{ "cells": [ { "cell_type": "markdown", "metadata": {}, "source": [ "### Notes: Inequality \n", "\n", "1. Inequality Survey (Brown University Lecture)\n", "2. 1992 and the \"Krugman Calculation\"\n", "3. Piketty\n", "4. Saez and Zucman" ] }, { "cell_type": "markdown", "metadata": {}, "source": [ " \n", "\n", "----\n", "\n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Doug Jones**: _The Patriarchal Age_ : \"The left panel shows effective population sizes based on Y chromosome DNA, transmitted down the male line. The right panel shows effective population sizes based mitochondrial DNA, transmitted down the female line. The dramatic dip on the left panel, where effective population sizes go way down in the last ten thousand years, means that there was a period, from the initial spread of major language families to near the dawn of history, where just a few men were leaving lots of descendants in the male line. This must reflect a time when polygyny – some men taking multiple wives, others not reproducing at all – was common. But this pattern probably reflects more than just polygyny. It probably also reflects a continuing advantage, carried over many generations, for some male lines of descent. In other words, back in the day, not just did Lord Y (or whoever) have many wives and many sons, but his sons, his sons’ sons. his son’s son’s sons, and so on, had many offspring. This probably implies some kind of long-term social memory, such that that the “Sons of Y” or the “House of Y” had a privileged position for many generations.... Eurasian history is often told as the story the rise of states and empires. But it’s also the story of the rise of patrilineal descent groups (and the heavy policing of female sexuality to make sure of paternity in the male line)...\n", "\n", "\"Patriarchy\n", "\n", "\n", "\n", "**Monika Karmin _et al._**: _A Recent Bottleneck of Y Chromosome Diversity Coincides with a Global Change in Culture_ :\n", "\n", "* _Supplemental Material_ \n", "\n", "\"Https\n", "\n", "\"Https\n", "\n", "\"Https\n", "\n", " #noted #2019-10-06\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Carl O'Donnell** (2014): _What Does It Take To Make The Forbes 400?: Increasingly More And More_ : \"Every year, the Forbes 400 sets the bar higher. Just making it to the very bottom of this year’s list requires 1.55 billion–250 million more than in 2013. And that’s only a single year. To truly appreciate how quickly the hurdle is rising, Forbes took a look at how much the minimum cutoff increased every year since 1982, when the first Rich List was created. In so doing, Forbes also revisited the millionaires and billionaires who have had the honor of ranking last on the Forbes 400. The poorest person on the list in 1982 was Armas Clifford 'Mike' Markkula Jr., who was then the CEO of a hot tech startup called Apple Computer. He joined the firm in 1977, when Steve Jobs and Steve Wozniak approached him for funding. Markkula’s net worth in 1982: $91 million. Not bad, but only about one 17th of what he would need to ascend to the Forbes 400 today. Granted, the dollar had more purchasing power in 1982. So how much would 91 million be worth in today’s dollars? About 225 million, still less than a sixth of today's cutoff...\n", "\n", " #noted #2019-10-06\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**On Piketty**: The \"elasticity of substitution\" is an _emergent_ property. It has very little to do with \"technology\" if only because there is not one single technology in the economy. There are lots of different types of machines and lots of ways to use workers and machines to produce things. And \"rigid organization\" is not quite right either here: **Suresh Naidu** (2014): _[Notes from Capital in the 21st Century Panel](http://slackwire.blogspot.com/2014/04/notes-from-capital-in-21st-century-panel.html)_: \"Perhaps a useful analogy is that this is the \"Free to Choose\" or “Capitalism and Freedom” for our time, from the left. I can’t think of a book that emerged from economics for a mass audience with as much reception since then. And what good news this is for economics! For 50 years Milton Friedman was the public face of partisan economics, and stamped it with a conservative public face that persisted. Maybe now Piketty’s book will give my discipline another public face...\n", "\n", ">...But let me push back against the book a bit. I think there is a \"domesticated\" version of the argument that economists and people that love economists will take away. Then there is a less domesticated one, one that is more challenging to economics as it is currently done. I'm curious which one Thomas believes more. I worry that the impact of the book will be blunted because it becomes a “Bastard Piketty-ism” and allows macroeconomics to continue in its modelling conventions, which are particularly ill-suited to questions of inequality.\n", "\n", ">The domesticated version is a story about technology and the world market making capital and labor more and more substitutable over time, and this is why r does not fall very much as wealth accumulates. It is fundamentally a story about market forces, technology and trade making the demand for capital extremely elastic. We continue to understand r as the marginal contribution of capital to the production of the economy. I think this is story that is told to academic economists, and it is plausible, at least on the surface. \n", "\n", ">There is another story about this, one that goes back to Keynes. And the idea here is that the rate of return on capital is set much more by institutions, norms and expectations than by supply and demand of the capital market. Keynes writes that \"But the most stable, and the least easily shifted, element in our contemporary economy has been hitherto, and may prove to be in future, the minimum rate of interest acceptable to the generality of wealth-owners.\" Keynes footnotes it with the 19th century saying that “John Bull can stand many things, but he cannot stand 2 percent.”\n", "\n", ">The book doesn't quite take a stand on whether it is brute market forces and a production function with a high elasticity of substitution or instead relatively rigid organization of firms and financial institutions that lies behind the stability of r.  \n", "\n", ">I think the production approach is less plausible... \n", "\n", " #noted #2019-10-12\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Inequality 1992**: \"Inbox\n", "\n", "I have long wanted an undergraduate to write a senior thesis about this episode. I have never found one to advise to do so:\n", "\n", "**Hoisted from the Archives**: The income distribution came on to the stage that is America's public sphere between February 14 and December 12, 1992. And the rhetoric of \"X% of gains in _per capita_ income over years Y-Z went to the top W%-iles of the income distribution\" became a one in American political-economic discourse over that time period as well. Over those ten months then-_New York Times_ economics reporter Sylvia Nasar wrote eight stories about income inequality in America. All of them were pitched at a high substantive and intellectual level—they would have fit into the _New York Times's_ later Upshot (which has recently refocused at a less analytically-substantive level as concerned with \"politics, policy, and everyday life\"). This was, needless to say, very unusual for the _New York Times_.\n", "\n", "Sylvia's first story addressed the peculiar fact that the \"80's Boom\", as Reagan Republicans and the _New York Times_ called it, had seen the poverty rate not diminish but rise. Sylvia attributed that rise to union-busting, and a growing disparity between high- and low-wage jobs springing from a decline in relative manufacturing employment and possibly from boosted high-wage white-collar productivity from computerization. Her second story, on March 5, took a turn. Instead of continuing to investigate the causes of rising poverty and wage stagnation in a decade of supposed boom, it focused on \"who had reaped the gains\" from \"the prosperity of the last decade and a half\". It highlighted the \"Krugman calculation\". It began:\n", "\n", ">Populist politicians, economists and ordinary citizens have long suspected that the rich have been getting richer. What is making people sit up now is recent evidence that the richest 1 percent of American families appears to have reaped most of the gains from the prosperity of the last decade and a half. An outsized 60 percent of the growth in the average after-tax income of all American families between 1977 and 1989—and an even heftier three-fourths of the gain in average pretax income—went to the wealthiest 660,000 families, each of which had an annual income of at least $310,000 a year...\n", "\n", "And she, referring to his \"testimony before Congress several weeks ago\", aggressively quoted Paul Krugman, who had taken the CBO's income-distribution estimate numbers and presented them in, as one economist said to me at the time, \"the most inflammatory fashion possible that was not actively misleading\": \n", "\n", ">We know that productivity has increased since 1977 and that more people are working. Where did all that extra income go? The answer is that it all went to the very top.... The number that no one had seen was how much of the growth went to a few people...\n", "\n", "(How Paul Krugman came to be browsing and what he found in the House Was and Means Committee's _Green Book: Background Material on Family Income and Benefit Changes_, Committee Print 102-30 (December 19,1991), pp. 61-81; what his \"testimony before congress\" was; and how Sylvia Nasar found out about it and decided it was interesting—these are not things that I ever got completely straight.)