no point or relevance. Three degrees and you are still a servant if you think you are needy, incomplete, growing into entitlement, gaining access through growth.

Only when the proletariat adopts that same attitude, that it all belongs to them/us, the houses and the cars and the boats and stocks and land are our damn property stolen by usurpers. All of it. Only when we recognize our position as the unjustly dispossessed, can equality be desired and grasped.

This can’t be learned, measured, analyzed, adjudicated. There are no scales, where they have one or ten percent too much. They never think “enough.” They think “all” and so should we.

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burritoboy 01.26.12 at 12:48 am

Bob,

You’re right, but I think your point is better put as: it’s probably good if society rewards those people that it thinks are doing various good things. Those rewards will create some amount of inequality. How much reward is justified for the various individual good things? The wealthy are providing some services (perhaps just capital aggregation) – how much do we want to pay for those services? If we overpay to get capital aggregation or managerial skill or entrepreneurial effort, it’s just as bad as overpaying for anything else.

Suppose the Nobel prizes were $10 billion each, rather than their current amount. It’s not at all clear that the vastly higher amount would do anything whatsoever in terms of motivating people to do great medical research. More likely, if the Nobel prizes were that amount, it would attract no better researchers in medical research, but it would attract lots of charlatans.

78

Jack Strocchi 01.26.12 at 1:09 am

Pr Q puts down:

Apparently, expensive tastes, once acquired in childhood, can’t be dispensed with without great suffering.

Touche. I nominate this line for the 2012 Thorstein Veblen award given to the “most mordant deprecation of the affluent”. Galbraith more or less made it his own for most of the Cold War, but it didn’t see much action during the “era of good feelings”. Although Krugman’s “Mah, he’s looking at me funny! mockery of thin-skinned bankers is short-odds.

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Barry 01.26.12 at 1:41 am

L2P @ 64: “In any event, based on income and buying power the difference between being in the 2nd, 3rd, and 4th quintiles aren’t nearly as great, relatively or absolutely, as they were 40 years ago. “

In the the USA, at least, the ability to buy a college education would vary vastly between those quintiles. As would the quality of that education (I’ve attended first, second and third tier universities; the difference is enormous).

80

Barry 01.26.12 at 1:46 am

Gerard MacDonell 01.25.12 at 11:10 pm

” His pose is that of a free thinker, but what he actually does seems plainly reactionary. I swear this guy is GA at a too-big bank. Can anybody explain how he gets paid by this? Or is Quiggin’s premise that Cowen is no fool just false?”

He’s the standard reactionary posing as an intellectual/’contrarian’.

” Cowen’s paper arguing that reasonable people cannot disagree was fun. But he increasinlgy sounds like David Brooks. And this is remarkable because his business is not really supposed to be just to fool the unwitting. Who does he eat with? Doesn’t it get awkward when he or she brings up the blog?”

If there’s one thing which this crisis made clear, it’s that there is no shame in academic economics. Has anybody heard of a right-winger being ostracized for being wrong (and unwilling to change)?

Doctor Slack 01.25.12 at 11:15 pm

” Jesus Christ, that point 5. Cowen really wants everybody to be talking about how poor people just might be genetically inferior? Really? Is he deliberately attempting the racial dog-whistle here or just spectacularly ignorant of what it looks like?”

Probably both; right-wingers have been more and more open in their racism. And as I said above, there is no shame.

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Peter Whiteford 01.26.12 at 2:36 am

In the various debates about this these issues here and elsewhere the point I want to make have been referred to, but I think it is important to distinguish between overall income growth, mobility between generations and the dynamics of incomes within any particular generation or cohort.

The figures that were being discussed in Cowen’s post were about mobility between generations. The standard way that this is measured is called the “intergenerational elasticity of income” and expresses the fraction of relative income differences that is transmitted, on average, across generations. The most common measures are of earnings. In Denmark this fraction is under 20%, in the USA it is around 45% and in Italy and Britain around 50%.

This measure abstract away from actual income levels. It is perfectly possible to have reduced income mobility and higher real incomes for everybody – and it is also possible to have increased mobility and lower real incomes.

There is some of the evidence that was discussed by Krueger at
http://www.icsw.org/doc/Intergenerational_Transmission_of_Disadvantage_Policy_Implications.pdf with the very long version at http://www.oecd.org/dataoecd/27/28/38335410.pdf

Some of the measures of income dynamics are zero-sum games, but again this reflects the way that dynamics are measured. In Australia, for example, between 2001 and 2008 around 25% of the population went up more than 20 percentiles in the income distribution and 28% by less than 20 percentiles, but 19% went down by more than 20 percentiles and 29% by less than 20 percentiles. When you are measuring positions in a distribution for anyone to go up, somebody must go down.

However, over this period just about all income groups in Australia experienced strong growth in real incomes, so somebody who moved down, say from the median to the 20th percentile lost a lot of money, but the real incomes of the 20th percentile were much higher in 2008 than in 2001 (although this is probably not a consolation to anybody who moved down a long way).

The evidence on income dynamics from the OECD “Growing Unequal” report finds that the USA also lower mobility out of poverty than a quite substantial number of European countries. For example over a three year period about 63% of Americans who were initially poor (below 50% of the median) stayed poor, while in Denmark the corresponding proportion was 44%.

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Bruce Wilder 01.26.12 at 2:51 am

Gerard MacDonell : “I do not understand why people who consider themselves intellectual are so eager to embarass themselves defending the existing order against common sense. Does doing so really enrich Tyler Cowen somehow?
[emphasis added]

Yes

http://en.wikipedia.org/wiki/Mercatus_Center

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Witt 01.26.12 at 4:05 am

6. I am more than willing to hear arguments than a less mobile society is a less stable society, or otherwise a society which makes worse political decisions. But I haven’t seen serious arguments here. By “serious arguments” I mean those which take endogeneity into account

I keep re-reading this thinking that somehow I have gotten it wrong. But no — he is actually stating that any serious argument must take for granted that some people are just inherently less capable of achievement? (And, presumably, that we have a reliable way to identify, isolate and control for this factor?)

He *is* talking about individuals here, right?

If so, then the kindest interpretation I can come up with is that he is totally ignorant of the substantial body of research on the impact of the external environment on human beings. The findings on lead exposure alone ought to rattle the foundations of any claim about inherent ability.

