tag:blogger.com,1999:blog-582368152716771238.post5780477219197322226..comments2024-03-28T14:41:03.793-05:00Comments on The Grumpy Economist: The mismeasure of inequalityJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger44125tag:blogger.com,1999:blog-582368152716771238.post-58797276600705511932012-09-04T08:41:04.346-05:002012-09-04T08:41:04.346-05:00One note....you need to define income. Having live...One note....you need to define income. Having lived in both the UK and Holland....their income tax allows almost no deductions. The US tax code allows almost infinite deduction and knowing what a Goldman or billionaire pays in taxes show that just using the rate is laughable. We need a flat income tax or an asset tax. Offshore money for decades or deferring capital gains should be reversed indexed. The average worker gets the shaft under our systemVenture Guyhttps://www.blogger.com/profile/03161086135404673406noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-20840682696303530062012-08-23T20:39:19.900-05:002012-08-23T20:39:19.900-05:00Didn't consumption exceed income in 2005 by so...Didn't consumption exceed income in 2005 by so much because of debt? Debt which is now being defaulted on?Piffle Dragonhttps://www.blogger.com/profile/16329359461156849578noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-65958853855480208232012-08-19T12:40:33.258-05:002012-08-19T12:40:33.258-05:00Veronica and Kabir, Thank you both for your contri...Veronica and Kabir, Thank you both for your contributions to this discussion. You bring up many questions which cannot be glossed over if one is to discus this in a meaningful way.KyleNhttps://www.blogger.com/profile/15766641765942339253noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-68932886530926584652012-08-18T20:08:43.598-05:002012-08-18T20:08:43.598-05:00As a tax lawyer, two factors which I have never se...As a tax lawyer, two factors which I have never seen discussed when discussing increasing income inequality. First, the measure of income is taxable income, or AGI. The impact of the changes in the tax laws in 1986 which eliminated passive losses and thus most tax shelters are not accounted for. You cannot compare the base income of 1980 (or 1979) where that income could (and for high income taxpayers was ) reduced by tax shelters with the income of post 1989 (the passive loss rules were phased in). Second, you cannot do cross country comps, as the high income taxpayers with business interests in most developed countries use corporate holding companies in which the income is currently taxed at a lower rate, and when paid out to the owner receives credit for the corporate taxes paid. In the US because their is no integration of the corporate system, individuals use flow through structures which causes the income of top earners to be much greater than if said income were reported by a holding company.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6329492199726897882012-08-17T23:49:45.321-05:002012-08-17T23:49:45.321-05:00I think everyone and here I include the right too ...I think everyone and here I include the right too misses out in clearly discussing the key issues with inequality. I mean just look at how biased we have become when someone above says these are nonsense arguments and that everything has been already refuted. If so could anyone shed more light on the following<br /><br />1. How much of the inequality in a country is an outcome of fundamental inequality, crony capitalism and how much of it is because of the government. So at one end there are fat lazy people who prefer to sit at home watching TV and still get to live in a bigger house and drive a care. At the other end there are 20 year olds working 20 hours a day dreaming up new apps and dot come sites trying to become rich. This simple difference "should" not result in inequality ?<br /><br />2. What is the trade off between inequality and overall prosperity and growth and employment. I mean Greece reduced inequality drastically but it now has 25% unemployment and is at the verge of bankruptcy. This trade off is irrelevant to be discussed using economics ?<br /><br />3. US rules the world. To put it mildly. It gets the power to print money which the rest of the world bows down and accepts. What are the costs it has to pay ? Free riding by the world on its military ? Free riding on technological innovations specially life saying drugs and healthcare ? I mean what is the mis pricing between how much the world benefits from US and the price it actually pays it ?<br /><br />I mean these are the real issue about inequality. And trying to measure what inequality more accurately is only a start. The left trying to frame the entire discussion only based on trivial issues is simply a clue a tell about how the left would prefer the discussion not to head in these directions.Kabir Gandhi Khanhttp://www.desigyan.org/noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-41511923143287661062012-08-17T10:39:58.581-05:002012-08-17T10:39:58.581-05:00I understood that the discrepency between European...I understood that the discrepency between European and US GDP can be largely explained by differences in hours worked - i.e. the gap between the US and Europe when looking at GDP/hour is smaller than GDP/capita (even when adjusted for the age distribution).