John Cassidy on Income Mobility and Inequality

by Don Boudreaux on January 26, 2014

in Inequality

Here’s a letter to the New Yorker:

John Cassidy concludes his musings on the finding that income mobility in America hasn’t changed in recent decades with a warning: “Finally, the new study doesn’t mean that the effects of inequality aren’t more serious than they used to be.  With inequality rising, particularly at the top, the rewards for clambering up the income distribution are greater, and so are the costs of getting stuck at the bottom” (“Social Mobility Hasn’t Fallen: What It Means and Doesn’t Mean,” Jan. 23).  This warning is confusing.

If rising inequality does indeed mean that “the rewards for clambering up the income distribution are greater,” then we should expect more such clambering.  In a market economy that means more work, more saving, more investing, more innovation.  The results of this clambering might not yet appear in the data, but it’s strange that Mr. Cassidy thinks that the higher rewards for “clambering up the income distribution” are necessarily a problem.

Also, why does rising income inequality mean that the “costs of getting stuck at the bottom” are greater?  Unless Mr. Cassidy assumes that Jones gets richer only by making Smith poorer (and surely no modern economics pundit would commit such a primitive error), why does Mr. Cassidy dismiss even the possibility that individuals’ absoluteincomes can rise even if their relative incomes do not?

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

I likely will write even more about Cassidy’s column.

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