\n", "\n", "What happened then? Well, two months later Sylvia Nasar's May 11 story is headlined: \"The Richest Getting Richer: Now It's a Top Political Issue\". According to Bill Clinton's press secretary Deedee Myers, Clinton read the March 5 study, went wild, and incorporated it into his stump speeches. Nasar called Clinton \"one of the few Presidential candidates since Harry S. Truman to woo the middle class by pummeling the rich\". She called Republicans furious: \"The Joint Economic Committee's... minority report accuses Democrats of using Joseph Stalin's approach to rewriting history. Supply-side architects... blasted the figures as 'propaganda, not data'.... Economic adviser Michael J. Boskin said he was livid... an editorial response signed by the President's counselor for domestic policy, Clayton K. Yeutter\".\n", "\n", "And then it becomes coy: seeming to minimize Sylvia Nasar's role in this:\n", "\n", ">When the Congressional Budget Office first released its income data... only a handful... paid much attention.... Even after... Paul R. Krugman... concluded that the major share... had gone to the richest... had trouble getting anyone to listen...\n", "\n", "And then: \"But Mr. Krugman's arithmetic ultimately crystallized the issue...\" It was Krugman's arithmetic, Sylvia Nasar's putting it on the front page of the _New York Times_, and Bill Clinton's adding it to his stump speech that \"crystalized the issue\".\n", "\n", "By May 18 Sylvia Nasar was pushing back against conservatives who claimed (falsely) that America is a land of such great opportunity that static distribution statistics are meaningless: \"rags-to-riches remains the economic exception.... A child whose father is in the bottom 5 percent of earners, for instance, has only 1 chance in 20 of making it into the top 20 percent of families.... Much... short-term turnover may be illusory... a large fraction of year-to-year changes... reflects reporting error, timing of income like capital gains, episodes of illness or unemployment and other transitory effects... \" On June 17 Sylvia Nasar was refereeing a debate over income inequality and the relevance of the \"Krugman calculation\" between Belle Sawhill and Mark London of the Urban Institute and Glenn Hubbard of the Treasury (now of Columbia). She scores it three-love for Sawhill and London, quoting Kevin Murphy saying that what drove Hubbard's claims was \"not your classic income mobility. This is the guy who works in the college bookstore and has a real job by his early 30's...\" She piled on further on July 20:\n", "\n", ">the Treasury has been quietly circulating a 'primer' on income distribution to journalists and economists. The 24-page document, prepared by R. Glenn Hubbard... asserts that the richest 1 percent of American taxpayers reaped only 11.3 percent of the income gains in the 1980's.... But experts in the field who reviewed the Treasury's calculation were highly critical, saying that the Treasury economist had fallen into a well-known statistical trap.... 'It's not a meaningful calculation', said Lawrence F. Katz.... 'I would ask Treasury to redo their calculation on the top 1 percent defined by 1988 income', said Joel B. Slemrod.... 'I'm pretty sure the numbers would change quite a bit'. A reporter had, in fact, asked Mr. Hubbard several times to make such a calculation, but he refused on the ground that the results would be uninteresting...\n", "\n", "The \"reporter\", we are meant to infer, was Sylvia Nasar, asking Glenn Hubbard a question that he did not dare himself answer, or allow others at his database so they could answer it.\n", "\n", "And on August 16, Sylvia Nasar quoted me extensively in an article trying to put the issues in perspective:\n", "\n", ">By the end of the 1980's... wealth in this country had become more concentrated than at any time since the Roaring Twenties. The share of net worth... held by the top 1 percent... jumped from below 20 percent in 1979 to more than 36 percent in 1989, according to... Claudia Goldin and Bradford De Long... and... Edward Wolff at New York University.... The wealthy's share of the total wealth expanded as much during the Reagan boom as it did in the 100 years—roughly 1830 to 1929—in which America transformed itself from an egalitarian land of small farmers into the world's reigning industrial power.... In some ways, the 1980's resembled the Gilded Age and the era of robber barons.... The biggest difference... had more to do with what was happening at the bottom.... While the pay of corporate presidents soared to 160 times that of the average worker, union membership sank, and pay and productivity, which had advanced handily in the early 20th century, stagnated.... 'John D. Rockefeller was a nasty bastard, but he built the oil industry', said Professor deLong. 'It's the combination of rapidly rising wealth for the Forbes 400 and slow productivity growth for the average American that's worrisome'....\n", "\n", ">The New Deal took from the monied... gave to the poor and middle class. Washington collected more income and inheritance taxes.... The New Deal saved the homes, farms and businesses of millions of ordinary Americans.... World War II squeezed wealth into the hands of the working classes.... The National War Labor Board—heeding F.D.R.'s directive to raise substandard wages—tended to approve raises for poorer workers while turning down raises for the better paid. The rich, meantime, had nowhere to invest except in war bonds whose value evaporated when the country inflated its way out of its huge wartime debt. It was in the mid-1970s, after Vietnam, the oil crisis and a bad recession shattered business confidence, that the wealthy's share hit a low point.... \"Prices doubled, but so did wages and home values,\" said Professor de Long, \"holders of financial assets got hammered.\" In between, the 1950's and 1960's was a golden age...\n", "\n", "Sylvia Nasar closed out the thread on December 12, with a shift toward writing about how the incoming Clinton administration would be able to do only a small share of all the good things it had promised during the campaign.\n", "\n", "Paul Krugman also closed out the thread in a fall 2012 piece in _The American Prospect_, calling to account a great many conservative economists and commentators who had behaved very badly indeed: Michael Boskin, John Taylor, and their staffs at the CEA; the _Wall Street Journal_; Paul Craig Roberts and Alan Reynolds; Glenn Hubbard; Richard Armey; and, of course, Clayton \"Democrats are Stalinists\" Yeutter. Paul close his piece with: \n", "\n", ">The... lesson... is what it says about today's conservative mind-set. It turns out that many conservatives, for all their anti-totalitarian rhetoric, have Orwellian instincts: if the record doesn't say what you wish it did, hide it or fudge it.... Many conservatives not only don't want to discuss substance: they prefer not to face reality, and to live in a fantasy world in which the 1980s turned out the way they were supposed to, not the way they did...\n", "\n", "Note that all this predated Donald Trump, the claims that the TCJA would substantially boost American investment and growth, and global warming and AR-15 denial by 25 years.\n", "\n", "Armey, Reynolds, Roberts, Yeutter, and the _Wall Street Journal_ editorial page never claimed to be in anything other than the propaganda business. \n", "\n", "But how to explain Boskin, Hubbard, and Taylor? \n", "\n", "As I understood it, the \"Krugman calculation\" was all about: \"you are no richer today than you would be if your slot in the income distribution had gotten none of the income gains of the 1980s\". But, again as I understood it, Boskin, Hubbard, and Taylor believed that Krugman—and Nasar, and Clinton—were crafting their message so that while that may have been what they _said_, what their audience _heard_ was different: \"you are no richer today than you were a decade ago\". Rather than Krugman framing the message as \"the most inflammatory fashion possible that was not actively misleading\", they saw his messaging as inflammatory _and_ misleading. \n", "\n", "But they did not, as Goldin, Sawhill and London, everybody else on the left and the center, Paul Krugman himself, and a good many on the then right (i.e., Kevin Murphy) did, attempt to de-mislead by distinctions between the two questions. Instead, they decided to mislead themselves by confusing things as much as possible (nd in the case of Boskin's CEA to throw in additional confusions. I have seen this often: people saying \"the other side isn't playing fair, but rather than ask them to follow the rules, we are going to try as hard as possible to be unfair ourselves\". It is rarely a good look....\n", "\n", "----\n", "\n", "**Sylvia Nasar** (February 14, 1992: _Economic Scene; Puzzling Poverty Of the 80's Boom_ : \"In at least one vital dimension, the 80's were totally unlike the 60's. The official poverty rate, which counts the number of people whose income falls short of some minimum level, did not come down as the economy rose. While poverty shrank by a quarter in those golden Kennedy-Johnson years, it was actually higher at the end of the Reagan boom than in 1979.... How come trickle-down economics did not work last time around, especially given that the unemployment rate fell by half, or more than five full percentage points, from 1983 to 1989?... Union-busting.... A widening disparity between low-wage and high-wage workers.... Jobs in manufacturing, where unskilled workers used to be able to earn premium pay, shr[a]nk as a share of total jobs... demand for unskilled workers either slipped or grew more slowly than for workers with more to offer. The problem may reflect the much-talked-about computerization of the American workplace...\n", "\n", " \n", "\n", "**Sylvia Nasar** (March 5, 1992): _The 1980's: A Very Good Time for the Very Rich_ : \"An outsized 60 percent of the growth in the average after-tax income of all American families between 1977 and 1989—and an even heftier three-fourths of the gain in average pretax income—went to the wealthiest 660,000 families, each of which had an annual income of at least 310,000 a year.... 'We know that productivity has increased since 1977 and that more people are working', said Paul Krugman, an economist at the Massachusetts Institute of Technology and the author of The Age of Diminished Expectations.... 'Where did all that extra income go? The answer is that it all went to the very top.... The number that no one had seen was how much of the growth went to a few people', said Mr. Krugman, who focused on the numbers in testimony before Congress several weeks ago...