Frank Talk on Status

by Don Boudreaux on August 17, 2007

in Competition, Reality Is Not Optional, Standard of Living, The Profit Motive, Work

In response to this review by Daniel Gross of Robert Frank’s latest book, I sent the following letter to the New York Times Book Review:

Reviewer Daniel Gross should have asked harder questions about Robert Frank’s argument that higher taxes on “the rich” will moderate individuals’ quest for status (“Thy Neighbor’s Stash,” August 5). Monetary wealth and the material goodies it buys are hardly the only source of status.  Consider, for example, Prof. Frank’s faculty position at Cornell University.  He earned this position in large part through his hard work.  By his own thesis, then, he inadvertently caused other scholars to work unnecessarily hard in their quest to win high status Ivy-League appointments — a quest that for the vast majority of us futile.

Higher taxes on the rich will do nothing to create more Ivy League faculty positions, more mansions with stunning views of the Pacific ocean, a greater number of the world’s most beautiful women or most eligible bachelors, or most of the other things that confer and signal high status for those who possess them. Frankly, it is naive to suppose that muting competition in markets will mute humans’ competition for status.

Indeed, given that humans are quite status-conscious, a social system in which we seek status chiefly through earning money provides what is likely the best available outlet for this proclivity — namely, competition within private-property-based markets.  Not only does it result in new and greater quantities of goods and services for others, but it sure beats the hell out of violence and even politicking as a means of challenging others for status.

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{ 29 comments }

Brad August 17, 2007 at 3:41 pm

I can't imagine how insulated one would have to be to make an argument like Robert Frank does and still be smart enough to have finagled one's way into a professorship. Does the guy not have a neighbor or a family member who has earned a modicum of success? I could easily list and tell the story of 50 people close to me who made their lives better by taking initiative and doing something. And I bet every one of them made someone else's life better too by creating a job to be done or a product that saved time or money. Uncle Bob must be a real hit at family gettogethers. Geez.

John Dewey August 17, 2007 at 4:04 pm

"Between 1980 and 2001, Frank notes, the median size of new homes in the United States rose from 1,600 to 2,100 square feet, 'despite the fact that the median family’s real income had changed little in the intervening years.'"

Did Frank bother to tell his readers the other part of the housing story? Finance costs and real household energy costs dropped significantly over that 21 year period.

floccina August 17, 2007 at 4:14 pm

Funny you made me ask who I envy most. The person is not rich at all but has other more important things.

tiger August 17, 2007 at 4:56 pm

I tire of this silly argument with elites who reap the fruits of our beautiful system like this Frank clown (or Clooney or Penn or Sarandon or John Edwards…) and then declare it's not fair for the rest of us to "struggle". They all know what's best for us and what to pay for our health care, etc. They don't realize or don't care that middle class people like me get screwed in socialism while the elites maintain their money and status and the non-working poor advance considerably all carried on the backs of the middle class. Prof. Frank also doesn't appreciate that people like consider that if he got his way and redistributed the wealth, etc. it would effectively pull up the ladder so no one else could climb as high as he has-he would be a true elite, well paid and untouchable. What an arrogant a$$.

anicolici August 17, 2007 at 6:12 pm

I can't imagine that those at the NYTBR haven't seen the movie "Enemy at the Gates" (http://www.imdb.com/title/tt0215750/). It was a run-of-the-mill movie but watching it you couldn't possibly escape the idea that envy lives on no matter what you do to society – even in the Soviet Union when all were made "equal". The love of a woman, in the case of this movie, was the source of the problem…

muirgeo August 18, 2007 at 2:29 am

They don't realize or don't care that middle class people like me get screwed in socialism while the elites maintain their money and status and the non-working poor advance considerably all carried on the backs of the middle class.

Posted by: tiger

No one is advocating socialism. Again I'll repost my graph as no one seemed to have any comment on it and its implications. Tiger it seems to imply the opposite of what you claim. Or in fact maybe you are right that the middle class gets screwed in socialism. But again no one is talking socialism but the propaganda and repeated claim has convinced you so.

State of Working America graph.

