How (not) to defend entrenched inequality

fn1 seems to be missing a referent.

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.

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?

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

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.

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.

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.

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.

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.

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.

@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.

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.

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?

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?

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.

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.

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?)

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.

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.

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.

bb @ 41

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

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.

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.

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.

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.

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.

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”.

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

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

“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%.

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.

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.

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?

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.

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.

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.

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.

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

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…)

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.

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.

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.

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.

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.

@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.

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.

@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.

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.

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.

“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.

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.

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.

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.

“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.

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.

@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.

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

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

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

“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.

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.

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…?

*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.

Thank you; that makes sense.

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

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?

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?

Christ, Cowen’s an jackass.

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

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”.

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.

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.

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.

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.)

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?

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.