November 25, 2002
Paul Krugman Worries About the Growing Respectability of Inherited Status

Paul Krugman worries about the growing respectability of inherited status. He thinks that American ideas of "meritocracy" are being corrupted by a semi-feudal strain of thought according to which "choosing the right parents" has merit of its own:


The Sons Also Rise

November 22, 2002 | By PAUL KRUGMAN

America, we all know, is the land of opportunity. Your success in life depends on your ability and drive, not on who your father was.

Just ask the Bush brothers. Talk to Elizabeth Cheney, who holds a specially created State Department job, or her husband, chief counsel of the Office of Management and Budget. Interview Eugene Scalia, the top lawyer at the Labor Department, and Janet Rehnquist, inspector general at the Department of Health and Human Services. And don't forget to check in with William Kristol, editor of The Weekly Standard, and the conservative commentator John Podhoretz.

What's interesting is how little comment, let alone criticism, this roll call has occasioned. It might be just another case of kid-gloves treatment by the media, but I think it's a symptom of a broader phenomenon: inherited status is making a comeback.

It has always been good to have a rich or powerful father. Last week my Princeton colleague Alan Krueger wrote a column for The Times surveying statistical studies that debunk the mythology of American social mobility. "If the United States stands out in comparison with other countries," he wrote, "it is in having a more static distribution of income across generations with fewer opportunities for advancement." And Kevin Phillips, in his book "Wealth and Democracy," shows that robber-baron fortunes have been far more persistent than legend would have it.

But the past is only prologue. According to one study cited by Mr. Krueger, the heritability of status has been increasing in recent decades. And that's just the beginning. Underlying economic, social and political trends will give the children of today's wealthy a huge advantage over those who chose the wrong parents.

For one thing, there's more privilege to pass on. Thirty years ago the C.E.O. of a major company was a bureaucrat -- well paid, but not truly wealthy. He couldn't give either his position or a large fortune to his heirs. Today's imperial C.E.O.'s, by contrast, will leave vast estates behind -- and they are often able to give their children lucrative jobs, too. More broadly, the spectacular increase in American inequality has made the gap between the rich and the middle class wider, and hence more difficult to cross, than it was in the past.

Meanwhile, one key doorway to upward mobility -- a good education system, available to all -- has been closing. More and more, ambitious parents feel that a public school education is a dead end. It's telling that Jack Grubman, the former Salomon Smith Barney analyst, apparently sold his soul not for personal wealth but for two places in the right nursery school. Alas, most American souls aren't worth enough to get the kids into the 92nd Street Y.

Also, the heritability of status will be mightily reinforced by the repeal of the estate tax -- a prime example of the odd way in which public policy and public opinion have shifted in favor of measures that benefit the wealthy, even as our society becomes increasingly class-ridden.

It wasn't always thus. The influential dynasties of the 20th century, like the Kennedys, the Rockefellers and, yes, the Sulzbergers, faced a public suspicious of inherited position; they overcame that suspicion by demonstrating a strong sense of noblesse oblige, justifying their existence by standing for high principles. Indeed, the Kennedy legend has a whiff of Bonnie Prince Charlie about it; the rightful heirs were also perceived as defenders of the downtrodden against the powerful.

But today's heirs feel no need to demonstrate concern for those less fortunate. On the contrary, they are often avid defenders of the powerful against the downtrodden. Mr. Scalia's principal personal claim to fame is his crusade against regulations that protect workers from ergonomic hazards, while Ms. Rehnquist has attracted controversy because of her efforts to weaken the punishment of health-care companies found to have committed fraud.

The official ideology of America's elite remains one of meritocracy, just as our political leadership pretends to be populist. But that won't last. Soon enough, our society will rediscover the importance of good breeding, and the vulgarity of talented upstarts.

For years, opinion leaders have told us that it's all about family values. And it is -- but it will take a while before most people realize that they meant the value of coming from the right family.

Posted by DeLong at November 25, 2002 09:41 PM | Trackback

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"Meanwhile, one key doorway to upward mobility -- a good education system, available to all -- has been closing. More and more, ambitious parents feel that a public school education is a dead end."

That's been true for at least 25 years. Back in those palmy days of the Carter Administration, my own parents found themselves having to pull me out of public schools in southern California -- because I was sleeping through the class, except when the teacher called on me, whereupon I'd wake up, give the correct answer, and fall asleep again.

If Krugman's just noticing this now, where's he been? And if he does actually realize that this is a long-standing problem, why aren't we hearing about how this is a bipartisan problem? Could it be that there is enough blame to go around?

I don't mean to be snide about this problem itself, which has been frightening for decades to serious people; but, really, can somebody please tell me anything that would actually solve the problem and that would not also gore several oxen of both the Left and the Right?

What does Krugman actually mean by "a good education system", and whose ideologies would be trampled if we in fact insisted on having one? The answer is left as an exercise for the reader.

Another question: say we implement the perfect public education system tomorrow, and it works, and we crank out a generation of self-directed geniuses. Whose interests are mangled?

Really, which political faction in this country, Left or Right, actually wants a self-reliant population that thinks for itself and takes direction poorly from either Christ or Chomsky?

"It is not God who kills the children. Not Fate that butchers them or Destiny that feeds them to the dogs. It's us. Only us."

Posted by: Erich Schwarz on November 25, 2002 10:05 PM

Well... if the US spent all it spends on military expenditure on education instead, it would most likely be the world's leader in educational achievement. But somehow, the idea of spending children's money on military equipment sounds more acceptable to most people than that of offering an education to younger generations. In doing so, we'd simply be providing a loan to younger generations that they'd be repaying with their future taxes. It must be that younger generations simply don't get to vote on how their future tax payments are spent...

As to what kind of education, private or public, confessional or non-confessional, these are largely non-issues as soon as educational achievement becomes the real target. The truth has always seemed to me that there is no single, one size fits all answer to educational issues. It would seem to me that vouchers would not be such a bad thing if public schools were properly funded to begin with.

>>That's been true for at least 25 years.<<

Well, maybe, given the increased evidence that inequality is on the rise in the US, it's simply time to act. Yesterday, we were still living in the high-growth-low-unemployment-new-economy-bubble, and inequality, economic class mobility, and educational opportunities didn't seem like they really matered. Or at least, high growth was thought to make poverty increasingly irrelevant, at least in an absolute sense.

The real reason Paul Krugman is reacting now more than ever is because he is worried about the rise of plutocracy. In an increasingly unequal nation, and given the nature of the media beast, the rich get undemocratically disproportionate political leverage. I remember discussing my secret admiration for Mccain's campain funding reform efforts. My Republican friend's answer was: "In principle, I aggree, but I simply don't like who would get elected if the rich couldn't pick the winners anymore." At least, he was being straightforward about it... (Hi Sean!)

Posted by: Jean-Philippe Stijns on November 25, 2002 10:29 PM

Erich, if you're actually concerned about the issues Krugman's raising, why are you attacking him? At least he's talking about them. (MizD says hi again.)

Posted by: Josh on November 25, 2002 10:31 PM

I don't really mean to attack Krugman, not this time. I'm just awfully frustrated that he's writing about this as if this were somehow a problem that had sprung from nowhere in January 2001, when Bush took office. That's a nice way for him to slam Bush yet again -- but it's actually polemical at best and dishonest at worst.

The problem has been around for a long time, and the Democrats do not have clean hands on this issue at all. If we really treated educating children poorly as a crime, a lot of people in both the Republican and the Democratic parties would be in big trouble. That's why I don't expect to see either party honestly address this issue, and that's why I quoted _Watchmen_ in my last post. The situation's very grave and the Democrats have no right to posture about it.

Krugman is giving some Democrats on the Upper West Side of New York the pleasant sensation of "fighting the power", but he's never going to talk about what would actually solve the problem. To do that, he'd have to lay rough hands on a great many sacred cows. He'd have to talk about some ideas, and some facts, being more important than others (Eurocentrism); he'd have to talk about some students being more accomplished than others (elitism); he'd have to concede the right of parents to take their children out of failing schools and relocate them to better ones (parental choice, i.e., vouchers, i.e., something the teacher's unions completely abhor); he'd have to talk about rigorous math and science education (e.g., Darwinian evolution, which the fundamentalist Christians despise, as well as reductionistic analysis of human neurogenetics, which most of the Left loathes); he'd have to talk about serious history education (which would mean, in practice, going into great length about the accomplishments of dead white males)...

