Chapter 3: Chess Pieces Fallacies
Professor John Rawls:
-wrote social justice literature like, A Theory of Justice, on various policies recommending on grounds of their desirability from a moral standpoint
-the writing often had little or no attention to the practical question of whether those policies could in fact be carried out and produce the ent results desired
-Rawls referred to things that “society” should “arrange” by not specifying either the instrumentalities or the feasibilities of those arrangements
Government:
-hard to imagine giving the “arrangement of society” power solely to the government
-it raises questions about the dangers of putting more power in the hands of politicians who run the government
-interior decorators arrange, governments compel so this is not a subtle distinction
Ex. government compels people to obey traffic laws but can’t compel you to not own a car
-there are dangers to be considered when expanding government compulsion for whatever is desirable
***that would mean destroying everyone's freedom for the sake of whatever crusade has caught the fancy of some influential segment of the population
Presumption of Doctrine Theorist:
”a man system” who “seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board”
***it is the exaltation of desirability and neglect of feasibility that today is still a major ingredient in the fundamental fallacies of the social justice vision
-its implications extend to a variety of issues, ranging from redistribution of wealth is at the heart of the social justice agenda
-social justice advocates stress what they see as the desirability of such policies
-the feasibility of those policies tends to receive far less attention, and the consequences of trying and failing often receive virtually no attention
-the larger issue is whether the actual effects of attempting more comprehensive and enduring confiscation and redistribution policies are likely to be successful or counterproductive (morally just)
Redistribution of Wealth:
-confiscation and redistribution of the wealth of “the rich” might seem politically attractive
-to what extent are “the rich” conceived as being like inert pieces on a chessboard
-to what extent that “the rich” can foresee and react to redistributive policies, the actual consequences can be very different from what was intended
-an absolute monarchy or a totalitarian dictatorship, a mass confiscation of wealth can be suddenly imposed without warning on the “millionaires and billionaires” so often cited as targets on confiscation
***in a country with a democratically elected government, confiscatory taxation or other forms of confiscation must first be publicly proposed, and then develop sufficient political support over time among the voters before being actually imposed by law
-the millionaires and billionaires are aware of the process so they would also be aware of the impending confiscation and redistribution before it happens
-nor will the millionaires and billionaires simply wait passively to be sheared like sheep
The Rich:
-when forewarned of a large-scale confiscations of their wealth
1-they can invest their wealth in tax-exempt securities
2-sending their wealth beyond the taxing jurisdiction
3-moving themselves personally beyond the taxing jurisdiction
-in the United States, the taxing jurisdiction can be a city, a state, or the federal government
-the various ways of sheltering wealth from taxation may have some costs to the “rich” that are immovable assets like steel mills or chains of stores, so may not be able to escape confiscation of these particular forms of wealth
-liquid assets in today’s globalized economies around the world, vast sums of money can be transferred electronically from country to country with one click of a mouse
***the actual consequences of raising tax rates on “the rich” in a given jurisdiction is a factual question
-the outcomes is not predictable and the planned confiscation will not be feasible
Ex. raising the tax rate X percent does not guarantee that the tax revenue will also rise X percent
-when we turn from theories and rhetoric to the facts of history, we can put both explicit and the implicit assumptions of the social justice vision to the test
History:
-Britain’s imposition of a new tax on its American colonies played a major role in setting off a chain of events that led ultimately to those colonies declaring their independence and becoming the United States of America
“Your scheme yields no revenue; it yields nothing but discontent, disorder, and disobedience.” Edmund Burke
-Americans were not just inert pieces on the great chessboard of the British Empires
-American independence deprived Britain not only of revenue from the new taxes they imposed but also new revenue from the other taxes they had already been collecting from the American colonies
***this is not the only time when an increase in the official rate of taxation led to a reduction in the tax revenues actually collected
Tax Rates versus Tax Revenues:
Ex. Maryland anticipated collecting more the $100 million in additional tax revenues, by increasing the tax rate on people whose incomes were a million dollars a year or more
-by the time the new tax rate took effect in 2008, the number of people living in Maryland declined so the tax revenues which had been anticipated to rise by more than $100 million, actually fell instead by more than $200 million
Ex. Oregon raised its income tax rate in 2009 on people earning $250,000 a year or more, its income tax revenues also fell instead of rising
***Americans were still not inert chess pieces
-similar things have happened in other countries who have raised tax rates on substantially high incomes with the expectation that it would automatically bring in more tax revenue, but the wealth moved to other countries
Reduction in Tax Rates:
***reduction in tax rates does not automatically result in a reduction in tax revenues
-people are not inert chess pieces in either case
-just as high tax rates can repel people, businesses and investments, lower tax rates can attract them
Ex. Iceland corporate tax rate was gradually reduced from 45 percent to 18 percent between 1991 and 2001, tax revenue tripled
