Income Inequality IV

Over the weekend James Joyner stepped up to the plate in the discussion of income inequality with a post whose title I took as a pathetic grab at attention ;-). His commenters don’t seem to be buying his position.

To save it from oblivion the following is the comment I wrote to that post.

The increase in income inequality is beyond doubt, however reckoned. The open questions are

  1. are the income increases of the top .1% coming at the expense of the lower 99.9%?
  2. what are the causes of the tremendous growth in income of the top 1%?
  3. is the increase in inequality a bad thing?
  4. will the measures proposed for remediation actually have that effect?
  5. will the adverse secondary effects of actions intended to remediate outweigh their benefits?

Since my ideal society is something resembling a 21st century equivalent of Jefferson’s yeoman farmers, I would answer “Yes” to #3. James has provided a bit of an argument for why the answer to #1 may be “No”.

I do think that policy is a major cause of the increase in inequality. For instance, the examples given by James (Bill Gates, Warren Buffett, LeBron James, and Lady Gaga) are all beneficiaries of government policies restricting the free flow of information. Maybe not Warren Buffett but definitely the rest.

Additionally, many of those in the lowest two income quintiles have lost ground or stalled due to other policies including immigration and trade policies.

I’m wary, however, of the focus on the top .1% of income earners. The next 4.9 percent (the top .9-5% of income earners) have seen income growth equal in dollars to the top .1%. That group includes hundreds of thousands of doctors of medicine (much of whose income is derived from tax dollars), thousands or tens of thousands of public officials (whose incomes are completely derived from tax dollars), tens of thousands of lawyers and dentists (protected or subsidized by the government), and so on.

IMO the large incomes of that next tier of high income earners is no less damaging than the very large incomes of the ultra-rich and a very large proportion of their income is the consequence of policy.

I didn’t see much interest in addressing my substantive points. I guess it’s more fun to beat up on “the rich” than to discuss the matter honestly.

4 comments… add one
  • PD Shaw Link

    I’ve not read anything to convince me that income inequality is a bad thing. I am convinced that in our democracy a degree of social equality is essential. And I think our culture has moved towards a type of meritocracy that assumes that some people have more merit than others and that those today who have the best jobs and attend the best schools are more equal than others. And those without them are losers who either deserve their fate or are victims of other losers.

  • steve Link

    “I’ve not read anything to convince me that income inequality is a bad thing.”

    What would it take to convince you? We are unable to construct an alternate universe with less inequality, so we are left with historical comparisons and indirect evidence for the most part.

    As I said in reply to your post.

    1-Sometimes. Certainly our saving the wealthy from taking the hits in the finance system hurt the rest of us. Of course, the unemployment from that is worse.

    2-Too long to answer. It does not appear to be linked to productivity.

    3-Yes.

    4-Probably not, especially since I dont think we are doing much. Anyway, billions of dollars buys you really good lawyers.

    5-Some, yes. Most of whatever measure are taken will hit the lower income group harder.

    Steve

  • PD Shaw Link

    ???

    What would convince me? Maybe, an argument, instead of just repeated references to a graph showing income inequality increasing.

  • Andy Link

    Well, there is always going to be income inequality no matter what, so there isn’t much use in calling it “bad.” That said, there are certainly differences of degree and I tend to agree that a growing gap is worrisome. I just don’t know what can be done about it.

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