Do you begin to see why I do not believe that the Democratic Party has the slightest interest in actually qualitatively improving public education?

More generally, I wonder if anybody in America really wants to, other than a crank few. When I was growing up, I was allowed to read anything that I was interested in that happened to be in the house. I suppose my parents might have drawn the line at _120 Days in Sodom_, but short of that, I was pretty much allowed to be a free thinker. One of the consequences of that was that I actually grew up *reading* things. Most of my parents' contemporaries thought that my parents were amiably deranged. What sort of reaction will most parents have if their children actually do get a serious education -- and come home from school spouting Milton's _Areopagitica_? Not a pleasant reaction, is my guess.

General excellence in education is not really something that most people, in their hearts, sincerely want! What they want is to not feel guilty about other people wallowing in brutish misery. They want to see that miserly alleviated *just* enough that they can stop feeling guilty. But, real education? Education that would actually inspire people to think that history wasn't over, that the Enlightenment and Renaissance weren't just passing fads, that innovation and discovery were still worth having? What political party wants *that*?

It seems to me that treating this problem as new because of "the rise of plutocracy" is to confuse an effect with a cause. To the degree we have increased economic inequality, it's because we're living in a period where most people are encouraged to live in a kind of mental stupor. End the stupor, and you'd probably see most of the inequality go away too.

P.S. I can imagine conditions under which the U.S. could sensibly cut military spending, but they're rather Utopian ones, and they're not likely to happen in the immediate future. As it is, every bloody time I hear a European say that the United States deserved 9/11 because of "root causes", or that Bush is a "cowboy", it just makes me more glad that my own ancestors had the sense to flee Europe -- and that America's armed to the teeth.

P.P.S. A warm hi back to MizD. :)

Posted by: Erich Schwarz on November 26, 2002 02:47 AM

This bit just just needs repeating and repeating:

"If the United States stands out in comparison with other countries," he wrote, "it is in having a more static distribution of income across generations with fewer opportunities for advancement."

Posted by: George on November 26, 2002 03:17 AM

I agree with Eric. This is not the first time that Krugman takes the right stand on issues, but uses it only to attack the Republicans, when the Democrats hardly did better when they were in office. And the result is insidious: people end up thinking that the issue is partisan, when it should not be. This political "gotcha" is just boring and infantile.

Posted by: Andrew Boucher on November 26, 2002 03:55 AM

Eric, Jean, Andrew ... this was an article about inequality! Why are you talking about it as if it was an article about education!!?!

I'd go out on a limb here and say that it would even be a good thing if America had a slightly *worse* education system, but one which was much more egalitarian. The actual marginal benefit from reading Areapagitica rather than Superman comics is pretty small when compared to the massive misallocation of resources and human talent which comes about as a result of having a load of rich thick kids in the top jobs.

Posted by: DD on November 26, 2002 05:15 AM

I seem to know an awful lot of people who are doing better than their parents did--not just absolutely but in terms of their apparent rank in the income statistics. Am I the only one? This claim about our having no social mobility seems very strange. At the very least, it seems to convey a misleading message about opportunity (if not necessarily about rank outcomes).

I wonder about the degree to which Paul Krugman's conclusions about the "upper-upper" income ranks reflected the boom in capital income (including, principally, corporate earnings) of the 1990-97/98 period. Certainly as a share of national income, capital income has slumped since. Might this slump "undo" some of the income rank conclusions? Is there any chance that some of the data was a historic artifact?

I don't know. I'm just asking.

Posted by: Jim Harris on November 26, 2002 05:16 AM

This is a reasonably good overview of the international trends in inequality where America is once again a leader.

http://www.sprc.unsw.edu.au/seminars/japan.pdf

How long before we will be approaching the feudal society that American pilgrims were attempting to escape? Is it already neccesary to be associated with a concentration of wealth? Have you picked your feudal lord? Should we reestablish primogenitor so that the power of one's estate is not dissipated by breaking it up across the kids?

Posted by: Ben Hyde on November 26, 2002 05:58 AM

Wow. Go, Erich.

As to why people are talking about education, I can hazard a guess - it is an obvious antidote to declining income mobility, although Prof. Krugman devotes just a couple of sentences to it.

As to US military spending, I would add a couple of thoughts: first, don't think of the situation as the US spending too much on defense - think of it as our "allies" spending too little. Free riding on international alliances is a tricky problem to solve.

As to the US adopting the de facto disarmament policy of Europe, when, precisely, should we have started that? George McGovern ran on a theme of "Come Home, America", and did manage to win Massachusetts. Had he managed to pick up a few more states, perhaps America could have come home from NATO in 1972. How the Cold War would have turned out is, of course, anyone's guess.

Or perhaps we should have so reduced our military spending as to have unilaterally disarmed in 1989. Our ability to honor our NATO commitments, or our commitments in the Pacific, would vanish, but so what - the Cold War was over.

Probable consequences - Saddam would still be in Kuwait, if not Saudi Arabia; Europe would still be imploring Milosevic to play nicely with his neighbors; and Japan, Taiwan, South Korea, and perhaps Germany, having spent about fifteen seconds pondering a map, would have gone nuclear - the cheap "rich countries' deterrent".

None of which would matter to Americans, since we can't find these places on a map anyway. Although perhaps the new, better educated generation could.

Posted by: Tom Maguire on November 26, 2002 06:23 AM

Thanks for the reference, Ben. Very helpful.

Two comments.

The piece is very interesting for what it says about the Anglo Saxon economies as a group (the same deterioration). And the inequality measures all seem to end at the closure of what I would call the "capital income surge" period, in 1997 or so.

I wonder if, when 2000-2001 data are added, the trends will be as strong. We will see.

Posted by: Jim Harris on November 26, 2002 06:25 AM

JP Stijns: The educational system is "underfunded"?! Have you taken a look at property tax bills lately? They have rapidly become backbreaking. Meanwhile, real per student educational spending has been rising for a couple of decades now. Result: declining scores and achievement. It's the system which is utterly broken and needs to be thoroughly reformed. The old GOP attack-cliche about "throwing money at the problem" is a good quotation to consider.

A really interesting thread nonetheless. I don't think there's any reason to think that a better education system would decrease inequality but it might increase social mobility to an extent.

Posted by: JT on November 26, 2002 06:38 AM

I'd say that the discussion of education has the direction of causation backward. For example, I received an excellent public school education. That's because in my jurisdiction (Montgomery county, MD), parents cared about their kids' education and demanded that their government deliver a quality service. Perhaps more importantly, kids grew up in an environment that was conducive to learning.
In the inner cities of this country, we expect the public schools to somehow fix the problems caused by crime, broken families, substance abuse, cultural dysfunction, etc. Others will disagree with me on this, but I think that these problems are chiefly due to economic inequality. If you fix the inequality, then the public education system will work the way it's supposed to.
And sure, implement school vouchers in poor and failing school districts as well. That might help some, but to really fix the problem, you've got to fix the problem of inequality.

Posted by: RC on November 26, 2002 07:15 AM

Declining achievement scores? What data lead you to that conclusion?

National Assessment of Educational Progress (NAEP) scores for 9-, 13- and 17-year olds have been mostly going up over the last thirty years. True, these scores have begun to stagnate in the last ten years. But they have not declined. The exception is science learning. Students have been scoring higher in science over the last ten years.

Those are the overall national trends. Compared to the nation overall, minority achievement is increasing at a fast rate.

We shouldn't be satisfied with the pace of progress and should strive for a better educational system. But we should not begin a discussion of educational policy on false premise - namely that student achievement is in a secular decline.

http://www.nsf.gov/sbe/srs/nsf96311/2achieve.htm

http://www.policyalmanac.org/education/archive/doe_state_of_education.shtml

Posted by: KJD on November 26, 2002 07:27 AM

And one more thing! The military has traditionally been an avenue from poverty into the mainstream - it's not just an adventure, it's a job!