Is not this cause of immobility very different — both practically and morally — from such factors as discrimination, bad schools, occupational licensing, etc.?

I don’t think we should let it pass unnoticed that Cowan apparently thinks occupational licensing is a serious barrier to class mobility. It would seem to me that the arguments in the other direction are at least as strong,* if indeed it is a substantial factor at all (which I doubt).

*E.g., the number of working-class white Irish and Italian American women who used an R.N. credential to vault themselves into the middle class.

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hwyl 01.26.12 at 4:11 am

Well, I haven’t seen more meritocratic and less class conscious societies than the Nordic countries. All education is free in Finland, there are no private schools, the “hard task” of putting your children to college is a totally strange concept: they will go if they so choose and pass the entrance examinations. Obviously your parents’ preferences and life experiences matter, but essentially it’s a very level playing field as regards education. So, no wonder the social mobility is much, much higher than in the US. As regards the thing about immigrants – some Americans should go out more, Sweden, for example is quite a multicultural society (actually quickly becoming Eurabia if you listen to far right idiots – and, btw, how is this Eurabia thing possible if we don’t even have immigrants, strange…)

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John Quiggin 01.26.12 at 4:27 am

“He is talking about individuals here, right?”

To be fair, I think he is talking about states, as the next sentence implies. The idea is that either that social instability promotes entrenched inequality (hard to work this out) or that there is some common cause, as in his implication that Denmark, being a more advanced polity than Brazil has both greater social stability and more intergenerational mobility. Of course, that implies that the US is more like Brazil than Denmark, but that no longer seems to be a problem for the right.

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Peter Whiteford 01.26.12 at 4:35 am

When I read Cowen’s post, I thought that the weakest argument was point 4 above: “Why do many European nations have higher mobility? …, here is one mechanism. Lots of smart Europeans decide to be not so ambitious, to enjoy their public goods, to work for the government, to avoid high marginal tax rates, to travel a lot, and so on. That approach makes more sense in a lot of Europe than here. Some of the children of those families have comparable smarts but higher ambition and so they rise quite a bit in income relative to their peers. “

As far as I can see this amounts to saying that it is possible to propose a hypothesis to explain higher mobility in Europe, but then he doesn’t present any actual evidence that is related to the hypothesis, and indeed it is very difficult to imagine how anybody could collect the evidence to test this particular hypothesis.

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Witt 01.26.12 at 4:46 am

84: Thanks. But I guess I still don’t get it, because I’m stuck on how a nation-state can be said to have “endogenous” traits. Oh well.

88

Ken 01.26.12 at 5:18 am

As a Canadian who has lived in the U.S. since 1996, I’ve been appalled at the growing concentration of wealth that has been easily visible since the reign of President George II. That alone, the fact that a president’s son of dubious ability was elected president, should have been a warning to everyone of a growing aristocracy in America. It’s nice to see this has at least reached national attention.

Sadly, I have no faith in the ability of the U.S. to react appropriately to the situation. Recent history suggests that major social change in the U.S. will take a very large disruption, something equivalent to the Great Depression or a World War.

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Tony Lynch 01.26.12 at 5:47 am

Cowens’ argument is the halfway point to the position that no argument is needed to justify entrenched inequality. The endpoint – and I have heard it – is “So, you’re losers! Suck on this!” – which may well be, at this stage (and too often already is), a baton or bullet.

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nick s 01.26.12 at 6:02 am

It’s all about getting into the top stratosphere – anything beneath it means you get paid a fraction of the people above you, and all the lower ranks are considered more or less indistinguishable.

Specifically, it’s about getting into the compensation-committee-sphere, where your remuneration is decided upon by people whose own remuneration is decided upon by compensation committees, which are made up of people… you get the picture.

Once you reach that point of recursivity, rewarded by people whose decisions reflect how much they themselves want to be rewarded, you are made.

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Greg 01.26.12 at 7:10 am

Two things – and apologies if they’ve already been covered in comments.

1. Focusing on language for a moment, the term “meritocracy” can be dangerous. Most people are instinctively for it, including those on the left, because it sounds like it means something along the lines of more social mobility. But “merit” is a combination of skill, aptitude and moral character that says whether or not you deserve to be rewarded. Thus in practice “meritocracy” is used to justify the separation of the “deserving” rich from the “undeserving” poor. If you are rich, you must have earned it, so everything’s fine, (and by the way here’s a tax cut to say thanks for being, well, just so super).

2. To highlight one of your points: previously the argument has been that growth is not a problem because we have mobility, and now the argument is that mobility is not a problem because we really need growth. It seems that you can only have one and not the other, and Cowen admits that right now we have neither. The right is yet to explicitly argue that we should be able to have both. This is nothing more than the tactic of lowering expectations in order to justify failure.

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Chris Bertram 01.26.12 at 8:02 am

previously the argument has been that growth is not a problem because we have mobility, and now the argument is that mobility is not a problem because we really need growth.

To be fair, the refusal to contemplate serious redistribution and the move to substitute growth for it is not just characteristic of the right, but also of the “neo-liberal”/new Labour-style left. Cf endless posts by De Long or Yglesias. On this point (rather than the battle they’re currently engaged with v Cowen and others on how to get growth) there’s is hardly a cigarette paper between them.

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Henri Vieuxtemps 01.26.12 at 8:23 am

In any society which is not perfectly egalitarian … social mobility matters. It is just a way of saying what chances, on average, are available to those in the bottom socioeconomic strata.

I disagree – well, depending on what you mean by “perfectly egalitarian”, I guess. Suppose you have a typical society, with the class of industrial workers, class of farmers, and, I dunno, managers, bureaucrats. Is this “perfectly egalitarian”? It doesn’t seem to be. It doesn’t, however, have to have the top and bottom socioeconomic strata. They don’t have to be arranged in a hierarchical order.

Classes can be all equal, so that moving from ‘farmers’ to ‘managers’ doesn’t, in abstract, improve your status. It changes it, but it doesn’t make it higher or lower.

In other words, what you need is not perfect equality, but the absence of hierarchy, absence of competition for a socioeconomic status. You can still have competition for other things: public recognition, (reasonably) better standard of living, etc.

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J. Otto Pohl 01.26.12 at 9:42 am

Nick:

Since I have never made more than $20,000 a year I am betting that even the nominal salary of most white male PhDs with US passports in 1961 was greater than mine. On the other hand I have had no debt at all since 2001. I am sure there are people in the US with higher incomes than I have that live worse than I do here in Ghana. But, I suspect that fifty years ago I would have been upper middle class in the US with the same credentials as opposed to merely middle class in Ghana.