Today on the Thom Hartmann show an economist ( Ravi Batra ) explained the dangers of increasing wealth inequities. Here I paraphrase his comments; The current problem he claims is the economies of the world are needing so much debt to function. Now because of the huge wage gap wages for middle class are not keeping up with productivity. Productivity is the source of supply while wages are the source of demand. If productivity is rising much faster then wages supply will increase faster then demand creating imbalance because the middle class has not enough money to keep buying. The short term solution is to use debt to keep the buying going. The income gap grows more and more but at some point the economy can no longer find the liquidity to buy the excess supply and then the walls come crumbling down as Walmart reports stagnant income because "Joe-buy-it-cheap" can't even afford the cheap stuff anymore.

Makes sense. Seems we are at a scary point with our economy not unlike on October 28 , 1929.

Tiger it's not the socialist that are screwing you. I think it's the economic purist who want to forget history and create policies that cause graphs like the one above. Seriously how do you explain that graph?

vidyohs August 18, 2007 at 12:06 pm

muirgeo,

"No one is advocating socialism."

Do you mean that in reference to this post and the comments about it, or that no one in the USA is advocating socialism?

Let's take the first possibility and I suggest that anyone who points out income inequality and suggests that it is in itself bad and harms a society is also by implication suggesting a fix or remedy for that situation. And, what would the most widely acknowledged fix or remedy for income inequality be……hmmmm? Socialism? Well I reckon it is.

Okay, now let's address the second possibility that you suggest no one in the USA is advocating socialism. There is nothing to say about that, but that it is ridiculous and false on the very face of it. Socialism has a pethora of advocates in our society.

Now about your graph that you seem so proud of and think people are running from, I suggest you consider the posibility that they, like myself, don't see anything in it that reveals wonderous dirty secrets about income inequality. I see a graph that show all incomes rising, from the beginning of the graph to the end of the graph. So what?

To me it simply confirms what I learned when I first began to play poker. I quickly learned that if I went into the game with a large wad of bills it was easier to win, and I learned the reverse was true, if I went into a game with just enough to cover the 'buy-in', then I stood considerably less chance of coming out a winner.

Your graph shows that people who begin with an advantage see that advantage increase with time…….i.e. money makes money and that truism just increases as what money is made is reinvested to make even more money. As I said, nothing to get excited or resentful about unless you are a dedicated socialist who envies those who can make it better than you.

Troy Camplin, Ph.D. August 18, 2007 at 12:27 pm

When we stop being social mammals, we will cease being concerned with status. We see people trying to achieve status even in the ghettos and barrios, let alone in Ivy League schools and among the richest amongst us.

Flash Gordon August 18, 2007 at 2:32 pm

I don't understand Muirgeo's graph because it doesn't tell us what the black, gray and dashed lines represent. I guess they represent low, middle and high income earners, but which is which. OK, if I assume that the black is the low income, dashed the middle, and gray the high, I still don't get the point. Is it that high incomes have grown faster than low incomes?

Well, if that's it, so what? Even if my assumptions are correct, the graph doesn't indicate what people are included in each category at any particular point. Those of Murigeo's persuasion usually assume that these are static categories in which the same people remain trapped. But anyone whose cognitive function has not shut down knows that these are dynamic categories that people move in and out of during their lifetimes.

In fact, the ability of high achievers to move from low income to high income may be the best explanation for higher growth among the higher income earners. They are people whose get up and go have propelled them into the higher income and they didn't stop working once they got there.

Nowhere else in the world is one born poor more likely to die rich.

Jason August 18, 2007 at 2:53 pm

Flash,

I have the same problem as you. I don't know what muirgeo's graph is showing. 1979 = 100. Ok, but what is it measuring, Before-tax, after-tax, with benefits, government transfers, per captia, per household?

muirgeo August 18, 2007 at 3:05 pm

Nowhere else in the world is one born poor more likely to die rich.

Posted by: Flash Gordon

That's pretty much an an unsupported and untrue statement based on the data I've seen. Here's the data to back up my claim.
Visit W3Schools!


See graphs 2C and 2G in particuliar.