OK, comments on Krugman's article:

America, we all know, is the land of opportunity. Your success in life depends on your ability and drive, not on who your father was.

An interesting twist on the American dream. I thought the idea was, you could succeed if you had drive and ambition, regardless of who your father was. This new wrinkle, that having a successful father was not and should not be an advantage, may not gain wide acceptance. We seem to have taken a new road to the "equality of opportunity" versus "equality of outcome" debate.

However, the idea that parents should not help their kids does point the Democratic Party in a new direction. Prof. Krugman approvingly cites Alan Krueger's work from last week, posted here as "How Far Does the Apple Fall From the Tree?" What does Prof. Krueger say about how success is passed on to the next generation? Is it simply a matter of giving dollars to descendants, or is there more to it?

Why is there such a strong connection between parents' socioeconomic status and their children's? A large part of the answer involves intergenerational transmission of cognitive ability and educational level.

But these factors can "explain at most three-fifths of the intergenerational transmission of economic status," Samuel Bowles and Herbert Gintis of the University of Massachusetts wrote in the latest issue of The Journal of Economic Perspectives. They suggest that the intergenerational transmission of race, geographical location, height, beauty, health status and personality also plays a significant role.

So, smart people tend to have smart kids. Educated people tend to focus on educating their kids. Healthy people have healthy kids, wealthy people take their kids to the doctor - these are bad things?

Prof. Krueger goes on:

...Even if the father-son correlation is high because traits that affect earning power are inherited, well-designed interventions could still be cost effective and improve the lot of the disadvantaged.

To take an extreme example, the correlation in incomes between fathers and sons was high in South Africa under apartheid because race is an inherited trait. The abolition of apartheid reduced the correlation. The organization of society matters.

Well, ending apartheid may not be on the US agenda. And that is as close as Krueger comes to suggestions for the US, so Prof. Krugman made great progress by mentioning education at all.

However, much of the heritability seems to be family-related. The benefits to a child of a stable family situation where parents are involved in the child's education are well known. In fact, Some people seem to think strong families are a good thing. But the Democrats are casting about for new ideas - perhaps Prof. Krugman can inspire them to become the party of "anti-family" values.

Are you reading to your kid at night? Did you buy them a computer, or teach them to use yours? Well, that is tolerable only if you are poor. The rest of you, knock it off - show a bit of solidarity. And please, stop helping the children with their homework, or trying to put them into good schools, or volunteering at the school to make it better - don't you know you are destroying the American dream?

Hmm, this may need work.

OK, back to serious business. We have two earlier comments (george, and Ben Hyde) endorsing Prof. Krugman's endorsement of Prof. Krueger's view that income mobility is less in the US than in other countries. As I re-read "How Far Does the Golden Apple of the Son Fall", I am not clear whether Prof. DeLong is endorsing, or merely reporting, such a view.

If I am following the link Ben provided, it takes us to international comparisons of income and wealth distribution. I only paged through it, but it does not seem to address income mobility.

However, here is a paper from the website that has the paper Prof. Krueger seemd to be citing in his column on international comparisons of income mobility. The paper Krueger seemed to be citing uses data from 1980 to 1990, and took a bit of criticism in the "Falling Apples" comments section. This paper, titled "Wealth Dynamics in the 1980’s and 1990’s: Sweden and the U.S." uses data from the 1980's and the 1990s, and has some interesting tidbits:

Adjusting for the large degree of imputation in the Swedish data, the U.S. index is only 3.4% to 6.1% less than that of Sweden. Along with exploring the role of racial composition differences, we conclude tha demographic variation between Sweden and the U.S. play very little role in explaining wealth mobility beyond that explained by the initial wealth distribution. Despite the higher quintile mobility in Sweden, dollar mobility is still high in the United States.

Dollar mobility? Yes, that is the statistical puzzle that flummoxed me earlier. The wealth distribution is much tighter in Sweden than in the US, so a smaller dollar change can vault a person across several quintiles. An extra $10,000 might represent a quintile move in Sweden, but not in the US. But does it really represent more mobility?

Now, as another measure, some of us may actually be interested in whether one can more easily break out of the lowest quintile and into the middle class:

For 1994 to 1999, Table 4 shows that 58 percent or almost three-fifths of U.S. families in the lowest quintile in 1994 were still in the lowest quintile in 1999. For Sweden (Table 5), of those in the bottom quintile in 1993, over half (56.8 percent) were in the bottom quintile in 1998. Of course absolute amounts matter, since the real value of assets of those in the bottom quintile in Sweden are well above the assets of those in the bottom quintile in the U.S.

Well, 58% versus 56.8% is pretty much a tie.

And what do these comparisons mean?

It is therefore difficult to compare mobility in the two countries. Given the larger wealth dispersion, it is possible for the U.S. to have larger absolute wealth changes but still have less rank mobility.

I hate to self promote, but I http://justoneminute.blogspot.com/2002_11_17_justoneminute_archive.html#85704338 last Friday, with lots more cool excerpts and such. Only for the truly patient, I should say - this is the short version here.

Now, I tend to think George has a point in his comment above, when he says that

"This bit just just needs repeating and repeating:

"If the United States stands out in comparison with other countries," he wrote, "it is in having a more static distribution of income across generations with fewer opportunities for advancement."

I somewhat suspect that that is precisely the point - Profs. Krueger and now Krugman have been repeating a statement that deserves serious qualification, and it is being picked up by folks who enjoy the conclusion without inspecting the analysis. I continue to hope that some other economist (I am not one, BTW) will join in and address this point.

Posted by: Tom Maguire on November 26, 2002 07:28 AM

Since this ties into the earlier discussion on the Krueger article, I'm reposting part of my thoughts on that one:

As to the interesting disparity between changes in income distribution and consumption distribution brought up by Jim Glass: if income inequality is increasing faster than consumption inequality, that has to be made up for by greater disparities in saving. Therefore inequality in wealth must be increasing even faster than income inequality is. So the richest will build up larger and larger nest eggs (which will enable them to invest in better education, housing, etc.), while the poorest build relatively even fewer assets, or go further into debt. Repeal of the inheritance tax will accellerate this trend. Intergenerational class mobility is likely to become even more restricted in the future.

We could get into a whole debate over what the cause of this widening inequality is (liberals like me will say it's because the rules of society are unfair and/or the government isn't doing enough; conervatives will say that it is either the fault of the poor themselves, or that it's the fault of misguided liberal policies, or that nothing can be done about it anyway). But either way it has to be considered a worrying trend for society.


Posted by: RC on November 26, 2002 07:29 AM

To all who have suggested that Krugman is attacking a problem that is not entirely new, do you remember a book by Jim Fallows entitled "More Like Us"? Came out in 1989, I think. In it, Mr Fallows argues (at a time that we were still obsessing about being overtaken by Japan) that our best path was not to be more like Japan (state picking winners, directing credit, limiting imports), but to be "more like us". As a sort of sub-theme, he noted that we were drifting away from our meritocratic roots (becoming less like us) toward the elitist, classist ways of the Europe we (as a culture, if not ethnically) had left behind. We were becoming "less like us" and it worried him. Law schools and medical schools setting aside "heritage" seats for the children of graduates (who then give money to get their kids in line for the seats), that sort of thing.

In response to that other Harris, Jim, in noticing lots of folks doing better than their parents: That is where statistical controls come in. You may be suffering from "confirmation bias" (everybody does - it's inescapable), which Krueger, one hopes, could escape through careful controls on his use of the data. On the other hand, you may not. It is never advisable to throw one's self at the feet of the latest piece of counter-intuitive research. In this case, Krueger is counter-intuitive to you (I think?), but not to Krugman.

Posted by: K Harris on November 26, 2002 07:29 AM

We could get into a whole debate over what the cause of this widening inequality is... But either way it has to be considered a worrying trend for society.

It may not be obvious from my comments, but I completely agree.

"No child left behind".