<br /><br />Whether this (optimally) reflects the preferences of Europeans for more leisure, or (suboptimally) is the consequence of rigid labour market institutions (=>higher unemployment, at least until the financial crisis broke; fewer hours worked per week; longer vacation mandated by law) is open to question, but the difference between European and US standards of living is significanly overstated by the GDP numbersJM Pindernoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-67692491937059356182012-08-17T10:08:22.764-05:002012-08-17T10:08:22.764-05:00I'm sorry, but pointing to median disposable i...I'm sorry, but pointing to median disposable income in comparing "living standards" between US and Europe is not what an economist should refer to as "fact-based". It is actually quite silly:<br /><br />* As has been pointed out this is irrelevant since e.g. health care and education in most of the richer European countries is not paid for by disposable income since it is publicly financed via taxes(this is of course highly relevant, considering the level of health-care expenditure in the US). <br />* Further, comparing average home size is not really that relevant either. This is very much endogenous w.r. preferences. <br />* Further, adjusting for age of the population? Well, adjust for hours worked and the US will look significantly worse in comparison with the richer European countries. Perhaps we should add an economic value of leisure hours for the time e.g. Norwegians spend on their hobbies and interests when the americans need to be working. (GDP/capita PPP adjusted in Norway is $53,471 vs. $48,387 in the US, while average working hours (per year) is 1,426 in Norway vs. 1,787 in the US). The point is that you can always find an "adjustment" that will be beneficial for the ideological point that you wish to make. This is not a good approach for a reasonable and intellectually solid discussion.<br /><br />Anyhow, above a certain level of threshold of GDP/capita I find this measure as a proxy for living standard rather uninformative and I think economists spend too much time on this aggregate and poorly measured variable. As an example, having recently moved back to Sweden ($40,394 GDP/capita) from Norway ($53,471 GDP/capita), with the same type of job at the same level, I cannot detect any significant living standard changes at all. I consume the same bundles of goods as before and save more or less the same. Perhaps the differences are seen at other percentiles of the incomde distribution (no idea), but I cannot see this as a particularly relevant measure when discussing international policy issues.<br />Anonymoushttps://www.blogger.com/profile/01894498597335923520noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46841046340658863072012-08-17T05:57:17.856-05:002012-08-17T05:57:17.856-05:00Good point indeed. Check this: http://www.ilo.org/...Good point indeed. Check this: http://www.ilo.org/travail/whatwedo/publications/WCMS_187497/lang--en/index.htm Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6740447749033370472012-08-17T03:43:06.314-05:002012-08-17T03:43:06.314-05:00"1. Consumption distribution is more equal th..."1. Consumption distribution is more equal than income distribution"<br /><br />This comment also addresses Anonymous below, who wrote:<br /><br />"Yes, consumption inequality might be different from income inequality, but the numbers totally ignore issues of borrowing (in case of poor people) and savings (in case of rich people). If poor people have to borrow to do their basic consumption, and the rich people can save even though their are consuming excessively, how is that comforting? Why should consumption inequality be a better measure of "inequality"?<br /><br />I might ask the reverse question: why would measuring inequality by consumption be a *worse* method of measuring inequality than measuring it by income? True, if I am able to borrow to finance current consumption, this borrowing should reflect reduced consumption in the future. Likewise, if I choose to save, this reflects the ability to consume more in the future. One would think, over time, these effects would smooth out. Have you noticed that the study covered a 29 year period? <br /><br />Also, I would think that the net effect of this "smoothing" would reflect an equality bias in favor of the current consumers rather than savers. As Cochrane (correctly) pointed out, savers will need to give back part of their future consumption to the government in the form of taxes on their savings. Debtors, on the other hand, get a tax subsidy for mortgage interest and student loan interest. Also, have you considered that some of that debt will never be repaid because discharged in bankruptcy or other forms of debt forgiveness such as mortgage writedowns? As far as "equality" is concerned, it strikes me that the ability to borrow works in the long run much in the favor of increasing the equality of the non-rich.<br /><br />At the end of the day, what matters is not what is in the bank, but what is on one's plate.Vivian Darkbloomhttps://www.blogger.com/profile/18362419878968863283noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-26369102712837876982012-08-17T00:06:03.741-05:002012-08-17T00:06:03.741-05:00I believe the document you found is this:
http://...I believe the document you found is this:<br /><br />http://www.welfareacademy.org/pubs/early_education/pdfs/Besharov_ECE%20assessments_Perry_Preschool.pdf<br /><br />The paragraph you cite does not strongly contradict their findings. Rather it points out vulnerabilities in the experimental design. Continue reading in that chapter, you will find a response to several of these issues.<br /><br />Further I recommend this: <br /><br />http://www.webmeets.com/files/papers/ESWC/2010/574/Paper_Reanalysis.pdf<br /><br />It is a statistical reanalysis of the Perry project's findings by James Heckman that is designed to exploit the potential biases but reveals that the results hold up.<br /><br />The Perry project has been peer reviewed, but don't take my word for it explore the data supporting early childhood intervention. True scientists have already been working on this.<br /><br />The only difficulty is the inertia of bad politics.<br /><br />LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-62639339929183635062012-08-16T22:13:45.166-05:002012-08-16T22:13:45.166-05:00O, I have consistently read your comments. You ar...O, I have consistently read your comments. You are so lacking in judgment you are unemployable. YOu are were you are due to republican economics. Go read Noah Smith, who documents that the country broke in the 1970s.<br /><br />The rich are never going to give you a dime, not a dime.<br /><br />You should have said one word to your 600 in attendance: unionAnonymoushttps://www.blogger.com/profile/07904132869021579763noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-79178327064740379502012-08-16T20:18:07.727-05:002012-08-16T20:18:07.727-05:00Great point. Would love to hear Cochrane's sta...Great point. Would love to hear Cochrane's stand on this.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-24377862538980416872012-08-16T19:16:37.223-05:002012-08-16T19:16:37.223-05:00Shengwei
Money goes where it is valued. As a saver...Shengwei<br />Money goes where it is valued. As a saver I want my money to be accessible to the largest number of possible APPRECIATORS. People who are interested in what I have. When a government makes everyone equal then my potential APPRECIATORS are very limited in how interested they can be in me. They are forced to be interested in hypochondriacs and reckless skydivers. Or football players. The taxes in china are much less than they are in America which enables like minded people to associate with each other. Thus "every shop one owner". In china private business is increasing, in USA private business is decreasing. Home ownership is also following this trend. You might say that now the Chinese can only buy one home. If so, you must remember when the inflation in house prices started. 2008 to 2010. Notice something here. I have several friends who do the foreign exchange in transmitting new deposits to the central banks reserves. ALL of the inflation was due to the united states bailouts of Wall Street banks. Agents (plain clothes banker puppies) were buying everything they could. We have one high profile example from Ireland Shawn Fitspatrick and his family. This was so wide spread that the Chinese gov had to step in to protect the Chinese people. This same thing happened in 1938-39 with the aftermath of mariner Eccles silver purchase. Nobody wants communism. NOBODY. But As Milton Friedman noted with a pseudo- Gold standard. Nations will do horrible things to each other. China is the land of plenty. There is no place on this earth as beautiful or spectacular as china. But the use of counterfeitable money forces people to leave the land of real things, living things, to go to a land of death, where there are no families. Where parents tell their children to go to the bank for an opportunity. Go into debt for an opportunity when capital accumulation in theory should stop this Devilish practice. Where is our accumulated capital. ? Why don't the parents have the ability to invest in their own children in America ? Economics is much more than just responding to shocks. Shocks are exactly that. When economists just look at numbers they loose perspective of the big picture. It is the difference between value investing and chart analysis. Americans are chart analyzers. Chinese have families. And family is the only way to survive the attacks / SHOCKS of counterfeiters.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-69020601808228344432012-08-16T18:46:58.851-05:002012-08-16T18:46:58.851-05:00I was speaking to foreign aid. The point was new s...I was speaking to foreign aid. The point was new schools and books (fixes) may do nothing, which was the case after rigorous peer reviewed analysis in India. On the other hand, mosquito nets and de-worming had statistically significant improvements. The study is very defensible. <br /><br />I googled "Perry Project Peer Review". The very first link was to a pdf stating in part, "In some cases, however, these [Perry Project] findings were inconsistent or varied by the measure used, raising some uncertainty about their validity. Moreover, despite the obvious care the High/Scope team devoted to the evaluation, several major issues related to the random assignment process and data inconsistencies limit the confidence that can be placed in these findings. Although there have been replications of the project, they have not been rigorously evaluated."<br /><br />I doubt the Perry Project's findings.<br /><br />Chicago Public spent $11,333 per pupil in 2008, not cheap in my estimation. I regard it as expensive, greater than the state average, and the system provides questionable returns. Moreover, spend $24,000 per pupil, like NYC, and you will get the same outcomes. Have two party control, same outcomes. <br /><br />I also do not believe charter schools would do better. I do not believe this professor would do better. I'm not defending, but blaming, both parties, one controlling or not. Fixes will be terribly difficult. Face the truth. I'd start by evaluting ideas to see what works through proper analysis supported by peer reviews. That's how true scientists work. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-24834962504941695312012-08-16T15:08:14.217-05:002012-08-16T15:08:14.217-05:00The Chinese system is something you can think as a...The Chinese system is something you can think as a benchmark when evaluating the US system. I am not exaggerating, even the tea party, based on the Chinese standard, is a socialist group... In China nobody cares if it is equal, the only thing decision makers care if it is productive enough. China spend very litter resources in the pre-university education, and the logic is simple: it is some kinda useless but the chinese universities got lots of resources. Why? to get into a good Chinese university you have to take strict exam which filtered out who are not "smart" or "capable" then it seems a good investment only to spend money on the smart people. <br />China is not a democracy so it doesn't have to "waste" resources on certain group of people which it thinks as "useless". In China, the decision makers only care things like: economy growth, rockets and satellites, new technology, of course together with gold medals in olympics. If you are a peasant labor and got your hand cut off by some machine at work, "who cares?" I watched one TV program from NHK(a japanese tv channel) documenting a chinese factory about the work-wounded workers, the owner of the factory just told the workers "go home and die" If you are a working class person in USA, you should try all your best to protect the US system, you all realize how lucky you are to work in such an euqal nation. Shengweihttps://www.blogger.com/profile/03352074182853308962noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-40332492051339854842012-08-16T14:48:32.171-05:002012-08-16T14:48:32.171-05:00As long as Brad DeLong reposts something about Dan...As long as Brad DeLong reposts something about Daniel Kuehn fighting the "evil forces of the dark side"...he's happy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3301967066971396932012-08-16T14:19:30.607-05:002012-08-16T14:19:30.607-05:00the article just recycles the same types of argume...the article just recycles the same types of arguments that the right has been using again and again in the recent past, which have mostly been refuted.<br /><br />Examples:<br /><br />1) Yes, consumption inequality might be different from income inequality, but the numbers totally ignore issues of borrowing (in case of poor people) and savings (in case of rich people). If poor people have to borrow to do their basic consumption, and the rich people can save even though their are consuming excessively, how is that comforting? Why should consumption inequality be a better measure of "inequality"?<br /><br />2) Comparing "median disposable personal income" between the US and Western Europe is well-known to be misleading, as European states provide much more public goods. For example, US parents might have more "disposable income" than Europeans, but they have to save for their children's education (something which European parents don't have to do to the same extent). All the article does is to define "disposable" in a way that suits the ideological argument of the authors.<br /><br />3) The argument against the capital gains tax ("Angelina and Brad") is just ridiculous. It starts with the assumption that two people with the same lifetime earned income should pay the same amount of lifetime taxes, and then concludes that a capital gains tax is unjust. But that is circular logic: the result is assumed in the first place. The point of people that argue in favor of a capital gains tax is that a strict distinction between "earned" income and "capital" income is not useful and also not practical. In the example, "Angeline" has a higher total lifetime income, and thus one can certainly make the argument that it is "fair" that she pays more taxes than Brad. Whether this is "efficient" or not is a different question.<br /><br />4) "The top five percent pay 44 percent more in taxes than the bottom 95 percent, while 47 percent of tax filers pay no tax at all." Deliberately confuses taxes with income taxes. Those 47% of tax filer that don't pay INCOME tax pay a lot of other taxes (SS, Medicare, VAT, etc.). If you do a plot of "total income of top x%" vs. "total taxes paid by the top x%", you realize how nice it is to be rich in the US compared to most other places on the planet.<br /><br />I could go on... It is really tiring to see all these nonsense arguments again and again. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-32789598849028082502012-08-16T13:27:41.302-05:002012-08-16T13:27:41.302-05:00The commentary article I posted does not explicitl...The commentary article I posted does not explicitly address the poor vs. rich life expectancy, but does utterly destroy the general lie about USA life expectancies in general, and I'll be willing to bet it applies more generally.<br /><br />Liberals lie, then cite each others lies as proof.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-52475149545658103652012-08-16T13:21:32.051-05:002012-08-16T13:21:32.051-05:00Yes, the life expectancy stuff is in great dispute...Yes, the life expectancy stuff is in great dispute, in that it's a liberal lie.<br /><br />Read it here: http://www.commentarymagazine.com/article/the-worst-study-ever/<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-64435558675744095202012-08-16T13:18:20.283-05:002012-08-16T13:18:20.283-05:00The U.S. has replaced a lot of welfare with the Ea...The U.S. has replaced a lot of welfare with the Earned Income Tax Credit which results in negative income taxes for low-income persons. Europe still pays generous welfare benefits but taxes them. The net result is that the U.S. tax system is substantially more progressive. U.S. taxes are substantially lower on average than Europe also. Nonetheless, I think it is clear that taxation isn't an answer to inequality concerns whether they be real or imagined.J McLanenoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-89903879806921559842012-08-16T12:23:43.139-05:002012-08-16T12:23:43.139-05:00Look up the Perry project or the abcderian (sp?) p...Look up the Perry project or the abcderian (sp?) project, scientists collected much of the data you are talking about and we can see that educating young children has enormous returns and is relatively cheap. Broken households are a big impediment to the development of early life skills, but they are not insurmountable.