And here.

muirgeo August 18, 2007 at 4:08 pm
muirgeo August 18, 2007 at 4:29 pm

vidyohs,

Your post requires a long reply. But let me start simply.

Is our governance Libertarian or Socialist? Is our economy Libertarian or Socialist? Roughly what percentage of Americans are Libertarian? Socialist?

Jason August 18, 2007 at 6:01 pm

muirgeo,

Are you spamming? I don't see the relevance of w3schools.

Brad August 18, 2007 at 6:46 pm

I don't think he's spamming. He's just being ironic — trying to increase his status or something.

vidyohs August 18, 2007 at 6:56 pm

It is to laugh, muirgeo!

People of the Libertarian persuasion might, just might, make-up 4% of the total population. The party itself has never exceeded that percentage in any national election. There are local arenas where a Libertarian has done well, Ron Paul for one. But, nationally, forget it, the percentage is so small at this time as to be totally ineffectual in any sense of the word.

Jesse Ventura was elected govenor of Minnesota and accomplished virtually nothing because his state congress was dominated by Democraps and Republicraps. This is exactly the reason that a Ron Paul election would be no more than symbolic at best. A Ron Paul election might be an education for America, but most would miss that education because the government teat could be squeezed a little by the power of the veto. But hey, four years and he'd be gone, I assure you, socialist America would send him packing.

In actual fact the vast majority of the population of the USA are socialist and that is why in actual fact we have an extremely socialist government. Even the Reagan era, for instance, produced Jack Kemp as HUD Secretary who oversaw the largest expenditiures of public funds on welfare give-away programs in history. Reagan did not do away with welfare and couldn't even budge congress to consider it.
I am also not sure he even wanted to.

The Reagan era also saw vast expenditures of public funds on weapons systems that were not needed or wanted by the military, such as the B2 bomber, and anytime one is spending money (paying salaries) on projects that are not wanted and not needed it is in effect "back door" welfare…..socialism.

The problem, perhaps even with yourself, is that most people have no idea of just what socialism is and therefore never recognize it in even themselves. But these same people have no problem with handing more control to government and more authority to seize the free individual's fruits of labor.
For instance, there is nothing more socialist than labor unions and an income tax, particularly a graduated income tax…..yet the staunchest supporters of the income tax are those who call themselves conservatives. Many union members think of themselves as conservatives. Go figure! I did go figure long ago, and I also observed, listened, and questioned. That is why I can categorically state that by far and away the majority of people in the USA have been enculturated by the public school system, their churches, the entertainment field, the public media, and government to be socialist thinkers.

An anecdote if you have the patience: In the mid 1980s I lived in Utah (BTW I am a USN retiree) and owned a small business. I had long before retirement in 1979 became a true conservative (the kind your great great granddaddy was when he packed his family up and headed west to claim and tame wild country with nary a thought as to whether there was government to bail his butt out if he got in trouble. He didn't care a bit about government. Ok?). Back to the story, we had two congressmen from the state of Utah, one of whom was a democrap.
There was a bill in congress to go ahead with the building of the B2 bomber, even though all the news at the time from the Pentagon was that they didn't think the plane was worth it and they didn't want it.
One of the plants to build the B2 was going to be a McDonell-Douglas plant and it would be located outside Salt Lake City and employ over 500 people. At the time the USA was just beginning to come out of the Carter recession, Anaconda mines had closed, and Kennecott was talking of laying off huge numbers of people.

Our democrap congressman was fiscally responsible enough to listen to the Pentagon and he voted against the program. Remember, the military (USAF in particualr) said the B2 was unwanted and unneeded.

By voting against it the congressman became the target of the most venomous hate mail you have ever seen The people of Salt Lake City castigated him unmercifully as a traitor and it cost him his position in the next election.

To me that whole scenario said one thing. Even though Utah is considered republicrap country and conservative, the people were so socialist enculturated that they would rather have the welfare of a salary on an unwanted and unneeded program than to look for honest business.

