More on the Long Tail of Income
Henry Farrell and I seem to be talking at cross-purposes on the question of power laws and inequality, which I take as a sign that my initial post was muddled. Let me see if I can do better. I entirely agree with the following:
Even if we did know that US income was distributed according to a power law, we still wouldn't know all that much. There is a very wide variety of mechanisms that can produce power laws. Without further investigation as to which mechanism is in play (which can't be discerned just from noodling the observed distribution), we may have a Nature publication, if the editors are dozing off again, but we haven't gotten very much closer to an understanding of what is causing the observed data.
This, indeed, was entirely my point: the skewed distribution of income likely arose from a variety of factors. Some of them are related to past policy decisions. Others are the inevitable consequence of having a complex market economy. My ideologically-colored guess is that the latter factors dominate, but I don't know, and I doubt anyone else does either.
Given this, I found Farrell's framing of his final point puzzling:
Even if all the above objections were wrong, and income inequality in the US did emerge from some 'natural' phenomenon, this does not at all invalidate the case for addressing it.
If Farrell's point is simply that the natural-ness of skewed income distributions isn't, by itself, an argument against progressive income taxes or welfare programs, I agree. Indeed, I said as much in the final paragraph of my post, when I wrote that I didn't mean to deny "that there are good arguments for taxing the wealthy in order to provide government services to the non-wealthy." My beef is with the assumption, implicit in Farrell's post, that inequality as such is an issue that needs to be "addressed."
If we lived in a society in which taxes fell primarily on the wealthy, and in which the resulting revenue were sufficient to provide a reasonable basket of government service to non-wealthy people (however you want to define "reasonable") then it seems to me that there would be no reason to be concerned about inequality, as such. Yet media coverage of inequality seems to focus a great deal on meaningless statistics such as the share of national income going to the wealthiest 1 percent of income earners. We can certainly object about those members of the 1 percent who obtained their wealth through political favoritism or other morally suspect means.
But the raw size of the inequality isn't evidence by itself of a problem. If Wall Street is being unjustly enriched by taxpayer bailouts, the problem is the bailouts, not "inequality" per se. Conversely if a single mother is having trouble making ends meet because of regressive taxes, the problem is the taxes, not "inequality" as such. Reducing inequality, in and of itself, isn't a worthwhile goal. Burning down Warren Buffett's house would reduce income inequality in America, but that doesn't make it a good idea.
I think the reason people regard inequality, as such, as a problem is that they've got a deep intuition that such an unequal distribution of wealth could not have arisen without wealth being taken from the poor and given to the rich. My point is simply that this intuition is mistaken. A skewed distribution of income may be a symptom of systematic injustices in the economic system. But the ubiquity of long tail distributions online suggests that it isn't necessarily the case. Clearly, nobody is robbing from me and giving eyeballs to Cory Doctorow. It's at least possible that the economy works the same way.
Perhaps a better question is how many of that 1% are still there one, five, and say, ten years later. There are no doubt plenty of one year wonders in that group who sold the house and/or business at retirement and who get to be in the top 1% just once.
I don't have stats handy, but recall that the top 5% of household income kicks in at about $150k to $160k and often with more than one wage earner. Is it unjust that households with more people and more wage earners have higher average income than households with fewer folk? The average 46 year old earns about triple the average 23 year old. Unjust?
June 18, 2008 3:43 PM | Reply | Permalink
Is it just or unjust that Leona Helmsley's pet pooch had it's $12 million dollar trust fund reduced by $10 million after Leona's death? And that done to provide for her grandchildren for goodness sakes.
Does that still leave the dog, with a household of one, still in the top 5%, or 1%, and for how long one, five, ten years? (are rich folks pets counted in these statistics-I don't know?)
link
June 18, 2008 4:15 PM | Reply | Permalink
Probably neither. You will note that Leona is DEAD and the effect on her being here or not being here on the uninsured, unemployed, uneducated, and/or unloved seems to be insignificant. In other words, who cares?
June 19, 2008 2:06 PM | Reply | Permalink
I agree with the trust of this post. Raging against the inequality per se is a bit of an abstraction.
Where raw inequality becomes more problematic is when those at the tippy top of the income distribution use their money to promote public policies that favors even more inequality and less contibutions from their segment of society to the provision of government.
In short there are 6 Scaif, Coors or Forbes families trying to warp public policy for their selfish benefit for every lone Buffet. That is America's nightmare and it goes a long way to explaining the last 30 years and why American conservatism rose so fast and held power for so long.