Britta:

I am now in my 40s and my father was born before the baby boom. I guess my mother was technically born near the start of the boom. So it is not just people in their 20s that are poorer today in my estimate. When my father worked as a professor his annual income was in the low six figures as against mine in the low five figures.

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Matt McIrvin 01.26.12 at 1:00 pm

I’m not quite sure why we should accept the premisses of the argument that mobility is a self-evident good, rather than over all equality or relatively high standard of living.

I don’t see the articles about low US social mobility as accepting the argument, so much as pointing out that the argument doesn’t even work on its own terms. Higher inequality is not the price of higher social mobility, or, for that matter, of a higher overall standard of living; you don’t actually get either one along with the inequality.

So libertarians who insist that the US socioeconomic system is superior, if they accept this data, are backed into a corner in which they have to accept lower social mobility, higher inequality and a lower overall standard of living as preferable to the alternatives.

I think the reason why this is only getting traction now is historical. Much of the earlier discussion in the US that I’m accustomed to seemed to involve the implicit assumption that the two alternatives on offer were basically the United States and the Soviet Union circa 1985. It seems to me that, outside of the “Obama is a Kenyan socialist” echo chamber, Americans are finally getting a little beyond rhetorically prosecuting the Cold War. There’s the problem that the example of Europe isn’t so attractive at the moment just because they’re getting into right-wing austerity politics, but we take what we can get.

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Jeffrey Kramer 01.26.12 at 1:33 pm

@27, 75 (“More recently, they’ve tended to really let their sociopath flag fly and come right out and admit that they actively want bad outcomes for large numbers of people.”)

I’m surprised nobody has made the connection to John Holbo’s essay on “Donner Party Conservatism”, where he observes David Frum lamenting how the welfare state has allowed the poor to get away with presumptuously self-indulgent behavior, and we need to put the fear of God and shame and destitution back into them, or else The Good Society is impossible.

And if you really want to be scared, consider that David Frum has lately come to the conclusion that today’s Republican Party is too sociopathic even for his tastes.

97

Jim 01.26.12 at 1:34 pm

It’s not just presidents’ sons becoming president, it’s governors’ sons becoming governor (again, George and his sons George and Jeb) and senators’ sons becoming senator. I tried googling for a list, but got too many hits about a father-son pairs in governor or senator positions simultaneously. Anyone know where to find a list of father-son pairs (and pairs of brothers) in office at different times as well?

98

Nate 01.26.12 at 3:36 pm

Ha! Of course argument number 5 is absurd. Maybe class and intelligence LOOSELY correlate in many cases, but they are not mutual. He needs to look up Christopher Langen, the smartest (well…tied at #1) man on earth who’s low class prevented someone who should be a huge name in science from participating in a relevant academic arena. OR better yet, to be topical, that glorified moron Rick Perry; kid has wealth but no brains. Speaks for itself.

99

brum Joe 01.26.12 at 3:50 pm

Cowen didn’t do his reputation for intellectual honesty any good with this one. Even some of his regular fans were calling him on it.

100

Sus. 01.26.12 at 4:10 pm

@Ken, 88: “Sadly, I have no faith in the ability of the U.S. to react appropriately to the situation. Recent history suggests that major social change in the U.S. will take a very large disruption, something equivalent to the Great Depression or a World War.”

It’s rare for me to be the voice of faith in the US system, but – as reflected in the original post – the Occupy movement has struck a broad cord here that has not fully gone away and (more important to my mind) put into sharper focus for more people the craziness of the Tea Party. Even with most US camps disbanded I’ve been reading about local communities that call on the Occupy forces whenever they need quick action on an issue. Most recently here in Atlanta they occupied an historic church facing foreclosure, causing the bank to reach a successful settlement with the church. With spring coming I’m hopeful for another round of activism.

My observation is that the “we are the 99%” message continues to resonate with people across classes and demographics, and has spurred more political and social action than I’ve seen in my adult life. Whether it will be enough to effect any real change and deal with these issues of equality and mobility in a serious way is anyone’s guess, but the time is more ripe than it’s been in decades.

On the other hand if we wind up with President Gingrich or Romney (insert any other GOP flavor-of-the-week) all bets are off, for this and other matters of importance.

101

LFC 01.26.12 at 4:20 pm

HV:
You can still have competition for other things: public recognition, (reasonably) better standard of living, etc.

Even in your posited non-hierarchical society, one might still want to have a measure of how easy or hard it is to improve one’s standard of living by (if one wanted) moving, say, from industrial worker to bureaucrat (or whatever). Now maybe in such a society no one would attach any significance to such moves — I guess that’s what you’re saying — so no one would care about measuring how easy or hard it is to make such moves. And in that hypothetical case, I guess you’re right that the concept of social mobility would not matter, or not matter very much. But I’m not sure there are any existing societies that match your hypothetical.

Implicit in your argument is also the suggestion that even discussing the concept of social mobility is politically undesirable b/c it tacitly assumes that a society which matches your hypothetical can’t come into being. IOW, we should focus 100% of attention on eliminating hierarchy, zero attention on measuring how easy it is to move from one rung to another of a hierarchical social system that should not exist in the first place. If that is your position, I understand why you think that, but I don’t think I agree. To measure social mobility is not necessarily to endorse the underlying social structure. Reasonable people can differ on this, of course.

102

Jared 01.26.12 at 4:25 pm

Anti-competition is basically what parenting is all about. Your job as a parent is to protect your child from all its competitive inadequacies. You try and teach the child to fend for and feed itself, but you never let it starve. Similarly, in a highly complex socioeconomic environment, you want a child to succeed in a profession on its own accord, but every parental fiber arrays itself against allowing the child to actually fail. If your ideal for mobility in society includes middle class parents having to accept that there is a one in five chance their child will end up in poverty, and you scoff at this causing unhappiness, you’re deluding yourself.

103

Jared 01.26.12 at 4:30 pm

To Shah8:

This is what you lead with: “I also think Cowen is whistling past the grave here. The primary soci0-economic crisis is about lack of growth.”

This what Cowen says he thinks we should focus on as the real measure of well being: “I find it more useful to focus on slow growth, if indeed that is the case.Just look at income growth for non-wealthy families and that is more useful than all the mobility measures put together.”