Okay, you say, that is Utah. Well sir, I have worked all over this nation since and associated with and read constantly enough to tell you with confidence that the rest of America and Americans are exactly like the Utah folk. They will close their eyes to the evidence that they are in effect drawing welfare as long as they can delude themselves by calling it a job. Look at the vast numbers of people who clamor for increases in MEDICAID, prescription drugs, and protection of the Social Security "safety net".

Listen with a truly open mind and critical ear to the people that call 'conservative' talk shows……you will find them expressing socialist opinions and supporting socialism in many varied ways….and sir, they never know it because they don't understand what they are asking for and what it would take to deliver it. Listen to the talk show hosts, even the standard maker Rush Limbaugh can't back away totally from socialism. Just listen carefully and you'll hear it.

So, in closing, I have said that 4% is probably the high end of an approximation of how many Libertarians there are in America, so that leaves 96% (minus one) that, in my opinion, are socialist….just a high number, about half, of those don't know it because of the reasons I have expressed above.

I am a businessman, muirgeo, not a huge corporation CEO, but a man who took a little capital, a lot of guts, a willingness to risk, and a will to work hard and steady; and I built a business that provided a good and comfortable income for my family. I could have built it much bigger, but after some experience I felt that to do so I would have to compromise business ethics and personal honesty. I was not willing to do that, so I topped out at a level beyond which I could not go without sacrificing what meant most to me. Oh, I recognize that there was a possibility that I might have eventually found someone to employ who believed as I did and who would give me the effort I would give an employer. Frankly it was because of that experience that I come to understand just how socialistic the average American had become.

I repeat I am a businessman and I have to tell you that I seriously doubt that you have anything to offer me that I haven't heard before and also nothing that would make me believe your statistics mean anything to an individual who wants to be more and is willing to work hard for it. I am not close minded, I am just educated and experienced…..and have been for many many years. Show me something new and we have some common ground. I just don't believe you can do it, nothing in your past posts lead me to suspect it.

I have read your comments on this website before and frankly, though you write well, you are still expressing the same old tired socialism of yesteryear in your own way. By it being expressed in your words the basics of it are not changed.

On the swing of the pendulum of political beliefs, left wing (socialist-democraps)being parallel left, you can place me way to the right side somewhere between the Libertarians (at perpendicular)and the Anarchists at due right (parallel).

I know that some sort of agreement (government) is a necessary evil, but I believe devoutly that a government that is imposed is a government that is inherently evil. Now don't just breeze by that word "imposed", if you do you make a huge mistake in understanding me and people such as me. We believe that if we have not personally agreed to it, then it is imposed, and you can not deny us the validity of that belief. No man can contract for another. No obligation on an individual can exist without that individual agreeing (contracting) to it. Any imposition of obligation is coercion and duress is the defense.

Have a G'day.

muirgeo August 18, 2007 at 8:42 pm

vidyohs,

I'm sorry but your post is convoluted, inaccurate and self-contradictory in so many ways.

First, you have defined 96% of Americans as socialist. I don't know the actual numbers but I can't even think of one person I know who claims to be a socialist. I believe the definition you use for socialist is some one who believes in more government then yourself. That's silly.

Anyway lets say the number is 96%. What in the heck is your reason for living here? And why do you think 96% of us should change the way we want to run society to suit your ideas?

Next I first want to thank you for your military service. I think that's honorable. I served 7 years active duty and 4 reserve in the USAF.

Most significantly when you were in the military did they give you a house or housing allowance? How about per diem for meals and living expense? Health coverage? Life insurance, disability, retirement, a gym to work out in, an exclusive swimming pool to swim in? Did you get a month paid time off per year? Do you get to fly space A around the world for free? Did they help pay for your eduction, give you a VA loan, pay for your kids education, provide and MWR facility, an officers club, a PX/BX (no taxes) a commissary (no taxes), do you still enjoy ALL those benefits as a retiree? After 20 years. You should go on one of the Fishing boats they have in Seward Alaska. Did you get all this with income tax from other tax payers that you think is unconstitutional??????

Sir you are likely the biggest cradle to grave socialist writing on this blog and the biggest hypocrite to boot. I don't mean to be harsh but JEEEEEEEEZZZZZ ARE YOU SERIOUS?!?