Posted by: Tom Maguire on November 26, 2002 07:34 AM

RC: Two problems with your posts: 1) The inner-city social dysfunction you describe is only partly the result of inequality, per se. Let's not gloss over decades of controversy with a pat conclusion.

2) You're misunderstanding the Consumption argument. If the "rich" (a reified concept if there ever was one) do indeed save consistently more than the "poor," then you'd expect them to spend more in about the same amount. In fact, they spend more but much less than is predicted by the income disparity which suggests that the income mobility is actually much higher than commonly thought. In response, economists rightly attempt to conduct the studies described in some detail by Tom Maguire. The argument hinges on these studies and the validity of the "lifetime-savings model" that is the theoretical backbone of the consumption argument and the validity of these studies.

KJD: Thanks for the correction. I appreciate it. The results do point to declining benefits from increased educational spending, though. Do you consider these test results valid?

Posted by: JT on November 26, 2002 08:32 AM

Tom Maguire, the quotations from the papers you site seem to be talking about individual or household income mobility. What Krugman and Krueger are talking about, however, is intergenerational mobility, which is a different subject.

To put it another way, one is the question of how much your individual income is likely to vary from year to year, while the other is how likely you are to end up at the same the position in the income distribution as your parents. Apples and oranges.

As to your statement:
"This new wrinkle, that having a successful father was not and should not be an advantage, may not gain wide acceptance."
Once again this seems somewhat confused to me. If you hold the position that coming from a disadvantaged background should not put you at a disadvantage relative to others, the logical corollary to that is that coming from an advantaged background should not give you an advantage. You can't believe in one without believing in the other. The thing that Krugman is espousing which you seem to find objectionable is just the standard belief in meritocracy.

As to your point about absolute vs. relative mobility (which was also made by Jim Glass), that seems like a fair point. If you can go back to the same papers and find some data that sheds some light on this subject with regard to intergenerational mobility, we might get somewhere.

Posted by: RC on November 26, 2002 08:36 AM

It is highly likely that the next round of Bush administration economic proposals will include making permanent the estate tax phase-out, scaling back double taxation of dividends, and generally lowering the burden of taxation.

Given that all of these policies demonstrably directly benefit the higher income echelons, it is logical for those in the political opposition to make "class warfare" a constant theme in the press, on the opinion pages, on the cable chat shows, and among the chattering classes generally.

Look for the phrase "trickle down" to re-emerge from the discarded cliche file, along with a fresh list of rich folks who claim they should be paying higher taxes.

Also, watch for deficit hawks to keep emerging from the left, and a bumper crop of hard-luck stories to crest just before Christmas.

Posted by: Bucky Dent on November 26, 2002 08:41 AM

"Confirmation Bias" is a sophisticated term for what I would call "The Smell Test." And it's just a way to get started on an issue--nothing to substitute for good empirics. Sort of like when I complained about the IMF-OECD assertion that Italy produces more GDP per hour actually worked than the United States, Germany, France, and the UK. I've done the follow up, and it still smells.

Good posts, anyway. Cheers.

Posted by: JiminVirginia on November 26, 2002 09:08 AM

"We could get into a whole debate over what the cause of this widening inequality is... But either way it has to be considered a worrying trend for society."

"It may not be obvious from my comments, but I completely agree."

I don't. The only trend of possible importance I see is whether or not poor people of, say 30+ years of age, are getting poorer or more wealthy.

The notion that Bill Gates' billions, or Warren Buffett's, or Michael Dell's, or Ted Turner's, or anyone elses, in any way reduce *my* wealth is simply false. In fact, the opposite is true.

Posted by: Mark Bahner on November 26, 2002 09:12 AM

What the hell is going on here?

Have the people criticizing PK actually read his pre-Bush II work? He wrote an entire book talking about things like this ("The Age of Diminished Expectations") which, among other things, explained why political debates about economics talked about epiphenomena rather than root causes.

"If Krugman's just noticing this now, where's he been? And if he does actually realize that this is a long-standing problem, why aren't we hearing about how this is a bipartisan problem?"

Since the Republicans are now in control of all three branches, it's not exactly unfair to talk about this as a partisan problem. And I didn't see PK mention the word "Republican" in his article at all. Tres Pavlovian, no? Mention "inequality," and suddenly people are barking at things that aren't there...

And anyway, in PK's writings during the Clinton administration, he did take the Democrats to task. In the introduction to a section of "The Accidental Theorist," he mentions that he'd been berated for his liberal friends for spending all his time knocking the Left ("Pop Internationalism.").

Paul Krugman: The Original Anti-Idiotarian.

Posted by: Paul on November 26, 2002 09:35 AM

A few call and responses with RC:

the quotations from the papers you site seem to be talking about individual or household income mobility. What Krugman and Krueger are talking about, however, is intergenerational mobility, which is a different subject.

Blame them. Krueger dragged a paper looking at individual mobility across countires into his column, and Krugman mentioned it. They also discuss intergenerational mobility, but the papers Krueger mentioned did not address it.

If you hold the position that coming from a disadvantaged background should not put you at a disadvantage relative to others, the logical corollary to that is that coming from an advantaged background should not give you an advantage.

Excellent - I have won a convert to krugman's "anti-family values" party. Look, I don't think that people who believe in a meritocracy go so far as to say that reading to their kids at night, of buying them computers, or encouraging academic achievement, or "unfair". But these things do transmit success from one generation to the next, according to Krueger. My suspicion is that a committed "meritocrat" would want to see open admissions to top colleges, job hiring based on merit, rather than family, and so on.

My impression of the current college admission process is that having parents as an alumni is not a big help for the child (hey, I get this at cocktail parties, what do I know?). Neither Krueger nor Krugman address the question of whether entry level professional jobes are closed to the ranks of all but sons and daughters of the rich.

If you can go back to the same papers and find some data that sheds some light on this subject with regard to intergenerational mobility, we might get somewhere.

What's this, the RC Assignment Desk? That is what the links are for. And the international intergenerational data won't be there for me, any more than it was there for Krueger.

Or, if your suggestion is that Krueger and Krugman have taken as nowhere, well, I am not arguing.

Posted by: Tom Maguire on November 26, 2002 09:39 AM

Well, what we really need to do is not fight against the trends, but re-organize our society to take such factors into consideration:

-The presidency should be made a life-long position, and be renamed "the Imperial Throne," the president being renamed "The Emperor."
-A life-support system should be developed for George W. Bush so that he would live on after his natural lifespan ended indefinitely, directing events in the U.S. psychically.
-Mayors, Governors, etc, should be replaced with "Imperial Commanders," who would serve at the pleasure of the Emperor in theory, but in reality would be appointed.
-All religions would be subsumed into the worship of the Emperor, with the Ecclesiarchy being a department of the government at large.
-Technological knowledge should be placed in the hands of tech-priest, who believe (albeit with more comprehension than most) that technology is a result of "machine-spirits" and the like, and believe that things should be fixed by performing certain fixed rituals that are pleasing to the Machine God (these tech-priests would worship the Machine God instead of the Emperor, viewing the Emperor as the emissary of the Machine God, rather than a god in His own right. The Ecclesiarchy would view them as heretics, needless to say, but grudgingly tolerate them nonetheless.).
-The military would be split into three branches: the normal military, AKA the Imperial Guard, which would have millions of marginally effective footsoldiers to throw at the enemy, the Marines, who would be fanatical in the worship of the Emperor and be very well equiped and trained, and genetically modified, but following their own rites of worship of the Emperor rather than the Ecclesiarchy's, and the military arm of the Ecclesiarchy itself, composed entirely of women, that would be responsible for waging wars of faith directed at rooting out heretics, blasphemers, etc. (note: all non-Americans are considered heretics)
-The current tax system would be overhauled and replaced with a system of titheing, in which local Imperial Commanders would be responsible for collecting and distributing tithes to the Imperial government themselves.
-An Inquisition would be set up to root out heresy and corruption within the Imperial government itself, and keep the local Imperial Commanders in line.

Julian Elson

Posted by: Julian Elson on November 26, 2002 09:43 AM

And I didn't see PK mention the word "Republican" in his article at all. Tres Pavlovian, no? Mention "inequality," and suddenly people are barking at things that aren't there...

