There is no doubt that inequality is increasing. Those with more education are pulling farther and farther away from those with less. Look at the chart below to see just how much things have changed (h/t TT)
Discuss.
Author Archive
Silent spring? Not so much
May 14, 2012, 3:10 pmI’ve mentioned before that I live in Rachel Carson‘s old neighborhood and often hike in the Montgomery County, MD parks, where she spent time ruminating about the natural world. Given that I’m a fossil-fuel loving, better-living-through-chemistry enthusiast, I am sure my presence there has her spinning in her grave.
Carson is, of course, most famous for Silent Spring, her polemic against industrial chemicals, including DDT. The book was serialized by the New Yorker 50 years ago this June and is credited with launching modern environmentalism.
The anti-DDT forces inspired by Carson went too far (something Roger Bate and his friends demonstrate conclusively in this fine book). Many millions of people in developing countries have suffered needless disease and death due to anti-DDT zeal and rejection of science.
In any event, despite my love of modern industrial society, I’m as much a sucker for cute, helpless animals as the next mammal with opposable thumbs. So I’m happy to note that, as the picture below shows, there’s a noisy spring in my neighborhood this year.
That’s a nest in my backyard, adjacent to Carson’s old haunts.
Do liberals bother to read books before denouncing them?
May 9, 2012, 10:55 amA few months ago I noted that lots of the folks denouncing Charles Murray’s book Coming Apart admitted they didn’t bother to read the book. Now we have Michael Kinsley denouncing the argument Edward Conard makes in his new book on economics and finance, Unintended Consequences. Except it’s clear Kinsley hasn’t read the book, just the NY Times Magazine piece about Conard. Kinsley doesn’t really address any of the substantive arguments Conard actually makes in the book.
It brings to mind the great scene in the movie Metropolitan where the character Tom Townsend admits he doesn’t read books. “You don’t have to have read a book to have an opinion on it,” he says. “I prefer good literary criticism. That way you get both the novelists’ ideas as well as the critics’ thinking.” Townsend is, of course, a boob.
You wouldn’t know if from the Times piece, but Conard’s is one of the better books written on innovation and economic growth over the past few years. Is it too much to ask liberals to wrestle with an author’s actual arguments before they denounce them? With Arthur’s Road to Freedom and Jonah’s Tyranny of Cliches flying off bookstore shelves this month, we’re about to find out.
America the Progressive, Part V
April 10, 2012, 12:44 pmSo President Obama is making his case for raising taxes on the rich today. Gene Epstein has a nice chart that puts total tax rates in perspective. Epstein points out that while taxes for all Americans have come down since the late 1970s, America’s tax code is still quite progressive.
For earlier installments in the America the Progressive series, go here.
Obama’s economy ‘built to last’ vs. Cantor’s economy ‘built to grow’
April 5, 2012, 10:47 amHouse Majority Leader Eric Cantor took a few moments recently to explain how his view of the economy differs from President Obama’s (and even, I’d add, from some in his own political party). While the president called for an economy “built to last” in his State of the Union address, Cantor contrasts that with a more growth-oriented, dynamic, and evolutionary view of the economy. Watch below.
The U.S. fiscal picture meets the tyranny of math
April 2, 2012, 9:00 am“The tyranny of the mathematics is inescapable.” That’s what Cliff Asness told me when we discussed the long-term U.S. debt picture. The U.S. needs to get control of its fiscal future or else big problems are sure to come. Asness runs AQR Capital Management, a hedge fund, and he has little patience for those who argue that current low long-term interests rates mean everything is hunky dory (“markets can be what geeks call non-linear… you become Greece much quicker than you want”) or that we can print money to solve the nation’s balance sheet problems. Watch the video here.
Who was to blame for the financial crisis?
March 29, 2012, 12:58 pmDuring my conversation with AQR Capital Management’s Cliff Asness, I asked him who was to blame for the financial crisis. Asness is careful to separate the real estate bubble from the broader financial contagion and too-big-to-fail. Of the too-big-to-fail problem, Asness thinks the solution is allowing failure—“I happen to think failure is less scary and more survivable than others do,” he says. But he admits the politics of a crisis complicate matters. Watch below.
