AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (107 comments)

  1. morganovich

    i would just like to tip my digital hat to ironman.

    this is a truly excellent and important set of analyses.

    well done sir.

    1. Walt Greenway

      I agree Ironman’s research and analyses is excellent, but I am surprised at the universal acceptance of the term income “inequality.” Getting the other side to accept a biased term in your favor is a lawyer’s trick; repeated often enough it can sway undecideds to your side. Many people would tend to think things should be equal because we live in a world where equilibrium is an easily understood concept and an expected outcome.

      ‘Inequality” seems to suggest that something should be equal when it probably never was, probably never will be, and probably should never be in this case. Can I suggest “income disparity” instead of “income inequality” and “non-right-to-work-state” instead of “forced unionism” while I am on a roll?

      1. Jon Murphy

        As I am sure you know, Walt, groups will often re-purpose an unfavorable term to suit their needs.

        Yankee was a term used by the British to slur the Americans during the Revolution (it is also a slur used by a Bostonian to describe a vile person from New York. So pretty much everyone from New York :-) ).

        Capitalism was meant to be a pejorative.

        Obamacare has become an unofficial name.

        I am not arguing the validity of your point at all, but rather just pointing to some counter examples.

        1. Walt Greenway

          Jon, I see your point, but there’s not much upside potential for people who disagree with the current issue to re purpose a word like equal to their favor. It’s just too much work for the payoff. I’m going to go with your earlier “so what?” on income “inequality.”

          Yeah, Obama defused and re purposed the term “Obamacare’s” negative connotation when he publicly embraced the term (for those on the edge anyhow–you can’t sway the diehards).

          1. Walt Greenway

            * that would be re purpose the term “inequality.”

            We gotta get edit here (our newspaper has a 3 minute edit feature on comments now–hint, hint)

          2. Defused the term ‘Obamacare’

            A little…. Pauses in the rollout allowing for the news cycle to put the effects on the back burner was where the water on the fuse came. The ACA bomb is still detonating.

      2. morganovich

        “disparity” still carries strong negative connotations.

        perhaps “income variation”.

        alternately, we could slant it ourselves and describe keep what you earn as “the natural distribution of wealth.”

        1. Walt Greenway

          morganovich, I like income variation better than disparity.

          My plan would tend to be the 1%, but missing that target still gets me ahead of where I would have been aimless.
          I am neither a flat-tax or soak-the-rich guy.

          1. morganovich

            walt-

            “flat tax” is another on of those enormous misframings.

            flat pricing for anyhting else mean you and i go to the store and each pay $1.99 for the same carton of milk.

            a flat tax is NOT flat. if you ear twice what i do, you pay twice as much tax for the same government (actually likely less as, as a wealthy guy, you will not use social programs).

            a flat tax is actually extremely progressive and a progressive tax extraordinarily so.

            a true “flat” tax would be a fee of X dollars each citizen paid each year.

          2. Walt Greenway

            morganovich, I agree with your interpretation, and I’ll re frame. I believe in a slightly progressive tax system with caps for government services (I don’t support you paying more for a cheeseburger than anyone else though). I am an incremental type person and usually not extreme on my positions, but I can adapt to conditions.

          3. morganovich

            walt-

            personally, i think we should get income taxes back down to under 10% of gdp as a start and try to get rid of them entirely if we can.

            an income tax is inherently anti growth and unproductive.

            to the extent that certain federal services are desired, we should do everyhting we can to make them user pays.

            pay for defense with a property tax.

            pay for highways with tolls or mileage charges.

            pay for airports and the FAA with a charge on plane tickets (or just privatize it entirely)

            there is really very little that requires the horrid distortions of an income tax.

            maybe federal courts.

            not much else.

          4. Walt Greenway

            morganovich, I agree with your ideas while realizing, or at least planning, most of what we will have to live with will not be appreciably different than what we have now. I do like my 0% capital gain/quantified dividend tax rate, and I don’t agree what I am guessing you pay.

          5. Property taxes are the work of the devil.
            I intend rhetoric.
            I find it terrible to have bought a piece of land, home, etc.,.. Only to never be free of fees. Essentially, you truly never own it. It belongs to the govt and you are renting. Miss a rent payment and they can confiscate it. We have seen the abuse of IRS, DOJ, and the other alphabet squads.

          6. Walt

            I believe in a slightly progressive tax system with caps for government services (I don’t support you paying more for a cheeseburger than anyone else though)

            How can you believe in a progressive tax if you don’t believe morganovich should pay more than anyone else for the same thing? If morganovich has higher income than I do, why should his share of the bill for the DOE be higher than mine?

          7. Walt Greenway

            Ron, I am able to separate the purchase of a chessburger from a jet in morganovich’s case.

            I’m going to agree with you all our taxation system is screwed up and too high for too little. My remedy for that situation is a bit more towards the middle than most of the commenters here.

        2. How about replacing inequality with “excellence incentive”? Don’t think liberals would like such a term though.

        3. …“the natural distribution of wealth.

          Uh-oh, Who is doing the “distributing”?

          “The natural creation of wealth in response to the choices of consumers” seems too cumbersome.

          1. Jon Murphy

            Well, distribution in this case refers to the data. It’s just how the data fall

        4. The whole point of it all is to create division and have the children crying “unfair!!”. Whereas, govt can ride in its white horse and offer prescriptions of resolution.