Well, from Krugman's piece:

Just ask the Bush brothers. Talk to Elizabeth Cheney, who holds a specially created State Department job, or her husband, chief counsel of the Office of Management and Budget. Interview Eugene Scalia, the top lawyer at the Labor Department, and Janet Rehnquist, inspector general at the Department of Health and Human Services. And don't forget to check in with William Kristol, editor of The Weekly Standard, and the conservative commentator John Podhoretz.

Call it my uncanny political awareness, but I noticed a lot of Republicans, and no Democrats on this list. Maybe later?

It wasn't always thus. The influential dynasties of the 20th century, like the Kennedys, the Rockefellers and, yes, the Sulzbergers, faced a public suspicious of inherited position; they overcame that suspicion by demonstrating a strong sense of noblesse oblige, justifying their existence by standing for high principles.

Oh good, some Democrats. Looking splendid in their white hats, too. And the Rockefeller Republicans are allowed into the "nice guys club".

Woof.

Posted by: Tom Maguire on November 26, 2002 10:01 AM

TM, I think you're just looking at the wrong paper. The fact that it was on a different subject than what Krueger was actually talking about should have been a tip-off, though. Maybe this paper has the data Krueger was looking at:

Jantti, Markus (with Bjorklund, Anders):
Intergenerational Income Mobility in Sweden Compared with the United States.
American Economic Review 87, December 1997, pp. 1009-1018.

I can't find the text of it on the Web though. In any case, in any case you should be more careful before accusing other people of dishonesty.

As far accusing Krugman of being against parents reading to their kids, come on. All anyone is saying is that poor parents ought to have roughly the same opportunity to do those type of things with their kids as rich parents.

Posted by: RC on November 26, 2002 10:39 AM

re-organize our society

Doesn't George Lucas own the copyright to this version of Imperial Empire? :)

Posted by: George Zachar on November 26, 2002 10:59 AM

political debates about economics talked about epiphenomena rather than root causes.

epiphenomenalism - The doctrine that mental phenomena are not causal despite the fact they may seem to be


http://www.artsci.wustl.edu/~philos/MindDict/epiphenomenalism.html

Posted by: George Zachar on November 26, 2002 11:01 AM

My initial post:

However, here is a paper from the website that has the paper Prof. Krueger seemd to be citing in his column on international comparisons of income mobility. The paper Krueger seemed to be citing uses data from 1980 to 1990,

OK, I misspelled "seemed" once in two tries, but I was pretty careful to admit that his citation was vague. In my follow up to you I dropped the qualification - sorry.

I had suggested the link I provided as the paper in question a week ago in discussing the Krueger column, and no one offered a correction.

Now, what did Krueger actually say:

Perhaps the only legitimate use of the intergenerational correlation in income is to characterize economic mobility. The data challenge the notion that the United States is an exceptionally mobile society. If the United States stands out in comparison with other countries, it is in having a more static distribution of income across generations with fewer opportunities for advancement.

Anders Björklund of Stockholm University and Markus Jäntti of the University of Tampere in Finland, for example, find more economic mobility in Sweden than in the United States. Only South Africa and Britain have as little mobility across generations as the United States.

Well, I did find their paper on economic mobility in Sweden. In context, he quite arguably seems to mean intergenerational mobility - boy, I wish he had said so. Bother.

Well, can anyone get this new paper? I have little doubt that many of the same objections will apply, especially quintile movements versus dollar movements.

Oh, and let me repeat what has been characterized as an "accusation of dishonesty":

Profs. Krueger and now Krugman have been repeating a statement that deserves serious qualification, and it is being picked up by folks who enjoy the conclusion without inspecting the analysis.

Well, it is cstill not clear, absent the paper, how robust their conclusion is, or how much qualification is appropriate. But dishonesty? And who among us has independently verified it?

Posted by: on November 26, 2002 11:04 AM

Well, here is Alan Krueger's website. Among his working papers are about three hundred on education, but none on apartheid. I have no idea which ones may be representative, but this upbeat title grabbed me:

Reassessing the View that American Schools Are Broken


I also find:

272. Card, David and Alan B. Krueger. "School Quality and Black/White Relative Earnings: A Direct Assessment."

265. Card, David and Alan B. Krueger. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States." May 1990. This Working Paper may be downloaded as a pdf file. Journal of Political Economy, Vol. 100, No. 1, 1992.

No hints on Sweden, as yet.

Posted by: Tom Maguire on November 26, 2002 11:17 AM

"My impression of the current college admission process is that having parents as an alumni is not a big help for the child (hey, I get this at cocktail parties, what do I know?)."

Tom--As of around '90 at Harvard, not true at all. In response to a discrimination suit by Asian-Americans, Harvard was forced to reveal that legacy children and athletes were considered in separate pools from the general population. (Asians are under-represented in these pools, and so are admitted at a lower rate relative to their accomplishments.) I believe a student with an alumnus parent was nine times as likely to be admitted than a non-athlete non-legacy.

Part of this may be due to talent differential, but it seems unlikely that all of it is. (For one thing, applicants self-select.) I believe studies showed that legacy children underachieved relative to everyone else at Harvard.

As evidence that what you hear at cocktail parties may be misleading you: I remember being told that having an alumnus parent was not a big factor. It was said that this would be used to break ties. Only after I got to school did the story break as part of the suit, and I was shocked to find out how much this really mattered.

Anyway, I haven't Googled my facts, so take them with the appropriate grain of salt.

(I've tried to insert the close italics tag, but I am a child at such things.)

Posted by: Matt Weiner on November 26, 2002 11:36 AM

Success!

Posted by: Matt Weiner on November 26, 2002 11:37 AM

'Do you begin to see why I do not believe that the Democratic Party has the slightest interest in actually qualitatively improving public education?'

Not even remotely. Bad US public schools are the direct result of local funding of schools; per-pupil expenditures vary by a factor of 10 or more, directly leading to a horrible misallocation of resources.

That said, while wierd, this is such a nicer discussion than that horrid 'Why Doesn't the Administration Have an Economic Policy?' one.

Posted by: Jason McCullough on November 26, 2002 12:09 PM

Bad US public schools are the direct result of local funding of schools; per-pupil expenditures vary by a factor of 10 or more, directly leading to a horrible misallocation of resources.

Here in NYC, we average about $10,000/kid/year, so a class of 25 kids represents an annual budget of $250,000.

Posted by: George Zachar on November 26, 2002 12:18 PM

Oops... I said "serve at the pleasure of the Emperor in theory, but in reality would be appointed." I meant "inherited" not "appointed." And my model isn't ripped off of Lucas's Galactic Empire. It's ripped off of somewhere, though. *runs off giggling with juvenile pleasure at confusing everyone*

Posted by: on November 26, 2002 12:18 PM

Erich asked what Krugman thinks ought to be done about the poor state of American public education. I did a quick search on www.pkarchive.org and found this 1991 proposal: $10-15 billion for Head Start and other child care programs, $20 billion for school districts.

Up here in Canada, I think I got a pretty good public school education.

Nice Watchmen quote, by the way.

Posted by: Russil Wvong on November 26, 2002 12:30 PM

Hey, Matt. I vaguely remember the story you are mentioning. But I am thinking of college admissions today, and it is brutal. Yogi Berra may be right - no one goes there anymore, its too crowded.

Anyway, as to my Swedish research friends, I can get this close, but no closer.

However, this is intriguing: Measuring Intergenerational Mobility and Equality of Opportunity

From the abstract:

We show how recently proposed theories of equality of opportunity can be meaningfully adapted to the intergenerational context. This throws a new light on the interpretation of existing mobility measures: these may be interesting to measure mobility as movement, but they are inadequate to capture the notion of equality of opportunity. We propose some new mobility measures, which start from the idea that the intergenerational transition matrix gives useful information about the opportunity sets of the children of different social classes. These measures are used in an empirical illustration to evaluate the degree of inequality of opportunity in the US, Great Britain and Italy.

