tag:blogger.com,1999:blog-582368152716771238.post8451441783982165649..comments2024-03-18T07:59:05.430-05:00Comments on The Grumpy Economist: Inequality mirage?John H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-582368152716771238.post-4258316572484607012022-05-30T10:22:24.613-05:002022-05-30T10:22:24.613-05:00I am a public school teacher married to another gr...I am a public school teacher married to another grumpy economist, who forwarded this article to me. I enjoyed the graphs and explanations and then you close with the outrageous statement that it all comes back to me and my colleagues! I work in an inner city school and invite you to come in and explain how it is our teacher's union that is the problem. Come and stay a full week with me and then dare to say its my efforts that keep my students down. Students with supportive parents and solid attendance succeed even though surrounded by students dealing with trauma. Students without a supportive home life that prioritizes school attendance and success fail. Those families are in abundance in poor neighborhoods and rare where poverty is rare. Success on state tests mirrors income more than anything else. When your teaching day is filled with handling social emotional issues, time on academic tasks is diminished. We are challenged with the task of keeping those ready to learn at school moving ahead while supporting those not ready and often interrupting the day moving ahead and learning to enjoy school and value education.rigglihttps://www.blogger.com/profile/08640969308949218623noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-25549160021362123562021-04-29T07:22:59.814-05:002021-04-29T07:22:59.814-05:00It is not a shock at all. Read Caplan's The My...It is not a shock at all. Read Caplan's The Myth of the Rational Voter and would be easy to understand why the voters vote what they vote. <br /><br />Politicians perfectly understand that tooEl emperador desnudohttps://www.blogger.com/profile/16816517303218671146noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-43201677979500291762021-04-22T16:46:29.409-05:002021-04-22T16:46:29.409-05:00Inequality goes down even further when you conside...Inequality goes down even further when you consider the present value of all government promises made: US Wealth is $100Tr[1], while we have ~40Tr in unfunded social security[2] and ~$45Tr in unfunded Medicare[3]. Even optimistically assuming wealth grows at twice the rate of obligations, the US has already voted to spend a 35% wealth tax, we just haven't got around to voting to pay for it.<br /><br />1. https://t.co/VHglVzN8sy?amp=1<br />2. https://t.co/iFBi22HJdN?amp=1<br />3. https://t.co/2OLAOTmRcX?amp=1<br />CCB reading bloghttps://www.blogger.com/profile/06514709548651888006noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27291187382614865522021-04-22T16:11:46.361-05:002021-04-22T16:11:46.361-05:00It might be of some interest to compute the GINI v...It might be of some interest to compute the GINI value for the chart titled "Main Results: Top 1% Income Shares" for the upper and lower traces shown in the chart. The upper trace is labelled "Piketty-Saez with capital gains". The lower trace is labelled "After-tax income". <br /><br />For the period 2010-2020, the upper trace lodges around 20% of income while for the lower trace a figure of roughly 10% of income will serve the purpose for computing the GINI value of the income distribution. <br /><br />Suppose that the income distribution follows a Pareto distribution (cf., https://en.wikipedia.org/wiki/Pareto_distribution). This is said to be a power-law distribution suitable for the characterization of population vs income distributions in many countries. The computation of the GINI value is described on the wikipedia webpage cited.<br /><br />For the upper trace, the Pareto Index (α) is 1.967; for the lower trace, the Pareto Index is 2.53. The corresponding GINI values are 0.341 for the upper trace and 0.246 for the lower trace.<br /><br />The GINI value of 0.341 is consistent with GINI values given for the United States as well as for a number of other western OECD countries. This validates the method, within the bounds of accuracy of the data presented in the blog article.<br /><br />The lower trace, labelled "After-tax income", by this method gives a GINI value of 0.246 which indicates that the degree of inequality is reduced by the force of taxation consistent with the redistributive characteristic of the U.S. income tax code.<br /><br />Redistribution is the means that economist T. Piketty favors to improve equality (reduce inequality). <br /><br />The presentation of economists David Splinter and Gerald Auten confirms (1) that taxation for purposes of distribution reduces inequality, and (2) that the distribution of gross income has become more concentrated over the course of time (i.e., since circa 1980).<br /><br />As the American-trained French economist Avram Florin remarks in his on-line published notes on the topic of stochastic finance, wealth is a multiplicative process. For investor Warren Buffet, it is 'the miracle of compound interest' at work. <br /><br />We would expect to see increasing inequality in the distribution of total wealth over time, ceteris paribus. Senators E. Warren and B. Sanders would tackle that phenomenon by a tax on accumulated net wealth over and above a certain threshold or baseline level of wealth. Others might consider applying a lump-sum tax on wealth (i.e., a one-time levy applied in one tax period).