      3. If you say something often enough, and loud enough…..

      4. Kernighan

        Very good point. I’d suggest use of statistical terminology like “Distribution” of income, or “statistical distribution” of income. . .wealth, whatever is being measured. Everything that constitutes a set and has scalar measurements for each element of a set, has a “distribution”.

        I’ve been asking this question over and over:

        Why should I be concerned if there is more or less skewing of the distribution of income? Shouldn’t I be concerned about the various scenarios and how they affect ME? How is it that some small set of high earning people exists, or increases their earnings producing a bad effect for me? How is it that this same phenomenon is somehow attributed to hurt anybody? What’s the mechanism? We are not talking about a pie, or a fixed system, but instead a varying and dynamic system.

        1. Kernighan

          You are absolutely correct, in fact that small sert of high earners are our own creation. We have made them high earners by voting with our dollars for their products and services. Their high earnings and/or wealth is an indicator of how well they have served others. (absent government interference)

          But to those who whine about income inequality, none of that matters. Neither logic, nor reason, nor economic reality are of any use to them. All they know is that someone has more of something than they do, and they’re determined to take some of it.

  2. morganovich

    also:

    for those not well versed in statistics and the gini coefficient, here is an important thing to realize:

    changes in (or even flat) household composition and size can lead to big variations in gini even if income for each individual is flat.

    consider a 10 person economy where each person works and earns $100.

    the average household size is 2, so the average household earns $200.

    if this economy has 5 2 person households, it has perfect income equality.

    if one household splits up, we now has 6 households, 4 of 2, and 2 of 1.

    not only does this cause average household income to drop, but it also causes a spike in the gini coefficient as now some households earn 2X what others do. repeat this again with another household splitting, and it gets worse. then, if 2 2 person households join to make a 4 person household, gini explodes.

    you now have 400, 200, 200, and 4X 100 as household incomes.

    but no one’s individual income changed at all and individual income is still dead flat.

    pickety and many others have mistaken changes in household composition and the shape of the distribution of household size for rising inequality due to some sinister economic reason.

    as that wonderful graph shows, it’s actually entirely demographic.

    that one chart blows an irreparable hole in all of the picketty doggerel and bad math.

  3. Jon Murphy

    Let us also consider the moral aspects of redistribution policies.

    Such policies are grossly immoral. As Bastiat noted, the law exists to protect rights (life, liberty, and property). That is the foundation for just legislation. Anything that damages these rights, then, is inherently unjust and immoral. The taking of property, for whatever the reason, certainly qualifies as damaging to property.

    If a man breaks into a person’s home and steals his money and, when he is caught, says “that man’s children go to the best schools, get the best cars, eat the best food! I am just trying to level the playing field,” would we accept that as justification for his actions? Would charges be dropped against him? Would he be lauded as a social hero? Of course not. He would be treated like the robber he is. So, why then, when government does it, are the actions applauded?

    When legislation strays from its intended purposes and becomes an instrument of gain rather than that of protection, then it is nothing more than organized plunder. In which case, a man must lose his respect for the law, which would lead to, ultimately, the breakdown of society.

    1. Walt Greenway

      Robin Hood and Jesse James were thought of as heroes by a lot of people. We often deal with perspectives that are difficult to put into right/wrong, moral/immoral. ethical/unethical boxes.

      It’s not always as easy as it seems, and on a 12-inch ruler with people at the opposite ends, a 5 or 7 can be considered a win. Can you tell the topic of my HR class tonight is collective bargaining?

      1. Che is dead

        Robin Hood was a conservative. He “stole” from the tax collector and “redistributed” back to the taxpayers. The Left has twisted this into a socialist fairy tale about stealing from the rich to give to the poor.

        Talk about a lawyers trick.

      2. Jon Murphy

        With Robin Hood, it wasn’t robbing the rich to feed the poor. It was returning tax money to those whom it was taken from :-)

        As for Jessie James, I do not know enough about him (other than he was a bank robber) to comment.

        As for the ruler, I’m not really sure there is much grey here. To take something that doesn’t belong to you by force has been considered immoral by nearly every belief structure out there.

        1. Walt Greenway

          There’s always gray when you have two polar extremes that must deal with each other, and we are polarized on almost everything in the U.S.

          My guest speaker tonight is a GM plant manager, and we are going to negotiate a grievance in front of the class. The spin: she’s going to be the UAW representative and I am going to be GM representative. This is probably where I will be called a hypocrite :) After this case presentation, the class will be randomly assigned cases and sides and must negotiate accordingly.

          1. morganovich

            “There’s always gray when you have two polar extremes that must deal with each other”

            ahh, so pregnant women and non pregnant women have a gray area of “kinda pregnant”?

            this is not true at all.

            the world has many, many binaries.

            if i take by force that which is yours, i am a thief, not a sort of thief.

            where is the gray area?

            what, it’s ok if lots of other people say it’s ok?

            would you accept that standard for rape or slavery?

            would majority approval some how make this issues gray areas?

            well, you weren’t really enslaved and sold, because people thought it was ok and generally approved of it socially?

            would that feel like a gray area to you?

          2. Walt Greenway

            “well, you weren’t really enslaved and sold, because people thought it was ok and generally approved of it socially?”

            I was told there were good slave owners and bad slave owners. Given just two choices, which is best. I like to think my family that owned slaves in the 1800s were good slave owners.