Suggesting that the question may not be settled, and the statement that the US lags other countires may require a bit of qualification.

Now, for the heavy math buffs (my goodness, look at the time, I must be leaving soon): OF SLOPE AND VARIANCE: ALTERNATIVE MEASURES OF ECONOMIC MOBILITY COMPARED, Nathan D. Grawe

Abstract:

As modern economies have grown past the point of providing basic needs, academic and political focus has shifted somewhat from efficiency toward equal-ity. In response, economic studies in North America and Europe have attempted to measure and compare equality of opportunity. Paradoxically, while many (most?) Americans believe that theirs is a country of extraordinary opportunity,
comparisons across countries have not detected this dierence. One possible explanation for this result is that the method of measurement employed by researchers does not match citizens conception of opportunity. This paper theoretically examines three alternatives to the log income-log income regres-sion slopeŠthe most widely used method of measurement. In all three cases, the variance about the regression line is shown to be just as important as the re-gression slope in determining mobility. In particular, this paper demonstrates the possibility for policy designed to increase mobility by one measure to di-minish mobility as measured by the others.

What does it mean? Well, operating without tedious data, he tries different ways of measuring mobility, and concludes that it is a tricky problem. Which is still my point.

Anyway, I would be thrilled to see the paper Krueger had in mind. Any talented hackers lurking?


Posted by: Tom Maguire on November 26, 2002 12:39 PM

epiphenomenon, n., pl. epiphenomena:

"A secondary phenomenon that results from and accompanies another: “Exploitation of one social class or ethnic group by another [is] an epiphenomenon of real differences in power between social groups” (Harper's)."

Dictionary.com

Posted by: Paul on November 26, 2002 12:53 PM

"Have the people criticizing PK actually read his pre-Bush II work?"

Why yes: _The Age of Diminished Expectations_ back in 1992, when I was hopeful enough to think electing Clinton would help matters; _Peddling Prosperity_, maybe his best popular book, in 1994; _Pop Internationalism_ in 1995; most of his Webbed columns since then.

Back in the old days Krugman did indeed write about things as if there was some balance in the universe; _Prosperity_ carefully explained why conservative economic arguments had cogency in the 1970s and why "supply-siders" weren't really representative of the more intelligent conservatives.

I really miss that sort of rationality in Krugman's columns, you know?


"Since the Republicans are now in control of all three branches, it's not exactly unfair to talk about this as a partisan problem."

1. No. They'll *be* in control of all three branches in January 2003. January 2003 is in the future; it has not even happened yet. Since they don't (as far as I know) possess the secret of time travel, blaming them unilaterally for not fixing problems in education dating from the 1970s is a bit weird.

2. As Tom pointed out, it's actually pretty easy to see Krugman's skew towards flaming Republicans in this column, if you're willing to look.

Posted by: Erich Schwarz on November 26, 2002 01:41 PM

I'd agree that Krugman has developed an anti-Bush fixation, even though I agree with most of what he says. I just wish he would attack the anti-trade/globalization left as well, like he used to. I guess he figures that since they're not such a big force these days it's not worth the effort.

And electing Clinton did help matters a whole lot, at least from my point ov view....

Posted by: RC on November 26, 2002 01:50 PM

In my last gasp in an attempt to dredge up the paper to which Krueger referred, I got an abstract, which may be subscription.

Intergenerational income mobility in Sweden compared to the United States
Björklund A, Jäntti M

Asks whether Sweden has more intergenerational mobility of income, as well as less cross-sectional income inequality, than the USA. Compares samples of fathers and sons taken from the Swedish level of living survey, correlating economic status as a measure of income mobility, plus education and occupation, for eight occupational classes. Uses US data from the PSID. Concludes that Sweden has both more mobility and equality than the USA, and wonders whether the two are related.

SO, this is the conventional regression the value of which another writer questioned.

And as to whether high equality and high mobility are related, well, suppose all sons have the same income. Then the correlation with dad's income will be zero. Perfect mobility, perfect equality. In the next generation, when all the dads have an equal income as do all the sons, the scatterplot collapses to a point, making the regression problematic.

Posted by: Tom Maguire on November 26, 2002 02:00 PM

wealth wealth wealth wealth wealth wealth wealth wealth wealth wealth wealth wealth wealth wealth

The above fourteen mentions of the word "wealth" provided as a service to this discussion, which has perhaps focused a little too much in income ...

Posted by: dsquared on November 27, 2002 02:27 AM

Isn't wealth simply accumulated income? Isn't wealth thus the *outcome* of income, if not the goal (beyond subsistence) of those laboring to produce income?

Put another way, and not being snarky at all, what is your point?

Posted by: George Zachar on November 27, 2002 06:47 AM

I missed this post earlier:
'We could get into a whole debate over what the cause of this widening inequality is... But either way it has to be considered a worrying trend for society.

It may not be obvious from my comments, but I completely agree.

"No child left behind". '

Okay, among liberals like me who think that inequality is a problem, the solution is simple and obvious: make the tax system more progressive.

But if you're a conservative who is worried about inequality, what do you propose to do about it, besides school vouchers?


Posted by: RC on November 27, 2002 10:59 AM

Well, as a proper conservative, I would first be suspicious of simple and obvious solutions.

Secondly, I would want to define and understand the causes of "the problem" - for exapmle, if higher taxes are simply punishing hard work and imagination, I would be inclined to look elsewhere for a solution.

It seems to me that there may be many "innocent" explanations of inequality. E.g., I happen to accept that Steve Jobs and Barry Bonds are, in income producing capability, worth more than me.

Have a nice Thanksgiving.

Posted by: Tom Maguire on November 27, 2002 12:22 PM

Tom--
You may well be right that things have changed since my day in Harvard's admission process.

On the other hand, Harvard has an interest in creating, among the general public, an impression that legacy admissions don't much matter. What happened round '90 was that that interest was trumped by their interest in not losing their court case. So the fact that we again have the impression that legacy status doesn't matter, doesn't mean that it's so.

Early admission wasn't as predominant then as it is now, so that may change things. Well, college admissions are another thread--I think Brad may be starting to post on that in six to eight years, correct?

Posted by: Matt Weiner on November 27, 2002 02:18 PM

'Isn't wealth simply accumulated income? Isn't wealth thus the *outcome* of income, if not the goal (beyond subsistence) of those laboring to produce income?'

*Consumption* is the outcome of income; wealth is just an income source for which little or no current labor must be expended. Maybe wealth can be thought of as an an intermediate good?

I think DD's point was that 70k earned from bonds is a lot different than 70k earned from labor.

Posted by: Jason McCullough on November 27, 2002 02:57 PM

*Consumption* is the outcome of income;

What about saving/capital formation?

wealth is just an income source for which little or no current labor must be expended.

Wealth is created from saved income, is it not? And yes, wealth or capital can, in turn, generate income, allow consumption, or be re-invested


I think DD's point was that 70k earned from bonds is a lot different than 70k earned from labor.

What if the bonds were purchased by income generated by the sweat of folks who saved and invested to enjoy a comfy self-financed retirement? What if the capital raised by the bonds was used to build employment-generating facilities, or public infrastructure?

Is income "different" because it is earned by teaching vs. digging ditches?

One can certainly conjure up differences, but they can be driven by political agendas all too easily.

Posted by: George Zachar on November 27, 2002 03:36 PM

*Consumption* is the outcome of income;

What about saving/capital formation?

wealth is just an income source for which little or no current labor must be expended.

Wealth is created from saved income, is it not? And yes, wealth or capital can, in turn, generate income, allow consumption, or be re-invested


I think DD's point was that 70k earned from bonds is a lot different than 70k earned from labor.

What if the bonds were purchased by income generated by the sweat of folks who saved and invested to enjoy a comfy self-financed retirement? What if the capital raised by the bonds was used to build employment-generating facilities, or public infrastructure?

Is income "different" because it is earned by teaching vs. digging ditches vs. filing "jackpot" lawsuits vs. clipping coupons from bonds bought in anticipaton of retirement?

Posted by: George Zachar on November 27, 2002 03:39 PM

Damn software.

