More on Middle-Class Stagnation

by Don Boudreaux on November 23, 2011

in Growth, Myths and Fallacies, Standard of Living, The Hollow Middle, Work

I should have mentioned – but carelessly did not – the work (linked here) of Minneapolis Fed economist Terry Fitzgerald in this, my lastest column in the Pittsburgh Tribune-Review.  (In my next, follow-up column I’ll correct this oversight.)

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{ 123 comments }

Nikolai Luzhin, Eastern Promises November 23, 2011 at 9:24 am

Why is Don biased against this narrative?

Is he hoping for, or giving thanks to, the Kochs as did Hayek, himself?

Against the broader trends, why the friviolous argument on point of scale about inflation

And, what about the injustice, where people doing the work are no longer being fairly compensated because of the rent seeking of the rich?

In sum, Don, you can’t have it both ways. You cannot be against corporate cronyism and for its consequences.

muirgeo November 23, 2011 at 10:25 am

I guess he believes that we still have mostly a market economy and such data might speak poorly of markets. It’s important for them to believe that market economies are efficient and fair. But the papers were full yesterday with yet new reports of record bank profits. This while the overall economy stagnates and we have very high unemployment. You would think he be more concerned with discussing that anomaly then denying the data on wage stagnation and increasing inequality.

It’s clear to me libertarians are comfortable with a society and economy that massively and disproportionately rewards people geometrically as they rise from the top 10% of earners to the top 0.1%. And then they scratch their heads trying to figure out why the other 90% aren’t OK with that.

Nuke Nemesis November 23, 2011 at 11:03 am

Why? I suppose because as he wrote, (to paraphrase) it’s bogus.

How is one way to identity a wing-nut? Mention the “Koch” brothers and see if they foam at the mouth.

If they do the same thing when you mention “George Soros,” there is hope for them.

Daniel November 23, 2011 at 11:39 am

So does the fact that I interviewed at a Koch-supported research institute recently while I am still financially supported by a fellowship sponsored by George Soros fit the bill?

Nuke Nemesis November 23, 2011 at 12:25 pm

Let’s try another test:

“Dick Cheney!”

Are you having seizures?

Greg Webb November 23, 2011 at 1:57 pm

Yes. And, if you mention “Boosh,” they will have a raging fit.

muirgeo November 23, 2011 at 4:32 pm

I don’t have fits , I just can’t stand the scum bag sellouts you mention that are the heart of the republican/libertarian party. They rare evil people.

Bill November 23, 2011 at 8:56 pm

“republican/libertarian party”? What is it called (other than ignorance) when someone combines complete opposites and tries to treat them as one?

Greg Webb November 26, 2011 at 3:20 pm

LOL! Yes, you do, George. Crazy, illogical, and occasionally incoherent fits against liberty and for government .

Invisible Backhand November 23, 2011 at 2:17 pm

Since Don’s paymasters are against OWS, he is too.

I find the trend is that a) they must support the positions their paymasters want them to, and b) if their is no big paymaster interest in their position (abortion, the kardassians, flowers) they can think whatever they wish.

They can of course go off the reservation (especially for tactical effect) but if they defy the massa for too long they get sold off.

Invisible Backhand November 23, 2011 at 3:46 pm

Of course, in the interest of full disclosure, I must also admit to everyone here that I support the positions of my own massas, Anonymous and MoveOn.org, who have long been my paymasters. They pay me to “find trends” (or invent them, if necessary) on Cafe Hayek, and it just wouldn’t be right to take their money and think whatever I wish . . .not to mention the fact that I would be sold off if ever I strayed from the plantation.

Ooops! I wrote “reservation” in my previous post when I actually had in mind “plantation.” My excuse is that I always (unless instructed otherwise by massas for tactical effect) lump ethnic and racial minorities together into one, easy-to-handle, monolithic bloc, and make as few distinctions among them as possible.

Injun, Nigrah, reservation, plantation — it doesn’t make any difference to me. They’re interchangeable. They’re fungible.

So just cut me some slack, OK?

Jon Murphy November 23, 2011 at 3:50 pm

Well…that crosses about 6 different PC lines.

Seth November 23, 2011 at 10:13 am

“Almost all the benefits of economic growth since (the 1970s) have gone to a small number of people at the very top.” -Reich

When I read the quote above, in the column I downloaded through my wi-fi on my iPhone, originally linked from a Reader, I thought two things.

First, perhaps most of the economic growth since the 1970s has been produced by a small number of people, instead of ‘having gone’ to them.

Second, as usual, folks like Reich miss the win-win, as the wealth and income of many of those of the very top derive from the improvements (like the iPhone and Reader and network I used to access the column) they’ve made to each of our lives.

It’s difficult to compare the standard of living I enjoy today with what I had 20 years ago in any meaningful way that could be represented with percentages or ratios.

muirgeo November 23, 2011 at 10:37 am

“First, perhaps most of the economic growth since the 1970s has been produced by a small number of people, instead of ‘having gone’ to them.”

Yeah I mean if they have the money that proves they earned it. Surly, it has nothing to do with an economy set up to reward asset inflation and those on lending side of the equation.

Bank Profits Return to Pre-Crisis Levels

http://www.foxbusiness.com/industries/2011/11/22/bank-profits-return-to-pre-crisis-levels/

Seth that headline mocks at the supposition you made.

Can you explain to me how in a properly running economy you have record bank profits while the whole economy is otherwise stagnating and unemployment is at record levels? Does that make ANY sense at all. I mean really ? Doesn’t this suggest something is very very wrong with the economy. And doesn’t it suggest your supposition is a bit glib.

And the win win thing …. come on. North Koreans probably have it better then they did 20 years ago. Is that a win win because now they have ball point pens were they used to just have chalk? It’s quite possible the rewards for our technological advancement were not fairly divide out by the market and it’s quite possible a more meritocratic society would have seen even far greater advances if incentives and rewards were better proportioned.