Perhaps if you weren’t so eager to call others idiots, you might find that they want to work on the same things you do.

104

Watson Ladd 01.26.12 at 5:32 pm

Henri, even in that society you mentioned different people would enjoy different access to resources. Wouldn’t we still want it that no matter where you started in life you could still potentially wind up enjoying more resources then average or fewer, and that your path in life would not be determined by who your parents were or what god you pray to? SES isn’t about social status: its about the fact that some people have a lot more money then others, because we live in a society with one kind of citizen.

105

LFC 01.26.12 at 5:43 pm

Watson:
Wouldn’t we still want it that no matter where you started in life you could still potentially wind up enjoying more resources then [sic] average or fewer

Not to be picky, Watson, but when you mean “than” why not type “than” (instead of “then”)? You make this mistake constantly and it’s beginning to annoy me.

106

MPAVictoria 01.26.12 at 5:54 pm

“Not to be picky, Watson, but when you mean “than” why not type “than” (instead of “then”)? You make this mistake constantly and it’s beginning to annoy me.”

LFC don’t be petty. We all make mistakes. Would you want everyone here to start combing through your posts looking for errors? I know I wouldn’t.

107

Henri Vieuxtemps 01.26.12 at 6:00 pm

What are these hierarchical ranks exactly? Money, prestige, power? It should be possible, I hope, to organize the society in such a way that the possibility of individuals exercising power over other individuals is reduced to the minimum. You can compete for the prestige, I have no problem with that.

So, money. So, fine, compete for the money, if that’s your thing, within a reasonable range, 20-30, I dunno, 50%. But not to the extent when it turns into exploitation. Make toilet cleaning the best paying job, let those who want to drive a BMW do it.

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LFC 01.26.12 at 6:14 pm

LFC don’t be petty. We all make mistakes. Would you want everyone here to start combing through your posts looking for errors? I know I wouldn’t.

No, I wouldn’t. But I don’t consider what I said to be petty. YMMV.

109

piglet 01.26.12 at 6:14 pm

Quiggin: “In the EU, the right has succeeded in taking a crisis caused primarily by banks … and blaming it on government profligacy, which is then being used to push through yet more of the neoliberal policies that caused the crisis. …
By contrast the success of Occupy Wall Street have changed the US debate, in ways that I think will be hard to reverse.”

In the US, the right has succeeded in taking a crisis caused primarily by banks and blaming it on government profligacy, which is then being used to push through yet more of the neoliberal policies that caused the crisis. The appearance of OWS may have changed the US debate but not (yet) the politics on the ground. We can all hope for the best but it is hard to see the situation in the US optimistic. At best, the worst neoliberal attacks might be thwarted. E. g. the latest round of anti-union attacks.

Also, movements similar to OWS have existed in Europe all along.

110

LFC 01.26.12 at 6:23 pm

Make toilet cleaning the best paying job

How?

This is roughly on a par with Fourier’s suggestion that garbage collection should be done by children b/c they, after all, enjoy playing around with dirt.

111

piglet 01.26.12 at 6:27 pm

“3. For a given level of income, if some are moving up others are moving down. Do you take theories of wage rigidity seriously? If so, you might favor less relative mobility, other things remaining equal.”

The argument is breathtakingly dishonest in several ways. As Quiggin points out, they can’t have it both ways – praising the US as a “land of opportunity” and then casually declare that too much opportunity might not be such a good thing after all. Remember that right-wingers originally argued that high social mobility makes up for inequality. In a more equal society, one could argue that social mobility isn’t that important and too much of it may be even counterproductive. But not in a highly unequal one.

A point that Quiggin doesn’t mention however is the observation, supported both by data and common sense, that low social mobility and high inequality go hand in hand. There is no “other things remaining equal”. So Cowen’s “argument” is indefensible on every count.

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Bruce Wilder 01.26.12 at 6:46 pm

One would think it would be recognized that unconstrained ambition is just another term for tyranny, but one would be wrong.

Going back to Tyler Cowen: Cowen is promoting the work of Scott Winship, in attacking Alan Krueger’s Great Gatsby Curve talk. Scott Winship, in addition to attacking Alan Krueger, is engaged with Miles Corak, a Canadian labor economist, who undertakes to defend Krueger. It may be useful to look at Corak, to see how a typical neo-liberal undertakes the criticism of inequality.

http://milescorak.com/2012/01/17/the-economics-of-the-great-gatsby-curve/

He’s an economist, so, of course, he thinks he needs a theory. And, where does he get his theory? Gary Becker, of course. The University of Chicago. Human Capital. Economics as morality play.

It makes for a lovely sound: “an era of rising returns to human capital or declining progressivity in public human capital investment is also an era of declining intergenerational mobility.”

Quiggin celebrates the weakness of Cowen’s argument, but the neoliberals, who appoint themeselves as the official left critics of inequality will not be outdone.

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MPAVictoria 01.26.12 at 6:46 pm

“No, I wouldn’t. But I don’t consider what I said to be petty. YMMV.”

Fair enough. Petty was probably a poor choice in words. Apologies.

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L2P 01.26.12 at 6:50 pm

“If your ideal for mobility in society includes middle class parents having to accept that there is a one in five chance their child will end up in poverty, and you scoff at this causing unhappiness, you’re deluding yourself.”

I scoff at the idea that the lowest quintile should be “poverty.” If middle class parents can wish greatness for their children and fear only mediocrity, we don’t have to worry about Cowen’s parade of horribles. That’s the glory of the safety net we used to have. And what about all the middle class parents with kids that are disabled, or get sick? Do we just tell them to suck it?

Christ, Cowen’s an jackass.

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Chris Bertram 01.26.12 at 8:42 pm

Cowen’s latest response is worth mentioning:

bq. Whether there then would be more or less marginal “churn” in the relative income rankings is not a matter of irrelevance but having somewhat more churn should not be viewed as a major social goal per se. It would depend on the reason for the immobility, and the real focus of our concern would be the reason (e.g., bad schools? some kind of unfairness?), and not the marginal change in the numerical churn per se.

As I read this, Cowen is simply asserting, without defence, that if children from poorer background have a lower chance of getting the better paid jobs in an unequal society than children from richer families do, then there’s no problem “per se” with this.

My first reaction is simply to disagree: yes there is because it is unfair in and of itself for some people to have worse opportunities than others through no fault of their own.

