A year and a half ago I became aware of a coup that occurred in Honduras and I suspected malevolent things because I had heard that the coup was directed by certain military units that had been trained by the School of the Americas at Fort Benning. Its students are notorious for their human rights abuses perpetuated in service to US hegemony.
I expressed my suspicion to a certain right wing acquaintance that will remain nameless and was surprised to hear his enthusiastic support of the coup. This was a restoration of order. The President was simply violating the Constitution. I thought it was strange that this person would express support of something such as this, but I said little in response because I didn't know much.
Recent Wikileaks disclosures shed light on the situation and I think help illuminate how good Americans are duped to support nefarious behavior and also how US foreign policy via violence tends to further the interests of the corporate world.
The basic facts are as follows. President Zelaya was a wealthy citizen that was elected President, but drifted from conservative viewpoints to more socially democratic viewpoints during his tenure. This is unacceptable. As in Cuba socialism is a grave threat to capitalistic designs. If Cuba is allowed to pursue socialism unfettered it will present itself as a model to other states, especially in states where the distribution of land and other wealth greatly favors the propertied classes. The poor and underprivliged may demand opportunities for a decent living and take matters into their own hands. This is something to be feared by the powerful and wealthy who want more for themselves and less for everybody else.
Zelaya proposed polling the public to ask them if they would support modifying the Constitution to permit a President to serve without term limits. For this he was deposed by the School of the Americas trained General who has ushered in another expanded series of human rights abuses.
World reaction was swift. Virtual unanimity that the coup was illegal and that the democratically elected President should be restored. There were just a couple of exceptions. Namely, the US and Israel. They stood against the world and were friendly towards the new regime. In the case of the US this was with firm support amongst GOP lawmakers. The GOP often doesn't even pretend to care about democracy and order but rather service to the corporate world.
Wikileaks has now revealed that in the opinion of top diplomats at the US Embassy in Honduras the coup was clearly illegal despite a foot dragging unwillingness to recognize it as such by the State Department. The cable details the arguments put forward by the coup's defenders and refutes them.
So I sent this information to my acquaintance thinking that he'd say something like "Interesting. I was obviously misled." I don't know why I'm always so optimistic. Instead I'm sent this right wing puff piece by Mary Anastasia O'Grady. This supposedly shows that yes, the coup was legal despite the cable from Wikileaks. That guy at the embassy knows nothing. The world knows nothing. The case for Zelaya is flimsy.
To me a cursory reading of the cable makes it clear that O'Grady isn't remotely addressing the substance of the cable. The cable basically says that following legal procedures means you must charge Zelaya with violating the Constitution and you must give him an opportunity to rebut the charges. If he's found to be guilty then the consequences would follow. But you can't just assert that he's guilty without giving him any due process. It would be as if Chinese trained militants simply said "Obama has started wars in Pakistan and Yemen without Congressional authorization and has therefore violated the Constitution, so we're entitled to remove him from power and install one of our own people."
So here's what I think can be learned from this. Our government simply sees to it that governments friendly to corporate interest are installed. That might mean egregious violations of the law. That might mean complete subversion of democracy. It might mean grotesque violence. The GOP can be counted on to support this behavior. And the right wing media can persuade otherwise intelligent people to argue on behalf of this action even when it's not in their interest and certainly not in the interest of justice.
The pattern repeats. This is not unlike Vietnam, Iraq, Cuba, Venezuela, and a host of others.
Thursday, December 30, 2010
Tuesday, December 28, 2010
For Those That Doubt The Propaganda Model
Watch this infuriating interview from CNN regarding Wikileaks. And while doing so keep in mind that CNN ostensibly is tasked with doing journalism. That is, if they are pursuing their perceived function they should be trying to uncover corruption/immoral behavior by powerful officials that work contrary to the public interest.
The difference between what the media portray themselves as doing and what they actually do was long ago explained by Ed Herman and Noam Chomsky when they offered their Propaganda Model for the media. They say that based upon an institutional analysis of what the media is and what it's incentive structure is, we should expect it to largely be an enterprise that is in service to power, not an institution that undermines power when that is in the public interest.
Herman and Chomsky proved that their model was correct in a number of ways. One way was to take the examples that are often put forward as evidence that the media is iconoclastic and examining them in detail to show that this perception is false. People perceive that media coverage of the Vietnam War was largely negative and played to the interests of the anti-war movement. Many think that this negative coverage undermined the war itself and worked against the interests of the powerful factions that were perpetuating that war. In fact that is just the opposite of the truth. For the details you'll need to check out Manufacturing Consent.