Nuke Nemesis November 23, 2011 at 12:26 pm

In this country, if you earn money illegally, you’re property may be seized.

Thankfully, the mere fact that you own or acquire more than others has not yet become a crime.

muirgeo November 23, 2011 at 4:36 pm

How bizarre… so our massive subsidies to the banks and the bailout funds that they turn into bonuses aren’t illegal so they were earned. I am sorry but I am so sick of the stupidity and illogic and double standards of the unthinking dolts here like yourself. THINK FOR CHRIST SAKE… use your g$% da*& brain you moron.

Jon Murphy November 23, 2011 at 4:38 pm

“I don’t have fits”

“THINK FOR CHRIST SAKE… use your g$% da*& brain you moron”

Really? You’re just gonna softball it in there like that?

Greg Webb November 26, 2011 at 3:21 pm

LOL! Another fit! And on the same thread, George. How convenient.

Slappy McFee November 23, 2011 at 1:22 pm

Whenever you use the phrase “properly running economy” it always makes me giggle. I can’t wait until you spout off about how much better evolution would be if only the right people were in charge.

Michael November 23, 2011 at 2:02 pm

+1

muirgeo November 23, 2011 at 4:42 pm

We are in charge of evolution…. from the corn to hybrid fish to GMF. And indeed we are in charge of the economy… God and the Invisible Hand God are DEAD. It’s all up to us to use our evolved brains to avoid extinction… Altruism has been a huge part of our success… The next major selection tat may be out of our control is that for traits which allow 7 billion of us to lives efficiently together. I suspect those “rugged individualist” genes will need to be culled from the gene pool because they stupid and holding us back.

lamp3 November 23, 2011 at 5:18 pm

“because they stupid and holding us back.”

Ohhhh yeah…

Slappy McFee November 23, 2011 at 5:28 pm

Who is this “we” you keep referring to? And if this “we” is running the economy, why are you complaining about it?

muirgeo November 23, 2011 at 8:01 pm

The collective WE are running the economy. Smart policy is smeared with a ton of stupid policy instituted by ding bats that vote for wealth to be transferred from their pockets to bankers pockets. If it weren’t for the stupid people voting against their own interest we’d be doing much better.

Automatic November 23, 2011 at 10:35 pm

Notice how closely culling the gene pool follows Altruism

SMV November 24, 2011 at 3:43 pm

“Smart policy is smeared with a ton of stupid policy instituted by ding bats that vote for wealth to be transferred from their pockets to bankers pockets. If it weren’t for the stupid people voting against their own interest we’d be doing much better.”

Yet you repeatedly support giving more power to politicians so that they can sell it to the highest bidder. This is what politicians do. Thinking a good one will be picked through a process of self nomination, ability to lie convincingly and say nothing with great sincerity. Is truly insane. Ultimately the choice is between two very imperfect candidates that survived.

Every once and a while a good one might get lucky and be elected, only to be totally ineffective because of the need to compromise with their fellow politicians.

It takes more than religious faith to believe that good laws will result from this process.

Greg Webb November 26, 2011 at 3:25 pm

“It’s all up to us to use our evolved brains to avoid extinction.”

Well, hurry up! We’ve been waiting years for you to grow up and evolve into a responsible adult.

Randy November 23, 2011 at 3:03 pm

Muirgeo: “Yeah I mean if they have the money that proves they earned it.”

It is almost impossible to know for certain, but I generally assume that if someone made their money from other than a political source that they earned it (e.g., retail, trades, industrial), and if they made their money from a political source (e.g., anything paid for out of tax revenues), that they did not earn it. But certainly there’s a lot of gray area. Many so-called private business are now subsidized, and there are a few political “services” that would be paid for even without taxes.

Seth November 23, 2011 at 9:18 pm

If you read the article it explains why profits are returning. Having more people pay their loans sounds like a good thing to me.

And, as I have stated before, I agree with you about bailing out banks. The government shouldn’t do that.

But how does more people paying their loans make a mockery of the idea that a small group of people have improved a lot of lives, (through voluntary action, btw)?

That’s like saying that a mugging outside your office erases all the good you’ve done for your patients.

What would a more meritocratic society look like? If less bank bailouts, I’m with you. What else?

Nuke Nemesis November 23, 2011 at 11:06 am

But the people at the top now aren’t the same people as those who were at the top in the 1970′s. People move and and down the economic scale it’s not stagnant.

But if we increase redistribution, empower government and raise taxes on the the producers and achievers, we will have stratified economic levels. In countries with a large welfare state, most people live and die within the same economic group as they were born into. The rich stay rich, the poor stay poor and the middle class struggles to pay for it all.

muirgeo November 23, 2011 at 11:18 am

You are simply wrong. We have one of the least equitable socities and one of the least mobile. Other countries with greater equity have greater mobility. Our own country was like that between the 30′s and 70′s. Even more significant, the more equitable societies seem to be more effecient and wealthy overall. We could be doing a lot better than we are but policies that disproportionatly reward the top, especially those in finance, have held our economy back.

Maybe YOU are OK with the current economy but the overwehlming majority of us understand the unfairness and the ineffeciencies of it. We demand a better economy and are not as easily pleased with the current mediocracy as you and the professor are. I guess we just have higher standards.

Nuke Nemesis November 23, 2011 at 11:40 am

I’m sorry. I thought we were talking about the USA. Where do you live? Cuba? Venezuala? Greece?

Besides, being “equitable” is not a goal of our economy or a cornerstone of our society. “Equal opportunity” and “equal treatment under the law” are not the same thing as equal outcome or equal distribution of wealth.

And who is the majority you speak of? You need to get out of Obamaville and expand your social contacts if you believe you represent more than a disaffected, angry and economically illiterate minority.