Second: the badness of this isn’t simply reducible to the badness of whatever causes it. Sure bad schools are bad in themselves (because it is good for people to better educated) but among the reasons they are also bad is that they result in reduced opportunities. So the badness of the cause, derives, in part from the badness of the consequence.

(Cowen’s parenthetical list of possible reasons for low mobility is also problematic, since it includes causal explanations of the low mobility and “unfairness” together. I take it that unfairness is not, as such, a cause of anything, though working out what Cowen means here is beyond me.)

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Trevor H 01.26.12 at 9:29 pm

I wonder if Tyler’s critics aren’t being deliberately obtuse.

Tyer’s point is simply that we are having the wrong debate. Or that it’s time to move on from the debate about whether there is inequality and immobility and on to what are the mechanisms that cause them and what to do about it. The inequality and immobility results have almost no practical value if you’re thinking about policy. The mechanisms behind inequality and immobility are clearly quite complex and not always welfare reducing. For instance, there’s unquestionably a factor of unwillingness to relocate away from family that causes some immobility. A talented person from rural Arkansas has no opportunity to build an income substantially different from the previous generation without a willingness to move to LIttle Rock, or even points further away. Maybe that person is content with the tradeoff of substantially lower lifetime earnings for staying near the family. How much immobility is caused by factors such as this? Maybe very little, we don’t know.

But I think that’s Tyler’s point. Our policy goal should be to identify specific sources of inequality and immobility and address those that are unfair (such as excessive returns to finance) rather than focus on broad statistical measures where movement in either direction has ambiguous meaning and value.

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John Quiggin 01.26.12 at 10:09 pm

That’s a very charitable reading, Trevor. Can you square it with (among others) Cowen’s point 3, which reads as a straightforward defence of entrenched inequality.

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Henri Vieuxtemps 01.26.12 at 10:20 pm

@110, I have no idea how.

But I also don’t see the point in rejoicing if son of a homeless beggar would become a fabulously rich banker, and son of a banker a homeless beggar. How does help anything? I don’t see any justice in it.

119

engels 01.26.12 at 10:23 pm

How does help anything?

It keeps everyone on their toes…

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Substance McGravitas 01.26.12 at 10:24 pm

“Churn” is another step closer to The Lottery in Babylon.

121

piglet 01.26.12 at 10:42 pm

Henri 118: if the daughter of a homeless beggar had the same economic opportunities as the son of a fabulously rich banker, that would be … something. Maybe not exactly justice but something similar. The point of intergenerational mobility is not that we rejoice over rich people falling down the social ladder. The point is that it is a measure of equality of opportunity. Cowen is telling us that equality of opportunity is not a worthwhile goal per se. I would argue that it’s not sufficient but certainly an improvement over what we have now.

122

shah8 01.26.12 at 10:49 pm

Substance McGravitas, I’ll have you know that I refuse to gorge on Borges.

123

engels 01.26.12 at 10:50 pm

The point of intergenerational mobility is not that we rejoice over rich people falling down the social ladder.

Can’t we? Not even a little?

124

John Quiggin 01.26.12 at 11:02 pm

HV, you’re derailing the thread. Please take 24 hours off, and please no more replies on this point.

125

chris 01.26.12 at 11:40 pm

To be fair, the refusal to contemplate serious redistribution and the move to substitute growth for it is not just characteristic of the right, but also of the “neo-liberal”/new Labour-style left. Cf endless posts by De Long or Yglesias.

Er, is that the same Yglesias who repeatedly comes out in favor of more and better public services financed by more progressive taxes (very nearly his exact words IIRC), or a different one? Because ISTM that public services are a form of in-kind redistribution, in that they can be enjoyed by anyone, while the benefits of wealth are available only to the wealthy.

It’s not my job to defend him or anything, in fact I find him misguided on some issues, but I think convening the old circular firing squad at all is counterproductive, let alone using strawmen to do so.

(DeLong, on the other hand, I don’t think is on the left at all; he’s just an old-school centrist (i.e. not the compulsive-difference-splitter type, but someone whose views just happen to fall in the middle) in a time when one party has run so far to the extreme they can’t even see the center anymore, even if they bothered to try, which they don’t.)

126

Charles Yaker 01.27.12 at 1:03 am

Daniel S Goldberg mentions data in 31 but doesn’t provide links. Anybody Intrested in the topic should check the data.

http://en.wikipedia.org/wiki/The_Spirit_Level:_Why_More_Equal_Societies_Almost_Always_Do_Better

127

js. 01.27.12 at 3:26 am

Wait, so how is the Turing test supposed to work here? (Or the “Turing test fail” as Cowen puts it.) Is the idea that when left/liberal economists encounter (obviously serious!) arguments like Cowen’s, all they can see are random response generators? Or that they, the liberal economists, become random response generators? Am I being way too literal, here? (Sorry somewhat off-topic.)

128

Eli Rabett 01.27.12 at 9:09 am

“A talented person from rural Arkansas has no opportunity to build an income substantially different from the previous generation without a willingness to move to LIttle Rock, “

Well that worked for Bill Clinton, but Sam Walton appears to have done OK without moving to Little Rock.

129

Eli Rabett 01.27.12 at 9:12 am

Henri Vieuxtemps 01.26.12 at 6:00 pm

What are these hierarchical ranks exactly? Money, prestige, power? It should be possible, I hope, to organize the society in such a way that the possibility of individuals exercising power over other individuals is reduced to the minimum. You can compete for the prestige, I have no problem with that.

—————————–

There goes the argument that if taxes go up, the Galts will stop creating chaos.

130

Jim 01.27.12 at 12:30 pm

middle class parents having to accept that there is a one in five chance their child will end up in poverty, and you scoff at this causing unhappiness

Middle and upper class people regularly scoff at the unhappiness of poor parents having to accept that there is a much greater than one in five chance their child will end up in poverty. They say the poor are “used to it”. No, you never get used to it.

131

barnetto 01.27.12 at 2:56 pm

I saw someone mentioned Wilkinson’s work. I recently finished reading his book “The Spirit Level,” where he went on to examine the relationship between other issues in society to see how/if they moved with inequality. In his work he found that high inequality and low social mobility correlate.

Highly unequal societies do not have high social mobility. And this makes some intuitive sense to me. If the people can afford tutors, a good education nutrition, better medical care, etc, they can succeed, and if people can’t afford to go to good schools and eat then it is going to be more difficult to gain the skills necessary to make more money than their parents had.