But as you said I suspect I offered you nothing new.

muirgeo August 18, 2007 at 8:44 pm

Sorry about the VisitW3schools link. I was just using it for the HTML hyperlink code and forgot to remove it. Man you guys are easily distracted. Is their an easier way to do hyperlinksif you can't remember the HTML code?

Brad August 18, 2007 at 10:40 pm

muirgeo, the only way you can label vidyohs a hypocrite is if you don't understand specialization. If the US needs the equivalent of 2 million active duty military, it isn't going to get that by have every citizen spend 2 days per year in the military. Whatever nice benefits are required, the government has to compensate at a level that is attractive enough to those who serve.

And maybe you could contribute something on topic to the discussion at hand… Like a graph of how punishing the successful will make them less status conscious.

vidyohs August 18, 2007 at 10:45 pm

muirgeo,

"your post is convoluted, inaccurate"

Perhaps convoluted to you, but inaccurate? How so pray tell?

"Anyway lets say the number is 96%. What in the heck is your reason for living here? And why do you think 96% of us should change the way we want to run society to suit your ideas?"

Don't you know that 98% of all statistics are made up on the spot? LOL! The actual detailed numbers don't mean a thing, what matters is the socialist indoctrination Americans have been under going since the 1930s. An indoctrination that has accelerated incredibly since the 1950s.

"What in the heck is your reason for living here?"

If I could find a place where I could escape socialism I'd be gone in a heart beat. But, in any case I was born here, a native, so why shouldn't I stay here and just work to defeat those who live to steal…socialist I am talking about of course.

Speaking of inaccurate, please point out to me where in my comments that I have stated that I want everyone to do things the way I want them?

"Most significantly when you were in the military did they 'give' you……"

Oh yeah, they 'gave' me…..I distinctly remember signing up and then just sitting around for 21 years amusing myself and taking what they 'gave', no place to be, no mission to work on, no long hard hours, because, why the h.ll should I do those things, after all they were 'giving' me all I needed to exist in comfort.

God forbid I might think that I was taking low pay and working my butt off to 'EARN' those things…..eh? Can't have a man actually thinking he earned his pay now can we?

Here again you reveal your thinking. Your use of the word 'give' in place of 'earn' tells me that your thinking is very much short circuited and it may describe how you got by in the USAF, but it is a long da.n way from what I did in the USN. LOL!

You see, muirgeo, there is this capitalist thing called "contract". It means that two parties make offers to one another until the terms are acceptable to both, then the contract is sealed. I made a contract with the U.S. govt. through its agent the USN and we agreed on terms. They made offers and attached criteria to the deal that said I had to perform specific tasks in an honorable fashion for a set number of years in order to fulfill my part of the contract. By performing as the criteria demanded I 'earned' the rewards offered, daily rewards, weekly rewards, monthly rewards, annual rewards, and finally lifetime rewards. At no time was I given anything. As a matter of fact the U.S. govt reneged on many of the promises they made to me in the beginning.

So, yeah, I can categorically say that I have 'earned' every penny I ever got from childhood to now. No one or no authority has ever 'given' me a bloody thing just because I exist as it happens in socialism. And, of course you're welcome to throw your tirade. I didn't think you were harsh, just foolish.

Oh, and BTW, that salary that came from the taxpayer…..guess what the USN did every payday? Can you say tax deductions from my gross pay? So, I was a taxpayer as well. Did they not do that with you in your claimed service? I filled out a 1040 every year, did you not as well?

"but I can't even think of one person I know who claims to be a socialist."

I know what you mean, most are eager to avoid the label and only a very few are honest enough to embrace it, but most avoid that stigma by calling themselves Liberals, progressives, or Democraps. Same old same old, just slightly different packaging.

"I believe the definition you use for socialist is some one who believes in more government then yourself."
"Sir you are likely the biggest cradle to grave socialist writing on this blog and the biggest hypocrite to boot."

Please make up your mind as to what I am. Those two statements contradict one another.
After all, if I am the biggest cradle to grave socialist writing on this blog, then there can't possibly be anyone who is a bigger believer in government than I, so how could I maintain and use the definition you claim I use?