Jon Murphy November 23, 2011 at 11:52 am

I wonder if he has been to OWS. Talk about a segregated society!

Captain America November 23, 2011 at 2:01 pm

Nuke Nemesis…as someone who is a member of the “Kochtopus,” I have to say you are indeed, “simply wrong.” Income mobility in the countries with the largest social welfare states in Europe is far higher than in the United States. Meanwhile, their per capita GDP is higher in nominal terms and not too far behind in PPP. These are factual propositions, not debatable.

Additionally, I think MOST Americans are upset with the status quo. That is why there exists a legitimate opportunity to build coalitions across ideological boundaries, with the hope of isolating specific parties’ tendencies to acquire massive rents at the public’s expense (ipso facto). The Tea Party, OWS, small businesses, competing businesses: everyone wants to end the lack of “justice as fairness” and inefficiency. For what ends? That is the subject of a great ideological debate. Nevertheless, our current system displeases the true capitalists, the true marxists, the socialists, and the anarchists: all of them want a more economically dynamic society of opportunity and I firmly believe that the current system impedes the establishment of the ideal meritocracy envisioned by all of those ideological factions.

Michael November 23, 2011 at 2:10 pm

Income mobility in the countries with the largest social welfare states in Europe is far higher than in the United States.

If I remember the stats correctly, that depends entirely on whether or not you’re talking about absolute or relative mobility.

GAAPrulesIFRSdrools November 23, 2011 at 2:15 pm

Where do you live? Cuba? Venezuala? Greece?

I’d pay for him to take a one-way ticket.

vikingvista November 23, 2011 at 2:43 pm

Captain America,

Is your personal impression of Europe consistent with what you believe to be the “facts” about Europe? I keep coming back from Europe wondering why the population doesn’t rise up in revolution. I wouldn’t want to live like that. It isn’t third world, but relative to what I’m used to in the US (and I travel extensively in the US as well), standards of living are depressing. Prices even relative to European wages are absurdly high (perhaps because of their tax structure). To get decent restaurant service you either have to go to a Burger King or five star restaurant, and don’t count on it in the latter. Air conditioning is almost unheard of, and the summers are hot. Even when AC is available, for some reason proprietors often refuse to use it. It’s a good thing most travel distances are short, because fuel prices are obscene. Even many of the most expensive hotels (including the likes of Ritz Carltons and Westins) are dumpy. Perhaps real estate has improved during this recession, but it used to be nearly impossible for an average family to afford a single family home or decent sized apartment.

Although traveling around Europe, it is quite clear that some people must be very wealthy. Perhaps life for them is not so grim.

My travels are weighted heavily toward the larger cities, which may partly account for my bad impression. But even in unpleasant US cities, like NYC, spending enough money will at least get you something tolerable. Heck, even watching a TV show like “House Hunters International” is 100% confirmation bias.

I’ve never been to Switzerland, but have heard dreamy things about it from other Europeans who pine that it is very difficult to emigrate to there.

And then I talk to Europeans who complain about exorbitant health care taxes that they must pay on top of the prices they pay for the private health care that they actually dare to consume (in countries where this is available), or what it’s like to try to run a business, and it makes me tone down my criticisms of the People’s Republic of Amerika.

At some point, a mountain of consistent anecdotal evidence must mean something, no? I mean, am I to believe your statistics or my lying eyes?

Almost every encounter I have with European life leaves me thinking that if I were a middle income European, I’d be trying to emigrate to the US. Or, if the numbers are to believed, perhaps Australia, Hong Kong, or Singapore.

Andrew_M_Garland November 23, 2011 at 3:58 pm

To Captain America (and Muirgeo),

You say, “Income mobility in the countries with the largest social welfare states in Europe is far higher than in the United States.”

What data are you relying on. It would be nice to have a link and page.

Why does “income mobility” matter? That is, who deserves more or less income? It can’t be that ups and downs in income are desireable merely because it goes up and down.

Jon Murphy November 23, 2011 at 4:21 pm

Well, income mobility just refers to how “easy” it is to move from one class to another.

Jon Murphy November 23, 2011 at 4:27 pm

One other thing on this whole 1%/class mobility thing:

Looking at the data here (http://g-mond.parisschoolofeconomics.eu/topincomes/), one can see that the distribution of wealth over economies is similar. America/ UK/ and different European countries all have a similar horseshoe-shaped curve. This clearly indicates this is not an American phenomena nor can more socialist economic systems prevent this from happening.

Ubiquitous November 23, 2011 at 6:39 pm

@Captain America:
These are factual propositions, not debatable.

Moron. Anything is debatable, especially the relevance or significance of “factual propositions.”

I see you’re a member in good standing of the Al Gore School of Debate: “There’s a consensus regarding X and there’s no longer any dispute about anything having to do with it; it’s not debatable. Anyone who disagrees with this is not only wrong, but has evil intentions for doing so.”

My question is: are you a lifetime member, an honorary member, or will you let your paid membership eventually lapse and learn to argue honestly?

kyle8 November 23, 2011 at 7:50 pm

Just to pile on to what VikingVista said. My friends in Italy are talented, and well educated people with what in the USA would be good lower six figure jobs.

But they live in a tiny two bedroom apartment, drive a breadbox and pay fricking enormous taxes.

I am currently trying to get this young couple to move here. Of course they would have to pay their own health care, but so the F what?

Captain Profit November 23, 2011 at 11:42 am

“policies that disproportionatly reward the top, especially those in finance, have held our economy back”

And your proposed cure is to give policy makers more ways to empower one over another and hope they pick the right winners this time…

Shidoshi November 23, 2011 at 12:40 pm

Muiedgro knows best

muirgeo November 23, 2011 at 4:53 pm

“And your proposed cure is to give policy…”

Absolutely. We know exactly what needs to be done to fix the inequities. First you dramatically increase capital requirements and get rid of the shadow banking system. You could re-institute the Glass Steagal and we could introduce a financial transactions tax. We could demand corporations to re-structure their board to properly align incentives with their compensation… If they don’t like it they can stop being corporations and stop enjoying the benefits there of.