So while I don't think raging against inequality per se is a good political strategy, I would really like to see national politicians and the national media, take on some of these very wealthy, powerful and political conservative families. Don't fight an abstration, shine light on specific facts.
June 18, 2008 5:20 PM | Reply | Permalink
oh to be able to think as clearly and deeply as our libertarian friends.
"I think the reason people regard inequality, as such, as a problem is that they've got a deep intuition that such an unequal distribution of wealth could not have arisen without wealth being taken from the poor and given to the rich."
The problem with inequality is apparently is our deep intuition (wrong of course) about how inequality might have arisen. Clearly it is not the perceived problem by many (albeit ignorant non-libertarians) that many, many people are homeless, hungry, without shelter, access to healthcare, without adequate education, while others in our society, already filthy rich, have now become more wealthy, more powerful, more indifferent to the suffering of those who are in need, and more willing to spend fortunes on preserving their growing power and wealth. Do not get the wrong impression. Mr.Lee is shilling for the plutocrats and oligarchs. Just read his rot carefully. It is all there.
June 18, 2008 5:56 PM | Reply | Permalink
many, many people are homeless, hungry, without shelter, access to healthcare, without adequate education
Yup, those are all problems. And like I said, there are good arguments for taxing the rich to alleviate them. But this has nothing to do with inequality, as such. Poverty, homelessness, and poor health care and education are bad whether or not there are rich people around to blame for it.
June 18, 2008 7:53 PM | Reply | Permalink
Poverty, homelessness, and poor health care and education are bad whether or not there are rich people around to blame for it.
No one blames the wealthy. When the 'richest country on earth' can cut taxes a trillion dollars on the 'have mores' while at the same time it is unable to find the money to provide basic health care for all its children, 25% of whom live in poverty, it does indicate something wrong with the values in that society.
June 18, 2008 8:18 PM | Reply | Permalink
Timothy, yes, yes, I agree if there was inequality, (even gross inequality, let's go even further, even super, super, gross, gross inequality) and we had no poverty, no homelessness, and everyone had access to quality education and education then I wouldn't have a problem with inequality as such. Duh. This is really a juvenile, fatuous,superficial, facile point; we are not characters in some Ayn Rand fantasy; here on earth, in modern day America, inequality comes packaged with human suffering for great numbers. Not some ideological construct without flesh and blood.
(You are not a kid in some honors program at the University of Minnesota anymore. Grow up. It's time.)
June 18, 2008 10:15 PM | Reply | Permalink
Why is TPM feeding the libertarians?
Next they'll want to sleep on your couch and use your ISP to organize a Frank Capra nightmare of psychopathic loners going around punching people in the face...
June 19, 2008 1:17 AM | Reply | Permalink
one further point on the libertarian silliness...perhaps Mr Lee in his infinite wisdom can explain why there is no member of the US. Senate who is not a multimillionaire (ok, I exaggerate. but it is pretty f*** close). Money and power are married; this is a "fair" game only in the childlike fantasies of our pure, above-it-all, libertarians. Money begets money and money controls the rules of the "game". When juveniles like Mr. Lee pontificate about a "just" economy, they are trying to drag the discussion to some "ideal model" of a free trade economy that does not exist, that has not existed and that never will exist. It is not "fair" or "just". You can find those only in the dictionary. Instead as anyone who has passed intellectual puberty knows, but not the young Mr. Lee, the economy functions for those who control it. And the gang that controls it now is the wealthiest top 1% of the nation. So sorry Mr.Lee, that is inequitable; if the economy cannot function for all of us; then we must expropriate those who will not use their power, wealth and ownership for the common good.
June 19, 2008 11:45 AM | Reply | Permalink
I think the reason people regard inequality, as such, as a problem is that they've got a deep intuition that such an unequal distribution of wealth could not have arisen without wealth being taken from the poor and given to the rich. My point is simply that this intuition is mistaken.
And therefore it can be said that the sun rises in the west. Right?
As more and more income is being taken from the 'poor' (maybe 'poor' should be defined for contextual purposes) and given to the wealthy. A rising tide will not lift all ships...if it did the wealthiest 1% would reinvest in the economy and wages would rise. Prices for goods and services are rising while the majority of Americans are seeing their incomes remain stagnant or decrease. But the worsening economic plight or working Americans has nothing to do with income inequality as more former middle-class Americans become the 'working poor'?
June 20, 2008 12:08 AM | Reply | Permalink
And although many libertarians at the time would tell you, that although they abhorred segregation and racism there was nothing wrong with "separate but equal" IN ITSELF.
June 20, 2008 9:24 AM | Reply | Permalink