Dodd-Frank and the expansion of crony capitalism
March 28, 2012, 10:59 amPeter Wallison, Alex Pollock, and others around here have done lots of spade work analyzing the myriad problems with Dodd-Frank (see here, here, and here for example).
In my interview with Cliff Asness of AQR Capital Management, he highlights one of the most troubling dynamics unleashed by the financial reform; namely, the way in which the expansion of arbitrary regulatory power at the heart of the law vastly increases the crony capitalism that undermines free enterprise.
Is uncertainty responsible for our economic woes?
March 27, 2012, 9:52 amI recently interviewed Cliff Asness, the managing & founding principal of the hedge fund AQR Capital Management, at AEI’s World Forum. Last year, Asness wrote a provocative piece in the WSJ about what’s holding the economy back, arguing that “Uncertainty is Not the Problem.” Cliff said:
Many commentators blame our continuing economic woes on ‘uncertainty.’ They allege that recent and anticipated dramatic policy changes make business planning difficult, and that this is retarding growth and employment. This view is not wrong—but our main problem is not the uncertainty surrounding new policies. It is the policies.
I asked Asness to expand on this idea. Watch below.
Buck v. Bell curve
March 26, 2012, 12:08 pmOver the weekend, the Times ran one of the weirdest pieces discussing Charles Murray’s book Coming Apart. It’s hard to tell if the author of the piece has even read the book. Either way, the piece is so goofy it would be worth ignoring were it not for its interesting discussion of Carrie Buck and the landmark Supreme Court case Buck v. Bell that approved forced sterilization. I mention it first and foremost because AEI’s own Walter Berns wrote one of the most important papers on that case—legal eagles can find it here.
While they don’t talk about it now, American progressives loved forced sterilization back in the day. Progressive lion Oliver Wendell Holmes Jr. wrote the opinion in Buck v. Bell. In it he said, “the principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes.” This is worth mentioning because supporters of the controversial contraception mandate under ObamaCare argue that the state has a strong public health interest in ensuring widespread availability of contraception in the same way it has an interest in, yup, widespread vaccinations. It’s funny how while history doesn’t repeat itself, it sure does rhyme.
Supreme knockdown of the EPA
March 21, 2012, 2:16 pmThe Supreme Court just sided with Mike and Chantell Sackett of Idaho in their fight against the EPA. Property rights advocates should be thrilled. It’s also a victory for the Pacific Legal Foundation and their talented attorney Damien Schiff.
I had the good fortune of meeting the Sacketts recently. It is difficult to overstate just how outrageous their treatment was by the EPA. Take a look at the following video from Nick Gillespie’s team at Reason to understand what happened to them.
Information rules and regulations
February 29, 2012, 3:15 pmWashington Post reporter Cecilia Kang is terrific at covering the myriad battles roiling tech-land, from patents to spectrum to anti-trust and more. But in a piece on the high “cost” of switching from Google to other information providers, she mischaracterizes what’s happening in info-tech. It’s important to get this right because a misunderstanding of the nature of information services can lead to misguided regulation.
She writes:
Consumers may be free to leave, analysts said, but Google’s services are designed to be sticky. Such tactics are widely used in the tech industry and elsewhere. Apple makes its apps and music on iTunes so they are compatible only with the company’s iPhone and iPad. Facebook friends cannot be transferred to other social networks. Cellphone companies urge customers to sign contracts. Even banks make it complicated to switch to competitors.
Indeed, the need for high “switching costs,” especially in Web business, was noted by Hal Varian in 1998, before he became Google’s chief economist. He noted that fickle consumers can change loyalties with a click of the mouse. “Once you have a chosen technology, or a format for keeping information, switching can be expensive,” he wrote in “Information Rules: A Strategic Guide to the Network Economy.”
Kang makes it sound like it’s some nefarious plot (e.g. “tactics are widely used…”) of firms — Apple, Facebook, Google and others — to lock in customers. But that’s not really what Varian or other students of the information economy had in mind. Varian was simply describing the nature of network effects and information goods and services. Indeed, just after the quote Kang cites, Varian states “this type of situation is the norm in the information economy.” Important from a regulatory standpoint, Varian also goes on in the book to explain to users/buyers of information goods and services “how to avoid [lock-in], or at least anticipate it.” It is sometimes hard for regulators to believe, but consumers of goods in competitive markets have a considerable amount of power and choice.
