Why does it matter at all to a vegetable picker in Fresno, or an unemployed teenager on the south side of Chicago, whether 10 or 100 hedge fund managers in Greenwich have private jets? How do they even know how many hedge fund managers fly private? They have hard lives, and a lot of problems. But just what problem does top 1% inequality really represent to them?I emphasized the quantity issue here. His grandfather in the 1930s watched movies and saw glamorous lifestyles way beyond what he could achieve. Increasing inequality is about larger numbers who live a lavish lifestyle. And the claim is that increasing inequality is changing behavior.
There is a view motivating the left that inequality is just unjust so we - the federal government is always "we" -- have to stop it. If they'd say that, fine, we could have productive discussion.
But they say, and I was going after in the post, all sorts of other things. That inequality will cause poor people to spend too much, that it will cause them to rise in political rebellion, for example. For that to happen, for the presence of the rich to affect their behavior in any way, they have to know about how the exploding 1/10 of 1% live, and how many of them there are. Which just doesn't make any sense.
Paul Krugman had a few revealing columns over the weekend. (No, not the endlessly repeated Say's Law calumny. I trust you all understand how empty that is.)
In "Our invisible Rich,"
In fact, most Americans have no idea just how unequal our society has become.
The latest piece of evidence to that effect is a survey asking people in various countries how much they thought top executives of major companies make relative to unskilled workers. In the United States the median respondent believed that chief executives make about 30 times as much as their employees, which was roughly true in the 1960s — but since then the gap has soared, so that today chief executives earn something like 300 times as much as ordinary workers....
So how can people be unaware of this development, or at least unaware of its scale? The main answer, I’d suggest, is that the truly rich are so removed from ordinary people’s lives that we never see what they have. We may notice, and feel aggrieved about, college kids driving luxury cars; but we don’t see private equity managers commuting by helicopter to their immense mansions in the Hamptons. The commanding heights of our economy are invisible because they’re lost in the clouds.Finally, here is something I can agree with him about. The rich are invisible. The average person has no idea really about the difference between taking a limo or a helicopter to the Hamptons, irksome as that may be to Paul. And less idea of whether there are 10 such people, implying no change in the distribution of income, or 1000, a big increase in the upper tail.
But this seems to play exactly to my point. If most Americans have no idea how the superwealthy live, or how many superwealthy there are, just how can their existence influence the behavior of people who don't know they are even there?
If a tree falls in the woods and nobody hears, did the tree fall? If a hedge fund manager has a $2,000 bottle of wine in his Hampton estate, how do you reach for that better beer you can't afford?
In "Having it and Flaunting it," Going after a very nice David Brooks piece, Krugman went on,
..for many of the rich flaunting is what it’s all about. Living in a 30,000 square foot house isn’t much nicer than living in a 5,000 square foot house;...So it’s largely about display — which Thorstein Veblen could, of course, have told you.
... If you feel that it’s bad for society to have people flaunting their relative wealth, you have in effect accepted the view that great wealth imposes negative externalities on the rest of the population — which is an argument for progressive taxation that goes beyond the maximization of revenue.This is all quite revealing. But if the average American doesn't know how the super-rich live -- first column -- it is simply impossible to have "negative externalities" of wealth per se --not, I need to keep reminding you, as a symptom of something else. So the second column flatly contradicts the first.
And, if the "average American" has no idea how the rich live -- first column -- they are surely not "flaunting" or "displaying" their wealth to the average American -- second column. Again, that's a flat out contradiction.
As I surveyed in the inequality post, the other big economic "problem" resulting from inequality is that the rich don't consume enough, so we have secular stagnation. Well, are the rich consuming too much or too little? Let's make up our minds here.
But 2+2 do make 4. "We," you and I, may not "see private equity managers commuting by helicopter to their immense mansions," but Paul sure sees it and knows about it. The super-wealthly aren't causing any "negative externalities" to you and me, and the less fortunate who surround us. But they sure are bugging Paul.
So what I see expressed crystal clear here is an age-old sentiment. The established liberal establishment aristocracy bemoans the garish tastes of the nouveau-riche. Plus ca change.
Except now it's not just, "let's not let them in the country club deah." It's "an argument for progressive taxation that goes beyond the maximization of revenue. " Read that again. It means take it, not to fund programs but simply to lop off their heads because Paul doesn't like their fancy haircuts.
As for Veblen and the theory of conspicuous consumption, if you haven't read H.L. Mencken's review, stop everything and do so now. (Google found me this one, there may be better) It ends,
But why don’t we keep flocks? Why do we renounce cows and hire Jugo-Slavs? Because “to the average popular apprehension a herd of cattle so pointedly suggests thrift and usefulness that their presence . . . would be intolerably cheap”. Plowing through a bad book from end to end, I could find nothing sillier than this. Here, indeed, the whole “theory of conspicuous waste” was exposed for precisely what it was: one per cent. platitude and ninety-nine per cent. nonsense. Had the genial professor, pondering his great problems, ever taken a walk in the country? And had he, in the course of that walk, ever crossed a pasture inhabited by a cow (Bos taurus)? And had he, making that crossing, ever passed astern of the cow herself? And had he, thus passing astern, ever stepped carelessly, and —