I think the above interview is another good illustration. The host and government spokerperson's views are pretty much identical. They disparage and criticize an institution that is in fact doing what journalists ought to be doing if what they did wasn't service to power. CNN is hostile to iconoclastic journalism so naturally they oppose Wikileaks.
The difference between what the media portray themselves as doing and what they actually do was long ago explained by Ed Herman and Noam Chomsky when they offered their Propaganda Model for the media. They say that based upon an institutional analysis of what the media is and what it's incentive structure is, we should expect it to largely be an enterprise that is in service to power, not an institution that undermines power when that is in the public interest.
Herman and Chomsky proved that their model was correct in a number of ways. One way was to take the examples that are often put forward as evidence that the media is iconoclastic and examining them in detail to show that this perception is false. People perceive that media coverage of the Vietnam War was largely negative and played to the interests of the anti-war movement. Many think that this negative coverage undermined the war itself and worked against the interests of the powerful factions that were perpetuating that war. In fact that is just the opposite of the truth. For the details you'll need to check out Manufacturing Consent.
I think the above interview is another good illustration. The host and government spokerperson's views are pretty much identical. They disparage and criticize an institution that is in fact doing what journalists ought to be doing if what they did wasn't service to power. CNN is hostile to iconoclastic journalism so naturally they oppose Wikileaks.
Thursday, December 23, 2010
Second Response to HP on Inequality
HP, like you don't claim inequality is not increasing at least to some degree I don't disagree that by some measures life is getting better for all. Wages are down for people in the lower income brackets, but technological advancements make like better for poor people as well. Productivity gains are enjoyed to a very tiny degree by the poor relative to the amount enjoyed by the rich.
I just think that we should consider an alternative system. As I said, life may have gotten better in slave societies with time, but this doesn't mean there isn't a better alternative. But instead of moving in a direction that will make it such that the poor also enjoy the gains in productivity we have a President that has enacted a tax policy that only raises taxes on the poorest Americans. There are changes to the estate tax that exacerbate the inequality situation. And in addition to that we have a tax holiday on social security taxes, which jeopardizes a program that is relied on heavily by the poor and prevents total destitution amongst the poorest of Americans.
Take a look at who it is that is enjoying economic growth these days with a couple of charts.
Here's another illustrating the same point.
You say no big deal. Yeah, inequality is for real, but it's not that bad. It's not bad in the sense that everyone is doing a little better. The poor have gained $200 in their income in the last 25 years. That's better. But why have a system that funnels virtually all economic growth into the pockets of a tiny minority? We know we can do better. We've done better in the past.
With regards to immigration, yes it does appear that the article from Cafe Hayek was mistaken to characterize Bourjas in the way they did. But I think there's a need to quantify the effect on wages. Look to the charts above. The disparity is enormous. This goes back to my prior point about how it seems you believe you can dismiss the importance of inequality merely because single motherhood is increasing or immigration is increasing. It's as if under these conditions you would assume it's impossible to know if inequality is a problem. The top 10% have enjoyed 63% of the income gains while the bottom 20% enjoyed 0.4% of the income gains. We expect the rich to gain more under any system. If all income groups enjoy a 5% increase that means most of the money goes to those at the top. That's perfectly reasonable. But at 0.4% the bottom 20% are getting almost nothing. Immigration can explain a tiny amount, but not all.
Also note that while immigrants start with a low income their increase in income as the years go by outpaces increases amongst natives. See a study here. So these are counterbalancing forces. As I said the key is to quantify the total effect. It may be positive in terms of reducing inequality when that is considered.
Now, consider your claim that involves a study that says if you merely consider health care costs the inequality gap disappears. That's nonsense as you would have to admit because you believe inequality is increasing. This study is flawed. The other thing I would point to is that the study seems to be arguing, based on your description, that with the rise in health care costs in fact total compensation considerations eliminate the inequality gap. So for their calculations they presume that health care costs are rising. If the compensation is corrected for inflation though that should mean that compensation doesn't change with rising health care costs. The fact that they say that it does would suggest they are doing it wrong.