\n", "\n", ">...The surge in pay at the top is just too large to be explained solely by working wives and M.B.A. degrees.... It is easy to exaggerate fluidity at the very top, some economists say. For one thing, the rich may get knocked off their perches from time to time, but the fall for most is not usually all that far.... For the present, the numbers are bound to provide yet another battleground for politicians arguing over which tax policy will produce the best combination of growth and 'fairness'...\n", "\n", " \n", "\n", "**Sylvia Nasar** (May 11, 1992): _The Richest Getting Richer: Now It's a Top Political Issue_ : \"When Bill Clinton wants to galvanize his audience, he thunders from the podium that the top 1 percent of families got 60 percent of the gains from economic growth during the 1980's and owns more wealth than the bottom 90 percent.... 'He was reading the paper that morning and went crazy', said Dee Dee Myers, the campaign's press secretary, referring to an article in The _New York Times_ on March 5.... Mr. Clinton is one of the few Presidential candidates since Harry S. Truman to woo the middle class by pummeling the rich.... The furor over the rich getting richer infuriates Republicans.... The Joint Economic Committee's annual minority report accuses Democrats of using Joseph Stalin's approach to rewriting history. Supply-side architects of the Reagan tax cuts blasted the figures as 'propaganda, not data'. Even the President's notably unemotional economic adviser, Michael J. Boskin, said he was livid. The White House itself took the unusual step of delivering an editorial response signed by the President's counselor for domestic policy, Clayton K. Yeutter.... Oddly, when the Congressional Budget Office first released its income data—the numbers that are now being hurled on the hustings—only a handful of Congressional aides and professional economists paid much attention. And even after the economist Paul R. Krugman of the Massachusetts Institute of Technology crunched the numbers and concluded that the major share of the gains in average family income between 1977 to 1989 had gone to the richest of the rich, he had trouble getting anyone to listen. But Mr. Krugman's arithmetic ultimately crystallized the issue...\n", "\n", " \n", "\n", "**Sylvia Nasar** (May 18, 1992): _Rich and Poor Likely to Remain_ : \"One school of thought says... even if the raw numbers are accurate, these economists say, the portrait fails to capture the amazing fluidity and flux of American society... But... rags-to-riches remains the economic exception, not the rule.... If anything, economists say, the climb out of poverty has become harder in the last decade or two.... A child whose father is in the bottom 5 percent of earners, for instance, has only 1 chance in 20 of making it into the top 20 percent of families, according to a coming article in _The American Economic Review_ by Professor Solon.... 'All you have to do is look at L.A. to decide that there are lots of people who think their permanent prospects are pretty crummy', said David M. Cutler, an economist at Harvard University.... Apart from changes in income and wealth that reflect the normal lifetime pattern... most Americans do not move a great many rungs up or down.... Much... short-term turnover may be illusory... a large fraction of year-to-year changes... reflects reporting error, timing of income like capital gains, episodes of illness or unemployment and other transitory effects...\n", "\n", " \n", "\n", "**Sylvia Nasar** (July 20, 1992): _The Rich Get Richer, but the Question Is by How Much_ : \"The Treasury has been quietly circulating a 'primer' on income distribution to journalists and economists. The 24-page document, prepared by R. Glenn Hubbard, Deputy Assistant Secretary for Tax Analysis, asserts that the richest 1 percent of American taxpayers reaped only 11.3 percent of the income gains in the 1980's.... But experts in the field who reviewed the Treasury's calculation were highly critical, saying that the Treasury economist had fallen into a well-known statistical trap that all but guaranteed that the gains for the top group of income earners would appear modest. 'It's not a meaningful calculation', said Lawrence F. Katz.... 'I would ask Treasury to redo their calculation on the top 1 percent defined by 1988 income', said Joel B. Slemrod, an economist at the University of Michigan. 'I'm pretty sure the numbers would change quite a bit'. A reporter had, in fact, asked Mr. Hubbard several times to make such a calculation, but he refused on the ground that the results would be uninteresting...\n", "\n", " \n", "\n", "**Sylvia Nasar** (August 16, 1992): _THE NATION: The Rich Get Richer, But Never the Same Way Twice_ : \"By the end of the 1980's... wealth in this country had become more concentrated than at any time since the Roaring Twenties. The share of net worth... held by the top 1 percent... jumped from below 20 percent in 1979 to more than 36 percent in 1989, according to... Claudia Goldin and Bradford De Long... and... Edward Wolff at New York University.... The wealthy's share of the total wealth expanded as much during the Reagan boom as it did in the 100 years—roughly 1830 to 1929—in which America transformed itself from an egalitarian land of small farmers into the world's reigning industrial power.... In some ways, the 1980's resembled the Gilded Age and the era of robber barons.... The biggest difference... had more to do with what was happening at the bottom.... While the pay of corporate presidents soared to 160 times that of the average worker, union membership sank, and pay and productivity, which had advanced handily in the early 20th century, stagnated.... 'John D. Rockefeller was a nasty bastard, but he built the oil industry', said Professor deLong. 'It's the combination of rapidly rising wealth for the Forbes 400 and slow productivity growth for the average American that's worrisome'....\n", "\n", ">The New Deal took from the monied... gave to the poor and middle class. Washington collected more income and inheritance taxes.... The New Deal saved the homes, farms and businesses of millions of ordinary Americans.... World War II squeezed wealth into the hands of the working classes.... The National War Labor Board—heeding F.D.R.'s directive to raise substandard wages—tended to approve raises for poorer workers while turning down raises for the better paid. The rich, meantime, had nowhere to invest except in war bonds whose value evaporated when the country inflated its way out of its huge wartime debt. It was in the mid-1970s, after Vietnam, the oil crisis and a bad recession shattered business confidence, that the wealthy's share hit a low point.... \"Prices doubled, but so did wages and home values,\" said Professor de Long, \"holders of financial assets got hammered.\" In between, the 1950's and 1960's was a golden age...\n", "\n", " \n", "\n", "**Sylvia Nasar** (December 12, 1992): _Tapping the Rich May Prove Tricky_ : \" https://www.nytimes.com/1992/12/12/business/tapping-the-rich-may-prove-tricky.html?searchResultPosition=257: \"Getting the really rich—the people who reaped an outsize share of the economic gains of the 1980's—to pay more was a major plank of the Democratic campaign.... The problem is that while higher tax rates on high incomes are likely to provide a good deal of new money, they are not likely, barring an unexpectedly buoyant economy, to generate the 92 billion over four years that the Clinton camp has claimed.... Where does that leave the middle-class tax cut?... 'Even without the middle-class tax cut, the plan is mildly deficit-increasing', said Paul R. Krugman, an M.I.T. economist. 'It would be nice to get a sense from Little Rock that there are some hard choices being made'.... Clinton made two proposals during the campaign... relief to middle-class taxpayers... expanding the popular earned-income tax credit.... Taken together, the two changes, if carried out on this scale, would swallow up the revenue raised from the rich and then some...\n", "\n", " \n", "\n", "----\n", "\n", "**CBO** (March 1992): _Measuring The Distribution of Income Gains_ : \"For several years, the Congressional Budget Office (CBO) has developed estimates of the distribution of income and federal taxes in response to requests from Committees of the Congress. CBO published the original estimates, and various publications of the Committee on Ways and Means have included more recent estimates along with explanations of the methodology used to calculate them and the staffs descriptions of the patterns they reveal. Policy analysts, commentators, and the media frequently reconfigure, interpret, analyze, and criticize the estimates. In the process, the interpretations and conclusions of these secondary appraisals are sometimes-and incorrectly-attributed to CBO. A case in point: recent media stories have used CBO statistics on incomes to buttress a contention about the increasing inequality of after-tax incomes among families. For example, The New York Times reported on March 5 that 'The richest 1% of families received 60% of the after-tax income gain' between 1977 and 1989. That figure, which was attributed to both CBO and Professor Paul Krugman of the Massachusetts Institute of Technology, was actually Professor Krugman's reconfiguration of CBO data contained in a December 1991 report issued by the House Committee on Ways and Means. Many of the commentaries that resulted criticized CBO's estimates and methodology or ascribed the conclusions in the original article to CBO. This memorandum seeks to clarify some of the confusion...\n", "\n", "**CBO** (March 1992): _Measuring The Distribution of Income Gains_ : \"See, for example, Subcommittee on Human Resources of the Committee on Ways and Means, U.S. House of Representatives, _Background Material on Family Income and Benefit Changes_, Committee Print 102-30 (December 19,1991), pp. 61-81, and Committee on Ways and Means, U.S. House of Representatives, 7997 _Green Book Overview of Entitlement Programs_, Committee Print 102-9 (May 7, 1991), pp. 1286-1329. CBO discussions of these issues appear in _The Changing Distribution of Federal Taxes: 1975-1990_ (October 1987); The Changing Distribution of Federal Taxes: A Closer Look at 1980 (July 1988); and testimony of Robert Reischauer before the Committee on the Budget, U.S. House of Representatives, July 17, 1991, and the Committee on Finance, U.S. Senate, November 26, 1991...