<br /><br />Bottom-line: While the analyses performed by economists David Splinter and Gerald Auten is useful, it fails to address the issue of accumulated wealth and the perception of increasing inequality in the distribution of that wealth amongst the American population. That perception is the tougher nut to crack.Old Eagle Eyehttps://www.blogger.com/profile/05270080708077871311noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-43058669131604966112021-04-22T13:42:25.233-05:002021-04-22T13:42:25.233-05:00There's merit to your point but Wealth is hard...There's merit to your point but Wealth is hard to measure and very sensitive to assumptions that John laid out in his prior posts.James Carlylehttps://www.blogger.com/profile/06778250145758547603noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-2576274483822780012021-04-22T11:15:47.525-05:002021-04-22T11:15:47.525-05:00Re: "Even this is misleading, because the act...Re: "Even this is misleading, because the actual people are different."<br /><br />This is probably most true of the top 1%. According to IRS data published in the NY Times circa 2000 and as stated by Thomas Sowell, most of the top one-percenters will be there only once in a ten-year period. The portion in the top 1% twice in a ten-year period is small.<br /><br />I suspect the top 1% is primarily composed of individuals that have experienced a once-in-a-lifetime economic event.<br /><br />R. S. Cox, CPA<br />Austin, Texasbengrayenhttps://www.blogger.com/profile/18153444832100697343noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-63667264133894653872021-04-22T10:34:27.086-05:002021-04-22T10:34:27.086-05:00You are measuring the wrong thing! Income now is a...You are measuring the wrong thing! Income now is a MIRAGE....where the tax credit buffet and scams galore(offshore patent holding companies, non-profits paying people millions, etC) erase, hide income. <br /><br />You should only measure Wealth increase which Asset growth+income per year. The richest...say Warren Buffet, Bezos, Gates, don't take income and heck now they just push it into a FAKE lifestyle charity where they hold complete sway for decades! If I own piece of art(why the rich invest) increase value from $10 to a billion dollars...in a year...did I get richer?<br /><br />Now redo this by WEALTH GROWTH(Income+ASSET GROWTH) and see what you get! <br />This headline should help "US wealth inequality - top 0.1% worth as much as the bottom 90%" <br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-8265765814399232872021-04-22T09:43:42.358-05:002021-04-22T09:43:42.358-05:00I am trying to square in my mind the following:
...I am trying to square in my mind the following: <br /><br />pre tax and pre tax plus transfers have definitely gone up over time while the after tax numbers have not<br /><br />The top 1 percent tax numbers have stayed flat.<br /><br />The first statement would suggest that taxes have gone up in lockstep with the pre tax income growth while the latter would seem to contradict that. Perhaps another reading suggests most taxes have increased on high income earners but not on the top 1 percent?<br /><br />Or perhaps John is right and income is a poor measure to begin with.James Carlylehttps://www.blogger.com/profile/06778250145758547603noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87621130127113826372021-04-22T07:41:14.043-05:002021-04-22T07:41:14.043-05:00Paul Graham has an interesting recent blog post on...Paul Graham has an interesting recent blog post on this issue - "How People Get Rich Now". I'd be interested to know what you think of it. http://www.paulgraham.com/richnow.htmlNormanhttps://www.blogger.com/profile/17573687140337856397noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-46652801290327697932021-04-22T01:36:42.267-05:002021-04-22T01:36:42.267-05:00Prof., hope all is well. WODR Inequality is huge p...Prof., hope all is well. WODR Inequality is huge problem...Sincerely, your StudentMPAhttps://www.blogger.com/profile/05204223669169160577noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-41842114518676767842021-04-21T23:47:02.650-05:002021-04-21T23:47:02.650-05:00Although you touched upon this issue in another po...Although you touched upon this issue in another post recently, I am still surprised by the additional details presented here. Rising income inequality has been splattered across quite a solid number of pages over the last decade -- and not just in popular culture, but also in top journals in economics.<br /><br />It's somewhat of a shock that we could get a basic picture so deeply and severely wrong. I can't imagine that in current political climate we will get anything like a sane public conversation about it, especially not where people acknowledge almost everyone left and right were wrong and shift their focus toward providing opportunities to help people build their way out of poverty.Stéphane Surprenanthttps://www.blogger.com/profile/12323914156735134263noreply@blogger.com