Posted on 12/29/2022 6:34:03 AM PST by karpov
Charles Calomiris has a splendid WSJ review of a great book, "The Myth of American Inequality" by by Phil Gramm, Robert Ekelund and John Early.
It is a "'a truth universally acknowledged,' according to the Economist magazine in 2020" that
little progress has been made in raising average American living standards since the 1960s; that poverty has not been substantially reduced over the period; that the median household’s standard of living has not increased in recent years and inequality is currently high and rising
Most of all the last one.
All of this is false. Most of all the last one.
1) Income. The central jaw-dropping, astonishing fact: The statistics you read about income and income inequality ignore taxes and transfers. By doing so, of course, they create a problem that is immune to its purported solution!
Especially on the low end, transfers including in-kind transfers (housing, medical payments, etc.) are a huge part of consumption and properly measured income.
Pay especially attention on the left hand side of the graph. Actual income is essentially flat in the first three quintiles of earned income.
Gramm Ekelund and Early are fond of quintile bar graphs, like this one. The bars are pretty flat from the lowest to third decile, and transfer income is a big part of the story.
More, do just a little bit of adjustment for household size. Single person households are obviously going to have less income than two-earner households. Households with children have less per capita income, but people with kids may be more likely to work. How does it work out? In per capita terms (middle) actual income, including taxes and transfers is almost completely flat in the first four deciles.
2) Work. Well, a good anti-capitalist might say, this just proves the point.
(Excerpt) Read more at johnhcochrane.blogspot.com ...
.
The reality is that America is mostly a spectacular success story and criticism has to be manufactured, unlike czarist Russia where the government’s failings were real. The myths have to be sold to a fat, spoiled culture that enjoys the highest standard of living in history that has no idea what oppression means.
SO true.
Where I worked, all the young people (ALL of them) had the best and newest car, terrific house, took annual vacations, always had the newest and coolest phones, new clothes, etc. while I struggled .... even though I was making more.
They are the ones who whine about ‘income inequality’.
THEY do not save, and they live on their credit cards. They are fat lazy cattle with NO concept of how they will live past tomorrow or if there is a ‘dowturn’.
Perhaps this really explains it. If the Pareto distribution has validity, then it applies across economic systems, from free market capitalism to communism. And if true, the question becomes not about equality but which system produces the highest lows and highest highs in terms of income. I can say for a fact that all the trillions of taxpayer dollars spent on poverty since LBJ’s Great Society that America has not maximized the highest lows of income. In other words, the number of people in so-called poverty hasn’t increased when not spending trillions would have increased the income level of what’s considered poverty.
Major take away: there’s always going to be uber rich and poor. Deal with it, don’t waste money on trying to change it since that only makes it worse.
I will have to review the Pareto distribution. Ran across it when I was looking at Zipf’s law.
“no idea what oppression means”
Oppression in the early 21st century, The Information Age if you will, takes on a different hue from that in the early 20th century and earlier periods. Things like gaslighting, ghosting and breadcrumbing are all efforts to oppress in the Information Age.
Wait til digital currency comes online, then you’ll get a real taste of what timeless oppression is.
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