          3. Jon Murphy

            I’m going to have to agree with Morganovich here.

            That said, good luck in your class tonight. That sounds like it will be an interesting class.

          4. Walt Greenway

            “I’m going to have to agree with Morganovich here”

            And that’s your right. But you might want to acknowledge there is a position between his and mine even if you don’t plan to go there if you find yourself stalemated and it is to your advantage to move (don’t always overlook win-win positions if you have to give a little with a winner-take-all approach if it works against you).

          5. Walt Greenway

            I’m just jerking chains with the slave remarks. We have both blacks and Hispanics in my immediate white family. Our family reunions look like a college recruiting poster.

          6. Walt Greenway

            Binary social positions where neither side moves and must live with each other are called wars or impasses (or maybe a strike tonight).

          7. morganovich

            “I was told there were good slave owners and bad slave owners. Given just two choices, which is best. I like to think my family that owned slaves in the 1800s were good slave owners.”

            this is not an answer, it’s a complete dodge.

            good or bad owner, you are still a slave. you have completely ducked the issue.

            there is no position between yours and mine.

            you are a slave and someone owns you, or you have liberty and own yourself.

            the “middle choice” you describe is nothing of the sort.

            “who do you want to be owned by” is not a middle way. it’s just multiple forms of slavery.

            you really do not understand the notion of natural rights, do you?

          8. Walt Greenway

            “there is no position between yours and mine.”

            There’s a huge difference between not acknowledging other positions and there not being other positions.

            Owning slaves is flat out wrong, and it is still happening in the world. I’m not going to judge my ancestors without walking in their shoes though. Strangely, most of the slaves that were freed stayed on our family farm as sharecroppers (I picked cotton with some of the offspring in the 1960s).

            Natural right discussions are really cool on blogs.

          9. morganovich

            walt-

            you are either dodging and obfuscating or you really do not understand the nature of rights and reality.

            slave is binary.

            you are property, or you are not.

            it’s that simple. there is no middle. there is no gray.

            it’s a yes no question.

            there is no other position.

            a well treated slave is still a slave.

            good owner bad owner is not relevant to whether or not you are a slave. it might affect your quality of life as a slave, but it does not alter the fundamental status.

            i am honestly completely baffled that you cannot see this.

            can you really not grasp that the distinction between being owned and being free is binary?

          10. Walt Greenway

            “you are property, or you are not.”

            Yes, I get it with a piece of ownership paper, and natural rights, too.

            What you don’t get is some people “think” they are still property because they have way, way less than you. What you are facing is from that viewpoint. You are never going to accept other viewpoints than your own.

          11. morganovich

            “What you don’t get is some people “think” they are still property because they have way, way less than you.”

            this does not even make sense. they are not property because they have less money any more than i am a catfish if i lie in a pond even if i really, really think i am.

            “What you are facing is from that viewpoint. You are never going to accept other viewpoints than your own.”

            just because a viewpoint exists does not make it valid.

            i can believe i am the prince of tunisia. that does not make it so, make it a view worthy of respect, make it any less a binary (you are a prince or not), or make it something Tunisians should have to compromise with or even take into account.

            the argument you are making does not contain even the rudiments of sense or logic.

            moral relativism is self refuting.

            you say “all viewpoints are equally valid” i then say “no, they are not”.

            checkmate.

          12. Jon Murphy

            Well, this took a direction I had not anticipated.

          13. This is probably where I will be called a hypocrite

            No, Walt, that is not a case of hypocrisy.

          14. Walt Greenway

            Not a hypocrite, Ron? Don’t you remember the long discussion where I argued that labor unions could and should attempt to contract work out when they wore their facility managers’s hat and attempt to not allow work to be contracted out when they wore their union representative’s hat?

            Objectives change with your roles and responsibilities. Actually, saying no to contracting out is just first-offer posturing if you find that is non-mover position. You are probably looking at a final agreement of some contracting out and severance packages with possible employment for the displaced employees at the new company. You always attempt to get something for anything you give up, and you WILL almost always give something up you can live with giving up.

          15. ahh, so pregnant women and non pregnant women have a gray area of “kinda pregnant”?

            Well, I know that if they are willing to negotiate, and don’t insist on all or nothing, they can most likely get something in return for everything they give up, so they can both come away winners. – Walt

          16. Walt Greenway

            “ahh, so pregnant women and non pregnant women have a gray area of “kinda pregnant”

            Actually, I’m old enough to remember when pregnant women were pregnant and stayed that way for nine months, but that’s not necessarily the case now. So if you want to split hairs–pun intended–pregnancy is a gray area.

          17. Walt

            Not a hypocrite, Ron? Don’t you remember the long discussion where I argued that labor unions could and should attempt to contract work out when they wore their facility managers’s hat and attempt to not allow work to be contracted out when they wore their union representative’s hat?

            I remember it well, Walt, as it was recent. You didn’t appear to understand what the word “hypocrite” meant then, and you don’t seem to understand what it means now.

            In your presentation tonight – which sounds interesting, by the way – you and the plant manager will be role-playing. Your students (hopefully) will understand that.

            If I insist that my children brush their teeth but don’t brush my own, I am a hypocrite. Do as I say, not as I do. I could argue a position for not brushing teeth, but my children would understand that wasn’t my true conviction.

          18. Walt Greenway

            “If I insist that my children brush their teeth but don’t brush my own, I am a hypocrite.”

