The authors—a former chairman of the Senate banking committee, a professor of economics at Auburn University and a former economist at the Bureau for Labor Statistics—show that these beliefs are false. Average living standards have improved dramatically. Real income of the bottom quintile, the authors write, grew more than 681% from 1967 to 2017. The percentage of people living in poverty fell from 32% in 1947 to 15% in 1967 to only 1.1% in 2017. Opportunities created by economic growth, and government-sponsored social programs funded by that growth, produced broadly shared prosperity: 94% of households in 2017 would have been at least as well off as the top quintile in 1967. Bottom-quintile households enjoy the same living standards as middle-quintile households, and on a per capita basis the bottom quintile has a 3% higher income. Top-quintile households receive income equal to roughly four times the bottom (and only 2.2 times the lowest on a per capita basis), not the 16.7 proportion popularly reported.
What explains the disconnect between reality and belief? Government statistical reports exclude “noncash” sources of income, which excludes most transfers from social programs. Taxes (paid disproportionately by high earners) are also ignored in official calculations. Furthermore, even the government’s “cash” income numbers are reported in a way that understates improvements in real (inflation-adjusted) income over time because government inflation measures fail to use the appropriate chained price indexes or take account of new products and services.
Increased earned-income inequality is the natural consequence of redistributive policies: if one can enjoy median household consumption without earning any income, the incentive to work is substantially diminished. This largely explains the growing distance between earned and total income for poor households (transfers to those households have gone up dramatically). Ironically, it is the very success of redistribution in reducing poverty and inequality that has led mismeasurement to create the false perception of increasing inequality.
Also recommending the Gramm, Ekelund, & Early book is David Lewis Schaefer. Two slices:
In their chapter on the “Super-Rich” (the top 0.1 percent of earners), the authors note that even this group derive a substantial part of their income from work, rather than coupon-clipping; that “almost two-thirds” had come from poor to upper-middle-class families; and that “wealthy investors who accumulate wealth but do not consume it (like the fictional Ebenezer Scrooge, or the real Warren Buffett) are public benefactors, not robbers, since “their wealth is creating jobs” and thereby “promoting the general prosperity.”
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Owing to its reliance on statistics rather than sweeping political claims or literary allusions, one cannot expect this book to enjoy the readership and influence of Piketty’s Capital in the Twentieth Century (it doesn’t draw “evidence” from Balzac’s novels, predict the imminent downfall of capitalism, or demand a worldwide taxing authority). Nonetheless, it would be a boon for America if reading it were required of every high school and college teacher of history and the social sciences as part of job certification.
David Henderson and Charlie Hooper rightly criticize Stanford University’s recent “Elimination of Harmful Language Initiative.” Here’s their conclusion:
People have rightly derided Stanford for the EOHLI document. In doing so, we should criticize the document for the right reasons: those who constructed the EOHLI have ignored or violated the principles for clear thinking that Stanford has developed and championed over the years. Ironically, it should be Stanford itself that helps less-enlightened organizations master the techniques of clear thinking that were at least partly developed at that great university.
Richard McKenzie reveals “the ‘unseen effects’ of California’s new minimum-wage law.”
Scott Lincicome and Ilana Blumsack recommend deregulation to empower workers.
Fraser Myers is correct: “We are paying a heavy price for our elites’ green fantasies.”
David Zweig reports on “how Twitter rigged the covid debate.” Two slices:
I had always thought a primary job of the press was to be skeptical of power—especially the power of the government. But during the Covid-19 pandemic, I and so many others found that the legacy media had shown itself to largely operate as a messaging platform for our public health institutions. Those institutions operated in near total lockstep, in part by purging internal dissidents and discrediting outside experts.
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In my review of internal files, I found numerous instances of tweets about vaccines and pandemic policies labeled as “misleading” or taken down entirely, sometimes triggering account suspensions, simply because they veered from CDC guidance or differed from establishment views.