I don't agree that it is my burden to research every speculative claim you offer in your attempts to explain inequality. Imagine that I explain the motivations of suicide terrorists by pointing to foreign military occupation and you reply "Did you investigate the possibility that brain boring bacteria may be prevalent in Islamic states? Go do some research and figure that one out and until you do I'm entitled to dismiss your claim." Mine is the position of the majority of economists and is the prima facie conclusion based on an analysis of income data. That's not to say that other causes are not relevant in explaining the data, but I think the ball is in your court to prove any claims about Britney Spears wannabes or Sergey Brin wannabes.
Regarding the rates at which the people with a college degree marry people without, I asked about the causes and you say this is specifically explained in the article. You cite the article. In that citation I see no explanation other than the repeated assertion about a striking decline since the 70's. Do you consider this an explanation? An assertion that this has happened since the 70's is not an explanation of the causes, nor does it give us the information we would need to consider whether there was some sort of correlation.
You say this fits my pattern calling for drastic changes in the 70's and 80's. First, we can't see the rates in your article, so I don't know why you're drawing that conclusion. Second, you imply that the rate reduced in the 90's. But inequality is still increasing in the 90's and in the 21st century. So this pattern does not fit the inequality that we are seeing.
Should you dismiss EPI or Huffington Post as I dismiss AEI? If they provide no argument, like AEI, then yes. Everybody wants to be a pop star, and my evidence is zero. That's quite weak coming from a group that takes thousands in tobacco money in order to put out studies on the virtues and glories of tobacco which kills hundreds of thousands of people per year in the US alone.
I think that if people read your blog they'd see which of us has the worldview commitment to an economic position. Not that I think that's relevant. It presumes to know your motives. It presumes to say that you have a prior commitment to an economic argument independent of the evidence. Maybe you do and maybe you don't. Regardless I think that's for the reader to decide. My speculating about your motives just isn't value added in my opinion. People can read your arguments and draw their own conclusions about your motives. I think you'd be better served doing the same, but suit yourself. The substantive portions of your replies are definitely value added and welcome here. I don't agree with you but I am learning.
I just think that we should consider an alternative system. As I said, life may have gotten better in slave societies with time, but this doesn't mean there isn't a better alternative. But instead of moving in a direction that will make it such that the poor also enjoy the gains in productivity we have a President that has enacted a tax policy that only raises taxes on the poorest Americans. There are changes to the estate tax that exacerbate the inequality situation. And in addition to that we have a tax holiday on social security taxes, which jeopardizes a program that is relied on heavily by the poor and prevents total destitution amongst the poorest of Americans.
Take a look at who it is that is enjoying economic growth these days with a couple of charts.
Here's another illustrating the same point.
You say no big deal. Yeah, inequality is for real, but it's not that bad. It's not bad in the sense that everyone is doing a little better. The poor have gained $200 in their income in the last 25 years. That's better. But why have a system that funnels virtually all economic growth into the pockets of a tiny minority? We know we can do better. We've done better in the past.
With regards to immigration, yes it does appear that the article from Cafe Hayek was mistaken to characterize Bourjas in the way they did. But I think there's a need to quantify the effect on wages. Look to the charts above. The disparity is enormous. This goes back to my prior point about how it seems you believe you can dismiss the importance of inequality merely because single motherhood is increasing or immigration is increasing. It's as if under these conditions you would assume it's impossible to know if inequality is a problem. The top 10% have enjoyed 63% of the income gains while the bottom 20% enjoyed 0.4% of the income gains. We expect the rich to gain more under any system. If all income groups enjoy a 5% increase that means most of the money goes to those at the top. That's perfectly reasonable. But at 0.4% the bottom 20% are getting almost nothing. Immigration can explain a tiny amount, but not all.
Also note that while immigrants start with a low income their increase in income as the years go by outpaces increases amongst natives. See a study here. So these are counterbalancing forces. As I said the key is to quantify the total effect. It may be positive in terms of reducing inequality when that is considered.
Now, consider your claim that involves a study that says if you merely consider health care costs the inequality gap disappears. That's nonsense as you would have to admit because you believe inequality is increasing. This study is flawed. The other thing I would point to is that the study seems to be arguing, based on your description, that with the rise in health care costs in fact total compensation considerations eliminate the inequality gap. So for their calculations they presume that health care costs are rising. If the compensation is corrected for inflation though that should mean that compensation doesn't change with rising health care costs. The fact that they say that it does would suggest they are doing it wrong.