Those societies that redistribute income in the form of meals, educational subsidies, and health care will have more poor able to gain the skills necessary to earn more money than their parents.

If I’ve repeated anything I apologize, I didn’t read through all 130 comments.

132

Matt 01.27.12 at 3:29 pm

John Q at 117: Why do you think Trevor’s reading (at 116) cannot be squared with Tyler C’s #3? I understand your point that Tyler C’s argument here is consistent with certain very old and tired defenses of entrenched class privilege. But it is also consistent with, for example, Robert Frank’s arguments about “positional goods” and their pernicious effects on the happiness of members of the middle class, which (regardless of whether you agree with them) are nothing of the sort. In any case, the fact that Tyler C’s argument is consistent with such arguments is surely not the same as saying those arguments are the same as Tyler C’s.

I read Tyler C as very clearly implying that we are, as Trevor says, having the wrong debate. The “we” here includes commenters on the right and the left. Matt Yglesias’s point that it was commenters on the right that started this debate is well taken, but surely this doesn’t preclude commenters on the right (especially those, like Tyler C, that did not as far as I know start this debate) from suggesting that we move on to a more productive one…?

133

SamChevre 01.27.12 at 4:55 pm

John Quiggin @ 45/117

I’m having trouble understanding how “falling a quintile is catastrophic” but “point 3 is unreasonable.”

134

shah8 01.27.12 at 6:15 pm

*SamChevre*, point 3 is unreasonable because TylerC wants you to think in terms of optional goods and services, such as Prada2Kmart handbag. If you’re treating an illness, moving from one drug to a cheaper drug often has debilitating consequences. If you have to move to a cheaper location, you’re probably moving away from people who have money to hire you. You’re also moving away from good provisions of social services, which tends to have meaningful impact on your QoL. All the slings, arrows, and slights of being poorer does great damage to your relationships with spouse and friends, and you become more isolated. Of course, I didn’t get started on public goods and society…

It is just not unreasonable for people to be unhappy. There are grievous material consequences to serious downward mobility.

135

John Quiggin 01.27.12 at 6:56 pm

@Matt&Sam – As Shah 8, the point isn’t that falling is catastrophic because of adjustment difficulties or habit formation. It’s that, in a society “geared to the rich” as Tyler puts it, not being rich has severe adverse consequences, whether or not you started out rich.

In fact, I’d tend to argue that, provided they don’t fall too far, the downwardly mobile still have a bunch of “social capital” assets not available to those who were born and remain poor, including skills in navigating the system, and access to various kinds of informal help from family.

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SamChevre 01.27.12 at 7:19 pm

Thank you; that makes sense.

137

fs 01.27.12 at 7:30 pm

I think a comment by Marginal revolution says it all: you can’t criticise the winners (it was about Germany and the economic crisis but has general validity I think for libertarians).

well-off white men are the only people. not that counts, just the only people.

138

Jon 01.27.12 at 9:11 pm

I think the best evidence for refuting point number 5 comes from the Marmot Review (2010). Figure six using data from the 1970 British Cohort study shows that the greatest driver of IQ appears to be socio-economic status. This is based on the fact the smart poor babies get dumber, and dumb rich babies get smarter…

The report is an interesting and eye opening read, located here:

http://www.instituteofhealthequity.org/projects/fair-society-healthy-lives-the-marmot-review

139

Jon 01.27.12 at 9:15 pm

To wit the point about the link between societal performance and lack of social mobility is most notably evident in US health and education statistics, which are notable for their failure to achieve, despite the massive investment in both (greater than every country).

140

L2P 01.27.12 at 9:24 pm

Could someone explain what Cowan means by his “response?” I can’t figure out what the Turing test is supposed to be. Is he saying that leftists show a lack of consciousness if they’re unpersuaded by arguments that income inequality and class immobility are really awesome so long as the poor get an extra cheeseburger every couple of weeks? Or is he saying that so long as the poor will always be poor for REALLY GOOD REASONS (plus the extra cheeseburger thing), leftists should see the inherent coolness of inequality and immobility?

Can you smart guys help me out?

141

Charles Yaker 01.27.12 at 10:34 pm

Amazing I offered data in 126 why more equal societies are usually better off and nobody seems to care. Does that suggest anything about the debate in the U.S. and elsewhere.?

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Matt 01.27.12 at 11:48 pm

John Q at 135: I’m not sure I’m understanding you. (Or maybe you’re not understanding me? Or maybe you were only responding to SamChevre’s question and just threw my name in there on accident?) At 117 you suggested that a charitable reading of Tyler C wasn’t really possible, because his 3rd point necessarily means he is a defender of “entrenched inequalities.” I suggested that there are other possible interpretations (I read him as merely saying that reducing inequality will have a number of consequences that we should consider and 3 is possibly one of them), and that it therefore isn’t clear that Tyler C supports any such thing. Your point at 135 seems to be that you don’t think that the problems Tyler C identifies are very important, or that they are made relatively inconsequential by other problems. And unless I am radically misunderstanding you, your argument and Tyler C’s point 3 are not at all mutually exclusive. In any case, it still seems to me that you can disagree with Tyler C about the importance of 3 without it necessarily following that he thinks poor people deserve to be poor forever. What am I missing?

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Matt 01.27.12 at 11:52 pm

L2P – Regarding Turing, I think he was just saying that the responses from Quiggan, Krugman, and De Long seemed a little too automatic. Like they could have been produced by a left-wing economist algorithm. In other words, he was saying “I know you are, but what am I.” But making it sound fancier.

144

engels 01.28.12 at 12:40 am

Christ, Cowen’s an jackass.

To paraphrase something I quoted on the religion thread: the criticism of Cowen is essentially complete.

145

John Quiggin 01.28.12 at 4:21 am

Matt, @Matt “What am I missing” Cowen’s point 3 says, quite straightforwardly, that it’s better that the poor should remain poor than that they should change places with the rich. I can’t see how that allows any interpretation of his remaining points other than apologetics for a system that has produced entrenched inequality

As regards Turing, it is, of course, predictable that leftists like me will dislike Cowen’s position. What’s not predictable is that I will offer a point-by-point critique and have it dismissed with a piece of snark.

