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Posts Tagged ‘wealth’

Inequality Update

Inequality has become the new hot topic over the last several years – in the media and in the research community. This post briefly reports several recent studies of inequality that tell us what’s been happening, why, and to what effect. (It’s not a cheery story.) Before that, notice how rapidly public attention – if not action – has recently turned to inequality.

Income inequality started widening about 1970, expanded quickly in the 1980s and 1990s (when colleagues and I wrote Inequality by Design), and grew much more slowly since.[1] Media and academic interest in the topic seems to have taken off about 25 years after the big jump. The number of stories in the New York Times that mentioned inequality rose from about 90 a year in the 1990s to 840 a year in the 2000s and to about 2,700 a year since the start of 2010. About 250 economics articles a year touched on inequality in the 1990s – much fewer than in sociology, by the way – 850 in the 2000s and over 3,500 per year in the 2010s.[2] Better late than never.

Source

Piketty & Saez via Source

What are some of things we are learning from this 30-fold increase in media attention and 14-fold growth in economic research? What follows is not a systematic overview – that would be a Herculean task and there are many books that attempt it – but an introduction to several studies that drifted across my (virtual) desktop recently. Some give us the long view, some a view of how the Great Recession accentuated inequality.

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The Assets Gap

Income inequality is widening, especially in the United States, which already has the widest income inequality among comparable nations. Just about everyone who pays attention knows this. The debate has now moved on to whether growing income inequality is inevitable. Should we just live with it? Is it really bad  — perhaps inequality is just how economies grow? (Wrong.) But in focusing on Americans’ paychecks, we attend too little to the greater component of widening social inequality: wealth.

aging.ohio.gov

It is accumulated wealth that better defines economic inequality, in quite visible ways — the mansion on the hill versus the trailer in the flats —  and in subtle but important ways, too, such as the risks some young people can  take and others cannot. Go to college? Accept an unpaid internship? Start a business? Or, play it safe and  take the cash register job at the supermarket?

Family wealth helps a lot. But wealth is hard to to assess — and to tax.

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Unequal Denial

That economic inequality is great and growing in the United States is now hard to deny. An earlier post reviewed how average Americans see and understand economic inequality. But one of the side stories is the expert debate about this inequality. Having followed the public and academic arguments about inequality for a few decades, I have a sense of how the terms of the debate have shifted and how defenders of post-1960s policies have responded. It’s an interesting dance of denial.

After a brief recap of the basic evidence, I’ll turn to that dance.

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Equal Visions

The liberal blogosphere is currently atwitter over a new study produced by Michael Norton and Dan Ariely (pdf) showing how much Americans underestimate economic inequality in America. A 2005 on-line survey asked thousands of respondents to estimate what proportion of all the total wealth in the country was owned by the richest one-fifth of Americans, the next richest one-fifth and so on. On average, the respondents guessed that the richest one-fifth owned about three-fifths of the nation’s wealth; in reality the richest one-fifth own over four-fifths of it. The survey also asked respondents for their ideal distribution; on average, they preferred a society in which the richest one-fifth owned about one-third of the national wealth.

(Although dramatic, these findings are not surprising. Americans have been shown, for example, to underestimate how wide the gaps are in earnings between jobs. And Americans generally cannot provide accurate statistical descriptions of America. For example, they tend to guess that minorities such as blacks and Jews form substantially larger proportions of the population than they really do.)

According to the new study, then, Americans not only think that wealth is much more equally distributed than it really is, they want an America that is much more equal than they imagine it is today. And yet, Americans are notably opposed to the government doing anything to move the distribution of wealth in that direction. Why the contradiction? (more…)

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Happiness Happy

An economist I recently lunched with muttered that the flood of research by economists on happiness was making him depressed. Since about 2000, economists have gone on a binge of writing books and articles about how people answer questions such as, “Taken all together, how would you say things are these days—would you say that you are very happy, pretty happy, or not too happy?” The news has even reached David Brooks and inspired an mini-screed from The New Republic‘s literary editor about the philistinism of “equation-makers” dealing with “realms of human experience in which their methods have no place.”

What has brought tough-minded economists to the point of studying something so, well, “mushy”? It has to do with the perennial question, Can money make you happy? And there IS an historical connection.

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