I don't agree that it is my burden to research every speculative claim you offer in your attempts to explain inequality. Imagine that I explain the motivations of suicide terrorists by pointing to foreign military occupation and you reply "Did you investigate the possibility that brain boring bacteria may be prevalent in Islamic states? Go do some research and figure that one out and until you do I'm entitled to dismiss your claim." Mine is the position of the majority of economists and is the prima facie conclusion based on an analysis of income data. That's not to say that other causes are not relevant in explaining the data, but I think the ball is in your court to prove any claims about Britney Spears wannabes or Sergey Brin wannabes.
Regarding the rates at which the people with a college degree marry people without, I asked about the causes and you say this is specifically explained in the article. You cite the article. In that citation I see no explanation other than the repeated assertion about a striking decline since the 70's. Do you consider this an explanation? An assertion that this has happened since the 70's is not an explanation of the causes, nor does it give us the information we would need to consider whether there was some sort of correlation.
You say this fits my pattern calling for drastic changes in the 70's and 80's. First, we can't see the rates in your article, so I don't know why you're drawing that conclusion. Second, you imply that the rate reduced in the 90's. But inequality is still increasing in the 90's and in the 21st century. So this pattern does not fit the inequality that we are seeing.
Should you dismiss EPI or Huffington Post as I dismiss AEI? If they provide no argument, like AEI, then yes. Everybody wants to be a pop star, and my evidence is zero. That's quite weak coming from a group that takes thousands in tobacco money in order to put out studies on the virtues and glories of tobacco which kills hundreds of thousands of people per year in the US alone.
I think that if people read your blog they'd see which of us has the worldview commitment to an economic position. Not that I think that's relevant. It presumes to know your motives. It presumes to say that you have a prior commitment to an economic argument independent of the evidence. Maybe you do and maybe you don't. Regardless I think that's for the reader to decide. My speculating about your motives just isn't value added in my opinion. People can read your arguments and draw their own conclusions about your motives. I think you'd be better served doing the same, but suit yourself. The substantive portions of your replies are definitely value added and welcome here. I don't agree with you but I am learning.
Tuesday, December 21, 2010
2010 Warmest Year On Record
Once again it seems that conclusions based on science are pretty reliable. That same science makes predictions. We'd better consider them.
Monday, December 20, 2010
Response to HP on Inequality
In my recent post on income inequality I got an extremely lengthy reply from my good friend Hispanic Pundit which can also be read here. Personally I think he should narrow the focus a bit just to make a response more manageable. It's the kind of response that usually wouldn't be addressed at all because it's just too much. However I am glad to get a response even if I'm not able to reply. It at least contains info pro and con so learning can occur.
But in this case I did go through every link he offered and I'm responding below. HP, I'm using the third person just because it was easier to write that way, so don't take it to be rudeness. Again, thanks for your reply and hopefully we can both learn a bit here.
HP has asserted, without evidence, that changing family structure is the reason for the increase in inequality that I've documented. But I did his work for him, showing that divorce rates and the # of children affected by divorce do not correlate with inequality. Divorce rates began increasing in the 60's and leveled off in the 80's. Income gains went to all sectors of the economy, poor and rich, from 1940 to the mid 70's. Inequality began skyrocketing in the 80's with divorce rates leveled off.
So in response HP offers what he says is evidence.
HP's first link offered as evidence says that the number of households has increased faster than the population. You could see why this would tend to suppress family income values. He offers a hypothetical explaining that if incomes doubled, but half the households divorce, then household income stays the same. OK. But does this in fact explain the rise in inequality? He doesn't try to show it. "Could be" is about as far as this can take us.
He says that though the population increased 38% from 1976 to 2006 whereas the number of families rose 60%. He says "presumably" this is due to an increase in the divorce rate. But the divorce rate didn't increase in that time frame and it isn't increasing now (I have data from 1940-1990, 1990-2002 and 2007-2009). The divorce rate is dropping and has been since the 80's.
On the other hand the marriage rate is reducing, so these things can offset one another. This is why the key in my view is the source I provided in the post HP is replying to. Family working hours are increasing. So to offer another hypothetical, if half the families divorced, but working hours for each of those working family members doubled, we'd expect no change in total family working hours. The fact that family working hours are increasing means that the net effect of divorce/delayed marriage is that Americans are working harder for less. The theory sounds plausible, but the data don't support the conclusion.