\n", "\n", " \n", "\n", "----\n", "\n", "**Clayton Yuetter** (March 24, 1992): _When 'Fairness' Isn't Fair_ : \" : https://www.nytimes.com/1992/03/24/opinion/when-fairness-isn-t-fair.html?searchResultPosition=1: \"Class warfare, discredited throughout the former Communist world, seems to have found new life in American political circles. A front-page article in the March 5 _New York Times_ described one example: an allegation that the recovery of the 1980's—and hence the conservative philosophy of the Bush Administration—helped the rich and hurt the poor. This analysis, a reprise of the so-called fairness argument, rests on a Congressional Budget Office study and an analysis by a Massachusetts Institute of Technology economist, Paul Krugman. The C.B.O. and Mr. Krugman have played prominent roles in shaping the liberal version of the fairness debate, and their allegations have become a staple in the speeches of Democratic politicians. But the analysis suffers from grievous flaws... throwing in data from the Carter era... gives the impression that American society consists of stationary social classes—a sort of human layer cake in which a haughty, unchanging upper class rests atop an oppressed, unchanging underclass... the C.B.O. study creates the impression of an increasingly divided America by overstating the 'wealth' of the top 1 percent.... But the fairness story involves far more than statistics. It involves values. Many advocates of the 'fairness' critique want to stoke middle-class resentment by implying that the rich take from the poor. They never seem to realize that a dynamic, entrepreneurial economy can create a bigger pie for everyone.... The politics of redistribution are as dead as Leninism. Today, people in former Communist lands beg for copies of the Federalist Papers and \"The Wealth of Nations\"—not for \"The Greening of America.\" They don't seek a sleeker socialism. They seek something like what President Bush calls the Good Society—one built on hard work, decency, thrift, service, family—one that places the individual before government. The C.B.O.-Krugman assault on the Reagan-Bush recovery avoids all these factual and moral subtleties, and muddles a debate that matters to most of us. That's a shame because the fairness debate will shape our destiny. As we take on the tangled issues that arise from it, we will need all the facts and all the real fairness we can get...\n", "\n", " \n", "\n", "----\n", "\n", "**Paul Krugman** (Fall 1992): _The Rich, the Right, and the Facts: Deconstructing the Inequality Debate_ : \"This public debate was remarkable in two ways.... The conservative side displayed great ferocity.... Conservatives chose to take an odd, and ultimately indefensible, position. They could legitimately have challenged... on the grounds that nothing can, or at any rate should, be done about it. But with only a few exceptions they chose instead to make their stand on the facts to deny that the massive increase in inequality had happened... [in] an extraordinary series of attempts at statistical distortion.... The combination of mendacity and sheer incompetence displayed by the Wall Street Journal, the U.S. Treasury Department, and a number of supposed economic experts demonstrates something else: the extent of the moral and intellectual decline of American conservatism...\n", "\n", ">...My own contribution to this discussion was to point out that there is a sense in which the rise in incomes at the top is in fact a major economic issue, and to offer a shorthand way of conveying that point: the now infamous 'Krugman calculation' that 70 percent of the rise in average family income has gone to the top 1 percent of families.... To help attract attention to a trend that I thought had been neglected I proposed the following thought experiment. Imagine two villages, each composed of 100 families representing the percentiles of the family income distribution in a given year in particular, a 1977 village and a 1989 village. According to the CBO numbers, the total income of the 1989 village is about 10 percent higher than that of the 1977 village; but it is not true that the whole distribution is shifted up by 10 percent. Instead, the richest family in the 1989 village has twice the income of its counterpart in the 1977 village, while the bottom forty 1989 families actually have lower incomes than their 1977 counterparts. Now ask: how much of the difference in the incomes of the two villages is accounted for by the difference in the incomes of the richest family? Equivalently, how much of the rise in average American family income went to the top 1 percent of families? By looking at this measure we get a sense of who was \"siphoning off\" the growth in average incomes....\n", "\n", ">Many conservatives were furious when the income distribution story surfaced in early 1992.... Indeed the belated attention to inequality during the spring of 1992 clearly helped the Clinton campaign find a new focus and a new target for public anger: instead of blaming their woes on welfare queens in their Cadillacs, middle-class voters could be urged to blame government policies that favored the wealthy. So the dismay and anger of conservatives was understandable. The response from the administration, the _Journal_, and other conservative voices was, however, inexcusable: instead of facing up to the fact of rapidly growing inequality under conservative rule, they tried to deny the facts and shoot the messengers....\n", "\n", ">The CEA calculation... includ[ing] sheer growth in working-age population gets us completely away from those questions.... Many conservative commentators including Paul Craig Roberts, Alan Reynolds, Representative Richard Armey, and the editorial page of the _Wall Street Journal_ have bitterly attacked the CBO for including capital gains.... Excluding capital gains from the CBO numbers makes very little difference.... Alan Reynolds... as well as... Republican Congressman Richard Armey... did not bother to read the study before attacking it....\n", "\n", ">The second line of conservative defense has become a familiar one: they claim that the growth record of the Reagan years shows that supply-side policies produce gains for everyone, and that it is destructive to worry about or even to notice the distribution of income.... The basic proposition that the \"Krugman calculation\" was meant to convey is that income inequality has been increasing so rapidly that most families have failed to get much benefit out of long-term growth. This proposition stands. One need not take seriously the efforts by supply-siders to chop the past fifteen years into little slices, and claim the good ones while disclaiming the bad ones.\n", "\n", ">The Conservative Response 3: Income Mobility.... The Hubbard Study... a report claiming that... 86 percent of individuals who started in the bottom quintile in 1979 had moved out by 1988.... But this report was based on what we may charitably call a strange procedure.... It tracked a group of individuals who paid income taxes in all ten years from 1979 to 1988, and compared their incomes not with each other but with those of the population at large. The restriction to individuals who paid taxes in all years immediately introduced a strong bias toward including only the economically successful; only about half of families paid income taxes in all ten years.... [Plus] the report essentially treated the normal tendency of earnings to rise with age as representing social mobility.... \n", "\n", ">The surprise lesson of the income distribution controversy, then, is what it says about today's conservative mind-set. It turns out that many conservatives, for all their anti-totalitarian rhetoric, have Orwellian instincts: if the record doesn't say what you wish it did, hide it or fudge it.... Many conservatives not only don't want to discuss substance: they prefer not to face reality, and to live in a fantasy world in which the 1980s turned out the way they were supposed to, not the way they did...\n", "\n", " #economicsgonewrong #equitablegrowth #highlighted #hoistedfromthearchives #orangehairedbaboons #politicaleconomy #politics #publicsphere #2019-10-07\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Clayton Yuetter** (March 24, 1992): _When 'Fairness' Isn't Fair_ : \"Class warfare, discredited throughout the former Communist world, seems to have found new life in American political circles. A front-page article in the March 5 _New York Times_ described one example: an allegation that the recovery of the 1980's—and hence the conservative philosophy of the Bush Administration—helped the rich and hurt the poor. This analysis, a reprise of the so-called fairness argument, rests on a Congressional Budget Office study and an analysis by a Massachusetts Institute of Technology economist, Paul Krugman. The C.B.O. and Mr. Krugman have played prominent roles in shaping the liberal version of the fairness debate, and their allegations have become a staple in the speeches of Democratic politicians. But the analysis suffers from grievous flaws. I will cite just a few. First, the claim that the top 1 percent of taxpayers raked in 60 percent of the benefits of the Reagan-Bush boom rests on a statistical sleight of hand. The C.B.O.-Krugman analysis masks the progress of the Reagan-Bush expansion by throwing in data from the Carter era, when the poor got poorer and the rich got poorer. During the Reagan-Bush boom, by contrast, the rich paid more in taxes and the poor made more in income. Minorities enjoyed a greater leap in wealth, employment and mobility than whites. The middle class shrank because more people became 'rich'. That's the Reagan-Bush record...