Posted by: George Zachar on November 27, 2002 03:40 PM

It's an interesting thing to discuss in general.

The possible uses of income are consumption and investment. Consumption is final good, while investment produces more income; therefore, all income must at some point end up as consumption. Sure, it may take until a microsecond before the universe collapses for all income to be consumed (there's a great unwritten SF story hiding in there!), but it all has to be consumed eventually.

'What if the capital raised by the bonds was used to build employment-generating facilities, or public infrastructure?'

I don't think what the bond bought matters; that's just someone else's current consumption you're funding in exchange for them giving you future income. What it buys is up to them, in general; they may care about what it buys if you think it affects the likelihood of them paying you back, but very few people invest based on the ethics of the company.

'What if the bonds were purchased by income generated by the sweat of folks who saved and invested to enjoy a comfy self-financed retirement?'

'Is income "different" because it is earned by teaching vs. digging ditches vs. filing "jackpot" lawsuits vs. clipping coupons from bonds bought in anticipaton of retirement?'

Economically, no; ethically, yes. That is, while theoretically an entirely consumption-based system of taxation would result in the most economic growth (ignoring the tax shelter argument), ethically, it'd be pretty horrid. I don't want to live a society like that, for all sorts of reasons (the usual progressive taxation justifications).

Specifically on investment vs. labor income: if the source of capital holdings was entirely past personal labor, I wouldn't care as much, if it all, about differing wealth holdings. As it is, enough comes from family connections, parental income, inherited status, and inherited wealth that the situation bothers me.

The elephant in this discussion is the estate tax. I wouldn't mind a flat income tax if it came with, say, single payer health care; progressivity of taxation doesn't violate my sense of right and wrong *that* much, especially considering the political difficulties involved. By contrast, I don't think there's a damn thing that'll convince me repealing the estate tax (wealth entirely from who your parents are! hooray!) is a net improvement to society.

Oh, and I'd say societal treatment of income is entirely a "political agenda."

(Heading off the David Thompson AI construct: dislike of non-market determined personal status doesn't violate any free-market principles.)

Posted by: Jason McCullough on November 27, 2002 04:27 PM

it may take until a microsecond before the universe collapses for all income to be consumed...

There's a marriage joke here somewhere, but I'm afraid the Mrs. will see this. :)

Posted by: George Zachar on November 27, 2002 06:28 PM

I don't think what the bond bought matters; that's just someone else's current consumption you're funding in exchange for them giving you future income. What it buys is up to them, in general; they may care about what it buys if you think it affects the likelihood of them paying you back, but very few people invest based on the ethics of the company.

All true. But the combination of tax-exempt status and high income taxes makes it very logical for folks in NY and CA to buy in-state muni debt as opposed to, say, corporates or even federal agency mortgage-backed debt.

Combine that kink with savvy capitalists who can hijack the State's balance sheet (stadiums come to mind), and unintended consequences appear.

Posted by: George Zachar on November 27, 2002 06:32 PM

I see that, when Tom Maguire is asked how HE wants to increase equality of opportunity in this country, he merely squirms uneasily. Well, certainly repealing the estate tax isn't the way to do it (to put it mildly). And neither is retaining the current appalling levels of inequity of school funding in richer and poorer districts (as even George Will has pointed out).

Of course, we're dealing with two separate problems here. Even if the US somehow got absolutely perfect "equality or opportunity", people with less brains would be earning less money for the same equal work effort -- and some additional income redistribution would still be appropriate to reduce this injustice.

Posted by: Bruce Moomaw on November 27, 2002 07:44 PM

Even if the US somehow got absolutely perfect "equality or opportunity", people with less brains would be earning less money for the same equal work effort -- and some additional income redistribution would still be appropriate to reduce this injustice.

Indeed. And to bring this back full circle, as wealth is arguably a second order phenomenon of income, that would need to be resdistributed as well.

Posted by: George Zachar on November 28, 2002 07:36 AM

societal treatment of income is entirely a "political agenda."

Once the product of one's labors is "entirely" disposed of in a "political" way, that is, by others, the discussion ends, because the DeusEx Machina role of the State assumes the allocation burden.

Posted by: George Zachar on November 28, 2002 07:51 AM

holy f*ck... i knew this was rather lefty but my god guys. are you really stating this stuff?

"people with less brains would be earning less money for the same equal work effort -- and some additional income redistribution would still be appropriate to reduce this injustice."

k that smacks too much like a crazy german guy who can't pay his laundry tab and has to spend most of his time inside his house!

not just equality of opportunity (which taken to the extremes here is rather unjust) but equality of result... i have a moral problem with making everyone, including the poor, worse off, just because you beieve that everyone should be absolutely equal from birth...

look, generally the traits that are rewarded with higher incomes tend to be also correlated with better parenting skills... you generally have less illiterates in high income brackets (mike tyson being the only insane, mostly illiterate, cannibal in the top 0.01%) than in lower.. and this translates to all sorts of other issues relating to parenting and eventual adult income levels...

having shitty parents is generally a bad idea, and will likely screw you up... the most screwed up rich kids, who end up sniffing glue and crack on the streets tend to come from screwed up homes... so do those who started off poor...

you're not going to change this, no "new socialist man" is coming guys... so snap out of it. Do people have the opportunity to advance themselves by working hard? yes. does starting from a higher position make it more likely that you;ll do better? yes. hell the article (assumed to be biased against admitting good reasons for low distribution) admits that it at least accounts for 3/5 of the outcome (he doesn't say at least, but come on.. he's not exactly fighting from the center for the past few years)

there is no moral way of eliminating this disparity in result, just as there is no moral way for eliminating the dispaity accorded to intelligence and hard work. Being a lazy idiot doesn't help anyone else, so unless you're an actor or born wealthy, don't expect a good life. It is in noones interest to reward sloth, incompetence, ignorance, or stupidity, but that seems to be the desire here.

I don't want people to be educated because its moral... I want it because otherwise the world would look like the slums of calcutta. Tom was right when he said that you are arguing the anti-family osition. Spartan child rearing is not going to go over well... You want the vast majority of children of the wealthy to do much worse than their parents (as implied by your arguments)... this does not seem like a good way to gain support, as everyone over avg can expect the government to actively work to make their children have worse lives, at least as compared to the rest of society. Do you really understand what kind of fundamentally evil policies are needed to do this? Positive policies will not accomplish this, only negative ones that sabotage all those above average.

You sound like the firends that I have that dislike western society and really truly desire to live in the stone age... it's a decent point (completely BS reasons though, as stone age people had a larger affect on their environment per capita than we do..) and they truly believe it, but it's not attractive and calls for the elimination of the vast majority of human population, if applied broadly (95% pop reduction)...


also bruce.. "same equal work effort"? k I can work my ass off at playing the piano, but I'm always going to be fucking incompetent... so i should get paid more than a virtuoso, because I try harder, while perfoming beautifully is easy for him? work of equal value is a crappy enough way of compensating labour, but you want to reward equality of effort?? I can't believe that you actually meant that! I can't believe that you would actually desire that! Have you learned nothing from history? Do you so fully misunderstand human nature? What the hell man?!!!!

I'm off to have some nice chateau latour that my grandparents gave me

Posted by: Libertarian Uber Alles on November 28, 2002 04:03 PM

trying to type too fast sucks.. and of course i'm referring to the good habits and traits that are heritable/inculcated, as well as commenting about krugman's relative political position...

and as for krugman... I loved Krugman, he was intelligent, broadly fair, and went after all sorts for economic idiocy... his work at slate was simply amazing, and was better even than his academic work, which was very good...

the broad consensus amongst people who enable the ret of the world to earn livings is that Mr. Raines requires a certain line, and that your name has to be Salman Rushdie or Tom Friedman to have less than 100% adherence... we all know what he wrote in the past, it's his writings currently that make no sense and should be completely demolished

Posted by: Libertarian Uber Alles on November 28, 2002 04:09 PM

>>Isn't wealth simply accumulated income? Isn't wealth thus the *outcome* of income, if not the goal (beyond subsistence) of those laboring to produce income?