We’ve had rules before and they worked fine, income was more equitably shared and growth was greater then now.

Yeah sure… must of this is a no brainer except for the power elites and their dumb ass cronies they use to promote the trickle down BS economic fundamentalism…

Jon Murphy November 23, 2011 at 4:56 pm

Sorry man, I just don;t see how creating a power elite is going to prevent a power elite from gaining power

muirgeo November 23, 2011 at 6:43 pm

@ Jon Murphy:
Sorry man, I just don;t see how creating a power elite is going to prevent a power elite from gaining power

I have no idea either, but that’s not the point.

The point is: I have good intentions. That should be enough to decide on policy.

Jon Murphy November 23, 2011 at 7:09 pm

Everyone has good intentions. That doesn’t make us experts on other people’s lives.

muirgeo November 23, 2011 at 8:06 pm

Jon ,

The good intentions remark is some lowlife impostor libertarian JA… it’s not me.

muirgeo November 23, 2011 at 10:59 pm

The good intentions remark is some lowlife impostor libertarian JA

Whereas I am a lowlife impostor leftist JA. There’s a difference. And the difference is that though I know nothing about economics, I make up for it by having high, noble intentions — and that should be sufficient for deciding policy.

Slappy McFee November 23, 2011 at 1:25 pm

You do realize that ALL income classes are richer today than they were at any time from the 1930′s – 1970′s?

Randy November 23, 2011 at 3:05 pm

Muirgeo: “We demand a better economy…”

Well, you know… screw you. I am not going to work for you and your friends. So go ahead, have your vote, then see what it gets you.

muirgeo November 23, 2011 at 4:54 pm

So you don’t want a better economy? OK call me unreasonable.

Randy November 23, 2011 at 4:59 pm

An economy is the result of what millions of people produce. What you’re really demanding is an outcome you prefer rather than letting the people who produce create the outcome that they prefer. So, again, have your vote – and then we’ll decide what we do about it.

Randy November 23, 2011 at 5:07 pm

In case I’m not being clear, Muirgeo, I’ve been hearing a lot lately about people wanting to vote for what they consider to be a more “just” economy. What you people are forgetting is the reaction of those who actually create the economy to what you all vote on. You assume that we will just keep on working no matter how much of what we create that you decide to take. I not only assume otherwise, I damn well guarantee it.

muirgeo November 23, 2011 at 7:47 pm

Who creates the economy Randy? Wall Street? With their loads of lobbyist is, lawyers and control of the money supply? Have you not noticed the only people making money are the banks. Wake UP brother.

A better economy starts with how we do money. Right now a privileged few control the money supply.

Jon Murphy November 23, 2011 at 7:53 pm

Swing and a miss.

Jon Murphy November 23, 2011 at 7:57 pm

We are the economy. I don’t know why that is so hard to understand. The economy has nothing to do with money. Money is nothing more than paper. Economics is the study of the allocation of scarce resources. The economy is the exchange of goods and services produced by resources. Economies existed before money and will last long after money. Your weird obsession with money impedes your understanding. All you care about are profits. Wake UP brother! Life is more than just money. Until you realize that, you will remain the sad, angry little man you are.

muirgeo November 23, 2011 at 8:10 pm

Talk about swing and a miss Jon. Does , “We are the economy” include Wall Street Bankers , their bail outs, political favors, special access and subsidies?

What…. we shouldn’t complain about that???

Oh and your NOT concerned with money. GOOD because we are going to make the rules at getting it a bit more fair. And if you are not concerned with money then shut up about taxes.

Jon Murphy November 23, 2011 at 8:49 pm

Foolish little man.

You just want to repeat the same mistakes again and again. Yes, the economy includes Wall Street bankers. No, it does not include bailouts and subsidies. That comes from the government. The same organization you wish to give more power to. All you will do is perpetuate the same problems over and over again.

It doesn’t matter if a wealth transfer is from the poor to the rich or the rich to the poor. Both are equally wrong. Both are just cases of thievery.

What you fail to comprehend is the economy us not a zero-sum game. People play the game because they both win. But all you see are dollar signs. You don’t see the benefits being exchanged.

When I pay my rent, you say I am losing because my landlord is now richer. But I win, too. I get 4 walls, heat, water, security. It’s the same thing with bankers. I give MFS my money each month to invest into the stock market for me so 40 years from now, I can retire. All you see is the $$$.

But then again, I suppose it is advantegious for you to not see. Willful blindness is quite profitable, no? You can line your own pockets at someone else’s expense. I can see right through you.

Greed is good. Isn’t that the quote toted by Gordon Gekko? The very same one you are now spouting under the guise of justice?

Let me give you a brief history lesson, my friend. Greed has destroyed empires. Greed has destroyed people’s lives. You are consumed by greed. You see others, maybe the shattered dreams you once held, and it burns you from the inside. You see someone like Mark Zuckerberg and you think “I could have invented that!” That just gnaws at your gut. Eventually, you delude yourself that you are entitled to something of what he’s made. He doesn’t need all that money after all, does he? Why can’t I just have a little? He’ll never miss it.

Then you look at the papers. You see Madoff. You delude yourself into thinking that, rather he being a minority, he is the majority! All rich people steal! They must be brought to justice! Your self-righteous fervor builds.

Then you look at the government. You see the lobbyists. You see the influence they have. You remember back to when you were a boy, somebody once told you “All those men are angels. They care about us. They want to help us.” So, it’s not them that’s the problem, oh no. It’s the businesses! Surely these good men who devote themselves to protecting America cannot be the problem. Surely the lobbyists are lobbying for tax breaks, not protectionist tariffs. These lobbyists only want tax breaks. They instituted this relationship, not the government when it decreed it had the right to interfere in business.