\n", "\n", ">...Second, the analysis gives the impression that American society consists of stationary social classes—a sort of human layer cake in which a haughty, unchanging upper class rests atop an oppressed, unchanging underclass. That is pure fiction: Our greatness as a nation arises from the fact that people rise and fall on the strength of their abilities. Many children of the rich fall below the national average income level in their lifetimes, and many poor children rise to riches. Third, the C.B.O. study creates the impression of an increasingly divided America by overstating the \"wealth\" of the top 1 percent and understating the wealth of everyone else. It lumps retirees who have sold their homes into the ranks of tycoons. It overlooks the incredible increase in the values of investments in the Reagan-Bush years. At the same time, the study understates middle-class wealth by overlooking the value of unsold assets like homes, stocks and pension funds. If you count everybody's capital gains, you find that the poor and middle class got the vast majority of benefits of the Reagan-Bush expansion.\n", "\n", ">But the fairness story involves far more than statistics. It involves values. Many advocates of the \"fairness\" critique want to stoke middle-class resentment by implying that the rich take from the poor. They never seem to realize that a dynamic, entrepreneurial economy can create a bigger pie for everyone. American workers understand how an economy works, however, and so do voters. They don't like the Robin Hood politics of class warfare, and never have. When societies exalt the corrosive instinct of envy they condemn themselves to a poverty of goods and spirit. Moses delivered a commandment that began: \"Thou shalt not covet.\" He and his wanderers understood that an economy runs not just on profits, but on values. The \"fairness\" argument ignores the way the market works. It twists the meaning to advocate a Government powerful enough to transfer money from rich to poor. But no one equates fairness with a Government that grows and raises taxes, regardless of its performance, or that transfers money from the rich and middle class into programs that lure the poor into permanent dependency. Most Americans think about fairness in practical terms. You work hard, and you keep what you earn: That's fair. If you save and invest and take risks, and produce something that fulfills the needs of others, you make a profit. That's fair.\n", "\n", ">The politics of redistribution are as dead as Leninism. Today, people in former Communist lands beg for copies of the Federalist Papers and \"The Wealth of Nations\"—not for \"The Greening of America.\" They don't seek a sleeker socialism. They seek something like what President Bush calls the Good Society—one built on hard work, decency, thrift, service, family—one that places the individual before government. The C.B.O.-Krugman assault on the Reagan-Bush recovery avoids all these factual and moral subtleties, and muddles a debate that matters to most of us. That's a shame because the fairness debate will shape our destiny. As we take on the tangled issues that arise from it, we will need all the facts and all the real fairness we can get.\n", "\n", " #noted #2019-10-07\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "\"Https\n", "\n", "**Paul Krugman** (Fall 1992): _The Rich, the Right, and the Facts: Deconstructing the Inequality Debate_ : \"During the mid-1980s, economists became aware that something unexpected was happening to the distribution of income in the United States. After three decades during which the income distribution had remained relatively stable, wages and incomes rapidly became more unequal.... During 1992 this genteel academic discussion gave way to a public debate, carried out in the pages of the _New York Times_, the _Wall Street Journal_, and assorted popular magazines. This public debate was remarkable in two ways.... The conservative side displayed great ferocity.... Conservatives chose to take an odd, and ultimately indefensible, position. They could legitimately have challenged,,, on the grounds that nothing can, or at any rate should, be done about it. But with only a few exceptions they chose instead to make their stand on the facts to deny that the massive increase in inequality had happened... [in] an extraordinary series of attempts at statistical distortion. The whole episode... is a sort of textbook demonstration of the uses and abuses of statistics.... The combination of mendacity and sheer incompetence displayed by the _Wall Street Journal_, the U.S. Treasury Department, and a number of supposed economic experts demonstrates something else: the extent of the moral and intellectual decline of American conservatism.... _Fortune_ has long carried out annual surveys of executive compensation; and since the mid-1970s compensation of top executives has risen far faster than average or typical wages.... Surveys carried out by the University of Michigan have also shed useful light on income distribution.... There is also anecdotal evidence: Tom Wolfe... soaring demand for apartments in Manhattan's 'Good Buildings'... his _Bonfire of the Vanities_ arguably tells you all you need to know about the subject...\n", "\n", ">...Most academic studies on the distribution of income in the United States rely on Census data, compiled from the Current Population Survey.... In all the mud-slinging of the income distribution debate, nobody has yet accused the Census of bias or distortion (although that may come next).... The 1947-73 numbers show what real, broad-based prosperity looks like. Over that period incomes of all groups rose at roughly the same rapid clip, more than 2.5 percent annually. Between 1973 and 1979, as the economy was battered by slow productivity growth and oil shocks, income growth became both much slower and more uneven. Finally, a new pattern emerged after 1979: generally slower income growth, but in particular a strong tilt in the growth pattern, with incomes rising much faster at the top end of the distribution than in the middle, and actually declining at the bottom.... 'Good' growth looks like an all-American picket fence; growth in the 1980s looked like a staircase, with the well-off on the top step....\n", "\n", ">Census numbers are of little use in studying high-income families... the arcane technical issue of 'top-coding'.... It is precisely because Census data are weak when it comes to very high incomes that those who use that data usually look no higher than the 95th percentile.... Over the period 1947-73, when everyone's income went up at about the same rate, the weakness of Census data at the top end didn't matter much. But it became obvious during the 1980s that incomes were rising even faster among the very well off than at the 95th percentile.... Work by the Congressional Budget Office fills the gap.... The top 1 percent of families saw their incomes roughly double over a twelve-year period. That's a 6 percent rate of growth, which means that for the very well-off the 1980s really were a very good decade not only compared with the slow growth lower down in the distribution, but even compared with the postwar boom years.....\n", "\n", ">It is a remarkable fact that incomes have soared so much at the top of the U.S. income distribution. But is it important? Until recently, most economists thought not; growing poverty might be an important social issue, but the fact that some people are very rich was only a social curiosity. My own contribution to this discussion was to point out that there is a sense in which the rise in incomes at the top is in fact a major economic issue, and to offer a shorthand way of conveying that point: the now infamous 'Krugman calculation' that 70 percent of the rise in average family income has gone to the top 1 percent of families.... To help attract attention to a trend that I thought had been neglected I proposed the following thought experiment. Imagine two villages, each composed of 100 families representing the percentiles of the family income distribution in a given year in particular, a 1977 village and a 1989 village. According to the CBO numbers, the total income of the 1989 village is about 10 percent higher than that of the 1977 village; but it is not true that the whole distribution is shifted up by 10 percent. Instead, the richest family in the 1989 village has twice the income of its counterpart in the 1977 village, while the bottom forty 1989 families actually have lower incomes than their 1977 counterparts. Now ask: how much of the difference in the incomes of the two villages is accounted for by the difference in the incomes of the richest family? Equivalently, how much of the rise in average American family income went to the top 1 percent of families? By looking at this measure we get a sense of who was \"siphoning off\" the growth in average incomes, accounting for the fact that median income went up so little. The answer is quite startling: 70 percent of the rise in average family income went to the top 1 percent... [and] when we speak of \"high income\" families, we mean really high income: not garden-variety yuppies, but Tom Wolfe's Masters of the Universe....\n", "\n", ">Many conservatives were furious when the income distribution story surfaced in early 1992. Above all, the story made the editors of the _Wall Street Journal_ and the Bush administration see red. The reason was pretty clear. Supply-siders like Robert Bartley, the _Journal's_ editorial page editor, believe that their ideology has been justified by what they perceive as the huge economic successes of the Reagan years. The suggestion that these years were not very successful for most people, that most of the gains went to a few well-off families, is a political body blow. And indeed the belated attention to inequality during the spring of 1992 clearly helped the Clinton campaign find a new focus and a new target for public anger: instead of blaming their woes on welfare queens in their Cadillacs, middle-class voters could be urged to blame government policies that favored the wealthy. So the dismay and anger of conservatives was understandable. The response from the administration, the _Journal_, and other conservative voices was, however, inexcusable: instead of facing up to the fact of rapidly growing inequality under conservative rule, they tried to deny the facts and shoot the messengers....