            If your objective was for your children not to have cavities, how would you brushing your teeth meet that goal, and whose budget would your toothpaste and cost of the time for brushing your teeth come out of? I saw a buy-or-build estimate with a crane charged to the part where a crane did not even exist within a quarter of a mile. You have to watch out for those cost-center shifts.

          19. Walt

            If your objective was for your children not to have cavities, how would you brushing your teeth meet that goal

            You must be kidding. Do you really not understand this, or are you deliberately being obtuse?

            My goal was to convince my children that not having cavities is desirable, and that brushing their teeth is a good way to not have cavities. They can see that I believe that to be true, because I brush my own teeth.

            …and whose budget would your toothpaste and cost of the time for brushing your teeth come out of?

            Not even remotely relevant.

            I saw a buy-or-build estimate with a crane charged to the part where a crane did not even exist within a quarter of a mile. You have to watch out for those cost-center shifts.

            Who cares? That anecdote is in no possible way related to to this discussion. It has less than zero value. Have you been drinking heavily this evening, or what?

          20. Walt Greenway

            I ain’t drank since 1990, Ron. I see where you are coming from. We all have our roles to play, and we walk out the door every day to play them in our costumes.

    2. Jon

      If I may summarize your comment:

      “Taxation is Theft.”

      1. Jon Murphy

        Actually, Ron, I’m going to say no. There are forms of taxation that are theft, but there are also ways to tax that are not.

        My comment is, rather, that legislation outside of the scope of governmental power (that is, to protect rights) is inherently immoral even if it’s goal is noble!.

        1. Those forms of taxation, whatever you intend, IMO, must be held to a standard of being uniform. For instance, tariffs should not be mixed. All items from France carry tariff X. All items from India carry tariff Y. Less, the politics and games begin for more reasons for the players to seek out govt influence.

          1. Jon Murphy

            Agreed.

            My thought is a national sales tax.

        2. Jon

          Actually, Ron, I’m going to say no. There are forms of taxation that are theft, but there are also ways to tax that are not.

          The only kind of tax that could escape being called theft, in my view, are direct usage fees such as highway and bridge tolls, where a person chooses whether or not to make direct use of something. But then, why should government have a monopoly on those provisions?

          Tariffs have their own problems with non-uniformity and the economic dead weight losses created, plus the abuse possible through favoritism for commercial or political interests.

          Your suggestion of a national sales tax probably comes closest to a uniform user pays system, but even that has problems.

          My comment is, rather, that legislation outside of the scope of governmental power (that is, to protect rights) is inherently immoral even if it’s goal is noble!

          And it seems impossible to prevent or contain!

          1. Damn shift key! (I have to blame something other than myself)

            morganovich

            Those keys on your keyboard that are worn and which probably read SH**T, aren’t really used to command defecation, they actually produce UPPER CASE letters. :)

          2. Jon Murphy

            Yeah, everything has problems, Ron.

            Taxes, by their very nature, are disruptive. If we assume a government is necessary, then it would need to collect taxes. So the goal would be to minimize the disruptions.

            And user fees are a great idea for bridges and roads, but what about a military? The public goods is where the conversation gets tough

    3. juandos
  4. Mangus Colorado

    Democracy… is a charming form of government, full of variety and disorder; and dispensing a sort of equality to equals and unequals alike.
    Plato

    Article V Project to Restore Liberty proposed 28th amendment.

    1. Zachriel

      Mangus Colorado: Article V Project to Restore Liberty proposed 28th amendment.

      Really? Repeal equal protection?

  5. marmico

    Eyrmann’s calculations on individual money income don’t pass the sniff test.

    Viewing Census Bureau Table P-54, the ratio of male (female) mean income to median income increased from 1.09 (1.38) in 1967 to 1.47 (1.46) in 2012 which results in an increasing, not flat, gini.

    1. Jon Murphy

      But that’s not how income inequality is calculated.

      The issue is inequality among all people, not between the sexes.

    2. morganovich

      untrue.

      the metric you use does not demonstrate what you claim.

      a mean can rise faster than a median because the bottom gets closer to the top as well indicating a LOWER gini.

      consider a simple example:

      we have 5 people who earn 1, 2, 4, 5, and 6.

      the median is 4. the mean is 3.6

      later, their income shifts to 2, 3, 4, 5, 6

      the median is still 4. the mean is now 4.

      so, mean is up, median in flat, and inequality dropped.

      thus, it is actually your sniff test that fails the sniff test.

      it does not prove your claims.

      1. marmico

        How does an increasing positive skew over 220 million observations result in a flat gini?

        1. Jon Murphy

          I suggest you re-read his post.

          1. marmico

            Huh!. Is it not arithmetically impossible for an increasing positive skew (mean increases faster than median) to result in a flat gini?

            Help me out. Is the only Census data reporting individual income gini in Table EI-2.

          2. Jon Murphy

            Perhaps if you read his article, you will find all your answers.

            Don’t expect the person you constantly refer to as being “retarded” to spoon feed you the answers. One of my flaws is I am vindictive. I enjoy watching you make a fool of yourself.

          3. marmico

            This comment has been removed by a blog administrator for not meeting minimum standards of civilized, adult-level discourse.

          4. Jon Murphy

            You didn’t read his post.

            It’s all there.

          5. marmico

            This comment removed by a blog administrator.