You see all this and it just eats at you. Your fervor builds until it bursts. You convinced yourself that stealing is ok as long as its from the rich. After all, these people are evil.

I know this, because I was once there myself.

You are so close, Muirgeo. You do not know it know, but you stand at a cross road. On one side is a life of crime disguised as a life of good. The other side is libertarianism and the free market. Nik converted the other day. You are so close now. Reject your hate. Reject your greed. Reject it. Purge your soul of all that. We are waiting.

Jon Murphy November 23, 2011 at 8:53 pm

Damn, when I get in the zone, I get in the zone!

muirgeo November 24, 2011 at 1:28 am

“The other side is libertarianism and the free market. ”
Jon

LOL… I’ve been a libertarian…. then I grew up. Libertarianism exist no where in the real world nor do free markets. Libertarianism is a belief for young foolish simpletons and imbeciles.In the real world the score is:

Social Democracies 35
Libertarian utopias ZERO

ZERO dude… you are the one that is young and idealist. I’m a pragmatist and a realist. The libertarian demographic is mostly young white males. Most grow out of the demographic. Give yourself some time. Hopefully,, it’s unlikely you’ll live your full life deluding yourself with God and Invisible Hand Gods.

Randy November 24, 2011 at 7:22 am

Muirgeo; “Have you not noticed the only people making money are the banks.”

That’s not true. Lots of people are making money. I am, and so are most of the people I know. I would like to break the political connection that the banks have. I think they should be allowed to operate freely (and fail freely when they screw up) and not be defacto owned by the political organization. I have no more problem with an honest bank (i.e., a non-political bank) making lots of money than I do with the fact that my brother makes more than I do because he’s an accountant and I’m a tech. There’s a trust issue that money handlers have that is well compensated.

Randy November 24, 2011 at 7:32 am

Muirgeo; “Social Democracies 35

Not true. There are no social democracies, nor any historical evidence that any kind of demotist (rule of “the people”)system could even work. What’s happening with the OWS right now is a real demotist system in action – a mob of idiots randomly proclaiming their demands with no idea of how to achieve any of them. And the response of the political organization is predictable – a bit of patience, with containment, and eventually suppression.

JWH November 23, 2011 at 7:45 pm

Just a little note since I remember the 70′s well. They ended with stagflation( high unemployement, inflation and interest rates both in double digits) that resulted in Reagans election in 1980. Gas lines were the result of price controls and other pressures on the middle class that were hard to bare. Many on the left blame the ills of today you discuss frequently on Reagan’s movement of the country to the right but I just want to remind everyone there was a reason he was elected.

James N November 23, 2011 at 11:20 pm

“Damn, when I get in the zone, I get in the zone!” Zone? It looks more like a man-to-man. What I don’t understand is why you keeping putting a full-court press on a fuc_ing moron.

I’ve said it before and I’ll say it again. muirgeo is nothing more than an ill-informed troll playing a repulsive parlor game. He knows he’s wrong, he knows his knowledge of economics is pedestrian, at best and he comes here for no other reason than to poke the bears with a stick and watch them react. Why give him the satisfaction?

Oh, by the way, the above description also applies to Nikolai

Jon Murphy November 24, 2011 at 8:41 am

“’ve said it before and I’ll say it again. muirgeo is nothing more than an ill-informed troll playing a repulsive parlor game. He knows he’s wrong, he knows his knowledge of economics is pedestrian, at best and he comes here for no other reason than to poke the bears with a stick and watch them react. Why give him the satisfaction?”

Trust me, James, I know, but the resulting stuff that comes out of their mouths is hilarious. I’m doing it for a cheap laugh. But if you wish, I’ll stop.

Aussie November 25, 2011 at 3:33 am

Exactly correct. The point is that we need to explain why the stagflation happened in the first place :)

I think that there were many factors including government overspending. In my country the overspending was done by the incompetent Whitlam government.

As I remember that period: there were the oil shocks but that does not explain the stagflation. We had high inflation, and we had cost-push inflation, as well as high interest rates. The other factor, which is the one that I believe was the cause of the stagflation due to lag times is high government spending. This was especially true in Australia. The Whitlam government went beserk with the spending.

Greg Webb November 26, 2011 at 3:26 pm

No, George. You are a thief.

Nikolai Luzhin, Eastern Promises November 23, 2011 at 9:47 pm

Seth makes the very foolish argument that, “First, perhaps most of the economic growth since the 1970s has been produced by a small number of people, instead of ‘having gone’ to them.”

Seth, people are not paid what they are worth; they are paid according to the leverage they have in the market place.

For example, a lot of wealth has gone to patent and copyright holders, in what is a pure leverage play

Jon Murphy November 23, 2011 at 10:30 am

Another superb column, Don. As usual, you look beyond the sound-bites, the partisianship, and the numbers to see what is actually going on.

This is almost as good as your three-part piece on the complexity of the economy (or, as I like to call it, “The Puzzle Piece”). Almost :-P

muirgeo November 23, 2011 at 10:43 am

Really Jon. The article he quotes shows single men and men with child saw their wages stagnate. So only by women having to tai ego the work force and overall family hours of work increase do we see family wages rise a bit. And the inflation numbers do not take into account health care, housing and college coast.

You guys are funny. You think all that needs to be done is for you to talk sense to the people and let them know that they have it better then they think. But the people are living the reality and going to the streets because of it. Deny it if you wish but history and reality will be like a tidal wave washing away your denial. People are done with the bullshit that is market fundamentalism. They live and know the truth. Big changes are coming and you guys proselitizing is in for a major smack down.

jjoxman November 23, 2011 at 10:54 am

Define ‘tai ego.’ Is this some new martial art I should be aware of? Are women kicking men’s asses with tai ego?

muirgeo November 23, 2011 at 11:21 am

Wow … lets focus on the typo and not the fact that these smaller families are working more hours and often requiring both parents to work. As always avoid discussing reality when you can go tangential on a typo…but I’m the troll.