HP's second link notes, correctly, that the proportion of households headed by women has increased. OK. Has that increase correlated with inequality? No. It increased by a wide margin in the 70's, but not so much in the 80's and 90's. Recall that the total amount of income going to the top 1% has skyrocketed from a mere 10% in 1980 to 23% today. Why has the bulk of the inequality been generated when single motherhood was not increasing as much?
Let me digress for a second here. I get the feeling with HP's analysis that no matter what is occurring in terms of inequality he'll conclude that we can draw no conclusions. Single motherhood has increased. So no matter what other data might show we should dismiss it as of no concern. These same arguments would apply in Haiti or Jamaica. But doesn't that make the view unfalsifiable? Do a thought experiment. Suppose that the top 1% had 10% of all income in 1980 but 90% today. Would it make sense to dismiss it because there has been an increase in single parenthood? No. If you want to argue the point you need to do the work and show the correlations. HP doesn't do that, nor do his sources. They think by merely pointing out one factor which can cause inequality data to be misleading they've shown that there's no problem. I can agree that a rise in single parenthood can cause one to overstate inequality, but I don't think this means that Citigroup is wrong in their economic analysis. They say the economy is being restructured so as to cater to the wealthy. They say this is due to our corporate friendly government. They offer an investment strategy that is based on that conclusion. The fact that there has been an increase in the total number of households doesn't change that.
HP's third link merely repeated what was in the second, so there's nothing to address there.
The fourth link says it's due to increases in immigration. Of course many immigrants are well educated. In fact the % of immigrants with 8 years or less of schooling is less than the native population and is dropping (as it is for the native population.) Some of the highest educated people in this country are immigrants. But also many unskilled immigrants arrive illegally, which is why I noted in the post HP is replying to that the amount of illegal immigration has been dropping since 2007 though inequality continues to rise. So once again no real attempt to show any correlation.
The fifth link clarifies the fourth and in fact has a link to a study which claims that the net effect on wages of immigration is positive. This of course would suggest that immigration doesn't suppress wages, but in fact should increase them. So the cause of the increase in inequality would have to be elsewhere.
The sixth link talks about how people move about various income groups as they age. It says that this doesn't tell us anything and I agree, so I won't comment.
The seventh link makes points about divorce that I've already addressed.
The eighth link says that it's better to remain married for economic purposes. That's of course true, but the data he presents shows a falling number of children affected by divorce and a falling divorce rate since 1995, though inequality has continued to skyrocket. So obviously this is not explaining inequality.
The ninth link talks about the same divorce study and adds nothing to it.
And that's just HP's first comment. I'm exhausted.
OK, so let's move to his second comment. He says that if you consider total compensation, including 401k's and health benefits, you find that the inequality gap disappears. I addressed this claim directly in the post HP is replying to, but he says nothing of my comments. But let me add a further comment.
HP's evidence is in a paper that requires payment to see and as far as I can tell he hasn't seen it himself. I've asked him directly if he's seen it and he simply won't respond to that question. If we haven't seen the evidence how can we draw conclusions? Does this paper account for the vanishing pension plan or the fact that pension plans out perform 401k's? How does it factor in the additional cost of health care? Because the inequality evaluations are being done in terms of dollars that are adjusted for inflation. Are they adding in rising health care costs in terms of dollars not adjusted for inflation to income dollars that are adjusted for inflation? We haven't seen so we don't know and we can't evaluate it.
HP's next argument is that while things may appear bad, in fact if you modify the CPI as necessary to reflect the cost of goods the poor are most likely to buy you find that things in fact aren't so bad. Luxury goods are increasing in price at a more rapid rate than goods poor people would be likely to consume. Perhaps unbeknownst to HP the source of this claim is no longer available. But the opening sentences from the piece HP is recommending are interesting:
"Inequality is growing in the United States. The data say so. Knowledgeable experts like Ben Bernanke say so. Ask just about any economist and they will agree. (They may or may not think growing inequality is a problem, but they will acknowledge that there has been a sharp increase in inequality.)"
It's worth noting that my claims regarding inequality are the consensus of economic experts. Doesn't mean I'm right, but it does mean that HP's view starts with a presumption against it.
The consensus is wrong according to this unavailable study. Again this is hard to evaluate, but if you read the comments at another source HP provided on this same topic you see claims that this claim regarding inflation bias is only true for people making less than $15K/yr, not the bulk of the population.