\n", "\n", ">The initial response of a number of conservative economists (including staffers at the Council of Economic Advisers) was to do a different calculation: to ask what share of the growth in total rather than average income went to the top 1 percent.... This is a very different number, because the number of families in the U.S. grew substantially between 1977 and 1989.... What's wrong with the CEA calculation? Remember the questions we are trying to answer: why didn't the typical American family see much increase in income even though productivity rose substantially, and who was reaping the benefits of rising productivity?... Using income growth numbers that include sheer growth in working-age population gets us completely away from those questions....\n", "\n", ">The next issue fits awkwardly into this scheme, since it involves an honest difference of opinion between myself and the CBO, and does not in the end make much difference.... Adjusted family income has been rising faster than income itself, because families have been getting smaller.... When you do a Krugman calculation using AFI instead of raw income, the result looks a little bit less extreme: the top 1 percent get 44 instead of 70 percent of the increase.... All this is relatively minor, however. With or without the family size adjustment, the data confirm a radical shift of income to the top 1 percent.\n", "\n", ">Capital Gains: Many conservative commentators including Paul Craig Roberts, Alan Reynolds, Representative Richard Armey, and the editorial page of the _Wall Street Journal_ have bitterly attacked the CBO for including capital gains.... Excluding capital gains from the CBO numbers makes very little difference. With capital gains included, the CBO shows the share of income accruing to the top 1 percent rising from 7 to 12 percent between 1977 and 1989, and shows this group receiving 44 percent of the rise in adjusted family income. Without capital gains, the shift is from 6 to 10 percent, and the share of the rise is 38 percent....\n", "\n", ">Can You Be Too Rich? When the Federal Reserve wealth study came out, it was immediately attacked by Alan Reynolds in the _Wall Street Journal_, as well as by Republican Congressman Richard Armey. Reynolds's main argument was that the study, based on a survey of 3,000 families, could not be reliable about the top 1 percent, since thirty families is too small a sample. This was an interesting reaction, since the Fed study carefully explains that they used a two-stage procedure and that their estimates were based on over 400 families in the top 1 percent. In fact, the study is written in the form of a working paper on statistical methodology, and the issue of sample size is raised immediately. One can only conclude that Reynolds did not bother to read the study before attacking it....\n", "\n", ">The second line of conservative defense has become a familiar one: they claim that the growth record of the Reagan years shows that supply-side policies produce gains for everyone, and that it is destructive to worry about or even to notice the distribution of income....\n", "\n", ">The basic proposition that the \"Krugman calculation\" was meant to convey is that income inequality has been increasing so rapidly that most families have failed to get much benefit out of long-term growth. This proposition stands. One need not take seriously the efforts by supply-siders to chop the past fifteen years into little slices, and claim the good ones while disclaiming the bad ones.\n", "\n", ">The Conservative Response 3: Income Mobility: America is not a static society.... In the two hypothetical villages that I described earlier, one would not necessarily suppose that the same people (or their children) occupied the same positions in 1977 and 1989. And economic welfare depends more on the average income you earn over a long period than on your income in any given year. So there are some risks in drawing too many conclusions about the distribution of economic welfare from statistics on the distribution of income in any one year.... If income mobility were very high, the degree of inequality in any given year would be unimportant, because the distribution of lifetime income would be very even. I think of this as the blender model: whatever the current position of the bubbles in your Mixmaster, over the course of a few minutes each bubble will on average be halfway up.... If income mobility had increased over time, this could offset the increased inequality at each point in time.... Unfortunately, neither of these possibilities actually characterizes the U.S. economy. There is considerable income mobility in the U.S., but by no means enough to make the distribution of income irrelevant....\n", "\n", ">The Hubbard Study: In June [1992] the Treasury's Office of Tax Analysis, under the direction of Glen Hubbard, an economist on leave from Columbia, released a report claiming that there is actually huge upward mobility in the U.S. In particular, it claimed that 86 percent of individuals who started in the bottom quintile in 1979 had moved out by 1988, and indeed that an individual who started in the bottom quintile was more likely to end up in the top quintile than to stay where he was. But this report was based on what we may charitably call a strange procedure. Here's what Hubbard's report did: it tracked a group of individuals who paid income taxes in all ten years from 1979 to 1988, and compared their incomes not with each other but with those of the population at large. The restriction to individuals who paid taxes in all years immediately introduced a strong bias toward including only the economically successful; only about half of families paid income taxes in all ten years.... [Plus] the report essentially treated the normal tendency of earnings to rise with age as representing social mobility. The median age of those whom the study classified as being in the bottom quintile in 1979 was only twenty-two. Kevin Murphy, a labor economist at the University of Chicago, neatly summed up what the Treasury study had found: \"This isn't your classic income mobility. This is the guy who works in the college bookstore and has a real job by his early thirties.\"\n", "\n", ">Income Gains.... In the Urban Institute's numbers, families in the bottom quintile in 1977 saw their income rise 77 percent by 1986, while families in the top quintile saw their income rise only 5 percent. The editorial page of the _Wall Street Journal_, Paul Craig Roberts, and others have seized upon this kind of number as evidence that the poor actually did better than the rich in the 1980s. Let me call this the \"WSJ calculation.\"... Essentially, the initially rich have nowhere to go but down, the initially poor nowhere to go but up. So if the income distribution were stable, any income mobility would inevitably produce the WSJ result; and it is not surprising that we still get it even when income inequality is rising.\n", "\n", ">You may accept this trend or deplore it, but one might have thought that nobody could seriously deny it.... The growth in income inequality in the United States since the 1970s is hardly an inconspicuous part of the economic landscape.... The surprise lesson of the income distribution controversy, then, is what it says about today's conservative mind-set. It turns out that many conservatives, for all their anti-totalitarian rhetoric, have Orwellian instincts: if the record doesn't say what you wish it did, hide it or fudge it. There are substantive issues about income distribution. Nobody really knows all the reasons why incomes at the top have soared while those at the bottom have plunged. Still less is there a consensus about what kinds of policies might limit or reverse the trend. But it seems that many conservatives not only don't want to discuss substance: they prefer not to face reality, and to live in a fantasy world in which the 1980s turned out the way they were supposed to, not the way they did.\n", "\n", " #equitablegrowth publicsphere #weekendreading\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Carl O'Donnell** (2014): _[What Does It Take To Make The Forbes 400?: Increasingly More And More](https://www.forbes.com/sites/carlodonnell/2014/10/03/what-does-it-take-to-make-the-forbes-400-increasingly-more-and-more/#3017f95bbbd4)_: \"Every year, the Forbes 400 sets the bar higher. Just making it to the very bottom of this year’s list requires 1.55 billion–250 million more than in 2013. And that’s only a single year. To truly appreciate how quickly the hurdle is rising, Forbes took a look at how much the minimum cutoff increased every year since 1982, when the first Rich List was created. In so doing, Forbes also revisited the millionaires and billionaires who have had the honor of ranking last on the Forbes 400. The poorest person on the list in 1982 was Armas Clifford 'Mike' Markkula Jr., who was then the CEO of a hot tech startup called Apple Computer. He joined the firm in 1977, when Steve Jobs and Steve Wozniak approached him for funding. Markkula’s net worth in 1982: $91 million. Not bad, but only about one 17th of what he would need to ascend to the Forbes 400 today. Granted, the dollar had more purchasing power in 1982. So how much would 91 million be worth in today’s dollars? About 225 million, still less than a sixth of today’s cutoff....