Jon Murphy November 23, 2011 at 11:27 am

Not going to lie, your point gets lost because of the typo. I’m not sure what your point is.

jjoxman November 23, 2011 at 11:37 am

I think you are an ideologue that can never be convinced he is incorrect. Therefore it is fruitless for me to engage your posts. Others do so quite well.

I prefer to have a little fun when I can.

Btw – maybe women prefer working to staying at home? Ever thought of that? Never mind. I’m not interested in what you think.

Jon Murphy November 23, 2011 at 11:38 am

Just another thought. Thus far, you’ve done a lot of rambling. You’ve said we are wrong, but you’ve yet to offer up any evidence that disproves Don’s article. You’ve offered lots of stories, anecdotes, and accusations, but no evidence. Surely you believe what you believe beyond “it sounds good comin’ out of my mouth.” Presumably, you’ve formed your opinions in an educated manner. Don provided his side of the argument. Now it’s your turn. We invite you to exchange knowledge with us because, as Don and Russ have said, there is a confirmation bias. It is only through rational discussion can we hope to uncover the truth. But this whole business of name-calling, ridiculous accusations, and grandiose speeches is only preventing progress, not advancing it. That is better suited in the halls of government then in an academic setting.

Again, I ask you, nay I challenge you, to present your case before the public opinion.

Methinks1776 November 23, 2011 at 11:41 am

I think you are an ideologue

Don’t you mean “idiotlogue”?

Nuke Nemesis November 23, 2011 at 11:43 am

People can choose to have larger or smaller families as they like. Do you actually believe that personal or family finances should have nothing to do with the decision as to when to have children, how many children to have or whether a couple should choose to not have children at all?

What a world that would be, to have no consequences or responsibility for personal choices.

Shidoshi November 23, 2011 at 12:45 pm

Meifdjsio, please post more links to show who formed your opinion on these matters.

Greg Webb November 23, 2011 at 1:59 pm

Don’t you mean “idiotlogue”?

Your point, Methinks1776, is well taken.

Greg Webb November 23, 2011 at 2:05 pm

Again, I ask you, nay I challenge you, to present your case before the public opinion.

Jon, I’ve asked George to do this many times without result. All I have ever read from George has been “name-calling, ridiculous accusations, and grandiose speeches” along with straw man arguments, non sequiturs, incoherent and illogical statements, and outright prevarications. I am not sure that he is capable of more. But, I would read any good argument that he could make, as I would for any of the big-government advocates on this blog. I’ve seen nothing so far.

Jon Murphy November 23, 2011 at 2:11 pm

I agree Greg. I just wanted to pontificate ;)

muirgeo November 23, 2011 at 5:09 pm

Jon,

Do you really think the peer reviewed economic literature supports Don’s opinion that there hasn’t been significant income stagnation in the middle class?

http://ftp.iza.org/dp1938.pdf

muirgeo November 23, 2011 at 5:10 pm
muirgeo November 23, 2011 at 5:11 pm
muirgeo November 23, 2011 at 5:12 pm
muirgeo November 23, 2011 at 5:14 pm
Jon Murphy November 23, 2011 at 6:17 pm

Only one of those things talks about stagnation. Everything else is about distribution and mobility which does not equal stagnation.

I think that’s the problem here. You think that income mobility is the equilivent of stagnation. It is not. Income mobility is how easy it is to move between social classes. Income STAGNATION is how much your income can buy. Two separate things.

I am glad you are trying, though. It’s a nice switch from your usual douchiness.

Jon Murphy November 23, 2011 at 6:27 pm

But see? This is what I meant. When we have a discussion, we can discover the impediments to the truth. When we hurl insults and sophistry, we get nowhere.

brotio November 23, 2011 at 7:44 pm

I’m not interested in what you think – jjoxman to Yasafi

When has Yasafi ever thought?

Seth November 23, 2011 at 9:22 pm

jjoxman brings up a good point. muirgeo – Do you believe you have ever been wrong about anything in your life? Please describe.

Dan J November 23, 2011 at 9:57 pm

Both families work because they want more toys and luxuries. It is not a necessity.

muirgeo November 24, 2011 at 1:33 am

” Do you believe you have ever been wrong about anything in your life? Please describe.”

Seth

Yes Seth I used to be a Libertarian. I voted for the libertarian candidate for president in 1992. Then I grew up. I thought it through a little more and realized how stupid and illogical a concept it is. It really is. Just think through a bit more what it is you believe and why it exist no where’s as a stable form of organizing society.

Dan J November 24, 2011 at 11:29 am

The only stupidity I have witnessed is that of one who advocates greater GOVT meddling, especially after the housing boom and bust was exposed as the creation of GOVT meddling.

CalgaryGuy November 24, 2011 at 4:18 am

Just think through a bit more what it is you believe and why it exist no where’s as a stable form of organizing society.

That’s easy, because there will always be power hungry jackasses who feel they have the right to rule over others. The fact that it doesn’t exist anywhere currently does not disprove that it is ideal. Similarly, the wide spread belief in God (or gods) is not proof in itself.

muirgeo November 24, 2011 at 5:09 am

“That’s easy, because there will always be power hungry jackasses who feel they have the right to rule over others”

Exactly! And that’s why the best we can do is a government BY the people…. NOT by the power hunger corporate jackasses.

And right no one has ever seen god or a libertarian society or invisible small flying pink elephants but that doesn’t disprove that they might exist and that they would be neat if they did… yep sir.