"But as you said I suspect I offered you nothing new."

Precisely.

muirgeo August 19, 2007 at 12:03 am

"…so why shouldn't I stay here and just work to defeat those who live to steal…socialist I am talking about of course."

vidyoohs

How you gonna defeat them? With a vote or with force?

vidyohs August 19, 2007 at 10:47 am

"How you gonna defeat them? With a vote or with force?"

I'm the wrong man to be asking that question. I am a country boy and as such never had a problem with dealing with useless egg sucking dogs or other varmints that screw the survival efforts of honest men and women.

For myself I think at best dealing with socialists should be much like dealing with "mad cow disease"; at worst then I could see treating anyone shown to be socialist the same way we do when catching someone committing armed robbery with the deadly weapon still in their hands.

I could see using some cranial tissue from socialists for scientists to study to try and determine what makes a human turn into a thumbsucking whiner as they grow.

To paraphrase an old politician, "Socialists are like cockroaches, it's not only what they eat and take away, it's also that they spoil everything they touch."

muirgeo, my own personal opinion is that anyone who receives as charity (public or private) any portion, no matter how small or from what source, of what it takes to provide for his/her existence should never be allowed in a voting booth or to speak or write about public policy. Iron-clad censorship of thumbsuckers vis-a-vis public policy.

A person such as described in the last paragraph was never intended to have the vote and should never be allowed to decide on how any public money is spent. Wise men through history recognized that and our founding fathers certainly did.

It is not to our nation's credit that it has ignored that wisdom and we the people have allowed it…..mostly because so many people see a little thumbsucking as okay as long as they get to partake.

Have a g'day, I am sure we are destined to converse more in the future. For now I have to go work.

muirgeo August 19, 2007 at 11:04 am

vidyohs,

WOW!…That's SCARY! Burn the other 96% per cent of Americans you diagree with like animals with mad cow disease??

I'm guessing that's gonna be an issue with a lot of your fellow liberty respecting Libertarians.

Yeah, well uh, nice um talking to er uh you and a g'day um to you..I'm gonna go know…is that er huh OK with you..BYEEEEE!

tiger August 19, 2007 at 12:59 pm

Muirgeo, Sorry about the big space between your post about mine. Looks like you've all moved on to other areas in the discussion. In reply to your question, how can the chart in your post can be explained, in as few as words as possible, it can't. And, more directly, it doesn't matter. I remember the 1970's, the economy was terrible, most people had one car and a small house and struggled to get by, even in the middle class. And, you had little choices about where to live, where to work and what to buy. Worse, income taxes destroyed my father's paycheck so that we had to use credit cards and a second mortgage at a very high interest rate (thank you Jimmy Carter). The fact is, I live much better than I did as a teen in the 70's. I hold the same type of job my dad did (middle manager) and are paid about the same (especially when, like your chart, you offset for time, inflation and the like). My dad and I had a conversation about how much better things are today then they were then, how many more choices we have to live, work, travel, how much more services and products we can obtain. The fact is that things got much, much better for middle America when taxes got lower, regulations were relaxed and free trade was allowed to flourish. I don't need any chart to see reality. Nor do I need to know what redistribution of the wealth would do to me. I would have less choice, less money and less opportunity. And, once again, elites like Prof. Frank and Bill Gates and George Soros and Pinch Salzberger would keep their terrific array of privileges, wealth and lifestyle and guys like me would never, ever have a shot. You'll find that most Americans don't want anything from the government and most understand that getting our incomes "right sized" or health care for "free" just means that we'll have to give up more of our income and choices to see that happen. And all most Americans want is a chance, not a handout.

vidyohs August 19, 2007 at 3:03 pm

Tiger,
Good post.

"And, more directly, it doesn't matter."

Exactly.

vidyohs August 19, 2007 at 6:50 pm

muirgeo,

Speaking of addressing ideas, thanks for your focus on my attitude towards how to deal with thumbsuckers; but I'd really like to hear you dispute the wisdom in these two paragraphs.