146

Chris Crawford 01.28.12 at 4:59 am

I’d suggest that we need not confine our evidentiary base to modern economic data. Although historical evidence is subject to interpretation, it still offers some utility. There are a number of angles here, starting with the concept of ‘social capital’. One historian uses the Arabic word ‘asabiya’ to describe the sense of social unity that seems to characterize successful societies, and the lack of which seems to be associated with unsuccessful societies. My favorite example of this is Mucius Scaevola illustrating the asabiya of early Rome (although that tale is semi-mythical). History provides us with endless examples of the social utility of asabiya and the high costs societies pay when asabiya declines. The single most telling example is the behavior of an army on the battlefield. So long as everybody believes in the group, the army is unbeatable. But the cry “Le Garde recule!” is always followed by “sauve qui peut”.

147

Daniel S. Goldberg 01.28.12 at 3:56 pm

@Charles Yaker # 41:

Amazing I offered data in 126 why more equal societies are usually better off and nobody seems to care. Does that suggest anything about the debate in the U.S. and elsewhere.?

Welcome to my professional life. The only thing most people want to discuss in a medical school is health care — they neither understand nor care to understand the overwhelming evidence that social conditions are fundamental causes of disease (Link & Phelan 1995) and the prime determinants of health and its distribution are structural inequalities.

Some people do care, of course; but I doubt I will ever get used to how much even highly educated people focus on all the wrong things when thinking about health.

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roger 01.28.12 at 5:48 pm

I think the evidence – at least from the OECD – is that upward social mobility is stalling in all the developed countries.
Cowen’s arguments are not very convincing. Let’s take his point about government work:
“Lots of smart Europeans decide to be not so ambitious, to enjoy their public goods, to work for the government, to avoid high marginal tax rates, to travel a lot, and so on. That approach makes more sense in a lot of Europe than here. “

What could this mean?
The first thing I’d point out is public goods/private goods distinction, upon which much of his argument rests, seems to envison the government as something that consists entirely of tax collectors, while the private sector consists wholly of Apple. In fact, governments can do a lot of different work, depending on what is nationalized and what isn’t. For instance, they can nationalize trains, or the mail, and provide the same service that private trains and private mail companies provide. Profit is a functional difference, but for the people working in the institution, it doesn’t really matter.

And the second thing I’d point out is that no developed country has a pre-1930s public workforce. In the U.S., the number of people who work for the government on all levels – local, state and federal is 17 percent. http://www.gallup.com/poll/141785/gov-employment-ranges-ohio.aspx

Now, that is less than the EU average, but significantly higher than the Japanese average. (see paper by J. Handler, here: 129.3.20.41/eps/pe/papers/0507/0507011.pdf ). In truth, the developed nations. Also, according to Handler, the U.S. public sector percentage is higher than that for Germany, the Netherlands and Italy. All of which tends to say that Cowen is talking through his hat.

Another factor that seems to escape Cowen is that taxation and redistribution are not the same. If, for instance, the U.S. taxes and spends that tax money on the military, the redistributive effect is very low. This is where the EU is very good. According to Handler:

“According to the latest data available (2001), there are significant differences in the structure of
the public sector between the EU and that in Japan and in the US. These differences are
highlighted by Figure 7. The largest difference, gauged from the social protection figures, is that
the EU15 redistributed roughly 12% of GDP more than the US and 8.5% more than Japan.
Moreover, the EU15 is leading with regard to health expenditures whereas it spends less than
half the share of GDP on defence than the US does. Finally, the US devotes slightly more public
expenditures to education than the EU15 and considerably more than Japan.”

That said, the EU has been far from immune to the neo-liberal virus, which is why it is threatened with massive wealth inequality and the politics that flows out of it – as anybody who looks at the austerity counter-revolution going on here can see. Developed economies really need higher levels of public employment – Germany’s is scandalously low, as is the U.S.’s – in order to produce what, at this stage of affluence, developed economies really need – more and better public goods. Choking the rich – imposing caps on income and expropriating absurd amounts of wealth – is only a tactic in the general movement that we should be seeing to a fairer system that spreads the benefits of the economic system to all. For instance, the use of the internet to set information free has shown that the information – in terms of tech and media products – will keep on flowing even if IP laws are changed to radically limit the monopoly power of IP holders. Similarly, healthcare as a public good is actually easier to do now than it has ever been, and would be cheaper if it were treated as a public good – i.e. the state simply inflating the population of healthcare workers far above its current level, throwing up clinics with the appropriate technology with abandon, etc. Instead, we are mired in the coils of a dying healthcare system that has elevated the incomes of doctors and dentists to absurd heights and taken no advantage of the advances in tech and education that would allow much of the work of the GP, for instance, to be done by an RN. And so we could go through the whole list – lower working hours, less emphasis on the money-merit connection (if you have a real talent, then it is a joy to do it in itself. Money is secondary), and in general the more humane capitalism that we are all very near.

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Matt 01.28.12 at 6:34 pm

John Q: I agree that if Tyler C wrote that “it’s better that the poor should remain poor than that they should change places with the rich” that this could reasonably be interpreted as “apologetics for a system that has produced entrenched inequality.” In fact, I agree with you that there is no other reasonable interpretation of such a statement. But Tyler C did not actually write the former. You wrote it, and then ascribed it (incorrectly) to him. Note that he does not actually use the terms “the poor” or “the rich.” That’s you, not him. What he wrote is that when people (not necessarily “the poor,” just people) move up the relative wealth ladder, other people (many of them not by any reasonable definition “the rich,” just people who are at first marginally richer than the people moving up) necessarily move down the same ladder, and that this can cause some kind of personal and/or social distress. I understand that you don’t think this distress is important. That doesn’t mean it doesn’t exist or that it shouldn’t be considered by anyone ever when thinking about the subjects of income inequality and social mobility. Nor does it mean that anyone who happens to spend a moment considering it (which is, in fact, all that Tyler C did) thinks poor people deserve to be poor forever.

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shah8 01.28.12 at 6:43 pm

This is what Tyler C. wrote:

3. For a given level of income, if some are moving up others are moving down. Do you take theories of wage rigidity seriously? If so, you might favor less relative mobility, other things remaining equal. More upward — and thus downward — relative mobility probably means less aggregate happiness, due to habit formation and frame of reference effects.

Do you think *John Q*’s summation is at all unfair? If not, then the rest follows.