Greg Webb November 26, 2011 at 3:31 pm

“And that’s why the best we can do is a government BY the people.”

You mean the people that you constantly ridicule and hate. No, you mean more of the same corrupt politicians helping themselves and their political cronies to taxpayer money. By advocating for big government, you make yourself a “useful idiot” to those corrupt politicians (i.e., Nancy Pelosi and Barney Frank) and their political cronies (i.e., Solyndra and Goldman Sachs).

GAAPrulesIFRSdrools November 23, 2011 at 2:16 pm

And the inflation numbers do not take into account health care, housing and college coast.

All bastions of government interference. Hmmm…

Jon Murphy November 23, 2011 at 2:23 pm

Isn’t “college coast” what Cancun becomes on Spring Break?

Ryan Vann November 23, 2011 at 5:30 pm

I think that is Palm Beach

James N November 24, 2011 at 7:13 pm

“Trust me, James, I know, but the resulting stuff that comes out of their mouths is hilarious. I’m doing it for a cheap laugh. But if you wish, I’ll stop.” No, I just let my frustration get the better of me. I just don’t understand why people, with such limited intelligence (muirgeo), has to come to sites like this and spew their nonsense. I’ll admit I’ve done the same as you on other sites and I think we do it because we know it so easy to refute their arguments. Like shooting fish in a barrel.

Nuke Nemesis November 23, 2011 at 11:18 am

If you look at individual income distribution instead of household income distribution, you’ll see the problem just magically goes away.

Does anybody recall Mark Twain’s quote about “Lies, Damn Lies and Statistics?” Look it up if you’re confused about why slicing the data one way shows different results from another. A great resource is Thomas Sowell’s “Economic Facts and Fallacies.”

W.E. Heasley November 23, 2011 at 11:55 am

‘For example, Robert Reich, former Labor secretary, lamented in 2008 in The Financial Times that “Almost all the benefits of economic growth since (the 1970s) have gone to a small number of people at the very top.”

One bit of evidence often used to support this gloomy claim is the fact that median household income in America, when adjusted for inflation using the Consumer Price Index (CPI), was only 18 percent higher in 2006 than it was in 1976. That’s a pathetically poor growth rate‘.

‘My own sense is that most inflation adjusters do a poor job accounting for improved product quality, thus causing inflation to be overestimated. That is, many price increases are caused less by a falling value of the dollar and more by rising product quality.

So, if we use the “Boskin Deflator” — which does the best job of adjusting for inflation by accounting for higher product quality — we find that real median household income rose from 1976 through 2006 by 43 percent. And real median household income per person rose by 60 percent — far better than the 18 percent figure typically used to tell the stagnation story‘. – Donald J. Boudreaux, Trib Live, Pittsburgh Tribune-Review, 11/23/2011

-Or- Beware of the dwarf!!

http://www.youtube.com/watch?v=OkLRtMx762Y

Ryan Vann November 23, 2011 at 5:19 pm

I’d leave the hedonic deflators out; it is way too subjective to start assigning quantitative quality determinations on anything other than computing products. Using the “Boskin Deflator” just seems like intentionally picking the most rose colored glasses to see a situation through. Likewise, I find “decrease in the average household” size arguments to be a bit awkward. I suppose family’s having less kids means their wages increased, using the most lithe logic.

Moreover, people want to bring consumption into the wage discussion, and I don’t think it belongs, aside from in determining how much stuff said wages can buy. Consumption above wages shouldn’t be part of the picture. I’d much prefer that data was strictly about individual laborers, adjusted only for inflation.

Ryan Vann November 23, 2011 at 5:34 pm

It would probably be a more accurate measurement to throw in non-monetary compensation too, even though I don’t personally like the tax preference they get.

Steve W from Ford November 23, 2011 at 7:57 pm

Dear Proprietor,

Would you possibly consider adding an ignore feature to your fine blog so that one would be able to get rid of the posts by such as Muirgeo? They are so tedious to wade through and it detracts from the otherwise excellent comments. The bane of good blogs seems to be the indefatigable trolls.

Captain Profit November 23, 2011 at 10:14 pm

Don’t they got no scroll bars where you live at, Tex?

muirgeo November 24, 2011 at 1:49 am

Again in 2004 Elizabeth Warren was explaining to us the trends in income inequality, wage stagnation and how they would effect the middle class and our economy. Don STILL doesn’t accept there is even a problem. And it is this history that I have followed. I have seen the arguments over the last decade and more. I saw who seemed to be objective and who seemed to been consistent with what was happening in the real world. I also saw those espousing things that were NOT consistent with the facts or the real world. Also I saw who was predicting this collapse and I saw the collapse occur as they predicted.

I also saw those who ignored the issues and they were the ones who didn’t see the crash coming and missed it totally and to this day in a grand display of cognitive dissonance deny there is still a problem. They deny obvious data and minimize what is happening in the real world.

It’s all beyond bizarre especially since their beliefs are used to guide our economic policy in an ongoing fashion. Pushing the idea of austerity and re-running the Hoover experiment all over before are very eyes. And again, the objective ones predicted the results of the continued stagnation. And again they are right. They will also be right when demand picks up only after major policy changes that take us back to a more meritocratic society. And the denialist … the ideologues will mostly continue ever more defenses of their indefensible position long since laid bare for any reasonable person to see.

http://www.youtube.com/watch?v=akVL7QY0S8A&list=FLQC7bk26kgCA91pJsgKAhZg&index=45&feature=plpp_video

Nikolai Luzhin, Eastern Promises November 24, 2011 at 3:51 am

muirgeo

Don will never admit there is any problem, any more than a kid who wears a Mohawk and dies his hair orange will admit they are doing such solely to shock and get attention.

If you read all the posts here, that is all the people are about, that and nothing more. They no more believe what they say than the man in moon.

Notice, the people here never are one with responsibilities, especially for others.