"muirgeo, my own personal opinion is that anyone who receives as charity (public or private) any portion, no matter how small or from what source, of what it takes to provide for his/her existence should never be allowed in a voting booth or to speak or write about public policy. Iron-clad censorship of thumbsuckers vis-a-vis public policy.

A person such as described in the last paragraph was never intended to have the vote and should never be allowed to decide on how any public money is spent. Wise men through history recognized that and our founding fathers certainly did."

Could you qualify? I can.

Go for it.

Flash Gordon August 19, 2007 at 10:03 pm

Nowhere else in the world is one born poor more likely to die rich.

Muirgeo, I don't understand the "evidence" you cite so I'll just stand by my statement. Actually, I think it is such an obvious truth as to not be refutable.

But if you think there is another country where that sort of social mobility is more easily obtained please just give us the name of the country. A lot of young people just entering the work force might like to move there. That is, if there is any room left because if you are correct I imagine the world is already crowding in there at a lightning pace.

And here I thought it was the U.S. that people from around the world were busting to get into.

muirgeo August 20, 2007 at 11:45 am

Flash,

If you want to claim something is "such an obvious truth" while ignoring the factual numbers there's little more for me to say or for us to discuss.

Indeed America is a land of opportunity. But the numbers suggest some place now ave greater opportunity for upward mobility and that maybe the trend is in the wrong direction in our own country.

John Thacker August 20, 2007 at 5:24 pm

If you want to claim something is "such an obvious truth" while ignoring the factual numbers there's little more for me to say or for us to discuss.

Muirgeo, the problem is that your graph is very poorly labeled, and doesn't say what it's measuring. Those numbers don't measure the same groups of people over time, and there are all sorts of other trends going on that affect those numbers. Many of those trends are to me positive, even if their effect on the number you've chosen is negative.

1) What about immigrants? Immigrants aren't counted at all until they get here. If an immigrant is richer here than in his country of origin, but he's still in the bottom 20% here, he's going to drag down the average for the bottom 20%, even if everyone's better off. Surely concern for the poor shouldn't stop at the country's borders.

2) What about education? People are spending longer and longer in school. Spending more time in school means taking more years as a poor student in trade for years as a wealthier graduate. That by itself increases inequality for a person as measured over one's lifetime. Thanks to going to graduate school, the inequality between myself today and myself five years ago is much greater than if I had gotten a job out of college. Since different people are at different stages in their life at any one time, then more education increases inequality, all things being equal.

3) What about divorce rates? If those numbers are per-household, then they have to take into account the fact that divorce rates have greatly increased among the poor, but not among the wealthy. That greatly increases measured inequality. A $50k/year household that becomes two $25k/year households massively increases perceived inequality.

4) What about women working? Educated women married to successful men are much more likely to work now than before, whereas poorer women were always more likely to work. Since the imputed value that those women used to add as homemakers and volunteers were not counted in the economy before, it has the effect of increasing inequality. Now, if you want to argue that women working full-time jobs more has meant more use of maids and cleaning services, and increased some sort of social inequality, you're free to. But at the same time I think that the decrease of discrimination against women is a good thing.

5) What about early retirement, and changing jobs? Lifetime employment is less likely– and yes, that has ill effects on people. But I also know other people who work very hard at one job making lots of money, and then quit after a few years to do something with more free time but less money. Again, if you work on Wall Street for a few years then quit, that increases personal inequality between different years of your life, and shows up in the statistics. A similar effect comes with people who took lower pay to found or work at startups, and then suddenly make it rich when it pays off. They could have made more money earlier in exchange for not having that chance to strike it big. Are you confident enough to know who should and shouldn't try?

6) What about leisure time and hours worked? There's lots of evidence showing that, unlike in previous eras, the growth among the income of the top 5% and top 1% is among people who work for a living, or people who founded or got in on startups early, working long hours waiting for it to pay off. In earlier times, the wealthy worked fewer hours than the poor. Recently, however, it's become reversed. The top 5% and 1% work more hours than the poor on average. With my own degree, I could make a lot more money on Wall Street than I do now. But I don't want to– I'd pay for it with punishing work hours that do not show up in your statistics.

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