The top 1% is a red herring

by Russ Roberts on January 10, 2007

in Inequality

Ezra Klein is upset about inequality and those of us who try and take a more nuanced approach to the data. Here is his first reaction to my observation that almost everyone born in America after 1920 are among the richest people in human history:

This strikes me as comparable in usefulness to telling
a poor person, "well, at least you’ve got good skin!" Yes, we’re better
off than we were a hundred years ago. No, that’s not a sufficient
answer, or even relevant comment, to questions of distribution and
justice. If you don’t think inequality is a problem or the current
distribution of wealth is troubling, that’s a position. If you’re going
to respond to the impoverished or the laid-off by explaining that thing
sure were tough in 1912, that’s not even an anecdote — it’s an utterly
meaningless digression.

Actually the point was to show how arbitrary any claim of injustice really is by examining this slice or that slice of the income distribution. The other point was much more important. I care less about inequality and more about whether people are getting ahead and having better lives.

Klein relents a little bit in this post and admits there might be some legitimacy to my point about the historical record. But then he gives this argument:

The Libertarian choice of pre-1920s America is quite helpful to our
case, because that’s right about the time inequality in this country
peaked and the American economy entered a long and fruitful corrective
process.  Here’s the Saez-Piketty data showing the income-share held by the top 1 percent:

Seazpikkety_graph

Indeed, what you see in post-1930s America is an economic system explicitly attempting to reduce income inequality and distribute growth gains more broadly.

This is a beautiful example of how  hard it is to interpret  economic data. First of all, talking about the top 1% makes it sound like the data refer to the American Economic Aristocracy. The haves vs. the rest of us.  But the people in the top 1% in 1929 aren’t the same people in the top 1% even in 1935, let alone much later. So this chart isn’t about a particular group and how they fare over time.

But the subtler problem with this picture is that it doesn’t tell you anything about how the rest of us are doing. It’s the share of the top 1%. When they get more in a particular year, it sounds like that means there has to be less for the rest of  us. After all, if you get more of the pie, doesn’t that mean less for me? But it doesn’t, because it doesn’t tell you about how big the pie is. If I get a smaller share of a bigger pie, I can have more to eat.

The opposite is also true. If I get a bigger share of a smaller pie, I can be worse off. It’s hard to read Klein’s chart, but if you go to Piketty and Saez’s numbers (go to Table A3, column 3 for the fraction of income going to the top 1%, including capital gains) you’ll see that the share going to the top 1% peaked in 1929 at 23.94%. In 1933, the number was 16.46.

Hurray! The rest of us, the bottom 99% were getting a bigger share in 1933. The economy was more fair! But there was nothing to cheer about. Real GDP per capita (cool tool—don’t miss it), fell 29%.

Do you think that was a good time for the average American or a bad time? Do you think the fall in the average was a statistical artifact caused by the right-hand tail of the distribution being lopped off? No. The fall in the share of the top 1% had nothing to do with social justice or redistributive policy or the rise of unions. It had nothing to do with any attempt of any system to explicitly or implicitly do something. It was caused by a lousy economy that hurt the average person and poor people and yes, rich people. The share going to the rich fell because it became really hard to make a lot of money. But it also became really hard to make a little money.

And yes, I know I’m cherry-picking four years to make a point. It doesn’t disprove everything people say about income shares. But it shows the danger of using income shares as a measure of well-being. I’ll write about the longer trends in the data, soon.

Alan Reynolds has recently critiqued Piketty and Saez and Saez and others have responded. Maybe I’ll talk about that in another post. But the biggest flaw isn’t in their data. It’s how they’re used.

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{ 36 comments }

John Thacker January 10, 2007 at 11:24 am

Isn't it a bit odd for people to focus exclusively on pretax income, as Ezra Klein does? Certainly I would think it would be extremely odd for people who believe that raising taxes don't affect investment or how much people work much, as many on the left seem to.

Sam January 10, 2007 at 11:37 am

I might suggest that citing income inequality is typical leftist appeal to lower class envy and liberal guilt to attract support for wealth redistribution through our collective extortion agency.

It would do well to consider income versus wealth consumption. Wealthy people might take up bigger chunks of land, have bigger houses, and eat fancier meals, but they also have to spend more maintaining said properties thus creating jobs for those whose talents and interests are compatible with servicing the wealthy.