Now we know why some American politicians want the United States to be more like China
February 27, 2012, 9:37 amWell this is interesting (h/t Tyler):
The richest 70 members of China’s legislature added more to their wealth last year than the combined net worth of all 535 members of the U.S. Congress, the president and his Cabinet, and the nine Supreme Court justices.The net worth of the 70 richest delegates in China’s National People’s Congress, which opens its annual session on March 5, rose to 565.8 billion yuan ($89.8 billion) in 2011, a gain of $11.5 billion from 2010, according to figures from the Hurun Report, which tracks the country’s wealthy. That compares to the $7.5 billion net worth of all 660 top officials in the three branches of the U.S. government.
Original story here.
America the progressive, part IV
February 24, 2012, 1:51 pmMy favorite liberal social scientist, Lane Kenworthy, wades into the debate on the progressivity of the American tax code here. As Lane notes, and despite all the hand-waving from some poorly informed liberal writers, America’s tax code is more progressive than those of most other rich countries.
Lane points out that if we want to redistribute wealth, it’s better to do it through spending than through progressive taxation.
So here’s an idea for far-sighted Republicans or Democrats—combine a growth-oriented tax code (broad base, low rates; tax consumption, not investment) with a plan to replace the welfare state.
An outstanding American
February 22, 2012, 11:49 amCongratulations to my friend Vivek Wadhwa, who was just named an Outstanding American by Choice:
The Outstanding American by Choice initiative recognizes the outstanding achievements of naturalized U.S. citizens. Through civic participation, professional achievement, and responsible citizenship, recipients of this honor have demonstrated their commitment to this country and to the common civic values that unite us as Americans.
Vivek wrote about America’s other immigration crisis here.
What’s driving rising inequality?
February 17, 2012, 10:56 amRuss Roberts has an important post here that ties together a lot of different debates of late—Peter Thiel/Tyler Cowen’s Great Stagnation thesis, the Occupy/inequality complaints, and Charles Murray’s Coming Apart. Read it.
America the Progressive, part III
February 14, 2012, 4:59 pmJim, good point re: the size of government in the United States being larger than most people think. I’d add (since this is a hobby horse of mine) that the U.S. tax system is even more progressive than most people think, a point noted here by Clive Crook (in a devastating takedown of Jon Chait):
According to the OECD, rich Americans bear a bigger share of the tax burden because they earn a bigger share of the income and because the US income tax system is more progressive.
Land of the free, home of the disabled (more on those phony unemployment numbers)
February 7, 2012, 3:03 pmJPM’s Mike Feroli is one of the best economists on Wall Street. In a new Economic Research Note he finds the number of Americans claiming disability is rising rapidly:
As of January over 8.5 million individuals were receiving federal disability payments (an additional 2 million spouses and children of disabled workers also received disability payments). Since the onset of the recession and the subsequent slow recovery, this figure has accelerated and grown faster than the overall size of the potential labor force—currently 5.3% of the population aged 25-64 is on federal disability, up from 4.5% when the recession began. The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year—more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined.
This spike in people claiming disability is keeping the unemployment rate artificially low (while I cheered the recent unemployment data, Feroli’s note bolsters Jimmy P’s claim that the latest unemployment figures are a little “phony”).
What’s most striking about the increase in disability is how out of character it is given the changing nature of the economy. Feroli notes:
The long-run increase in disability benefit payments, as well as their acceleration during times of weak labor markets, is puzzling along two dimensions. First, improving aggregate health outcomes and an increasingly service based economy would suggest a trending down in disability insurance rolls. Second, health outcomes are countercyclical, improving as the economy worsens (fewer workplace injuries, etc.) while disability recipiency appears to increase when the labor market is weak.
One thing that might be driving this spike? While Charles Murray’s latest book looks at the decline of industriousness among certain segments of American society, here’s another factor—network effects:
Income support programs may be susceptible to network effects—benefit growth may beget more benefit growth, as increased program usage generates learning among neighbors and others within a social network about the benefits that are available. Judging the magnitude of these effects is difficult, but one thing that can be said with more certainty is that the recent data show little letdown in the growth of the number receiving federal disability benefits.