Next we're directed to this link that offers a variety of what the author apparently thinks are plausible explanations for inequality. Rich people marry rich people now (as if they didn't before). People with college degrees marry people without a college degree at a lower rate now. Isn't that because fewer people lack a college degree? There's less people without a college degree available for marrying.
But maybe people are doing things like starting internet companies, which can either go bust or make them staggeringly rich, like Sergey Brin. Or maybe people want to be pop stars, so it's big money or bust. Just a bunch of haphazard guesses as to the causes and a final comment that there's probably not much the government can do about it. I'm not shocked to read that this guy is a fellow at the right wing American Enterprise Institute. From shilling for corporate interests on global warming to shilling for RJ Reynolds it's not surprising to see these scatter shot arguments in favor of the status quo from the AEI and it's hard to take it seriously in my view, especially in light of the fact that there's just not much of an argument there.
Some inequality is good we're told. Does that mean Haiti is the place to be? Nobody has argued for perfect equality so I don't see the point of this comment.
Finally we're told that it doesn't matter because life is getting better with technological advancement. That was true in slave societies as well as I already commented. That doesn't mean it's right that the vast bulk of the increases in productivity and efficiency gains are being enjoyed only by the super wealthy. The point is that a better system would be a system that allowed everyone to reap income gains.
But in this case I did go through every link he offered and I'm responding below. HP, I'm using the third person just because it was easier to write that way, so don't take it to be rudeness. Again, thanks for your reply and hopefully we can both learn a bit here.
HP has asserted, without evidence, that changing family structure is the reason for the increase in inequality that I've documented. But I did his work for him, showing that divorce rates and the # of children affected by divorce do not correlate with inequality. Divorce rates began increasing in the 60's and leveled off in the 80's. Income gains went to all sectors of the economy, poor and rich, from 1940 to the mid 70's. Inequality began skyrocketing in the 80's with divorce rates leveled off.
So in response HP offers what he says is evidence.
HP's first link offered as evidence says that the number of households has increased faster than the population. You could see why this would tend to suppress family income values. He offers a hypothetical explaining that if incomes doubled, but half the households divorce, then household income stays the same. OK. But does this in fact explain the rise in inequality? He doesn't try to show it. "Could be" is about as far as this can take us.
He says that though the population increased 38% from 1976 to 2006 whereas the number of families rose 60%. He says "presumably" this is due to an increase in the divorce rate. But the divorce rate didn't increase in that time frame and it isn't increasing now (I have data from 1940-1990, 1990-2002 and 2007-2009). The divorce rate is dropping and has been since the 80's.
On the other hand the marriage rate is reducing, so these things can offset one another. This is why the key in my view is the source I provided in the post HP is replying to. Family working hours are increasing. So to offer another hypothetical, if half the families divorced, but working hours for each of those working family members doubled, we'd expect no change in total family working hours. The fact that family working hours are increasing means that the net effect of divorce/delayed marriage is that Americans are working harder for less. The theory sounds plausible, but the data don't support the conclusion.
HP's second link notes, correctly, that the proportion of households headed by women has increased. OK. Has that increase correlated with inequality? No. It increased by a wide margin in the 70's, but not so much in the 80's and 90's. Recall that the total amount of income going to the top 1% has skyrocketed from a mere 10% in 1980 to 23% today. Why has the bulk of the inequality been generated when single motherhood was not increasing as much?
Let me digress for a second here. I get the feeling with HP's analysis that no matter what is occurring in terms of inequality he'll conclude that we can draw no conclusions. Single motherhood has increased. So no matter what other data might show we should dismiss it as of no concern. These same arguments would apply in Haiti or Jamaica. But doesn't that make the view unfalsifiable? Do a thought experiment. Suppose that the top 1% had 10% of all income in 1980 but 90% today. Would it make sense to dismiss it because there has been an increase in single parenthood? No. If you want to argue the point you need to do the work and show the correlations. HP doesn't do that, nor do his sources. They think by merely pointing out one factor which can cause inequality data to be misleading they've shown that there's no problem. I can agree that a rise in single parenthood can cause one to overstate inequality, but I don't think this means that Citigroup is wrong in their economic analysis. They say the economy is being restructured so as to cater to the wealthy. They say this is due to our corporate friendly government. They offer an investment strategy that is based on that conclusion. The fact that there has been an increase in the total number of households doesn't change that.