          6. marmico

            This comment removed by a blog administrator for being juvenile, offensive, valueless, and having X-rated content.

          7. I’m chuckling here. i can only imagine the volcano of venom Marmico spewed after Jon rubbed his nose in it.

  6. mesaeconoguy

    And the lies continue -

    Economist says U.S. inequality reaching “spectacular” heights

    This is pretty much confirmation that Piketty is out for publicity and political motives, not economics. Outright lying.

    Pieces like this one serve as complete lies and fabrication for the ignorant masses, and will be regarded as truthful by the witless.

    We have now entered the age of disinformation. Lies are truth.

  7. Robert puharic

    This comment removed by a blog administrator.

    1. mesaeconoguy

      Mark, not being an economist means that not being a scientist means you know J. K. Galbraith died in 2006.

      J.K. Galbraith was a speechwriter for FDR, not an economist, boy.

      His fraud economist son, James Galbraith, has incorrectly asserted that “income inequality” (term undefined) is somehow increasing over the past 30 years, and therefore is Michael Mann.

  8. Zachriel

    Mark J. Perry: Sorry Krugman, Piketty and Stiglitz: Income inequality for individual Americans has been flat for more than 50 years

    Kitov doesn’t seem to include capital gains, which has been the biggest contributor to income inequality over the last generation. See Hungerford, Changes in Income Inequality Among U.S. Tax Filers between 1991 and 2006: The Role of Wages, Capital Income, and Taxes, Social Science Research Network 2013. (Not sure about his adjustments to low income individuals either.)

    1. Z: “‎Kitov doesn’t seem to include capital gains, which has been the biggest contributor to income inequality over the last generation.

      If that’s true, then we should conclude that capitalism is the greatest producer of income and wealth the world has ever known, and the path to greater wealth is through savings for the purpose of accumulating and directing capital.

      We can see that those who employ capital instead of labor improve their well being faster and to a greater degree than those who rely entirely on money wages.

      That would seem to fly in the face of the Keynesian notion that the road to prosperity is through aggregate demand and spending.

      The lesson is clear. Thank you for pointing that out.

      1. mesaeconoguy

        No Ron, because as Piketty has so definitively demonstrated, capital just “is.”

        It does nothing, other than get taxed.

        Actually, using that leftist misconception, capital shouldn’t be taxed at all, since it is non-productive.

        1. Actually, using that leftist misconception, capital shouldn’t be taxed at all, since it is non-productive.

          Not taxing capitol, or more precisely a gain in capital, would get my vote.

      2. Zachriel

        Ron H: If that’s true, then we should conclude that capitalism is the greatest producer of income and wealth the world has ever known, and the path to greater wealth is through savings for the purpose of accumulating and directing capital.

        Certainly it a great producer of income for some. Isn’t that what the discussion was about?

        Ron H: We can see that those who employ capital instead of labor improve their well being faster and to a greater degree than those who rely entirely on money wages.

        It takes capital to make capital.

        1. Mangus Colorado

          Capitalism V labor is a simple formula – a worker has just so many hours to produce labor for wealth. Capital works 24/7/365 and can be duplicated over and over by accumulation and reinvestment.

          Keep in mind that capital is not taxed unless it is profit. Most nations let capital accumulate untaxed. That is why we see so many Corporations and individuals moving to tax havens.

          States like nations lose capitalist and new expansion or business creations in high tax locations. Competition is the best driver of innovation and growth of wealth and JOB creation.

          Tax laws in the US are used to do social engineering and to create winners and losers – look at tax credits for E=GREEN power.

        2. Z: “Certainly it a great producer of income for some. Isn’t that what the discussion was about?

          Of course. It’s a great producer of income for anyone who employs capital, which is anyone who defers some amount of their consumption through savings.

          That means anyone capable of producing something that can be exchanged on the market, including their labor.

          “It takes capital to make capital.

          Deferred consumption – savings – becomes capitol, which can then create more capitol. It’s sort of magical, and almost anybody can learn to do it, no matter how large or small their income. It’s the only thing that makes real economic growth possible.

          1. Zachriel

            Ron H: It’s a great producer of income for anyone who employs capital, which is anyone who defers some amount of their consumption through savings.

            Who often have more capital than they need for consumption. Keep in mind that the greatest increase in inequality has been within the very top tiers.

            Ron H: Deferred consumption – savings – becomes capitol, which can then create more capitol.

            And on the flip side, people at the low end of the income scale must often spend most of their meager income on daily sustenance.

            Ron H: It’s sort of magical

            Magical thinking is like that! It’s easy for a CEO who has stock options to save. It’s much harder for a poor laborer with children to save. Even if a poor laborer saves, a small emergency, such as losing work over a sick child, can often eliminate those meager savings.

            Yes, capital is important for economic growth. However, despite Kitov’s claim above, income inequality has increased over the last few decades.

            Not everyone has equal abilities, much less an equal start. That was true before, and it’s true now.

            The U.S. used to be proud of its strong middle class, but the middle class is under a great deal of stress, while the benefits of economic growth being realized by those at the top.

          2. profitup10

            Where was the concern for the middle class blue collar started to lose jobs due to EPA, Clean water, and air? Rules and regulations forced all the Manufacturing offshore and America lost 50+ million job.

            This was the heart of middle class America and we let the government destroy it for invented purposes. The pollution was from the war and was being cleaned up by industries.

