Tiptoe Through The Minefield

Paul Krugman returns to the subject of income inequality with today's column.

We noted that some his great howlers have been on this very subject, as noted in points (4) and (5) of this old post.  Let's see if he has benefitted from our constructive criticism (a hint that he has does appear in this column - although he ducks it initially, he eventually admits that the Great Depression led to his Golden Age of Income Equality).

For a bit of background - here is his NY Times magazine piece from 2002, and his sources.

This looks like a mid-90's piece on inequality that Krugman wrote for Mother Jones.

We will have more later - our themes will be, what about immigration and its impact on these stats, and what about technological innovation as the engine of inequality.

But let's stop (for now) with this Great Moment in Self-Awareness, from the latest column:

Above all, the partisans engage in name-calling.

Indeed.  And for those unfamiliar with his style, in Krugman's world, it is his critics that are the "partisans".

MORE:  Nothing Wrong With America That A Depression And A War Can't Fix:

Jim Glass picks up Krugman's aversion to the word "depression", but he missed this, from Krugman's 2002 NY Times magazine article:

The first point you learn from these new estimates is that the middle-class America of my youth is best thought of not as the normal state of our society, but as an interregnum between Gilded Ages. America before 1930 was a society in which a small number of very rich people controlled a large share of the nation's wealth. We became a middle-class society only after the concentration of income at the top dropped sharply during the New Deal, and especially during World War II. The economic historians Claudia Goldin and Robert Margo have dubbed the narrowing of income gaps during those years the Great Compression. Incomes then stayed fairly equally distributed until the 1970's: the rapid rise in incomes during the first postwar generation was very evenly spread across the population.

The word "depression" does finally appear in Krugman's recent column, the second time he sidles up to this point.  As a policy prescription, it is a bit rough, but we are delighted to see the self-styled "reality-based community" joining us in reality.

ANOTHER QUICK HIT:  Someone should put out an Amber Alert for a missing statistic - Krugman tells us that median income doubled from 1947 to 1973, and that median income grew 22% thereafter while the top 1% doubled.

But how did the top 1% do from 1947 to 1973?  Without even looking it up, I will say that it *way* more than doubled.

I can stop anytime.  (Bet I don't).

Comments

[spencer]

But, But, in his letter to the editor Greg Mankiw agreed with him that income inequality has been increasing for 25 years.

[Mick Wright]

What do you make of the way he plagiarized Dan Okrent's criticism of him? I'm dumbfounded.

[TM]

I am not disputing that income inequality has risen. However, causes and consequences are important.

For example, IIRC it is Greg Easterbrook that argues that, absent immigration, income inequality would not have gone up at all.

[Miracle Max]

More immigrants as a share of the population increase poverty rates. Over time, if immigrants' income rises more rapidly than the population as a whole, they could reduce poverty rates. So the overall effect depends on the numbers, as discussed among other places here: http://www.epinet.org/content.cfm/briefingpapers_bp130.

As for "technology," since you can't measure it, you can't support a statement linking it to inequality, or anything else for that matter.

Where is the Easterbrook analysis? Are the Jews involved?

[Jeff]

Indeed. And for those unfamiliar with his style, in Krugman's world, it is his critics that are the "partisans".

Just to be clear, Krugman is targeting politicians, not the chattering class. There's a BIG difference. And if the left's chattering classes had anything like the partisan vitriol of the right, you wouldn't spend so much time on Krugman, who is among a small handful of name-calling partisans.

[Jim Glass]

"Above all, the partisans engage in name-calling."

Does saying somebody else engages in name calling qualify as name calling?

Hey, for cheap slicing and dicing, one can note how over a succession of stories Krugman has gradually sliced all mention of the Great Depression out of the Great Contraction.

So the Contraction, originally caused by Depression and World War II, now is merely the result of liberal Democratic policy that was no accident.

(Think of all the people who were saying that at the time about FDR, who were dismissed as kooks.!)

Of course, in a mere 700-word column there's little room for more than the simplest slicing and dicing. For the real Benihana experience and a Dice-o-matic display on the side, one must look to something longer, like that Nation article a little while back, the elements of which have been recycled through the Times columns since.

For links to expressions of admiration of the slicing skills shown there -- and to the magic words that made years of reading the comments to Brad DeLong's blog much more than worthwhile...

"I talked to Emannuel Saez himself [whose data Krugman cited] last night about the disparity between his graphs and the Census' of changes in real income of the lower 95% of adults between 1973 and 2000 -- his graphs show their real income dropping while the US Census' show them rising.

"Lo and behold, it turns out that on this point Glass is entirely right and Krugman wrong..."

... ~sigh~... see my own ever humble entry on all this.

[SaveFarris]

If "economic security is a thing of the past: ... All it takes is a bit of bad luck in employment or health to plunge a family that seems solidly middle-class into poverty.", then we would see a rise in poverty rates, right?

Wrong.

Funny, the 1960s era that Krugman praises in the preamble to his column averaged a 17.4% poverty rate. Is Krugman really advocating raising the poverty rate by 28%?!? If it did, would he say "Look at all the equality!" or would he blame it on Bush?

[TM]

Just to be clear, Krugman is targeting politicians, not the chattering class.

I didn't get that e-mail; maybe he will include me on the circulation list next time.

Where is the Easterbrook analysis? Are the Jews involved?

Actually, I think that rather than Jews, it is gas-passing sheep... oops. A lot of his stuff is hidden at TNR, but I infer that his notions on immigration and inequality are discussed in his book, "The Progress Paradox".