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Matt 01.28.12 at 6:44 pm

By the way, I found out what he meant by the ideological Turing test. I had it wrong before. It is due to Bryan Caplan with a nod to Paul Krugman. (And yes, I know that I am not doing the concept any favors by invoking its author’s name here; cue “Caplan is a jackass” comments in 4,3,2…)

In a nutshell: Would your opponent be able to recognize your description of their argument or point of view as their own? If yes, you have passed the test. I guess I am, essentially, suggesting the John Q is not passing the test in the case of his representation of Tyler C’s point 3.

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Matt 01.28.12 at 6:48 pm

shah8: I do indeed think that John Q.’s summation is unfair, and I have tried to explain why I think so as best as I am able. Sorry if my point is not clear, but I have no idea at this point how to make it clearer.

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John Quiggin 01.28.12 at 11:41 pm

@Charles Yaker I didn’t respond, as I’ve already cited The Spirit Level in my book, but I agree that it’s important.

@Matt As far as I can see, the only objection you’ve made is that I use the terms “the poor” and “the rich” rather than more abstract references to people moving up and down the income distribution in summing up Cowen’s position. But that was just a shorthand in the comments thread.

My response in the original post did not use these terms, and (since I quoted Cowen in full) obviously did not misrepresent him directly. If you think my response in the OP imputes to him a position he would not recognise as his own, please explain how.

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Sebastian 01.28.12 at 11:55 pm

I”m perfectly willing to believe that more equal societies to some extent do better than non equal societies, but the Spirit Level is atrocious proof of that. It is straight up cherry picking. (See especially neglecting Hong Kong, downplaying South Korea and ignoring Singapore all of which have US or greater levels of inequality with Nordic style outcomes.)

155

Matt 01.29.12 at 3:41 am

John Q: Look, Tyler is a big boy and can speak for himself. But if I had to guess, I would say that he would probably object to your characterization of him as being a defender of entrenched inequality. So that is the part of your characterization of his argument that he likely wouldn’t recognize as his own (i.e. the OP in its entirety). What I read him as saying is: “Here are some consequences of economic churn/mobility that we should consider when we think about policies that might address economic inequality.” Just that. Nothing more. That is a very far cry from “the poor deserve to be poor forever” or “rich people should not have to give up their private jets, because that would be terribly inconvenient for them!” And again, in point 3 he doesn’t even mention rich people. “For a given level of income…” I’m pretty sure he means any level of income.

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John Quiggin 01.29.12 at 3:49 am

@Matt Yes, something more. He is writing “Here are some bad consequences of social mobility”. In the context of a string of arguments against those who argue that low/declining social mobility is a big problem, I can’t see any other way of interpreting him.

And the fact that emotive words like “rich” and “poor” aren’t used makes matters worse, not better. As an exercise, I’ll rewrite his point 3 with the concrete “rich” and “poor” in place of his abstract terms

For a given level of income, if some poorer people are becoming richer other, richer, people are becoming poorer. Do you take theories of wage rigidity seriously? If so, you might favor poor people staying poor and rich people staying rich, other things remaining equal. More poor people becoming rich -and therefore rich people becoming poor- probably means less aggregate happiness, due to habit formation and frame of reference effects.

That’s an absolutely fair statement of his argument as it applies to rich and poor people, and is clearly a defence of entrenched inequality.

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Andrew F. 01.29.12 at 1:06 pm

I think you’re missing his point. Cowen isn’t defending “entrenched inequality.” He’s arguing that economic mobility measures leave a large number of unanswered questions as to what we’re measuring, what’s causing changes in what we’re measuring, and how what we’re measuring actually translates to overall well-being.

In point 3 he offers an example of a complicating factor – the “other things remaining equal” condition should be a red flag that he’s not using the argument to defend “entrenched inequality.”

Imho, you and other commentators are assigning a much more strategic intent to Cowen’s post than is warranted.

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Matt 01.29.12 at 2:17 pm

What Andrew F said. I would add: While Tyler C’s point three certainly can be applied in some way to “the rich” and “the poor,” my point was that it doesn’t only apply to the rich, and the rich are not typically the primary group of interest when people talk about the psychic consequences of economic mobility. If I understand the research on wealth and happiness correctly, the very wealthy are not likely to be affected very much (if at all) by marginal changes in relative income; in fact, once you are in the low six figures, such changes have no measurable effect on happiness. It is the middle and lower classes who do suffer measurable psychic distress when their relative incomes change.

The question of whether pointing out a negative consequence of something necessarily means you are against doing it seems to me to be self-answering, but in case it isn’t, a real life example: Early in our marriage, my wife and I began what turned out to be a very long (spanning many years) discussion about having children. Even though we both considered a very large number of negative consequences of doing so, we decided to have children anyway. It turns out many of the negative consequences we were concerned about actually happened! And yet we do not regret our decision! (Usually.) In any case, I am glad we had the conversation.

Note that the post you tag as a “non-response” from Tyler C actually explicitly talks about the need to address some kinds of inequality. This is presumably despite the concerns he raised in the previous post. How would you square that with your image of him as a defender of entrenched inequality?

Anyways, my patience is wearing thin, and I imagine yours is as well. I think I understand your point now, though I disagree with it. Do you still not understand mine?

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Henri Vieuxtemps 01.29.12 at 2:23 pm

This must be an incident of the stupidest concern trolling ever.

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chris 01.30.12 at 11:50 pm

He’s arguing that economic mobility measures leave a large number of unanswered questions as to what we’re measuring, what’s causing changes in what we’re measuring, and how what we’re measuring actually translates to overall well-being.

Well, then, he has a point, of a sort. A new Great Compression could be carried out without changing anyone’s rank order of income by a single place (it probably wouldn’t be, because e.g. yacht salesmen would be the new buggy whip makers, but in theory it could) but would obviously, under fairly minimal assumptions, produce a massive increase in overall well-being (rich people who derive pleasure principally from their rank order of income wouldn’t actually be hurt at all, while poor people who need more actual resources to meet their real needs could benefit greatly).

This does, in fact, prove that rank order is an inadequate measure of anything, and changes in rank order might mean less than changes in real income. In theory, this could support a “you don’t need mobility, you can stay in the same quintile and gain real income” defense of the status quo, but the facts of the U.S. at least don’t support it — the bottom two or three (IIRC) quintiles are moving backwards in real income *despite* rising productivity and GDP, because inequality is rising even faster.

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