The problem with having an agency with the power to redistribute wealth is that it will inevitably fall under the influence of those of means who now find their interests lie, not with creating more wealth, but with affecting the political process to to enhance and/or protect their own position in the scheme of things.

Thus we now have a government that takes wealth from everyone, consumes a good deal of it in subsidies, bureaucracy, payoffs, foreign aid, and so on, to the detriment of the poor most of all.

The impact of wealth redistributors has been greatest on the poor and it has been negative.

This is the outcome of the criminal philosophy of economic collectivism and that is why it must be exposed and nuetralized at every opportunity.

JohnDewey January 10, 2007 at 12:04 pm

"But the people in the top 1% in 1929 aren't the same people in the top 1% even in 1935, let alone much later."

That's such an important point, but one that I have trouble communicating. People can easily understand that Michael Jordan earned much more his last few years in the NBA than in his rookie season. But they don't seem to understand the same is true for today's CEO's. In fact, the CEO's income growth was much more gradual.

JohnDewey January 10, 2007 at 12:07 pm

The EH.Net tool is definitely a 'cool tool". I quickly determined that real per capita GDP for the U.S. increased nearly 25% since NAFTA was implemented. What happened to the "race to the bottom" that all the NAFTA opponents predicted?

Russ Roberts January 10, 2007 at 12:14 pm

JohnDewey,

The trade obstructionists will tell you that all of that increase went to the top 1% or 5% and that the average American got nothing. I think they're wrong but we have a lot of work to do given how much noise is made by the gloom-and-doomers. I hope to have some data up on the web soon that shows that the average American did share in the gains.

David Rotor January 10, 2007 at 12:25 pm

I found this post to be useful, not just to explain your points but also valuable at looking how you view a problem and data from many angles. And thanks for writing this post in accessible language that even a non-economist like me could follow.

Cheers,

David Rotor

Fundamentalist January 10, 2007 at 12:41 pm

I'm still trying to figure out the left's fetish with inequality. Do they think the rich have stolen from the poor? Or is it just plain envy? Do they still believe the medieval idea that wealth is limited and one man can gain only at the expense of another?

The Left seem to think that inequality is evil by definition. But if the rich have earned their wealth honestly, why should they care how much they have, especially if the poor get richer, as they do?

Morgan January 10, 2007 at 2:20 pm

Part of the argument of proponents of redistribution (PORs) (according to Bruce Webb in the comments at Mark Thoma's site) "is that the gains from productivity are not being distributed in an equitable fashion."

Leaving aside whether that is an accurate statement (uneven does not imply inequitable), there is an implication that the distribution of incomes has some ideal "fair" shape, that the ideal shape is known, and that if any income distribution fails to match that ideal then the economic system that produced it is ipso facto unfair. Add to that the presumption that government redistribution is the way to correct that unfairness. It's a heck of a stretch.

Among other things, it means that only two kinds of change are "fair" – everyone's income increases by a fixed percentage, or people swap places within a fixed-scale distribution. And the way to fix it is not to remove regulation or in any other way to increase opportunity, but to tax and redistribute.

Russ Nelson January 10, 2007 at 4:03 pm

Unfortunately, the equality mavens really DO count relative equality as more imortant than absolute prosperity. If everyone becomes worse-off, but the rich become even more worse-off, they count that good.

Patrick R. Sullivan January 10, 2007 at 4:41 pm

It's impossible not to laugh out loud at someone who says:

'The Libertarian choice of pre-1920s America is quite helpful to our case, because that's right about the time inequality in this country peaked and the American economy entered a long and fruitful corrective process.'

Aka; The Great Depression, followed by WWII.

In the 100 years just concluded (1907-2006) the first quarter century included WWI and the beginning of the Great Depression.

The second quarter, I've already noted, had its own shortcomings as a Golden Age. The third 25 year period included Vietnam, stagflation, and ended with the second worst downturn (1979-82) in the 100 years under discussion.

Then we have the Age of Friedman: Reagan, Clinton, Bush(s); 2 short, mild, recessions, 23 years of economic expansion. From which we're supposed to cry in our beer over 'the poor'!

Forbes January 10, 2007 at 4:51 pm

Fundamentalist–I think the easiest way to view the question you ask regarding equality/inequality is from the view of equal opportunity vs. equal outcome.

Cheers.