Reaganomics vs. Obamacare
February 6, 2012, 5:01 pmJimmy P., you make a good point about the Reagan record and the extent of the boom. It brings to mind one of my favorite lines from Reagan’s re-election campaign in 1984:
“I could tell our economic program was working when they stopped calling it Reaganomics.”
It will be interesting to see if Obama will be able to say something like “I could tell our health program was working when they stopped calling it Obamacare.” What are the odds?
Coming Together—the need for a liberal book club
February 3, 2012, 3:07 pmCharles Murray’s new book has been getting lots of attention, and I wanted to take a look at what liberals who disagree with him had to say (believing I’ll learn more from the critics than I will from those who agree with him). So I searched for criticism of Coming Apart and here are sentences from some of the critiques:
“I haven’t read Murray’s book, and probably won’t.” (Kevin Drum)
“While I haven’t yet read Murray’s latest book…” (Greg Anrig)
“I haven’t read Murray’s book…” (Jon Chait)
No additional comment required.
Thinking about think tanks
January 12, 2012, 1:32 pmThe Hudson Institute’s Tevi Troy (who was once an AEIer) has written an interesting essay in the latest National Affairs called “Devaluing the Think Tank.” Arnold Kling and I experimented with Google+ videoconferencing technology to talk to Tevi about the piece.
Let us know what you think.
Regulation is, in fact, a growing problem
January 11, 2012, 3:39 pmLiberal economists are right to point out that poor demand/sales have been a drag on the economy. Put aside for the moment whether or not that justifies more fiscal stimulus. They might be interested to learn that regulation is a growing problem for small companies. The gang at Dismal Scientist has the data ($):
They point out that:
The most small firms since the late 1990s have begun citing regulation as their biggest problem. Regulation is poised to surpass taxes in the survey, which is rare.
And while we’re at it, our aggie-philosopher Blake Hurst recently pointed out the incalculable damage done by foolish regulation.
Wonder Bread, gone
January 10, 2012, 10:30 amEinstein said, “The process of scientific discovery is, in effect, a continual flight from wonder.” Well, the flight from wonder continues: The WSJ reports that the maker of Wonder Bread may be headed to bankruptcy:
Weep, children.
Hostess Brands, the creator of magical marvels of modern science such as Twinkies, Ding Dongs, and Wonder Bread, is preparing to file for bankruptcy protection…
American.com contributor Ralph Bennett wrote about the demise of Wonder Bread back in 2004.
Lake Wobegon professors and the origin of grade inflation
January 9, 2012, 2:01 pmTim Taylor has a fun post highlighting new research that looks at the grading practices of Republican and Democratic professors. According to new research (emphasis added):
Relative to their Democratic colleagues, Republican professors tend to assign more very low and very high grades. The share of the lowest grades (F, D−, D, D+, and C−) out of the total is 6.2 percent in courses taught by Republican professors and only 4.0 percent in courses taught by Democratic professors. The share of the highest grade (A+) out of the total is 8.0 percent in courses taught by Republican professors and only 3.5 percent in courses taught by Democratic professors. Both differences are highly statistically significant.
The important point from our perspective is that the evidence suggests that Republican professors are associated with less egalitarian grading outcomes.
Taylor provides a nifty graphical representation of the results.
At least now we know where grade inflation comes from!
Here’s a task for an enterprising journalist who is sick of the primary season cattle calls—find out how Barack Obama and Newt Gingrich graded students back when they were college profs.
Being rich ain’t what it used to be
January 3, 2012, 10:18 amMy friend Andy Kessler has a fantastic piece in the WSJ shifting the discussion over income inequality to a discussion of consumption.
Yes, some people have more than others. Yet as far as millionaires and billionaires are concerned, they’re experiencing a horrifying revolution: consumption equality. For the most part, the wealthy bust their tail, work 60-80 hour weeks building some game-changing product for the mass market, but at the end of the day they can’t enjoy much that the middle class doesn’t also enjoy. Where’s the fairness? What does Google founder Larry Page have that you don’t have?
Andy’s piece is a great read, but given space constraints it’s light on data. For the datanauts we can turn to Attanasio et al and their fine book Inequality in Living Standards Since 1980, and to Bruce Meyer and James Sullivan’s paper on the material well-being of the poor and middle class since 1980.