            Politicians then stepped in as they saw the cleanup working and wanted credit and control thus the laws and more laws leading to over regulation. It was again overreach by government that caused the mass exodus.

            Now the worst polluted sites are mostly government owned where the Congress and the many agencies just ignore. The government is again above their own laws.

          3. Zachriel

            profitup10: Rules and regulations forced all the Manufacturing offshore and America lost 50+ million job.

            Um, that number doesn’t even begin to make sense.

            profitup10: The pollution was from the war and was being cleaned up by industries.

            The pollution was from industry and transportation. As you mentioned already, much of the industrial pollution was exported. Just look at China’s river and air. Pollution due to transportation was significantly curtailed.

          4. Mangus Colorado

            Just check the number of manufacturing employees, steel, metal fab, machining center, pipe and valve makers, wood furniture, aircraft and auto painting, metal casting for equipment and transportation/construction/farming, chemical makers, pharmaceuticals, lumber mills, paper mills, weavers, shoemakers, paper mills and many many more.

            Now we have moved the entire electronics hard goods offshore. Yes 50 million since 1950 is a low estimate if you care to do the research it is all there. Try buying American made cloth, carpet, wood furniture, smelted metals for casting?

          5. Z: “Who often have more capital than they need for consumption.

            You can decide for other people how much of something, including capital, they need? That’s truly amazing!

            Perhaps you feel that they don’t deserve what they have. If that’s the case, could you explain why they don’t deserve it if they have honestly earned it? Otherwise please explain what the problem is.

            Just to be clear: Hopefully you agree that earning something means exchanging something of value in voluntary, relatively free exchanges, without much government interference.

            Keep in mind that the greatest increase in inequality has been within the very top tiers.

            Umm…so what?

            And on the flip side, people at the low end of the income scale must often spend most of their meager income on daily sustenance.

            That’s true. What’s your point? Is there something about fairness you’re leaving unsaid?

            People at the low end of the income scale can and do manage to save some of their meager income to create capital because they understand that is the only way to create wealth and improve their lives – besides asking their agent, government, to steal it from those who have it.

            Of course those who have already succeeded will constantly enlist the force of government to place obstacles in the path of those low income people in the form of regulations, licensing requirements, and fees, but that’s a different issue.

            Magical thinking is like that!

            Capitalism is magical thinking? Who knew?

            It’s easy for a CEO who has stock options to save. It’s much harder for a poor laborer with children to save. Even if a poor laborer saves, a small emergency, such as losing work over a sick child, can often eliminate those meager savings.

            All very true. Your point? Life isn’t always pleasant for poor people. That’s why they strive hard to become un-poor – well, some of them do. Others demand things that don’t belong to them, and you encourage such dishonesty.

            Yes, capital is important for economic growth. However, despite Kitov’s claim above, income inequality has increased over the last few decades.

            So what? Why can’t/won’t you answer that question?

            Are you forgetting that production creates its own demand? Producing a high income creates high demand for those things that income will be exchanged for. Goods and services are paid for with goods and services. What difference does it make if that demand is created by one person or a thousand?

            Not everyone has equal abilities, much less an equal start. That was true before, and it’s true now.

            And you would like to do…what? Redistribute starts and abilities through coercion? Or is it just outcomes you are concerned with?

            The U.S. used to be proud of its strong middle class, but the middle class is under a great deal of stress, while the benefits of economic growth being realized by those at the top.

            Blah blah blah – there’s the party line. What nonsense.

            The benefits of economic growth, if created by voluntary exchanges of value, are necessarily realized by everyone involved in those exchanges, not just “those at the top”.

          6. profitup10

            I am a retired CEO and let me share with you how I made it to the top. I worked 60 plus hours per week for decade and have traveled so much that I would do anything for a HOME COOKED MEAL . . after a long time travelling even 5 star restaurants start to taste like fast food.

            Once at the top which is surly unreliable in length of employment requires the Companies to both pay well and give employment contracts to attract the best talent.

            I can tell you that a good CEO earns far more for the Shareholder than they are compensated. Look at Chrysler the CEO saved them form BK decades ago, GE the same, Berkshire Hathaway, Ford, and many other public Corporations. The CEO was paid one billion dollars and his leadership earned 20 billion dollars for the Shareholders – did they pay the CEO too much?

            If you answer yes then you do not understand business and how companies are propelled to growth and success.

            Look at Apple after Jobs left they had serious problems and the same people that forced him out begged him to come back – point made.

          7. Zachriel

            Mangus Colorado: Yes 50 million since 1950 is a low estimate if you care to do the research it is all there.

            There aren’t enough available American workers to fill 50 million jobs.

            Mangus Colorado: Try buying American made cloth, carpet, wood furniture, smelted metals for casting?

            Americans make other things for export.

          8. profitup10

            Like what product does America make to export? Intellectual property, technology licenses, food products, coal, – what about any value added manufactured products. Using our abundance of raw materials to produce and export what?

            Zeros and ones are quite useful but not in creating 50 million Middle income jobs . . where will the non technology workers find employment that will support families and provide a middle standard of living.

            No, sir the standard of living is going up for the so called poor [average total available subsidies for family of 4 is now +- $40K per year]. Could this be why such a high percentage of the population is on welfare?

          9. Zachriel

            Zachriel: Who often have more capital than they need for consumption.

            Ron H: You can decide for other people how much of something, including capital, they need?