HP's third link merely repeated what was in the second, so there's nothing to address there.
The fourth link says it's due to increases in immigration. Of course many immigrants are well educated. In fact the % of immigrants with 8 years or less of schooling is less than the native population and is dropping (as it is for the native population.) Some of the highest educated people in this country are immigrants. But also many unskilled immigrants arrive illegally, which is why I noted in the post HP is replying to that the amount of illegal immigration has been dropping since 2007 though inequality continues to rise. So once again no real attempt to show any correlation.
The fifth link clarifies the fourth and in fact has a link to a study which claims that the net effect on wages of immigration is positive. This of course would suggest that immigration doesn't suppress wages, but in fact should increase them. So the cause of the increase in inequality would have to be elsewhere.
The sixth link talks about how people move about various income groups as they age. It says that this doesn't tell us anything and I agree, so I won't comment.
The seventh link makes points about divorce that I've already addressed.
The eighth link says that it's better to remain married for economic purposes. That's of course true, but the data he presents shows a falling number of children affected by divorce and a falling divorce rate since 1995, though inequality has continued to skyrocket. So obviously this is not explaining inequality.
The ninth link talks about the same divorce study and adds nothing to it.
And that's just HP's first comment. I'm exhausted.
OK, so let's move to his second comment. He says that if you consider total compensation, including 401k's and health benefits, you find that the inequality gap disappears. I addressed this claim directly in the post HP is replying to, but he says nothing of my comments. But let me add a further comment.
HP's evidence is in a paper that requires payment to see and as far as I can tell he hasn't seen it himself. I've asked him directly if he's seen it and he simply won't respond to that question. If we haven't seen the evidence how can we draw conclusions? Does this paper account for the vanishing pension plan or the fact that pension plans out perform 401k's? How does it factor in the additional cost of health care? Because the inequality evaluations are being done in terms of dollars that are adjusted for inflation. Are they adding in rising health care costs in terms of dollars not adjusted for inflation to income dollars that are adjusted for inflation? We haven't seen so we don't know and we can't evaluate it.
HP's next argument is that while things may appear bad, in fact if you modify the CPI as necessary to reflect the cost of goods the poor are most likely to buy you find that things in fact aren't so bad. Luxury goods are increasing in price at a more rapid rate than goods poor people would be likely to consume. Perhaps unbeknownst to HP the source of this claim is no longer available. But the opening sentences from the piece HP is recommending are interesting:
"Inequality is growing in the United States. The data say so. Knowledgeable experts like Ben Bernanke say so. Ask just about any economist and they will agree. (They may or may not think growing inequality is a problem, but they will acknowledge that there has been a sharp increase in inequality.)"
It's worth noting that my claims regarding inequality are the consensus of economic experts. Doesn't mean I'm right, but it does mean that HP's view starts with a presumption against it.
The consensus is wrong according to this unavailable study. Again this is hard to evaluate, but if you read the comments at another source HP provided on this same topic you see claims that this claim regarding inflation bias is only true for people making less than $15K/yr, not the bulk of the population.
Next we're directed to this link that offers a variety of what the author apparently thinks are plausible explanations for inequality. Rich people marry rich people now (as if they didn't before). People with college degrees marry people without a college degree at a lower rate now. Isn't that because fewer people lack a college degree? There's less people without a college degree available for marrying.
But maybe people are doing things like starting internet companies, which can either go bust or make them staggeringly rich, like Sergey Brin. Or maybe people want to be pop stars, so it's big money or bust. Just a bunch of haphazard guesses as to the causes and a final comment that there's probably not much the government can do about it. I'm not shocked to read that this guy is a fellow at the right wing American Enterprise Institute. From shilling for corporate interests on global warming to shilling for RJ Reynolds it's not surprising to see these scatter shot arguments in favor of the status quo from the AEI and it's hard to take it seriously in my view, especially in light of the fact that there's just not much of an argument there.
Some inequality is good we're told. Does that mean Haiti is the place to be? Nobody has argued for perfect equality so I don't see the point of this comment.
Finally we're told that it doesn't matter because life is getting better with technological advancement. That was true in slave societies as well as I already commented. That doesn't mean it's right that the vast bulk of the increases in productivity and efficiency gains are being enjoyed only by the super wealthy. The point is that a better system would be a system that allowed everyone to reap income gains.
Wednesday, December 15, 2010
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