-in the United States, tax-exempt securities provide an obvious way for high-income people to avoid paying high tax rates
-Instead of avoiding, reducing the tax percent incentivises and increases income tax revenue that is collected
Ex. Woodrow Wilson Administration
-the federal income tax rate on the highest incomes in 1920 was 73% on People earning $300,000
-by 1921 the highest income tax rate had been reduced to 25%
-in 1928, the total amount of income tax revenue collected increased as there also was an increase of people earning a million dollars or more per year
-in 1921, there were less than 5% of people earning a million dollars or more per year
-in 1928, million dollar earners rose to 15.9%
***the point made is that the rich had vast sums of money invested in tax-exempt securities
-these securities paid a lower rate on return and were not subject to taxation
-moving the tax rate from 73% to 25% made sense for high-income people to move their revenue from a lower rate on return to being taxed with a higher rate on their return
***the federal government collected more tax revenue from the lower tax rate because 25% of something is larger than 73% of nothing
“Both Secretary of the Treasury Andrew Mellon and President Calvin Coolidge said beforehand that a reduction of the tax rate would increase tax revenue, as it did, and bring in more tax revenue from exempt securities had created a situation that was ‘repugnant’ in a democracy–namely, that there was, in effect, “a class in the community which cannot be reached for tax purposes.”
Math:
Taxes Up = Revenues Down
Taxes Down = Revenues Up
-the implicit assumption that tax revenues automatically move in the same direction as tax rates seem impervious to factual evidence
-this evidence is readily available on the Internet from the official records of the Internal Revenue Service
Social Justice:
-arguments for reducing the top tax rate were denounced as “tax cuts for the rich”
-catchy, but does not reflect the math that has proven to be successful
-the chess pieces fallacy remains largely unchallenged who continue to advocate for higher tax rates on the rich which does not work
-this chess move on the basis of its desirability from their perspective without regard to questions as to its feasibility as a revenue-collection mechanism
Politics:
-highly expensive proposals to have the government provide various benefits “free” to everyone can be very appealing to some voters when the additional costs to the government are said to be paid for by collecting higher tax revenues from “millionaires and billionaires”
-an outcome might seem desirable to some voters, from a social justice perspective, but desirability does not preclude questions of feasibility
***the goal is not truth but votes
-if most voters believe the rhetoric then is is success as far as politicians are concerned
***People who imagine that the benefits they receive “free” from government will be paid by others may discover that they themselves end up paying for those benefits, as a result of inflation
The Inflation “Tax”
-just as tax rates on paper are not necessarily collected, so things that are not taxes can have the same effect as taxes = inflation
Trickle down Effect:
-tax revenues to pay for “free benefits” given to various groups fail to cover the expenses of those benefits
-the government can get additional money needed to cover the deficit by issuing more government bonds and selling them
-these bonds are purchased in the market, accrues interest, and will be paid for by taxpayers in the future
-if the bonds are not bought, the Federal Reserve System of our government can purchase them legally to create money
***this additional money in circulation will result in inflation
-the net result of inflationary price increases is that everyone’s money –regardless of income–loses some of its value
***Money loses value
-a tax on money is not a tax on tangible assets such as real estate which increases in market value during an inflation
-the net result of all this is that an inflation “tax” can take a higher percentage of the assets of the poorest people, whose money is likely to be a higher percentage of their total assets
-they are less likely to own factories, real estate, and other tangible assets that rise in market value during in inflation
***Free = paying higher prices for goods and services
-in inflation tax is a regressive tax paid whenever buying groceries, gasoline, or other consumer goods at higher prices
-the illusion of getting “free” benefits from the government may be maintained, so long as the recipients do not see the connection between the higher prices they end up paying for what they buy after the government gives them “free” things
***the biggest beneficiaries of this situation are the politicians who attract voters by offering them “free” benefits “as a right, not a privilege”--which the voters end up paying for in a roundabout way = inflationary price increases on the things they buy
-politicians cover their tracks by calling the key mechanism–the Federal Reserve’s creation of money to buy government bonds = "quantitative easing”
***instead of saying in plain English that the government is producing more of its own money, in order to pay for the things it is giving away “free”
-QE2 (quantitative easing) is used to designate a second round of creating money which sounds impressive but it only means “producing more money for politicians to spend”
Chess Pieces and Price Controls:
***This is the most basic principles of economics
-just as people’s behaviors changes when governments change tax rates, so their behavior changes when governments change the terms of other transitions
-governments have been setting prices on various goods and services by law, for thousands of years–going back to Roman times, and even to ancient Babylon before that
Reactions to Price Controls:
-the people subject to price-setting laws have seldom remained passive, as if they were inert chess pieces
-Richard Nixon was fully aware of the adverse economic consequences of price controls, imposed those controls anyway
-Milton Friedman criticized his decision but Nixon responded “I don’t give a good goddamn what Milton Friedman says. He’s not running for reelection.”