\n", "\n", " #noted #2019-10-06\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "\"Is\n", "\n", "**No Longer Fresh at Project Syndicate**: _[Is Plutocracy Really the Problem?](https://www.project-syndicate.org/commentary/krugman-plutocracy-economic-policy-by-j-bradford-delong-2019-07)_: After the 2008 financial crisis, economic policymakers in the United States did enough to avert another Great Depression, but fell far short of what was needed to ensure a strong recovery. Attributing that failure to the malign influence of the plutocracy is tempting, but it misses the root of the problem.... In fact, big money does not always find a way, nor does its influence necessarily increase as the top 0.01% captures a larger share of total income.... The larger issue...is an absence of alternative voices. If the 2010s had been anything like the 1930s, the National Association of Manufacturers and the Conference Board would have been aggressively calling for more investment in America, and these arguments would have commanded the attention of the press. Labor unions would have had a prominent voice as advocates for a high-pressure economy. Both would have had very powerful voices inside the political process through their support of candidates. Did the top 0.01% put something in the water to make the media freeze out such voices after 2008?... [Read MOAR at Project Syndicate](https://www.project-syndicate.org/commentary/krugman-plutocracy-economic-policy-by-j-bradford-delong-2019-07)\n", "\n", "----\n", "\n", "Why did the economic policy response to the Great Recession that started in 2008 only partially reflect the lessons learned from the Great Depression that started in 1929? Up until now the smart money has been on [Martin Wolf][10] and [Barry Eichengreen's][11] interpretation: Enough was remembered to keep the 2008 shock, which was as large as the 1929 shock, from being nearly as destructive. But a lot had been forgotten as an ideological drift to the right took hold and was unchecked by reality because of the rareness of deep depressions in the countries from which global economics drew its thought leaders. And the partial relative success in managing the crisis at first gave the establishment confidence so that thought and policy remained substantially ossified by ideology and partisanship.\n", "\n", "Now, however, comes [Paul Krugman with an alternative explanation: plutocracy][12]. At the start of the 2010s, the top 0.01%—30,000 people around the globe, half of them in the United States—were for the most part unconcerned with high unemployment which they and their circles barely saw, were greatly alarmed by government debt and calling for austerity, and exercised a [Gramscian hegemony][13] over the public sphere: \"the political and media establishment internalized the preferences of the extremely wealthy\".\n", "\n", "Would American politics and political economy in the 2010s have been materially different had the 1980s, 1990s, and 2000s seen the income share of America's 0.01% constant, rather than rising from its old 1.3% to the past decade's 5%? Paul Krugman's judgment that it would be underpins his claim the because \"in the end big money will find a way—unless there’s less big money to begin with\", curbing plutocracy is America's political-economic job #1: the first \"necessary step toward a healthier political system\". But I think he is wrong. Big money does not always find a way. For big money to find a way is not _that_ much easier when big money has 5% rather than 1.5% of national income—when the average plutocrat has 50000 rather than 12500 times the income of the average. And Big Money was not tightly attached to attempts to unlearn the lessons of the Great Depression.\n", "\n", "Let's look at the five lessons, and at Big Money's attachment to them:\n", "\n", "A first lesson—that an episode of high unemployment was extremely unhealthy and was not, as early 20th-century economist Josef Schumpeter had claimed, simply a bracing \"cold douche\" for the economy—was forgotten only by a lunatic fringe: for example, [John Cochrane][1] of Chicago and Stanford's cry that a recession was needed to stop people from pounding nails in Nevada. Big Money was not invested in the Hoover administration belief that the market system was so perfect that a general liquidation was to be welcomed. \n", "\n", "A second lesson—that monetary expansion and bank rescues were powerful but limited tools to fight high unemployment—also drew dissent only from a fringe, [albeit a larger fringe][2]. This fringe's size and anger was, however, reinforced by an absence of an answer from Obama or Bernanke or Draghi or anybody else as to why so much concern was focused on restoring asset prices and cushioning those who had over leveraged than on those who had played by the rules and yet lost their jobs. Big Money may have mourned the loss of income from lower interest rates, but it applauded the boost to asset values.\n", "\n", "But forgetting a third lesson—that the continuation of very low interest rates were proof positive that the economy was not awash in but rather still short of safe and liquid stores of values, and called not for cutting back on but rather further monetary expansion—rapidly became a required litmus test for holding office as a member of or being a candidate endorsed by the Republican Party. And an astonishingly large number of [economists of formerly good reputation joined in][3], having forgotten that the market price that is the short-term safe interest rate is a good thermometer. Or perhaps they only wished to appear to have forgotten: the level of cynicism and posturing seemed, to me at least, [unusually high][4]. Here the financial wing of Big Money was important, fixating on a false idea that the Federal Reserve was trying to push values away from \"fundamentals\" and so was doomed, and not recognizing that \"don't fight the Fed\" is a rule-of-thumb for the good reason that within wide limits fundamentals are what the Fed says they are.\n", "\n", "And a fourth lesson—that having the government print or borrow money and buy stuff was an effective tool of last resort when unemployment was worrisomely high—[could not even command the assent of American President Barack Obama][5], his Treasury Secretary Tim Geithner, or his highest political and policy advisors beyond the end of 2009, at which time [the unemployment rate was still 9.9%][6]. Here it was not Big Money but rather the neoliberal surrender of the high ground by the Democratic Party. It was not Ronald Reagan or George H.W. Bush or George W. Bush who used his State of the Union address to say \"the era of Big Government is over\". It was Bill Clinton. And while Bill Clinton and his administration only one-quarter believed that, Barack Obama and his administration by and large did.\n", "\n", "Last but not least, there was a fifth lesson: that governments could and did successfully keep interest rates low enough after World War II that the then-high levels of government debt did not lead to loss of control over the price level and an unwanted inflationary spiral. Thus stabilizing the government debt was simply not a priority as long as inflation was elevated: as [John Maynard Keynes wrote][7] in _The Times_ in January 1937: \"The boom, not the slump, is the right time for austerity at the Treasury...\" But in this case those of us [who remembered this lesson][8]—well, [we were the fringe][9] viewed as \"lunatic\" by the near-consensus of the public sphere in the early 2010s. Here it was not the presence of Big Money—Big Money well understands that one makes money by borrowing when money is cheap and lending is dear—but rather the absence of other voices. In an earlier era the National Association of Manufacturers and the Conference Board would have been aggressively promoting and frequently quoted on the benefits of investment in America. In an earlier era the AFL-CIO would have had a prominent voice as an advocate for a high-pressure economy.\n", "\n", "Did Big Money put something in the water to make Big Media freeze investment-in-America, labor, and mass-production manufacturing voices out of the public sphere? And if so, what? Yes, the political implications of plutocracy are annoying and destructive: Olin money distraining judges, Koch money misinforming people about global warming, Murdoch money terrifying old people that terrorists are crossing the southern border to kill them, Peterson money trumpeting fake awards for fiscal responsibility to budget arsonists—all of these are harmful.\n", "\n", "But just because the public sphere of discussion and debate is burdened by plutocracy does not mean the fight for less irrational policies over the next decade is doomed before it begins. Indeed, Paul admits as much toward the end of his article, where he condemns future \"journalist[s and] centrist politician[s] who... internaliz[e] the prejudices of the wealthy\" as \"pull[ing] another 2011, treating the policy preferences of the 0.1 percent as the Right Thing\", and calls for \"vigilance... [to] mitigate the extent to which the wealthy get to define the policy agenda\". The first task is to ask yourself every day: Which voices are being heard much more frequently than they deserve? And which voices are not being heard at all?\n", "\n", "---\n", "\n", "**References**:\n", "\n", "[1]: https://www.bradford-delong.com/2018/12/cochrane-lippert.html \"John Lippert (2008): 'We should have a recession', [John] Cochrane said in November, speaking to students and investors in a conference room.... 'People who spend their lives pounding nails in Nevada need something else to do...'\"\n", "\n", "[2]: https://www.thedailybeast.com/when-cnbc-created-the-tea-party \"Rick Santelli (3009): 'The government is promoting bad behavior. How about this, president and new administration, why don’t you put up a website to have people vote on the Internet as a referendum to see if we really want to subsidize the losers’ mortgages...'\"\n", "\n", "[3]: https://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/ \"The Federal Reserve's large-scale asset purchase plan... risk[s] currency debasement and inflation.... Improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus...\"\n", "\n", "[4]: https://www.bloomberg.com/news/articles/2014-10-02/fed-critics-say-10-letter-warning-inflation-still-right \"Caleb Melby, Laura Marcinek and Danielle Burger (2014): Fed Critics Say 2010 Letter Warning Inflation Still Right: Douglas Holtz-Eakin: 'The clever thing... is never give a number and a date. They are going to generate an uptick in core inflation.... I don’t know when, but they will...'