            Capital used for consumption has an obvious limit. For instance, Bill Gates can’t possibly consume his wealth. Hence, savings takes no effort on his part.

            Ron H: Perhaps you feel that they don’t deserve what they have.

            We merely pointed out that saving when you are poor is much more difficult than when you are rich, even if you have all the right attitudes towards thrift.

            Zachriel: Keep in mind that the greatest increase in inequality has been within the very top tiers.

            Ron H: Umm…so what?

            You were waxing eloquent about the magical advantage of capital. We were merely pointing out that it is an advantage many people don’t enjoy.

            Ron H: The benefits of economic growth, if created by voluntary exchanges of value, are necessarily realized by everyone involved in those exchanges, not just “those at the top”.

            Income inequality is increasing, so obviously something has changed.

          10. Mangus

            paper mills and many many more.

            Now we have moved the entire electronics hard goods offshore.

            Where it belongs. Jobs in that industry are now almost all low skilled low paying, mind numbing drudgery. Good riddance to them. Meanwhile, we as consumers benefit far more from our electronics than our parents could even dream of.

            Yes 50 million since 1950 is a low estimate if you care to do the research it is all there.

            And yet, all those people aren’t still standing around outside the gates of their former employers business, wondering what to do with themselves. since the ’50s the unemployment rate – except during recessions – has been a remarkably consistent 4-6%, while the number of people in the US civilian workforce has more than doubled since 1950. Fifty million jobs may have been destroyed (I won’t even dispute the number) since 1950, but more than twice that number have been created.

            Jobs and the skills required by employers are constantly changing: creative destruction. That doesn’t mean fewer jobs, that means more stuff per worker, and more prosperity all around.

            Try buying American made cloth, carpet, wood furniture, smelted metals for casting?

            Why would I want to do that? As consumers, and that means everyone, we are always better off paying less for things. We know that instinctively, as we all shop for the most bang for our bucks.

          11. Z: “Capital used for consumption has an obvious limit.

            The limit is time, not capital. We understand your point, but wonder its relevance.

            For instance, Bill Gates can’t possibly consume his wealth. Hence, savings takes no effort on his part.

            That’s one of the hellish consequences of great wealth. J. D. Rockefeller had the same problem. In later life, as a philanthropist, he was unable to get rid of money as fast as it came in, no matter how hard he tried.

            While our hearts may ache at the injustice of such suffering, we are comforted in the knowledge that it’s only a problem for a few at the very top, so we need not concern ourselves with seeking a solution.

            We merely pointed out that saving when you are poor is much more difficult than when you are rich, even if you have all the right attitudes towards thrift.

            Yes, we agree. We pointed out that government obstacles often reduce those opportunities even further.

            You were waxing eloquent about the magical advantage of capital. We were merely pointing out that it is an advantage many people don’t enjoy.

            We understand that nothing is perfect in a society of human beings. It’s just that some things work better than others. Capitalism and free markets, for example.

            Income inequality is increasing, so obviously something has changed.

            What could it be? And why are we concerned? Those with enormous incomes spend a lot and save a lot. The spending is income for maybe thousands of others, and the savings is additional capital either available to other entrepreneurs, or used directly to create even more wealth – something the very wealthy have already demonstrated they are good at. It’s a win-win all around.

            And don’t forget, absent government interference, every dollar of income earned by those at the top, is one willingly given to them by someone who got more than a dollar of value in return. Any exception to that basic economic truth can be traced, almost always, to the use of government force.

          12. Zachriel

            Ron H:We understand your point, but wonder its relevance.

            A two-tiered society with a hollowed out middle has obvious social implications. While some might be concerned with the plight of the poor, the traditional conservative view is that it results in political instability.

            Zachriel: We merely pointed out that saving when you are poor is much more difficult than when you are rich, even if you have all the right attitudes towards thrift.

            Ron H:Yes, we agree.

            Common ground!

            Ron H:We understand that nothing is perfect in a society of human beings. It’s just that some things work better than others. Capitalism and free markets, for example.

            Yes, capitalism and free markets are essential for economic growth. They are not sufficient, however. It also requires a politically stable environment.

          13. Z: “A two-tiered society with a hollowed out middle has obvious social implications. While some might be concerned with the plight of the poor, the traditional conservative view is that it results in political instability.

            A two tiered society hardly describes the US with a continuum of incomes from $0 to a $gazillion. Ninety percent of the population is either middle class or working class, per capita income is ~$40k, and the average household income is over $100k.

            There is more income inequality among the top 1% than there is among the bottom 99%.

            That the far upper tail of the distribution is stretching out is of no consequence.

            We don’t think you should worry about a 2 tiered society any time soon.

            Yes, capitalism and free markets are essential for economic growth. They are not sufficient, however. It also requires a politically stable environment.

            And that is to be accomplished…how? By redistributing income from those who earn it to those who don’t?

            More understanding of economics and less phony agitation about the 1% would go a long way toward promoting political stability.

          14. Zachriel

            Ron H: A two tiered society hardly describes the US with a continuum of incomes from $0 to a $gazillion.

            Income inequality is a continuum. It is more unequal now than it was over the last few generations.

            Ron H: Ninety percent of the population is either middle class or working class, per capita income is ~$40k, and the average household income is over $100k.

            Wrong measure.

            Let’s say there are 10 middle-class people sitting in a bar. Then the person with the highest income leaves and Bill Gates walks in. Mean increases dramatically, but the median stays the same.