-Nixon was re-elected by a larger majority than that which first put in in the White House
-the economic consequences of the price controls is setting the price lower that what was set by supply and demand
***consequences = the amount demanded by consumers went up because of the artificially lower prices, the amount produced by producers went down because of those same artificially lower prices
-neither consumers nor producers were inert chess pieces
***consequences = the net result was that there were widespread shortages of food, gasoline, and numerous other things which become widely apparent only after the election
Ex. Zimbabwe decreed drastic cutbacks in prices to deal with runaway inflation in 2007
-citizens of Zimbabwe “greeted the price cuts with a euphoric–and a short lived–shopping spree”
-the increase in the amount of consumers demanded was accompanied by a decrease in the amount that producers supplied
-bread, sugar and cornmeal, staples of every Zimbabwean’s diet vanished
-meat became nonexistent even for middle class who had to buy it on the black market
-hospital patients were dying for lack of basic medical supplies
***people of Africa were not inert chess pieces
-the forms of price controls has been tried all over the world with similar patterns of failure
Why don’t politicians learn from their mistakes?
-they do learn
-they learn what is politically effective
-what they do is not a mistake politically, despite how disastrous such policies may turn out to be for the country
What can be a mistake politically?
-to assume that particular ideals–including social justice–can be something that society can just “arrange” through government, without considering the particular patterns of incentives and constraints inherent in the institution of government
***rent control laws have created housing shortages in cities around the world
Minimum Wage Laws:
***price control laws force prices down with creates shortages
-not all price control laws force prices down, some price control laws force prices up
-producers produce more because of higher prices, but consumers by less
-people are not inert chess pieces in either case
-price control lays that force prices up tend to create unsalable surpluses
Ex. Agriculture
-price support programs in the United States
-led to farmers growing larger crops than the consumers will buy at artificially higher prices
-the unsalable surpluses have led to expensive government programs to buy this surplus output–storing it—while figuring out how to dispose of it and limit future production
-these costs run into the many billions of dollars of the taxpayers’ money
Minimum Wage:
-a special form of price controls to force prices up are minimum wage laws often supported by social justice vision
-minimum wage laws are among the many government policies widely believed to benefit the poor by preventing them from making decisions for themselves
-that surrogate decision-makers regard as being not as good as what the surrogates can impose through the power of government
***This is basic economics
-people tend to purchase less at a higher price
-employers, not being inert chess pieces, tend to hire less labor at a higher price based on supply and demand
-minimum wage rates are usually set by law at a level lower than what the average worker makes
-laws now set wage rates higher than what an unskilled beginner would earn by supply and demand
-the unsalable surplus is called unemployment
Consequences:
-a minimum wage law tends to be greater on young beginners–especially teenage workers–whose unemployment rates are especially relevant as test of the economic principles which suggest that minimum wage laws create higher rates of unemployment
***minimum wage laws = creates higher unemployment
Effects of minimum wage laws:
1948-unemployment rate in United States for black 16-17 year old males was 9.4%
-white counterparts was 10.2%
-black 18-19 year olds was 10.2%
-white 18-19 year olds was 9.4%
***in short there were no significant racial differences in unemployment rates among teenage males in 1948
-there was no minimum wage law in 1948
History:
-the federal minimum wage law–the Fair Labor Standards Act of 1938
-a decade later it was even worse as it did not work in a supply and demand economy causing high rates of inflation
-in 1946, Professor George J. Stigler, a leading economist of the era stated
“The minimum wage provisions of the Fair Labor Standards act of 1938 have been repealed by inflation.”