Dennis Gildea January 10, 2007 at 5:59 pm

I can imagine an amusing scene in a Depression-era movie, with Mr. Klein lecturing a hostile crowd of unemployed factory workers: "It's not a 'depression', it's a 'fruitful corrective process'". Of course, he wouldn't really say that under such circumstances. "Equality" is an argument of opportunity, not a moral principle. If we were all equally poor, Mr. Klein would have some other buzzword on his banner.

Nathan Benedict January 10, 2007 at 8:11 pm

"But the people in the top 1% in 1929 aren't the same people in the top 1% even in 1935, let alone much later. So this chart isn't about a particular group and how they fare over time."

Perhaps slightly off topic, but this reminds me of a newspaper headline I just saw on another one of this site's pet peeves, the minimum wage. The headline said something like "Democratic House votes to give minimum wage workers first raise in 10 years." You could probably count on one hand the number of people who have been working at minimum wage at the same job for a decade.

Maybe it was just sloppy headline writing, but it seemed to reinforce the image of the min wage earner slaving away in poverty for years on end, kept poor by the greedy capitalist, wages raised only by the benevolent government.

Brad Warbiany January 10, 2007 at 11:04 pm

I would point out a small fact I picked up in a recent podcast (Cato Daily Podcast, Jan 3, feat. Alan Reynolds).

He brought up the point that shortly after 1986, we saw an amazing increase in the income share picked up by the top 1%. What's crucial about 1986? At that point the highest bracket of personal income tax dropped below that of corporate income tax.

Thus, entrepreneurs structured their income as personal rather than corporate income, and POOF! we saw the share of income held by the top 1% grow! Did they get richer? Not by much, but their "income" sure grew!

Frankly, I worry more about what I make than how it compares to what those in the top 1% make.

undergroundman January 11, 2007 at 8:33 am

There are many disconcerting things about the income inequality. 40 million people are uninsured in the United States. 3 billion people in the world have less combined wealth than 200 people. People are starving while there is plenty of resources for all. Meanwhile, the Earth is being destroyed by unbridled, irresponsible consumerism.

The income inequality encourages inefficiency when you think of efficiency as distributing resources to people who need them and are certainly willing to work for them. Simply because these people grew up in an economy which cannot produce goods that we like doesn't mean they don't deserve to eat. We've made such vast productivity gains that laborers aren't really all that necessary. Soon the US economy is going to have to come to grips with the fact that the retail sector could be entirely phased out and replaced by managers overseeing shops, or online ordering.

Soon we're going to have to decide what to do with all these people who are actually incapable of integrating themselves into the "knowledge economy" — with our huge advances in productivity, why can't we give them free healthcare, food stamps, and housing vouchers? Perhaps a small stipend (negative income tax credit) for other things. That leaves them with an incentive to work if they want further consumption, but still enough money to live. I'd venture to say many, many people would be happy to simply have a small house, basic food, the internet (free wireless is common), and a small amount of discretionary income. And, in fact, that would be a very good thing – it would reduce the burden on the environment as the phase into a more equitable and highly populated world. The fact is that there are scarce resources, and the Earth does have a limit – we cannot support 9 billion people living like the 500 million currently do.

There is nothing wrong with a post-materialist economy!

Lee January 11, 2007 at 8:51 am

People should avoid adopting the rhetoric of the left when discussing income inequality, as it tends to be preloaded with economic fallacies and will only hinder efforts to communicate liberal ideals. That is 'liberal' in the classical sense, I simply refuse to yield that name to those who main preoccupation seems to be reducing liberty, not preserving it.

In this case, the offending terminology is 'redistribution.' Thomas Sowell makes a good case against this. The fact is that economic wealth is only distributed in the statistical sense, it is not *actually* distributed from anywhere. We can't very well argue against the *re*distribution of wealth, because wealth was never distributed in the first place.

Individuals produce wealth, which would not otherwise exist if not for their personal efforts, it is *not* distributed.

Mike January 11, 2007 at 9:36 am

I think a fruitful place to take a discussion on inequality would be to consider Bill Baumol's take on it.

My reading of his stuff is that there is nothing about measured consumption, wealth or income inequality that is particularly distressing. Rather, he is concerned about the equitable distribution of privilege.

