The facts about inequality in the US, and increasingly in other developed countries, are now so clear-cut that the defenders of the status quo have little solid ground left on which to stand. So, they are mostly confined to arguments that have already been effectively rebutted. As new talking points emerge, it’s become increasingly easy to pick them out before they are fully formed and have a prebuttal ready.
That’s the case with data showing that income inequality arises mainly from differences in current incomes* rather than from inheritance. As I pointed out a couple of months ago, the absence of large inherited inequalities is a logical consequence of the fact that the distribution of income in the postwar generation was relatively equal.
Sure enough, here’s the prebutted talking point, stated by John Cochrane, who asserts
There are a lot of facts: the widening distribution comes from a skill premium, not inherited wealth.
He goes on with some older points, long rebutted
It’s new people getting rich, not the old rich keeping more money. It’s pretax income, not the rich keeping more money. Consumption inequality is much less than income inequality. And so on.
fn1. This is a bit disappointing to me. In his technical work in finance theory, which overlaps with mine, I’ve found Cochrane to be admirably precise in his analysis and sensible in his comments on the critical issue of the equity premium. But his contributions to the broader public debate over the past few years have been very poor (of course, there are plenty who say the same about me).
- As JW Mason points out in comments, much of the growth in income for the rich has taken the form of capital gains rather than higher salaries. Piketty and Saez rank income-earners based on income net of capital gains, which obscures this fact.