As to the notion that we cannot measure "technological change" - I agree, and it reminds me of a very profound thought that came out of the Vietnam war.

One of MacNamara's managerial whiz kids was explainng that, as part of their management process, they attempted to quantify aspects of the war (this was the mindset that gave us body-counts). His point, which he summarized quite pithily and which I clumsily paraphrase, was "We started out trying to quantify what we thought was important; we ended up believing that if we could not quantify something, it wasn't important".

Enemy morale, for example, or public commitment - just becuase it can't be reliably measured does not mean it is not important.

Same thing (one might argue, and I am) with technological change. I'll grant that there may not be some generally accepted measure of it. However, that does not mean it can be dropped from a discussion of econoic growth, or income inequality.

[Brainster]

Tom, you may have some interest in a post I put on my blog on this column. Suffice to say that Krugman made his point by drawing a line between a peak and a trough and encouraged his readers to believe that was the trend. If you draw the line between peak and peak or trough and trough you get a quite different picture of a middle class moving up; not as sharply as the rich, but still quite comfortably improving over time. In short, Krugman engaging in his usual tactics of shaping, slicing and selectively presenting data in an attempt to mislead.

[Jim Glass]

"Suffice to say that Krugman made his point by drawing a line between a peak and a trough and encouraged his readers to believe that was the trend."

No, no, he actually said the income growth was the result of enlightened policy.

Over at The Nation, where he had more room, he explained...

During the 1930s and '40s, however, America experienced what the economic historians Claudia Goldin and Robert Margo have dubbed the Great Compression: a drastic narrowing of income gaps, probably as a result of New Deal policies.

"Probably as a result of New Deal policies"! ;-)

The Great Depression and World War II were New Deal policies! Think of all the people who were unjustly maligned for saying that at the time!

(And I love that qualifying "probably" -- yes, if somebody inquires, the Depression and World War II might have had a little something do to with it, in addition to the NRA.)

OK, so median income is first driven down by the Great Depression and then by World War and its attendent mass conscriptions and wage controls (ie, "probably by New Deal policies"), then when it rises from an aberrant low at faster than average rate the credit goes to ... hey, I think you may have a point!

BTW, who used to take the lead in debunking the late-'80s Reagan boom by saying that it was only the natural follow-up to the worst recession since the Depression, so that all that above-average growth didn't count for anything until things got back to the long-term trend line? IIRC, it was Paul Krugman.

[James]

Man, it looks like everyone is commenting on this beauty. And I thought I was being original. My biggest point on my blog is that Krugman is ignoring the fact that the growth rate of economies will inevitably slow as they industrialize, thus growth of income will follow. Also if you look at the numbers, they don't support the claim that income growth is largely from working more hours.

[TM]

If Jim Glass had a comments section, I would leave this there - it is from Krugman's 2002 NY Times magazine piece, and ties in to the the theme that the Great Depression was not a part of the story of income inequality:

The first point you learn from these new estimates is that the middle-class America of my youth is best thought of not as the normal state of our society, but as an interregnum between Gilded Ages. America before 1930 was a society in which a small number of very rich people controlled a large share of the nation's wealth. We became a middle-class society only after the concentration of income at the top dropped sharply during the New Deal, and especially during World War II. The economic historians Claudia Goldin and Robert Margo have dubbed the narrowing of income gaps during those years the Great Compression. Incomes then stayed fairly equally distributed until the 1970's: the rapid rise in incomes during the first postwar generation was very evenly spread across the population.

Nowhere in his 2002 article does he mention the depression - the word finally appears in his 2005 column.

We eagerly await further advances in economic history.

[Patrick R. Sullivan]

'if the left's chattering classes had anything like the partisan vitriol of the right'

Right, Michael Moore, James Carville, Lawrence O'Donnell, Al Franken, Rosie O'Donnell are just such sweethearts.

[Patrick R. Sullivan]

I think the biggest howler from Krugman today was blaming a trend he identifies as beginning in 1973 on 1980s policies. Wouldn't policies from the '60s be somewhat likelier culprits?

Say, the War on Poverty? The Civil Rights Act?

[Jim Glass]

"If Jim Glass had a comments section, I would leave this there ... Nowhere in his 2002 article does he mention the depression - the word finally appears in his 2005 column."

The correction and extra info are noted, a Russian joke is added, and because the thing grows longer there's a new link too.

[Jor]

"But it rose only 22 percent from 1973 to 2003, and much of that gain was the result of wives' entering the paid labor force or working longer hours, not rising wages."

That could be a line from the American conservative. I agree, that you have to compare the growth rates of the rich between 1940 and 1973 to the growth rate of their income now to get a fair perspective -- but the fact that the majority of income rose due to spouses, seems to suggest Krugman is probably right.

[Patrick R. Sullivan]

"the fact that the majority of income rose due to spouses, seems to suggest Krugman is probably right."

Heh heh, according to one of the Angry Bears (and seconded by Brad DeLong) the new Gold Standard for Econ Stats is labor force participation and/or the employment to population ratio.

For the latter, the average was 56.5% for Krugman's Golden Age. For the Great Destruction Era, it's 61.0%

But, the lowest household income quintile contains only about half as many people as the top quintile. Because the lowest contains most of the single mothers, and the top most of the stable marrieds. The top quintile increased their incomes by working more.

Meaning it was the Tune In, Turn On, and Drop Out messages of Krugman's side of the aisle that's responsible.