To the extent that the relative increase in the living standards of upper income people was not a reflection of their abilities and efforts, but rather their retention of privileges created under different circumstances, then there is a lot to be said about measured inequality. I think the classical liberal case is that to the extent that this happened, it was GOVERNMENT that maintained and enforced those privileges. Market competition naturally eats away at these privileges.

Morgan January 11, 2007 at 10:21 am

One other thing to keep in mind is this – almost half of the top 1% of tax returns reported incomes between 200,000 and 500,000 (as of 2004), which means that the cutoff for the top 1% is probably around $300,000/year.

That means that lots of people selling their small businesses or houses qualify as the "elite" for that year only. And because we're talking about fewer than 1.5 million people, these groups are likely to constitute a large part of the total.

In addition, we'd expect people preparing for or entering retirement to make these changes. So we'd expect the upper tail of the income distribution to be inflated (and hence inequality to increase) when there is a large demographic bulge of people planning to retire. Like now.

Given the relatively small increase in measured inequality in the US over the last 5 years, the underlying trend in inequality (net of demographic forcing) might be negative since 2000.

That would be hilarious.

JohnDewey January 11, 2007 at 11:19 am

morgan: "we'd expect the upper tail of the income distribution to be inflated (and hence inequality to increase) when there is a large demographic bulge of people planning to retire."

Good point, Morgan. Boomers will continue to enter retirement for the next 25 years. The largest groups are yet to come. Their sales of businesses and real estate will continue to skew reported inequality.

The IRS allows the exclusion of $500,000 in gain on sale of a primary residence. The balance must be reported as a capital gain.

Piketty and Saez provide income data sets that exclude capital gains as well as others that include them. The graph above appears to match the Piketty and Saez data that includes capital gains. It must be especially skewed by residence sales. Income from most home sales – those under $500,000 – will be excluded, as such income doesn't even show up in IRS data. Those who gain more than $500,000 from a residence sale will be an even more exclusive group.

Adam Malone January 11, 2007 at 11:31 am

"There are many disconcerting things about the income inequality. 40 million people are uninsured in the United States. 3 billion people in the world have less combined wealth than 200 people. People are starving while there is plenty of resources for all. Meanwhile, the Earth is being destroyed by unbridled, irresponsible consumerism."

There only one sensible answer to this from an liberal economists point of view. "SO WHAT?"

-40 Million people don't have health insurance in the US. IS this a big deal? NO. First of all this statistic is useless because it doesn't give an indication as to how long these people have been without health insurance. Second, in the US insurance is generally connected to employment benefits so the majority of people who are frictionally unemployed (which right now is about the only unemployment we have) likely do not have health insurance, nor do their dependants. Third, a lot of those people choose not to have health insurance. THEY KNOW THE RISKS and decide that money is better in their pocket. I will only mention one more thing that makes this a silly statistic, in a global economy why are you only worried about the 40 million Americans? What about the 4 billion or more people who have almost no access to health CARE not just health insurance. It is a little hypocritical of you…

-"3 billion people have less combined wealth than 200" Once again a useless statistic. This is like those grocery stores that take a cart and fill full of their sale items and say "All of this is only $100, if you went to Joe's Grocery it would be $130". The store has not committed some for of subterfuge, however Joe's Grocery, or Bill's grocery, or even Sally's could do the same thing with their sales items. The only way such statistics should actually influence shopping is if you only want the things that are in the cart. A stat that compares 3 billion people to 200 people is more than a little silly for this reasons. I have not done the math but it is likely that the Forbes 100 list have a combined wealth that is greater nearly everyone's wealth combined. But the point is SO WHAT? Did those extremely wealthy people make everyone hand over their money at gun point? NO the majority of the Forbes list is made of people like Bill Gates, Sergey Brin, and the world's oil sheiks. You could have just have easily drawn this comparison: The sale price of Microsoft Vista will likely be greater than the annual income of most people in the world. But I guess you already realize that is probably a silly statistic…

-"People are starving…" That is a bad thing. I will agree. You have a point. I don't like people to die of starvation. In fact, I don't think I know anyone who does like people to die of starvation. Unless of course it is the dictators and warlords and that prevent the people from having access to markets where they can obtain their food. Although perhaps you had a more negative slant in this comment…maybe a reference to your mention of those 200 people that are so wealthy. I am just going to guess that you believe that those 200 people should start buying grain and cheese and shipping all over the world to care for the less fortunate. It certainly is their right to do so. But before you recommend that a later date, perhaps you should review the successes of such programs as the IMF, UNICEF, OxFam, et al. All of that generosity has actually done little to help poor people. But they have made sure that all the dictators and war lords were well fed…MAYBE you should target those people…

I realize this has been somewhat of a rant, sorry about that. But statements/statistics like those I have discussed above are so popular right now with the left that they are difficult to avoid.