Put another way, and not being snarky at all, what is your point?<<

Differences in wealth are more important than differences in income in this context because wealth is more easily transmitted intergenerationally, and wealth, not income, is the determinant of political power. $10m coming from a year's work at Morgan Stanley is a heckuva lot different from $10m coming from ownership of a controlling stake in the New York Times, one might say.

I'd also point out that (borrowing from JS Mill's observation) Jason McC is entirely right about the difference between $70k from working and $70k from coupons; one of these is a form of income in which your claim on the money is protected by, in the final analysis, men with guns, and the other isn't. Or to put it another way, have a couple of heart attacks and then see which form you'd rather have your income in.

And finally:

"there is no moral way of eliminating this disparity in result"

confiscatory estate taxes would go a long way in this direction ...

Posted by: dsquared on November 29, 2002 07:51 AM

wealth, not income, is the determinant of political power

Then how do wealth-less unions have so much sway in politics?

the difference between $70k from working and $70k from coupons; one of these is a form of income in which your claim on the money is protected by, in the final analysis, men with guns, and the other isn't.

Both are protected by the legal system. Can't I sue to force payment of income from employment if the boss tries to stiff me?

Posted by: George Zachar on November 29, 2002 08:28 AM

<< "people with less brains would be earning less money for the same equal work effort" >>

It takes a special kind of mind to get from reading that statement to telling the person who said it:

<< you beieve that everyone should be absolutely equal from birth... >>

Fortunately for him, Libertarian Uber Alles has just that kind of mind, the kind that doesn't read things before it composes replies to them, but simply spits out straw men like he was trying to get admitted to the Ray Bolger Fan Club.

Posted by: Tuxedo Slack on November 29, 2002 08:46 AM

'Once the product of one's labors is "entirely" disposed of in a "political" way, that is, by others, the discussion ends, because the DeusEx Machina role of the State assumes the allocation burden.'

Unless you get rid of the whole democracy bit, yes.

'Then how do wealth-less unions have so much sway in politics?'

Alternate phrasings of this question:

"Why did unions have so little power back when they were a quarter or more of the workforce?"

"Why do political outcomes consistently not match polling of the general population?"

Posted by: Jason McCullough on November 29, 2002 03:46 PM

George; don't be obtuse. $70k from coupons can be extracted without touching your capital, and is an income which comes back every year. $70k of labour income has to be earned every year.

And the comment about unions is just silly smoke-blowing and red herrings; Unions have political power because they have lots of members. Wealthy individuals have power because they are wealthy.

Posted by: dsquared on November 29, 2002 04:34 PM

Unless you get rid of the whole democracy bit, yes.

To which, the standard response is: Democracy can be 3 wolves and 2 sheep voting on what to have for dinner.

"Why do political outcomes consistently not match polling of the general population?"

And that, I frankly do not grasp, as it relates to this thread.

Posted by: George Zachar on November 29, 2002 05:21 PM

don't be obtuse

And please refrain from name-calling and (mis)characterizing reasoned responses. I am fairly certain, after two decades on trading floors, that my perjorative vocabulary exceeds yours. :)

I understand the definitional difference between investment income and labor income. What I fail to understand is why some folks want to set themselves up as arbiters to decide the relative value of each, and use the machinery of govt/taxation to favor or punish people they can only know in the abstract.

Unions have political power because they have lots of members.

Check the data on political donations. You may be surprised at how much cash the wealth-less unions can provide to candidates. My point was to refute the simplistic statement that "wealth, not income, is the determinant of political power", as if there were no other.

One counter agrgument one might make, supporting the notion of wealth's centrality, is the ascent of Corzine and Bloomberg to public office. Interestingly, both are quite "liberal" in the American political sense.

Posted by: George Zachar on November 29, 2002 05:37 PM

>>What I fail to understand is why some folks want to set themselves up as arbiters to decide the relative value of each, and use the machinery of govt/taxation to favor or punish people they can only know in the abstract<<

Well, why don't you go and have an argument with those folks then; perhaps they might hang out in discussion threads where this personal hobby-horse of yours was relevant.

The point is quite clearly that, to repeat myself, wealth is in general transmitted intergenerationally more than income, is much more concentrated than income, and, the red herring of unions notwithstanding, is a much better indicator of political power at a household level than income.

Here's an experiment, George. Starting Monday, I'll attempt to join a union, and you attempt to join the top 1% of households by wealth. Last one to achieve their goal has to show their arse in Woolworth's window.

and in related news, "don't be obtuse" is not an insult to someone who is at that moment being obtuse, just as "don't sit on the windowsill" is not an insult to someone who is sitting on the windowsill. I would only switch from using "be obtuse" as a transitive term to a participle if I thought a) that your general state was one of obtuseness and b) that exhorting you to rise above that state would help. I see no evidence for either proposition yet.

But I admire the fortitude of someone who can last 20 years on a trading floor while being offended by such phrases as "don't be obtuse"; though perhaps a Swiss finishing school might have been a more satisfying career for one with such a hypertrophied amour propre?

Posted by: dsquared on November 29, 2002 05:57 PM

...you attempt to join the top 1% of households by wealth.

Interestingly, that's exactly what I (try to) do!

being offended by such phrases as "don't be obtuse"

Offended? Moi? Au contraire.

I merely have had the experience of our gracious blogmeister, sotto voce, upbraiding *me* for not comporting myself with sufficient grace while playing in his sandbox.

I thought it would be a courtesy to not let this thread decay into name-calling, ad hominem attacks, and the usual stuff that goes on when class warfare is the subtext, hiding behind mounds of high-minded rhetoric.

Fret not. I'll bore you no more here.

Posted by: George Zachar on November 29, 2002 06:18 PM

Someone wrote, 'Once the product of one's labors is "entirely" disposed of in a "political" way, that is, by others, the discussion ends, because the DeusEx Machina role of the State assumes the allocation burden.'

Jason McCullough responded, "Unless you get rid of the whole democracy bit, yes."

If my federal taxes were cut by even 10%, I would gladly give up my vote in federal elections. Democracy is OK. Freedom is much better.

Posted by: Mark Bahner on December 1, 2002 12:38 PM

Wow. That's one hell of a definition of freedom.

Posted by: Jason McCullough on December 1, 2002 05:34 PM

That's one hell of a definition of freedom.

You don't know his tax rate. :)

Posted by: on December 2, 2002 02:34 PM

Freedom to spend your OWN money as you see fit? What a concept!

And the state is only the lesser of two evils when compared to anarchy. Democracy doesn't somehow elevate it to God-like status and make all its "populist" decisions "right" or even wise.

When the Federal income tax was instituted, it was only on the richest 3% of Americans. It tapped into the populist idea of "soaking the rich." Today even people drawing Social Security (not rich, by any definition) are paying Federal income tax.

The lesson: stop "soaking the rich"... you can't afford it.

Posted by: Edward Dodge on December 5, 2002 11:04 AM


What you do to get ahead in America is at the #1 position at the top of the list of factors in your personal success.

George W. Bush inheriting "brand recognition" from his father in the political realm, your astrological "sign," and the phase of the moon *combined* don't even rate a distant #2,#3,#4,#5, ad infinitum.

Posted by: Edward Dodge on December 5, 2002 11:20 AM

Jason McCullough writes, "Wow. That's one hell of a definition of freedom."

You don't consider spending the money you earn as you see fit, "freedom"?

Posted by: Mark Bahner on December 10, 2002 09:48 AM

"You don't know his tax rate. :)"

Without doing much checking, I'd say it's somewhere between the 20th and 40th percentile, where the 1st percentile is the 1% highest income. In other words, somewhat to the upper side of middle class. But that's just a guess.

Posted by: Mark Bahner on December 10, 2002 09:52 AM

"Why do political outcomes consistently not match polling of the general population?"

Obviously, polling error. Or are you implying elections are fraudulent?

Posted by: Mark Bahner on December 10, 2002 09:56 AM

Put simply, this is simply Krugman posting a summary of Krueger's summary of Björklund's work on earnings mobility.

Posted by: Presley H. Cannady on December 13, 2002 11:26 PM
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