\"\n", "\n", "[5]: https://www.bradford-delong.com/2013/06/the-truly-excellent-and-highly-estimable-martin-wolf-how-austerity-has-failed.html?asset_id=6a00e551f080038834019103a5d537970c \"Barak Obama (January 28, 2010): 'Families across the country are tightening their belts and making tough decisions. The federal government should do the same. So tonight, I'm proposing specific steps to pay for the trillion dollars that it took to rescue the economy last year. Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don't. And if I have to enforce this discipline by veto, I will...'\"\n", "\n", "[6]: https://fred.stlouisfed.org/graph/?graph_id=576337&rn=333 \"Federal Reserve Economic Data: Civilian Unemployment Rate 1985-2009\"\n", "\n", "[7]: https://books.google.com/books?id=Tv4WCAAAQBAJ&printsec=frontcover&dq=john+maynard+keynes+1937+collected+works&hl=en&sa=X&ved=0ahUKEwjQ-eujyILjAhWQu54KHRRbAyYQ6AEIKjAA#v=onepage&q=The%20boom%2C%20not%20the%20slump%2C%20is%20the%20right%20time%20for%20austerity%20at%20the%20Treasury&f=false \"John Maynard Keynes (January 1937): 'The boom, not the slump, is the right time for austerity at the Treasury...'\"\n", "\n", "[8]: http://larrysummers.com/wp-content/uploads/2012/10/2012_spring_BPEA_delongsummers.pdf \"J. Bradford DeLong and Lawrence H. Summers (2012): Fiscal Policy in a Depressed Economy\"\n", "\n", "[9]: https://www.brookings.edu/wp-content/uploads/2012/03/2012a_DeLong.pdf \"See the general discussion of Lawrence Summers's and my arguments by a very Keynesian audience that ought to have been sympathetic to our points in: Brookings Institution (2012): Discussion of J. Bradford DeLong and Lawrence H. Summers: 'Fiscal Policy in a Depressed Economy'\"\n", "\n", "[10]: https://books.google.com/books?isbn=1101608447 \"Martin Wolf (2014): The Shifts and the Shocks: What We've Learned—and Have Still to Learn—from the Financial Crisis\"\n", "\n", "[11]: https://books.google.com/books?isbn=0199392005 \"Barry Eichengreen: Hall of Mirrors: The Great Depression, The Great Recession, and the Uses—and Misuses—of History\"\n", "\n", "[12]: https://www.nytimes.com/2019/06/22/opinion/notes-on-excessive-wealth-disorder.html \"Paul Krugman: Notes on Excessive Wealth Disorder\"\n", "\n", "[13]: https://www.jstor.org/stable/2708933)_: \"Thomas R. Bates (1975): Gramsci and the Theory of Hegemony: The intellectuals succeed in creating hegemony to the extent that they extend the world view of the rulers to the world, and thereby secure the 'free' consent of the masses to the law and order of the land. To the extent that the intellectuals fail to create hegemony, the ruling class falls back on the state's coercive apparatus...\"\n", "\n", "[14]: https://www.bradford-delong.com/2019/06/thomas-piketty-and-emmanuel-saez-2002-2018-_income-inequality-in-the-united-stateshttpsemlberkeleyedusaezpi.html \"Thomas Piketty and Emmanuel Saez: Top 0.01% Income Share\"\n", "\n", "\n", "\n", "----\n", "\n", " #economicsgoneright #economicsgonewrong #macro #monetarypolicy #fiscalpolicy #projectyndicate #highlighted #mediumform\n", "\n", "###### This File: \n", "###### Edit This File: \n", "###### Fold.cm: \n", "###### Project Syndicate: \n", "\n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Doug Jones**: _The Patriarchal Age_ : \"The left panel shows effective population sizes based on Y chromosome DNA, transmitted down the male line. The right panel shows effective population sizes based mitochondrial DNA, transmitted down the female line. The dramatic dip on the left panel, where effective population sizes go way down in the last ten thousand years, means that there was a period, from the initial spread of major language families to near the dawn of history, where just a few men were leaving lots of descendants in the male line. This must reflect a time when polygyny – some men taking multiple wives, others not reproducing at all – was common. But this pattern probably reflects more than just polygyny. It probably also reflects a continuing advantage, carried over many generations, for some male lines of descent. In other words, back in the day, not just did Lord Y (or whoever) have many wives and many sons, but his sons, his sons’ sons. his son’s son’s sons, and so on, had many offspring. This probably implies some kind of long-term social memory, such that that the “Sons of Y” or the “House of Y” had a privileged position for many generations.... Eurasian history is often told as the story the rise of states and empires. But it’s also the story of the rise of patrilineal descent groups (and the heavy policing of female sexuality to make sure of paternity in the male line)...\n", "\n", "\"Patriarchy\n", "\n", "**Monika Karmin _et al._**: _A Recent Bottleneck of Y Chromosome Diversity Coincides with a Global Change in Culture_ :\n", "\n", "* _Supplemental Material_ \n", "\n", "\"Https\n", "\n", "\"Https\n", "\n", "\"Https\n", "\n", " #noted #2019-10-06\n", " \n", " " ] }, { "cell_type": "markdown", "metadata": {}, "source": [ "**Martin Luther King, Jr** (1963): _The Promissory Note and the Bank of Justice_ : \"In a sense we have come to our nation's capital to cash a check. When the architects of our republic wrote the magnificent words of the Constitution and the declaration of Independence, they were signing a promissory note to which every American was to fall heir. This note was a promise that all men would be guaranteed the inalienable rights of life, liberty, and the pursuit of happiness...\n", "\n", ">...It is obvious today that America has defaulted on this promissory note insofar as her citizens of color are concerned. Instead of honoring this sacred obligation, America has given the Negro people a bad check which has come back marked \"insufficient funds.\" But we refuse to believe that the bank of justice is bankrupt. We refuse to believe that there are insufficient funds in the great vaults of opportunity of this nation. So we have come to cash this check -- a check that will give us upon demand the riches of freedom and the security of justice. We have also come to this hallowed spot to remind America of the fierce urgency of now. This is no time to engage in the luxury of cooling off or to take the tranquilizing drug of gradualism. Now is the time to rise from the dark and desolate valley of segregation to the sunlit path of racial justice. Now is the time to open the doors of opportunity to all of God's children. Now is the time to lift our nation from the quicksands of racial injustice to the solid rock of brotherhood.\n", "\n", ">It would be fatal for the nation to overlook the urgency of the moment and to underestimate the determination of the Negro. This sweltering summer of the Negro's legitimate discontent will not pass until there is an invigorating autumn of freedom and equality. Nineteen sixty-three is not an end, but a beginning. Those who hope that the Negro needed to blow off steam and will now be content will have a rude awakening if the nation returns to business as usual. There will be neither rest nor tranquility in America until the Negro is granted his citizenship rights. The whirlwinds of revolt will continue to shake the foundations of our nation until the bright day of justice emerges.\n", "\n", ">But there is something that I must say to my people who stand on the warm threshold which leads into the palace of justice. In the process of gaining our rightful place we must not be guilty of wrongful deeds. Let us not seek to satisfy our thirst for freedom by drinking from the cup of bitterness and hatred.\n", "\n", ">We must forever conduct our struggle on the high plane of dignity and discipline. We must not allow our creative protest to degenerate into physical violence. Again and again we must rise to the majestic heights of meeting physical force with soul force. The marvelous new militancy which has engulfed the Negro community must not lead us to distrust of all white people, for many of our white brothers, as evidenced by their presence here today, have come to realize that their destiny is tied up with our destiny and their freedom is inextricably bound to our freedom. We cannot walk alone.\n", "\n", ">And as we walk, we must make the pledge that we shall march ahead. We cannot turn back. There are those who are asking the devotees of civil rights, \"When will you be satisfied?\" We can never be satisfied as long as our bodies, heavy with the fatigue of travel, cannot gain lodging in the motels of the highways and the hotels of the cities. We cannot be satisfied as long as the Negro's basic mobility is from a smaller ghetto to a larger one. We can never be satisfied as long as a Negro in Mississippi cannot vote and a Negro in New York believes he has nothing for which to vote. No, no, we are not satisfied, and we will not be satisfied until justice rolls down like waters and righteousness like a mighty stream.\n", "\n", ">I am not unmindful that some of you have come here out of great trials and tribulations. Some of you have come fresh from narrow cells. Some of you have come from areas where your quest for freedom left you battered by the storms of persecution and staggered by the winds of police brutality. You have been the veterans of creative suffering. Continue to work with the faith that unearned suffering is redemptive.\n", "\n", ">Go back to Mississippi, go back to Alabama, go back to Georgia, go back to Louisiana, go back to the slums and ghettos of our northern cities, knowing that somehow this situation can and will be changed. Let us not wallow in the valley of despair.\n", "\n", ">I say to you today, my friends, that in spite of the difficulties and frustrations of the moment, I still have a dream...\n", "\n", " #weekendreading #2019-10-06\n", " \n", " " ] }, { "cell_type": "code", "execution_count": null, "metadata": {}, "outputs": [], "source": [] } ], "metadata": { "kernelspec": { "display_name": "Python 3", "language": "python", "name": "python3" }, "language_info": { "codemirror_mode": { "name": "ipython", "version": 3 }, "file_extension": ".py", "mimetype": "text/x-python", "name": "python", "nbconvert_exporter": "python", "pygments_lexer": "ipython3", "version": "3.6.1" } }, "nbformat": 4, "nbformat_minor": 4 }