Tuesday, May 10, 2016

McArdle Nugget

Megan McArdle has produced a timely nugget of wise prose
I would cross income inequality itself off the list of priorities. Far greater concerns include: absolute suffering among those with low incomes; a socioeconomic structure that seems to be ossifying into a hierarchy of professional classes; and a decline in income mobility, which is to say, in equality of opportunity. It doesn’t really matter whether Bill Gates has some incomprehensible sum of money at his disposal. It does matter a great deal whether there are Americans in desperate want. And of course, it matters whether anyone with the aptitude and motivation can become the next Bill Gates, or only a handful of privileged people who are already well off.
I also submit that the importance of the issue is inversely proportionate to the ease of solution. The government is very good at taxing income of some Americans and writing checks to others. (Whether you think it should do this is, of course, a different question.)
[JC: Actually, I'm not so sure the government is very good at this. Our tax code is a mess. Our income transfers largely go to middle class and well connected businesses. Our system of writing checks includes numerous 100% + marginal tax rates and other disincentives. Despite the one of the most progressive tax systems on the planet, there are still schizophrenics on the streets.]
It is very bad at preparing someone to live a solid and fulfilling life of work and community, which is one reason we mostly leave that job to parents.
Government is also not well suited to creating a lot of satisfying and remunerative jobs. It can contribute to productivity and help companies to flourish, for example through basic research and by maintaining a competent legal and regulatory system. And it can directly create a few jobs providing government services; these have been, for many communities at many times, a stepping stone to the middle class.
... For the most part, the best the government can do is to avoid stepping on the creation of satisfying and remunerative jobs; no nation on earth seems to have figured out how to generate “good jobs” for everyone. 
[JC: I think she means no government on earth.. "nations" have figured it out!]


  1. Some of this sounds similar to Frankfurt's argument in On Inequality.

  2. I am deeply interested in regressive policies that hurt the poor, like licensing, zoning, scope of practice rules, auto dealer monopolies, and highways that subsidize sprawls. What are examples of 100+ marginal rates in the tax code?

    1. Some have claimed Obamacare can effectively create a marginal rates of 100% or more for certain individuals.


  3. Thanks for pointing out this article. It's brilliant.

    It supports my view that the government does too much even as it does too little.

  4. Decriminalize push-cart vending.

  5. Susan of Texas deconstructed that particular McArdle piece & explains what Megan is really saying:


  6. This assumes inequality is not, in large parts, driven by policy. This is perhaps true in some cases, like possibly a Bill Gates (though I don't know the details of his story). Of course, many of the "inspiring" entrepreneur cases require us to ignore the role of copyrights and patents which one could argue aren't optimal (the best case I've seen is Boldrin and Levine books Against Intellectual Monopoly).

    I suppose you could refrain the question and not view it as tackling inequality but instead tackling bad policies, but they amount to a lot of the same outcomes. Many authors have belabored these points for the "super rich," but even consider the artificially cap on the say the number of physicians which is manufactured by congress and the AMA to raise the wages of doctors - despite the cries of a supposed on-coming of "doctor shortages." This not only raises inequality but also increases the cost of health care.

  7. well I think things would currently be a lot fairer...if the fraudsters running the banks weren't rescued for the fraud they perpetuated in 2007. So we live where taxpayers subsidize a racket of wall street and Washington....in closed loop. Where Hedgefunds and large banks skim ever more disposable money. Just look at oil where hedgefunds/Goldman Sachs drive the price to $200/barrel....then down to $30/brl....all using the central bankers unlimited printing press. Home prices skyrocket.....loans are made....people default....bank is given unlimited money to take back the home....and then rent it out to the same people they over loaned to. With recourse loans....you can't escape the bad loan decision. Whereas a large borrower just dissolves the company who took the large bad loan. We have a rigged system...that is shredding the middle and underclass. I am 100% for capitalism...we currently have crony capitalism...the worst form! IPOs of almost completely fraudulent companies hawked to pension funds etc...that implode after the bankers, venture people and advisers have skimmed billions. Capitalism has stopped functioning as the money class buy without fear....and abuse all with impunity! That is why there has been no recovery for the 90%. Why didn't Jon Corzine go to jail for gambling away a billion dollars of other people's money...wait he donated to Obama? Why did not one person on wall street go to jail...yet a $100 billion in fines have been paid....from money given to the same bank...by the federal reserve at ZERO INTEREST!

  8. Waaay OT: where is 100% reserve banking, are helicopter drops necessary from time to time to inject new money into the system?

  9. "It doesn’t really matter whether Bill Gates has some incomprehensible sum of money at his disposal."
    Actually,I think it does matter, because the disproportionate, distorting power and influence of such wealth it as at the root of everything McCardle deplores.

  10. This post brought out a lot of points that is related to the fuss about increasing in minimal wage. Yes, there is a problem with the suffering among those with low income resulting from the lack of opportunities that arises for these people. Many say (in relation to California), that people do not deserve the government to increase minimal wage to $15/hr (previously $10.50/ hr) stating that those who have low income chose to be in that field and chose to not excel, therefore asking for a higher minimal wage indicates their lack of motivation, some of these people also added that this would increase cost of living so what is the point. I completely disagree with this. First, the majority of the people with low income do not choose to remain in that field; they are typically immigrants and have a family and need immediate money to pay bills, they do not have the time or financial flexibility to go to college and find a job suitable; also these low income jobs do not leave room for one to be lazy, it is typically physically demanding. Second, considering the cost of living in California, a $3 increase in minimal wage could barely cover their fixed costs. Third, people under low income typically do not match any other higher profession, therefore they have no choice but to remain in entry level; like i've stated before, they typically don't have the privilege to obtain an education, also, we should also take into account the language barrier and lack of experience due to where they came from that inhibits them from finding a suitable "higher-level" job. However, steering away from immigrants, what about students with entry level jobs? And the argument for that is: No student enjoys working while they are occupied with their education; getting a job is clearly out of financial necessity due to the cost of living and tuition fees. Typically, even after getting out of school and having all the means to get out of the entry level field, their profession would still require an 'x' amount of experience, which means internships (no pay) and/ or payed very minimal as someone who is new to the field; therefore most of the time, these students/ or former students, would still HAVE to maintain their entry level jobs to sustain a living. In conclusion, as a result of mismatched opportunities, it is only fair for an increase in minimal wage to compensate for the cost of living depending on the economy of the area.


Comments are welcome. Keep it short, polite, and on topic.

Thanks to a few abusers I am now moderating comments. I welcome thoughtful disagreement. I will block comments with insulting or abusive language. I'm also blocking totally inane comments. Try to make some sense. I am much more likely to allow critical comments if you have the honesty and courage to use your real name.