-the intervening years had such high rates of inflation that the minimum wage specified in 1938 was well below what even an unskilled teenage male beginner was paid in the devalued dollars in 1948
-for practical purposes, there was no effective minimum wage law
-in 1950, there began a series of increases in the minimum wage rate over the years in order to keep up with inflation
-the 1950s were the last decade in the 20th century in which black 16-17 year old males had annual unemployment rates below 10%
-decades later the annual unemployment of black teenage males never fell below 20%
-in some years it ranged above 40%
***Anyone who lived through those early years knows that there was more racism then than today
-1950, public schools in Washington were explicitly segregated by race
-federal agencies also had racially segregated employees, though not officially
Milton Friedman:
-the Nobel prize winning economist denounced minimum wage laws as “one of the most, if not the most, antiblack laws on the statute books.”
-his student, Gary S. Becker, conducted an in-depth analysis of the economics of discrimination
Points:
-racism is an attitude inside a person’s head, and may cost racists nothing
-discrimination is an overt act, out in the real world, that can cost the discriminator either little or a lot depending on economic circumstances
-in a free competitive market, with prices determined by supply and demand, discrimination can have serious costs to the discriminator
***minimum wage laws reduce the cost of discrimination to the discriminator
-a wage rate set by government–at a level higher than it would be set by supply and demand in a competitive market–causes reactions by both workers and employers, as with other sellers and buyers who are not inert chess pieces
-higher wage rates attract more job applicants
-but these higher costs of labor tend to reduce the amount of labor employers hire
-the net result is chronic surplus of job applicants for low-wage jobs affected by minimum wage laws
-employers who turn away qualified minority applicants can often readily replace them with other qualified people from the chronic surplus of job applicants
***discrimination under these circumstances may cost the employer nothing
-not surprising that there was no significant difference in unemployment rates between black and white male teenagers in 1948 even though there was more racism than in the later years
-not surprising that after a series of minimum wage rate increases over the years, to offset inflation and make the minimum wage law effective again, a substantial racial gap in teenage male unemployment rates became common
Discrimination:
-the cost of discrimination to the discriminator can vary considerably from one kind of economic activity to another
-businesses higher in competitive markets where the employer’s own money is at risk
-the most discriminatory employers in history have been among non-profit organizations, regulated public utilities, and government agencies
-it costs government discriminators nothing to discriminate because the costs are paid by taxpayers
-discrimination in non-profit institutions where employers are likewise spending other people’s money
-government-regulated public utilities discrimination can be passed onto the customers who have no choice but to pay when dealing with a government regulated monopoly
-Each of these kinds of institutions has had a long history of especially discriminatory policies against minority workers, as compared to policies in institutions operating in competitive markets with employers’ own money is at risk
***there is a pattern: most discrimination happens when it costs the discriminator the least; the least discrimination happens when it costs the discriminator the most
Point:
-neither social justice advocates nor anyone else can safely proceed on the assumption that the particular laws and policies they prefer will automatically have the results they expect, without taking into account how the people on whom these laws and policies are imposed will react
***both history and economics show that people are not just inert chess pieces, carrying out someone else’s grand design
Chess Pieces and Income Statistics:
“In controversies revolving around social justice issues, some of the most serious distortions of reality are based on statistics showing income distribution trends over time.”
-the statistics may be perfectly accurate, but the distortions come from discussing people as if they were like inert chess pieces, and remained fixed in the same income brackets over time
Trends Over Time:
-this has long been a theme common in such media outlets, television programs, politicians, and academics.
“The gap between rich and poor has widened in America.” New York Times
“The rich have seen far greater income gains than have the poor.” Washington Post
“The wealthy” as “people who have made almost all the income gains in recent years.” Washington Post
“The top 10 percent no longer takes in one-third of our income, it now takes half.” President Barack Obama
“The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year.” Prof. Joseph E. Stiglitz of Columbia University
“Society’s wealth distribution has become lopsided.” Prof. Stiglitz
“99 percent of Americans” are said to be together “in the same stagnating boat.” Prof. Stiglitz
****if these were the same people in the same income brackets over the years, the conclusions reached would be valid, but these are not the same people in the same brackets over the years
-According to the Internal Revenue Service, “more than 50 percent of taxpayers in the bottom quintile to a higher quintile within ten years.”
