Monday, October 31, 2011


Political Calculations provides this chart:

It shows inequality as measured by the Gini coefficient for the U.S. Higher is more unequal.

Individuals tend to have far more unequal income than families or households. This is just measuring the obvious truth that one of the reasons for forming families or households is so that individual income can be more unequal: this is what it means to care for someone young, old, or disabled. So, the red line should be at the top. By the same token, households should be more unequal than families because families tend to be more likely to be caring for the young, old, and disabled.

Now, look at the trends. Individual income inequality is improving, family and household inequality is getting worse. How can that be so?

What you’re seeing here is that inequality is about how people form households and families. The people getting paid are more equal than before, but the households and families they live in are more unequal. The reason for this is the agglomeration of richer people together and poorer people together … not the winner-take-all society.

Saturday, October 29, 2011

The Romance with Small Business

Matt Yglesias riffing on Jared Bernstein I think, to me the fact that if small firms were so fantastic Italy and Greece would be the economic superstars of the western world:

The Republicans have had a crush on small business for about 20 years (yes, they always did, but it’s gotten to be an unhealthy crush).

They need to start thinking about this more like the income distribution: there’s probably something wrong with a small business that isn’t a medium-sized business the next time you check up on it.

Thursday, October 27, 2011

How Much Is Income Inequality and How Much Is Effort Inequality?

Mark Perry point out that the rich* bring in 15 times as much income as the poor. But, the rich also have 5 times as many jobs, making the extent to which their income is unequal 3:1 instead of 15:1.

Note that students want a premium for effort included in their grade when it might help them, but that the tax code doesn’t allow households to discount for effort when it might help them.

* The rich are defined by the average household income of the top income quintile, and the poor by the average household income of the bottom income quintile.

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How Fundamentally Human Are Property Rights?

How about this: 3 year olds understand property rights.

And not just their own property rights: they apparently understand this it is their duty to protect the property rights of others from abuse.

I argue in my macroeconomics classes that broad societal acknowledgement of this point is one of the things that caused the growth miracle of the last 3 centuries.

Dave Elsewhere 2

Got an hour? Here's a video of the presentation I did in a Pizza and Politics session for the Leavitt Center. I'm sorry that it is "sideways" ... this was an unofficial video taken by a student in the front row. The topic is the national debt.

Dave Elsewhere 1

Here’s an op-ed I wrote about the current economic situation for the school paper back in August.

I didn’t formally transfer copyright, so the can sue me (Winking smile)for reprinting it below.

I’d like to touch on three topics.

First, how is the economy doing? The answer is that it’s OK, but not good.

We had the worst recession in 25 years or more, but it’s over. We’re now into the third recovery in a row that has started out weakly.

How weak? If we grade the U.S. economy with the same grade distribution that SUU students earn, over the last eight quarters the economy’s gotten 3 A’s, 2 B’s, and 3 C’s. If you’d be happy with a 3.0, you should be happy with the economy.

Secondly, if the economy as a whole is doing OK, why is there so much unemployment? Here, we have to delve a little deeper. It turns out that hiring and layoffs were out of balance a few years ago, but are in balance again, and they have been for many months.

So how can unemployment still be high? One part of the answer is that the normal turnover of people leaving for better jobs and creating openings in their old jobs is still below normal. The second part is that the longer a person is unemployed, the harder it is to get them back into a job. Because they haven’t had a job for so long, they may look like trouble to a prospective employer.

If you’re a college student, the message is twofold. If you’re new to the job market, you’re probably in better shape than you think: the jobs are out there, and you have no history of unemployment working against you. But, if you’re not new to the job market, and have been out of work, the going gets tougher. You need to convince prospective employers that you are just as good as someone new to the market. And, your history of unemployment creates a void you have to fill with extra effort.

Finally, let’s talk about the debt scare, and our “toxic” political system.

This is an issue that is all about dealing with our spending commitments. The ugly truth is that politicians really don’t have that much control over their cash inflows from tax revenues and borrowing. There was no serious talk this summer about cash not coming in; rather, it was about knowing all too well how much cash had been promised to go out.

By and large, those commitments were not made by current politicians. They were made by people that were elected in the past, and who are often long gone. But, the key point is that they made commitments that current politicians have to try to honor.

This makes our political problems anything but toxic. These are discussions that should have taken place in the past. They didn’t. That was irresponsible, but it doesn’t make the current situation toxic. These are serious issues that our political parties should disagree about: one side wants to honor past commitments, the other side is worried about further committing future generations that can’t yet vote. Both positions are worth defending.

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Tuesday, October 25, 2011

Bailed Out by the Barbarians

Today's Frank and Ernest:

Of course, these days it’s the Greeks who are behaving barbarically.

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Monday, October 24, 2011

Sunday, October 23, 2011

9-9-9 Would be a Shift to a More Regressive Tax System

The Tax Policy Center* says that Cain’s 9-9-9 tax proposal will lead to tax increases for almost everyone in the middle and lower classes.

Via Greg Mankiw.

* The Tax Policy Center is a joint effort of the Urban Institute and the Brookings Institution, so it’s safe to say it’s left of Herman Cain.

The Real Bubble

Mark Steyn:

Whenever the economy goes south, experts talk of the housing "bubble," the tech "bubble," the credit "bubble." But the real bubble is the 1950 "American moment," and our failure to understand that moments are not permanent. The United States emerged from the Second World War as the only industrial power with its factories intact and its cities not reduced to rubble, and assumed that that unprecedented pre-eminence would last forever: We would always be so far ahead and so flush with cash that we could do anything and spend anything, and we would still be No. 1.

Via Cold Spring Shops.

Turning the Solyndra Debacle Upside Down

The end result of the Obama administration’s gamble on Solyndra, which Monday morning quarterbacks didn’t criticize until it went bad, is that it will make a conservative, reactionary bureaucracy more conservative and reactionary:

The real trouble with bureaucracies is not that they are rash, but the opposite.  … they universally show a tendency to “play safe” and become hopelessly conservative.  The great danger to be feared from a political control of economic life under ordinary conditions is not a reckless dissipation of the social resources so much as the arrest of progress and the vegetation of life.

This 90 year old quote is from Frank Knight, and I’m requoting from Don Boudreaux.