I doubt it will shake too many people from their prior beliefs, but you should definitely surf on over. It's in the free section--get it while you can. There may be no such thing as a free lunch, but if you can spare a few minutes, I think the marginal benefit will exceed the marginal cost of your time.
Wall St. Journal Econoblog link
While I tend to side with Roberts on this one, I must say that the discussion gave me some ideas that I intend to kick around a bit. Something to think about over spring break.
Hmmm, I skimmed through it yesterday and didn't see a single Boushey argument that was even interesting.
What did you see to think about?
(BTW, I was SURPRISED I didn't see any good arguments against excessive inequality, I think there is at least one obvious one)
Erik,
Here are the parts I found most interesting. First, from Boushey:
"Your second point is that what you really care about is whether people are moving ahead. Here, data tell us that Americans are less likely to move up the ladder today than they were a generation ago. The economy we once had, where a poor boy could grow up to be the CEO or the president, is fast fading. Sons from the bottom three-quarters of the socioeconomic scale were less likely to move up in the 1990s than in the 1960s. By 1998, only 10% of sons of fathers in the bottom quarter (defined by income, education and occupation) had moved into the top quarter, whereas by comparison, by 1973, 23% of lower-class sons had moved up to the top. Thus, there is a smaller chance that a low-income family will move up the income ladder over time.
Later in the debate, from Roberts:
"So what about absolute mobility? By 1990, it takes more income to reach the higher quintiles than it did in 1969 -- not simply because of inflation, but because people are doing better. So Gottschalk and Danziger look at absolute mobility as well -- would some families have moved ahead if the income cutoffs in 1990 had been the same as in 1969, corrected for inflation? Essentially, they are asking whether families are doing better in absolute terms.
"By 1990, 69% of the families in the poorest quintile achieved a standard of living that would have put them in a higher quintile if the income cutoffs had not increased. By 1990, 75% of the families in the second quintile would have moved up if the cutoffs had not changed.
"In other words, more than two-thirds of the poorest families in 1969 would have moved into a higher quintile 20 years later if everyone else had not gotten richer, too. More than 11% of the poorest families in 1969 had by 1990, reached a standard of living equal to the highest quintile in the earlier period. Over 42% of the families in the second-lowest quintile did the same.
That got me thinking about the mathematics of income and wealth dynamics. Boushey and others generally come back to the same statistics. Roberts gave a lot of nice arguments, but when people of such divergent views debate on this subject it's hard to land any punches. Roberts' main arguments are great classroom discussion starters, but to convince someone who doesn't hold that view you have to engage on their field of battle. As Roberts points out, evidence on absolute mobility is thin. Boushey deflects by going back to relative mobility. And so on, round and round we go.
There needs to be more theoretical AND empirical work on the mathematics of income and wealth dynamics.
I think they both missed the point. The best rational for income inequality is that it is suppose to lead to higher savings and investment that makes everyone better off. But for a quarter century we have had sharply rising inequality that has been accompanied by a sharp plunge in personal savings -- and some research at the Fed implies that it has stemmed almost exclusively from lower saqvings by high income groups -- and except for a short boom in the late 1990s little new investment.
So why are we not getting the results our theories tell us we should be getting from rising inequality -- rising savings and investments?
Kash sided with Bouchey. My only contribution is noting the fact that real incomes for the lower percentiles in 2004 were below their 1999 levels. AB reader mcwop asks if this is due to the business cycle. I think he's right - even if this White House is under the mistaken view that we returned to full employment a couple of years back.