-most Americans do not stay fixed in the same income bracket, as if they were inert chess pieces
***empirical studies that followed the incomes of specific individuals over a span of years also showed a pattern directly the opposite of the pattern in widely cited studies
-in assumption of stagnation is not stagnation, when there is turnover of most individuals in these brackets from one decade to the next
University of Michigan Study:
-followed specific individuals of working Americans from 1975-1991
-the pattern it found was that individuals who were initially in the bottom 20 percent in income in 1975 had their incomes rise over the years
-not only at a higher rate than the incomes of individuals in the higher brackets
-1991: 29 percent of those who were in the lowest quintile in 1975 had risen all the way to the top quintile
-only 5 percent of those initially on the bottom quintile remained where they had been in 1975
-these were not the rags to riches fictional characters
-these were mundane realities about people usually having higher incomes in their thirties than they had in their twenties
-there is a continuing of increases of pay as they acquire more experience, skills, and maturity
-individuals who were initially in the top quintile in 1975 had the smallest increase in real income by 1991
-smallest in both percentage terms and in absolute amounts
***radically different from conclusions in studies which implicitly assume that it is the same people in the same income brackets over the years
U.S. Treasury repeated this study of 1996-2005
-those individuals whose incomes were initially in the bottom quintile of this group had their incomes rise by 91 percent during that decade
-their incomes nearly doubled in a decade, which is hardly stagnating
-the top 1 percent saw their incomes actually fall by 26 percent during the same decade
***the opposite of what has been said repeatedly, loudly and angrily by income distribution alarmists in politics, in the media and in academia
Canada study of 1990-2009:
-during those two decades, 87 percent of the people initially in the bottom quintile rose
-the incomes of those initially in the bottom quintile rose at both a higher rate and a larger absolute amount than the incomes of those who were initially in the top quintile
U.S. Bureau of the Census also had a study with the same results
***these studies were done following the same individuals over a span of years
2020 Census/Bureau of Labor Statistics:
-this data collected is on statistical categories containing multiple individuals each, such as families, households, or “consumer units”
-when these categories of income recipients are divided into income quintiles, these quintiles can contain equal numbers of such categories, but not equal numbers of people
Different Numbers of People:
-comparisons of the incomes received by people in the top and bottom quintiles therefore have a built-in exaggeration of income disparities between individuals
-since twice as many individuals would have twice as much income, even if every individual in both categories had the same income
-single parent families are more common among low-income people
-money earned vs. sources of welfare or unemployment compensation as part of income
-Bureau of Labor Statistics data show that there were 5 times as many people earning income in the top quintile as in the bottom quintile
-people who draw alarming inferences from Census and similar other data reason as if they are discussing what was happening to a given set of human beings
-really are discussing the fate of “the top quintile,” “the top ten percent,” “the top 1 percent,” or some other statistical category
-these categories containing different numbers of individuals in different quintiles, as well as an ever-changing mix of individuals in each of these quintiles from one decade to the next
Ex. 2020 Census
-complete redistribution of income, so that every income recipient recorded in the 2020 census now received exactly the same income as other recipients in a subsequent year, that would mean a zero disparity in individual incomes
-the data would show those people who had formerly been in the top quintile would now appear to have just over twice the incomes of those people who had formerly been in the bottom quintile
***a zero income disparity in fae would now appear statistically as an income disparity larger than today’s income disparity between women and men or between black and white Americans
“Stagnating” Income Growth:
-there is a long history of alarmist claims about supposedly “stagnating” income growth among Americans as a whole
Statistics:
-the average income-money income adjusted for inflation–rose by only 6 percent from 1969-1996
-the average real income per person in the United States rose by 51 percent from 1969-1996
***both of these stats can be true because according to the Bureau of the Census stated that the average number of people per household has been declining through these years
-this decline can be seen as far back as 1966
-income alarmists have their choice of what statistics they choose to use
“The incomes of most American households have failed to gain ground on inflation since 1973.” New York Times
“The incomes of most American households have remained stubbornly flat over the past three decades.” Washington Post
“The economy is growing without raising average living standards.” Christian Science Monitor
-such conclusions arise from statistical naivete
-But more likely the inconsistency of the patterns in which data are cited might suggest bias
Ex. New York Times columnist, Tom Wiker,
-used per capita income statistics when he depicted success for Lyndon Johnson administration’s economic policies
-used family income statistics when he depicted failure for the policies of Ronald Reagan and George H. W. Bush