<br /><br />On the other hand, forbidding teachers to use red-ink because it hurts 8th graders' self esteem is an institutional failure completely unrelated to the budget (and happens in Chicago). Children are often never told that they do not know how to read or write or do arithmetic until highschool at which point it is practically too late.<br /><br />We don't need more mosquito nets in the southside of chicago, we need to end institutional racism propagated through terrible k-12 policies. My personal emphasis would be on j-5 and I would bet anything (because I spent a couple of years monkeying on the data listed above and tutoring children in the south side and know the answer) that the adverse impact would be diminished-though probably not completely disolved.<br /><br />The bottom line is that we aren't facing insect dangers in Chicago, Dallas, New york, Los Angeles, Houston, Atlanta,... . We are facing one party local government politics that have made the same systematically poor choices across the nation.LALhttps://www.blogger.com/profile/08196675112184615614noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-13620147506561795952012-08-16T10:57:45.658-05:002012-08-16T10:57:45.658-05:00You are talking about K-12 we are talking about gr...You are talking about K-12 we are talking about graduate school and professors in ivy league schools. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-59157758368210442612012-08-16T10:50:00.740-05:002012-08-16T10:50:00.740-05:00"Higher income workers get better benefits so..."Higher income workers get better benefits so excluding that from your measure of compensation makes things look more equal;"<br /><br />I wonder if you could also provide some support for this assertion? <br /><br />It appears that you are writing about employer-provided benefits such as health care, child care, pensions, etc. <br /><br />I'm sure that higher income workers generally get larger benefit packages (in nominal dollar terms) than lower income workers; however, for those employers who do provide such benefits, the effect on "progressivty" and hence inequality (as a coefficient) would tend to work in the other direction:<br /><br />1. Health care benefits typically do not depend on salary level, but rather on family size. Thus, with respect to this benefit, lower income workers would tend to get a *higher* amount as measured by percentage of taxable compensation than the higher income cohorts;<br /><br />2. The same should be observed, I think, for pension programs, albeit to a lesser extent. Due to monetary caps, this benefit should increase, not decrease progressivity. Also, ERISA makes it illegal, beyond certain parameters, to discriminate in favor of highly compensated employees.Vivian Darkbloomhttps://www.blogger.com/profile/18362419878968863283noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-924417445573881862012-08-16T10:31:48.777-05:002012-08-16T10:31:48.777-05:00"Europe uses more progressive benefits and le..."Europe uses more progressive benefits and less progressive taxes than us, so looking at income taxes alone makes us look more progressive"<br /><br />I would be interested in the source for your assertion that "Europe uses more progressive benefits" than the United States. It is true that most European countries spend more as a percentage of GDP on non-defense than the US does; however, is this spending necessarily "more progressive"? The European countries in which I have lived generally do not do means testing for much of the government sponsored programs such as education, health care, public social security, etc. If public education is free or dramatically subsidized, it is so for all and not just for those that have financial need. The same for health care (does the UK offer health care only to the poor?) On the other hand, the spending sides of the four largest US federal programs are definitely "progressive". SNAP and Medicaid very much so and Social Security and Medicare are progressive to a lesser extent (higher income folks pay higher premiums to enroll in some Medicare programs). Also, are you counting refundable tax credits as part of the "progressive" tax system, or does it fall under the benefit side? Do your statistics account for factors not normally figured into traditional studies of the progressivity of benefits? I'm thinking, for example, of the very real disparity with respect to tuition prices paid at universities (public or private) that discriminate based on income.<br /><br />The distinguishing characteristic of the European model is not that it is necessarily produces less inequality (I reserve judgement as to whether that would necessarily be a good thing, anyway, if it reduces everyone's wealth--see Cuba, North Korea, Zimbabwe, Venezuela and the entire 70 year experiment with Eastern Europe, the Soviet Union and China) but it is most certainly more paternalistic. Vivian Darkbloomhttps://www.blogger.com/profile/18362419878968863283noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-81007433936627083382012-08-16T09:59:36.765-05:002012-08-16T09:59:36.765-05:00A "beautiful soliloquy" by Daniel Kuehn?...A "beautiful soliloquy" by Daniel Kuehn?<br /><br />Why thank you!Daniel Kuehnhttp://www.factsandotherstubbornthings.blogspot.comnoreply@blogger.com