Useless statistics are so pervasive in the political debate that intelligent people often start quoting them…that requires them to forget that 80% of all statistics are useless. :)

Morgan January 11, 2007 at 11:38 am

JohnDewey:

Thanks for the correction. I knew that there was an exclusion for the sale of a primary residence, but had assumed that all capital gains on the sale of a home showed up as income (but were subtracted out before calculation of taxes).

Sam January 11, 2007 at 12:43 pm

Repost to respond to undergroundman.

"The problem with having an agency with the power to redistribute wealth is that it will inevitably fall under the influence of those of means who now find their interests lie, not with creating more wealth, but with affecting the political process to enhance and/or protect their own position in the scheme of things."

This is one of the unwritten rules of the political game. There is no way, given the realities of human nature to avoid this characteristic of politically controlled wealth distribution. The actual result of foreign aid to third world nations provide averwhelming evidence of this.

The ONLY way, I repeat, THE ONLY WAY to bring these poor and starving masses out of their dire circumstances is to allow them to pariticpate in a market economy.

Sunny Molini January 11, 2007 at 3:17 pm

Here's an article from the Naked Economist column, http://finance.yahoo.com/columnist/article/economist/19750

He's markedly against income inequality. But the reasons he gives have less to do with altruistic morals and more to do with security. The only problem that I can find is that the security risks he cites are more closely correlated to social mobility than strictly income equality.

Any thoughts? the Gini index doesn't measure social mobility.

JohnDewey January 11, 2007 at 4:08 pm

"the reasons he gives have less to do with altruistic morals and more to do with security. "

How can Charles Wheelan seriously compare the world's wealthiest nation with Brazil, and imply anything about U.S. security risks? The only social risk is that the "disadvantaged" in the U.S. may be influenced by the income inequality garbage being spewed by liberals.

The U.S. is still considered the land of opportunity for poor people all over the world. Immigrants and refugees come here by the thousands and make their own fortunes – most modest but many very large.

The major impediment facing the U.S. poor is their own doubts in their abilities. Those doubts have been instilled by the worthless do-gooders and minority "leaders" who built an entitlement culture – a culture that left the poor more dependent than ever before.

undergroundman January 12, 2007 at 4:20 am

"Second, in the US insurance is generally connected to employment benefits so the majority of people who are frictionally unemployed (which right now is about the only unemployment we have) likely do not have health insurance, nor do their dependants."

And that's a good thing how? Besides, that's not true — these people are covered under Medicare. Get your facts straight.

"Third, a lot of those people choose not to have health insurance. THEY KNOW THE RISKS and decide that money is better in their pocket."

Indeed. But when they go the emergency room and can't pay their bill, guess what? The federal government foots the bill. Health problems cause a large number of bankruptcies. The US spends more on healthcare per capita than any other industrialized nation and yet it seems to get the least done, with 47 million uninsured. If you'd like some facts (for a change), check out these two sites. Find credible sources that contradict them — if you can.

http://www.nchc.org/facts/cost.shtml
http://www.cmwf.org/Publications/Publications_show.htm?doc_id=372221

"I will only mention one more thing that makes this a silly statistic, in a global economy why are you only worried about the 40 million Americans?"

I'm not a complete altruist. I, like most Americans (or perhaps because of most Americans) think that we should take care of the -needs- of our own first. That's not silly. It makes economic sense. Health problems are devastating to workers, and if they aren't treated, you can kiss that worker goodbye.

"It certainly is their right to do so. But before you recommend that a later date, perhaps you should review the successes of such programs as the IMF, UNICEF, OxFam, et al."

Perhaps you can point me to your source? Your information has drifted down from you — you believe in dogmatically, like some sort of religious nut. You don't understand economics, you just listen to those who say they understand economics (like Russel here) and take it on faith. I see it all the time.