***there is a difference between individual income vs. household income (skews the data)
-no intrinsic reason why the income distribution of individuals cannot be presented and analyzed, especially when incomes are in fact usually paid to individuals, rather than to families, households, or “consumer units”
***income distribution alarmists seldom, if ever, cite income statistics that compare the same individuals over time
-such statistics show radically different results than the conclusions of income distribution alarmists
Turnover in Income Brackets:
-the turnover rate of individuals is especially high in the highest income brackets
-referred to as “the charmed circle of the 1 percent” Prof. Paul Krugman, City University of New York
Problem:
-most of the people in that circle in 1996 were no longer there in 2005
-neither high income people nor low-income people are like inert chess pieces
-the turnover rate was even more extreme “top 400” highest income recipients than among the “top 1 percent”
Internal Revenue Service:
-income tax data showed that during the years of 1992-2014
-there were 4,584 people in the so called “top 400” income recipients
-3,262 of these were in that bracket just one year during those 23 years
***Lie: when incomes received by thousands of people over the years are presented statistically as if these were incomes received by hundreds of people, that is a tenfold exaggeration of income disparities
-it seems strange to rig it so that 71 percent of them would not repeat their one year in that high income bracket during the 23 years covered by the Internal Revenue data
The “Rich” and The “Poor:”
-loose words used in many discussions of income differences includes calling people in the top quintile of income recipients “rich” and those in the bottom quintile “poor”
-2020 census data = top quintile begins with a household income of $141,111
-that is a very nice income for an individual
-less impressive for a couple making just under $75,000 a year each
***neither income households are considered “rich” being able to afford mansions, yachts, or private planes
-the “poor” are often as misleadingly labeled as “the rich”
University of Michigan Study:
-95 percent of the people initially in the bottom quintile rose out of that quintile during the years covered
-that left 5 percent behind during those years
-this means that technically only 1 percent of the bottom quintile for that duration were eligible to be called “poor”
-this is contrary to Prof. Stiglitz’s claim that the incomes of 99 percent were “stagnating”
-it is the incomes of the low-income 1 percents that was stagnating
Questions:
-How poor is “the poor”?
-Compared to what?
-poverty used to mean hunger, cramped housing, ragged clothing, and other afflictions
-poverty statistics are now defined by the government statisticians who collect and publish official data
***official “poverty” means whatever these staticians say it means
2001:
-three-quarters of the officially “poor” Americans had airconditioning which only one-third of Americans had just a generation earlier in 1971
-97% of people in official poverty in 2001 had color television which less than half of all Americans had in 1971
-73% owned a microwave oven which fewer than one percent of all Americans owned in 1971
-98% of “the poor” had either videocassette recorder or a DVD player which no one had in 1971
-the average American in officially defined poverty had more space per person than the average European
***Americans do live in poverty and have problems-that is true
-they often have more serious and even urgent problems today as victims of crime and violence than in the past
-the terms “rich” and “poor” are misleading in another and more fundamental sense
-the terms apply to people’s stock of wealth, not their flows of income
-income taxes do not tax wealth
-even taxing 100 percent of a billionaire’s income would not stop that billionaire from remaining a billionaire though it can stop others from becoming one of them
-billionaire’s who publicly recommend higher income taxes is excessive
Implications of “Social Justice:”
-attempts to verbally convert people currently in different income brackets into different social classes ignore turnover
-higher-income brackets are much more transient with a one year spike in income
***it is flesh-and-blood human beings whose well-being we are so concerned about, not disparities between statistical categories containing very different numbers of people and ever-changing mixes of people
-claim: the share of income going to people in the top quintile has been growing
-claim: income redistributionists suggest that a given set of peop-le was receiving or “taking” a larger share of society’s total income
-this only works if people in the different income brackets had been continuous residents in those brackets, but income brackets are transient
Points:
-there is always an increased incentive and higher pay-off for rising to the top
-outcome is consistent with the fact that the age of peak earnings has risen over time from 35-44 year olds to people 34-54 year olds
-technological development has made knowledge more valuable relative to the physical vitality of youth
-since everyone ages, such an outcome does not automatically concentrate high incomes in particular social class
***Statistics can be enormously valuable, for testing our beliefs against empirical evidence, but requires careful attention to specific data
“Measuring the growth of incomes or the inequality of incomes is a little like Olympic figure skating–full of dangerous leaps and twirls and not nearly as easy as it looks. Yet the growth and inequality of incomes are topics that seem to inspire many people to form very strong opinions about very weak statistics.” Economist Alan Reynolds, Senior Fellow at the Cato Institute