          15. Z: “Income inequality is a continuum.

            Thank you.

            There is no yawning chasm between rich and poor, the 1% and the 99%, the feeelthy rich and the rest of us. Those are artificial distinctions that are of little use in the real world.

            It is more unequal now than it was over the last few generations.”

            So what? Any stretching out of the tail at the extreme high end of the distribution involves relatively few people, who aren’t all the same people from year to year, and unless they have used the force of government to advantage themselves, we can assume that they earned it by providing greater value in return. We thank them for their enormous contributions by offering our dollars.

            Let’s say there are 10 140 million middle-class people sitting in a bar. Then the person with the highest income leaves and Bill Gates walks in. Mean increases…

            …oh, wait.

          16. Zachriel

            profitup10: Like what product does America make to export? Intellectual property, technology licenses, food products, coal, – what about any value added manufactured products.

            The U.S. exports electrical equipment, fabricated metal parts, medical equipment, computers and electronics, machinery, transportation equipment. The U.S. exports more today than it every has, however, manufacturing employment is far below levels from generations past.

          17. profitup10

            Which of tour list done not contain mostly foreign made subassemblies? Where is US mined, harvested raw material in your mix?

          18. profitup10

            Which of your list done not contain mostly foreign made subassemblies? Where is US mined, harvested raw material in your mix?

          19. Zachriel

            profitup10: Which of tour list done not contain mostly foreign made subassemblies?

            So? That doesn’t mean the U.S. isn’t exporting value-added manufactured goods.

          20. Zachriel

            profitup10: Where is US mined, harvested raw material in your mix?

            You asked for value-added manufactured products.

  9. Zachriel

    Also, among full-time workers, individual earnings income has increased from 0.33 in 1973 to 0.4 in 2009.
    https://www.census.gov/hhes/www/income/data/historical/inequality/IE2.xls

    1. Zachriel

      individual earnings income inequality

      1. profitup10

        Democracy… is a charming form of government, full of variety and disorder; and dispensing a sort of equality to equals and unequals alike.
        Plato

  10. Assuming that the figures above were produced using available data on Gini ratios, I contend that the latter does not whatsoever capture the Inequality Piketty is arguing about. He is not limiting himself to only “earned incomes” in the traditional meaning, but rather “wealth” which a much broader concept. He clearly admits using “income” and “wealth” interchangeably. To Piketty, any source of cashflow coming from investments in the broader sense (e.g. patents, rents from real estate, etc.) are to be considered as an income generating medium.
    I think that using the Gini data would be in this case comparing apples and oranges.

    1. Ismail

      He is not limiting himself to only “earned incomes” in the traditional meaning, but rather “wealth” which a much broader concept.

      Actually income and wealth are 2 different things, although confusion abounds. Income is a process, a flow of value, whereas wealth is the accumulated value of that income that is not spent.

      He clearly admits using “income” and “wealth” interchangeably.

      Which means he isn’t speaking as an economist. Anyone with a minimal exposure to the study of economics knows they are two different concepts.

      To Piketty, any source of cashflow coming from investments in the broader sense (e.g. patents, rents from real estate, etc.) are to be considered as an income generating medium.

      Yes. Any value that comes in (in-come) should be considered income. That would include any value received from wages, benefits, rents, royalty, interest, dividends, etc. Wealth is a measure of the value of all physical and financial assets held by a person or other entity.

      Generally wealth is accumulated from that portion of income that isn’t spent. Income can produce wealth and wealth can produce income.

      It’s possible for a low income person to have considerable wealth, if they have lived frugally and saved a great deal of their income over time. It’s also possible for a person with high income to spend it all, and accumulate no wealth. Most of us are somewhere in between there.

      I think that using the Gini data would be in this case comparing apples and oranges.

      Gini is a measure of the inequality of income distribution of a given country. Wealth distribution would be a different measure.

  11. Charles Hill

    I’ll just make one observation here: The calculation of the GINI ratio for individuals is based on income as reported in the US Census Bureau’s March survey, which is itself drawn from a sample of the population. The Census Bureau’s definition of income used in this survey explicitly EXCLUDES income from capital gains, which accounts for an increasingly disproportion share of income for those in the top percentiles of the total income distribution. Most academic studies of inequality argue that it is income from capital gains that is driving increasing income inequality over time. By using a data source that excludes capital gains, the measure of individual income inequality reported here is biased by omission. I just don’t think you can draw any meaningful conclusions from this data.

  12. Charles Hill

    Looking again at Kitov’s paper and the US Census data, I’ve found another methodological error. The US Census data he uses does not give the exact income for respondents, but allows them to select a range (e.g. $1 to $2,499; $2,500 to $4,999; and so on). The top category offered is “$100,000 and over”. Here is the problem with this; most of the rise in income inequality observed by others can be attributable to the increase in income (from labor plus capital gains) for those in the top 1% of the distribution. In 2012, to be in the top 1% you had to earn at least $395,000. Kitov’s measure does not capture this, and in fact cannot capture this, because he simply does not have the fine-grained data on the incomes of higher earners. All that he can know from the data is what proportion of the population earned $100,000 and over. This produces a downward bias on the value of the GINI coefficient for income computed by Kitov.

    Interestingly, Kitov acknowledges this problem in the paper cited on his blog (Kitov and Kitov), but does nothing about it.

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