Krugman put it really well the other day: they talk and write the way a stupid person thinks a smart person does

You have true kooks who have no idea what they are talking about. My favorite one is the “gold standard.” Look at how impossible it would be to do business with a gold standard and the attendant price fluctuations in just the last 90 days. Yet this people claim, falsely, to be concerned about price stability.

As even Friedman has pointed out, at the world at present needs massive increases in money (because of velocity declines). How does one do that with any commodity based currency?

Last, what is really funny is how contradictory this blog is on trade. The only chance Southern Europe (and now perhaps Germany itself) is to price enough money to devalue all their exports. If you are Greece or Italy or Spain or France, the sole path to growth is exports. One’s domestic markets are not large enough to scale. The only way that can be done is via a drop in the value of their currency. Literally, they need to reach $59.99 at their best hotels, they need to drop their currency to where all their agricultural products sell, I could go on

muirgeo November 24, 2011 at 4:03 am

Yep.. they put down the OWS protestors and I wonder if they would have put down the protestors back in 1776. I wonder how many of them would ever be the brave ones taking to the street as they are doing in Egypt. I suspect almost none would. These are the type of people that sit on the sidelines and complain. Protesting to change the world is beneath them yet the world should do and be as they say. It’s all such a disastrous self centered teenagish ideology. And only the protest, the altruism and the blood of others allows them to safely hold such inane views. No respect for those who came before them and fought the wars and paved the roads and built the bridges… they simply just do not want to pay taxes and that’s as far as they’ve thought about the issues. And unknowingly their real purpose in life is to be the dupes for the enthroned elites and the modern day aristocrats and the purveyors of privilege… they are modern day Tory’s.

Randy November 24, 2011 at 7:44 am

Muirgeo;
“Protesting to change the world is beneath them yet the world should do and be as they say.”

Yes, protesting is beneath me. No, I do not expect the world to be as I say. I work for a living. The politicians take a cut. They need me more than I need them That’s what you’re here to complain about, right? Fearing that we will stop paying?.

…only the protest, the altruism and the blood of others allows them to safely hold such inane views.

Bullshit. Those who protest and shed blood do so because that is the type of people they are. It has nothing to do with people who earn their living by creating and trading value. We just have to deal with their insanity.

…No respect for those who came before them and fought the wars and paved the roads and built the bridges…

We paved the roads and built the bridges. The wars were unnecessary but they forced us to fight them.

…they simply just do not want to pay taxes and that’s as far as they’ve thought about the issues.

That’s right, we don’t want to pay taxes. And if the so-called “services” the politicians make us pay for had any real value to us then they wouldn’t have to force us to pay for them.

muirgeo November 24, 2011 at 12:22 pm

Randy… this post of yours explains all one needs to know about you and how detached from reality your position is. Claiming protesting is beneath you is like saying you’ll submit to any form of government but you’ll sure as hell bitch and whine and complain…assuming those that do protest have secured your rights to free speech….it’s a pathetic childish position. You stand for nothing except whininess ? sp…. You should start your own Whinemier Republic… Home of the Do Nothing Whiners. Your no advocate for freedom… you’re an advocate for spoiled brats who live in their mothers basement. I still like you Randy but i find your position despicable.

Randy November 24, 2011 at 10:52 pm

Muirgeo,

“…like saying you’ll submit to any form of government but you’ll sure as hell bitch and whine and complain…”

Yep, that’s pretty much it. I submit because they have guns – lots of them. Not to generally at least pretend to follow their stupid rules would be foolish. And I speak up because that is my nature, not because some politician “secured” my right. Politicians don’t give me a right to speak. I have a right to speak. Certainly they can silence me if they so choose, but then I won’t work, and then they can’t exploit me anymore. Their power is limited not by some piece of paper, or by the blood of fools, but by their dependance on the exploitation revenue stream.

“i find your position despicable

So what? Just because you pretend to speak for all that is good and holy doesn’t mean that your beliefs are actually either. The “road to hell…”, you know.

Greg Webb, librarian clowns, et al November 24, 2011 at 6:50 am

You believe in the trickle-down theory which everyone knows is both false and immoral. No matter how hard you try to persuade the median person that their lot is better, you won’t be able to accomplish this because it isn’t true overall. Capitalists frequently rape, pillage and plunder to become unnecessarily, and inordinately rich. Now that is a fact we should all believe in.

http://en.wikipedia.org/wiki/Trickle-down_economics

Greg Webb, librarian clowns, et al November 24, 2011 at 7:00 am

http://en.wikipedia.org/wiki/A_rising_tide_lifts_all_boats

What if you don’t own a boat to begin with. Some are born with Yachts and others are born with dinghies, or even a flat tire. A goal of government should be to equalize these disparities in as fair a manner as possible. Government has failed because of tea party gang bangers and their librarian ilk.

Captain Profit November 24, 2011 at 9:59 pm

What if you’re in a U-boat with Hitler’s invisible robot army?

G. Webb November 24, 2011 at 9:36 am
SmoledMan November 24, 2011 at 12:29 pm

Many of these so-called poor own smartphones, HDTVs, other luxury goods and have access to our modern medical care.

steve November 24, 2011 at 9:50 am

Don- Why do you prefer household income measures over individual income?

Steve

muirgeo November 24, 2011 at 12:24 pm

The same reason he likes certain measures of inflation over other measures of inflation all of which don’t include things like housing, health care or higher education. The same reason some people prefer Holy water over the plain stuff.

Randy November 25, 2011 at 4:23 am

Steve,
Not being a professional economist I’ve wondered the same thing. I suspect that the household figures are quoted most frequently because that is the data that is most readily available. Regardless, if figures are presented in terms of household income, then changes in the average household size certainly do matter.

Tigara electronica November 24, 2011 at 10:07 am

I am not surprised…simply idiots

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