But, yes, you do have a point. I like the microfinance idea of Muhammad Yunus (who doesn't?) and agree that large donations are often weak. There are a lot of problems with the way we do aid (especially just giving corrupt companies money). Instead we have to force accountability — get some good (principled) Americans on the field. Pay our workers to build infrastructure and train people overseas. Similarly, handing out money can simply destroy the developing world's agricultural sector. Instead we could eliminate the subsidies on our farms and help to distribute money to the people so that they can buy their own food. There are effective ways to distribute food.

The benefits, I might add, would be enormous. With lower poverty (and a resulting stronger lower-class) we would see, I expect, less violence, ecological destruction, political corruption, and productivity (which might put more of a strain on world resources, but it would be a good thing).

"This is one of the unwritten rules of the political game. There is no way, given the realities of human nature to avoid this characteristic of politically controlled wealth distribution. The actual result of foreign aid to third world nations provide averwhelming evidence of this."

Huh? I don't see the link between your quote and your conclusion. Your quote sounds like it's saying that when wealth transfers happen, the lower-class will inevitably use it to further their political causes – but that wouldn't happen. We set the standard at the basics and no higher. If you want the good shit, you will always have to work for them. But in the modern age, when there is plenty, people (especially American citizens) should have healthcare (like the rest of the developed world) and food stamps, and shelter. We already provide these things, just not as broadly as we will inevitably have to. Besides – you claim evidence, but you don't show. Again, I fear you've accepted information which has trickled down to you as fact with dogmatic enthusiam. I'm not saying I know everything about these things, but I have my own analysis, at least — which tells me that the world of work is going to get a lot stranger in the future, and that we could do a lot more for the world.

undergroundman January 12, 2007 at 4:51 am

"And that's a good thing how? Besides, that's not true — these people are covered under Medicare. Get your facts straight."

Err. Meant to say Medicaid, and even that is not exactly right – Medicaid covers low-income children and people with disabilities.

JohnDewey January 12, 2007 at 10:26 am

undergroundman: "that's not true — these people are covered under . Get your facts straight."

Isn't it difficult to qualify for medicaid? Qualifications vary from state to state, but generally one must:

- have children and a limited income;
- receive or are eligible for Supplemental Security Income (SSI);
- be a pregnant woman who meets income requirements; or
- have assets of less than $2,000.

Many chronically unemployed persons will not meet any of these criteria. While some states have expanded medicaid coverage recently, the Kaiser Commission on Medicaid and the Uninsured reports that other states have tightened eligibility.

Do you have different facts about medicaid coverage?

Sunny Molini January 12, 2007 at 11:49 am

I feel like I've been shouted down like some kind of nutcase. From an academic perspective, does anyone disagree with my social mobility theory?

Perhaps I haven't made my own stance clear enough. I agree with you Dewey that the US is still seen as the land of opportunity all over the world, I further feel that that expectation is based on the intense economic freedoms afforded to US residents. Mexicans do not risk life and limb to cross the boarder for the privilege of being poor.

I am not saying that social mobility in the United States is anywhere nearly as bad as the situation in Brazil.

I am trying to figure out if it would be fruitful to reframe the debate from income inequality to social mobility, since I think social mobility would seem like a more noble goal than simple equality. Also, I can't imagine that income equality matters in any way except for the ways that it is correlated to time and social mobility.

JohnDewey January 12, 2007 at 12:32 pm

sunny molini: "I am not saying that social mobility in the United States is anywhere nearly as bad as the situation in Brazil."

I'm not putting words in your mouth, only responding to the article you linked us to. The Charles Wheelan article certainly implies U.S. social mobility is a problem. First, he argues that crime in Brazil is born of hopelessness. Then he presents data showing how the U.S. is becoming more like Brazil with respect to income inequality. Then he concludes with this question:

"Would you want a distribution of income that looked more like Sweden's, or Brazil's?"

The implication is very clear to me.

sunny molini: "Also, I can't imagine that income equality matters in any way except for the ways that it is correlated to time and social mobility."

It's those with a political agenda who will use (misuse) income inequality data rather than mobility data. If the objective is to show that recent Republican policies have benefitted the rich at the expense of the poor, then it makes sense to ignore lifetime and intergenerational mobility.

Sam January 12, 2007 at 1:34 pm

"Huh? I don't see the link between your quote and your conclusion. Your quote sounds like it's saying that when wealth transfers happen"

I guess I didn't explain well enough. Our foreign aid typically is given to the political class of other countries for "distribution". The experience is that the political class tends to utilize the funds to perpetuate their own rule and the expense of the poor. See Africa.

Sam January 12, 2007 at 2:17 pm

apologies, 'AT the expense of the poor'.

A good deal of the problem in communicating about the market process is that one side compares the current situation to how bad it would be without government intervention, while the other side compares the current situation with how good it could be without government intervention.
While the left is fond of criticizing 'inequities' and injustices of our so-called free market, libertarians realize that we do not have, and have not had, anything like a free market in the U.S.
Progressives accept at face value the progressive interpretation of U.S. history and see only evil businessmen as the source of all evils.
Progressives, it seems, do not acknowledge the incredible waste of wealth we have experience through the agency of government, except when it fits their critique. While they condemn subsidies to business (as do libertarians), they do not seem to comprehend the vast waste of bureaucracy and foreign aid. (Among many other factors which prevent us from achieving the true benefits of liberty.)

Money provides its benefits, its value, by flowing throughout society as a means of noting the value of the contributions of market actors through their labors, ideas, skills, and risk taking. Having a coercive redistribution agency control the flow distorts the signals and perverts the outcomes that we all would like to see happen.

ben January 12, 2007 at 3:47 pm

Undergroundman

If the federal government steps in any time an uninsured person gets sick, what was the purpose of citing the number of uninsured in the first place?

undergroundman January 12, 2007 at 5:33 pm

Because it's extremely inefficient to treat people in the emergency room. And they don't always do it – sometimes they force people to file for bankruptcy, or make them lose their life savings, or force them to stay at home with their health deteriorates.

Notice that no one tried to refute me in my point that the US spends the highest amount on healthcare and achieves the least? The US spends the most per capita on healthcare of the dveloped world. This is a fact. We could do better with a universal system because it would reduce the bureaucratic mess that we have right now. And it would make it easier for companies in the US to compete globally — right now they're struggling under the burden of health insurance.

"I guess I didn't explain well enough. Our foreign aid typically is given to the political class of other countries for "distribution". The experience is that the political class tends to utilize the funds to perpetuate their own rule and the expense of the poor. See Africa."

Ah, right. My argument for that is: use the money smarter by doing the following: 1) Not giving it to corrupt groups and government. 2) Paying US citizens to actually do the work, as well as, perhaps, trusted citizens of the free world. I'm not saying we should dump money into the coffers of corrupt governments, regardless of what we've done in the past. There are ways around that. I detailed some of them in my post.

JohnDewey: Medicaid/Medicare doesn't really address the issue, yeah, which is why we need a solution. (I think they're inefficient, though I'm no expert.)

Randy January 12, 2007 at 6:11 pm

Undergroundman: "Notice that no one tried to refute me in my point that the US spends the highest amount on healthcare and achieves the least?"

It is important to separate necessary medical spending from luxury medical spending. Americans spend a great deal on healthcare because they want to and because they can. Luxury spending on healthcare can be done away with by government, but it cannot be redistributed.

JohnDewey January 13, 2007 at 2:19 pm

"no one tried to refute me in my point that the US spends the highest amount on healthcare and achieves the least? The US spends the most per capita on healthcare of the dveloped world. This is a fact."

It is definitely not a fact that the U.S. health care system achieves the least.

It is important to separate the outcomes from the health care system and the outcomes from lifestyles. Physicians and hospitals cannot save the citizenry from eating poorly and failing to exercise. Nonprofit hospitals and free clinics cannot force sick poor people to take advantage of their available services.

Proponents of big government health solutions often point to infant mortality rates as evidence that the U.S. health care system fails more often than that of European countries. Actually, that statistic reflects that the U.S. health care system tries more than those of many European countries. U.S. hospitals go to much greater lengths to save premature birthed infants. Many European nations do not even count as deaths those premature infants that fail to breathe on their own or that arrived under a small birth weight.

What the U.S. health care system does deliver – what many socialized systems cannot – is timely service. Statistics on waiting times for surgeries show that Canadians, for example, must suffer for much longer periods while aswaiting surgery.

JohnDewey January 13, 2007 at 2:33 pm

undergroundman: "the US spends the highest amount on healthcare"

That should be no surprise whatsoever. The U.S. is wealthier than every other nation, and its citizens are going to pay more for both elective and necessary surgery.

The sensible way to hold down costs would be to force patients to share more of the costs of health care. A socialized system would do just the opposite.

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