On Illiteracy | Econbrowser

Reader JohnH writes in regards to the discourse on Econbrowser:

Superb the Krugman’s minimalist remedy of inequality far exceeds what I see talked about right here!

For his edification, I’ll reprint a 2011 post.

Dismissing the plots of earnings inequality in earlier posts [0] (associated posts [1] [2]), an Econbrowser reader asks:

“Do you concur that measures of the wealth distribution have been principally quiescent for the reason that Seventies and that the distribution of wealth is extra even in the present day than it was within the Nineteen Forties (the height for the US trendy period)?”

Nicely, I believe that that is an attention-grabbing query, and so I went a-searching for information. That is what I discovered, which led to my reply of “no”.

 

Determine 1: Wealth share of the highest one percentile, from Kopczuk and Saez (2004) (blue +), and from Kennickell (2009) (purple squares). Supply: Kopczuk and Saez [xls] and Kennickell (2009), tables A3a-g.

I don’t see the height in wealth related to the highest 1% within the 1940’s because the reader asserts (appears like round 1930 to me), however I’ll go away that apart. So far as I can inform, inequality in 2007 exceeds that over many of the 1940’s. A caveat is important, as a result of now we have a 2007 estimate by Kennickell based mostly on Survey of Client Funds, and 1940’s estimates by Kopczuk and Saez based mostly on Property tax return information. Nonetheless, related actions and ranges over the overlapping time durations means that the collection aren’t fully non-comparable.

The final two purple squares are at 2004 and 2007, respectively. Word the massive soar going from 2001 to 2004, and the plateau to 2007.

It’s attention-grabbing to see what the authors concluded from their research. From the summary to Wojciech Kopczuk and Emmanuel Saez, “Top Wealth Shares in the United States, 1916–2000: Evidence from Estate Tax Returns,” National Tax Journal 57(2) part 2:

This paper presents new homogeneous collection on prime wealth shares from 1916 to 2000 in the USA utilizing property tax return information. High wealth shares had been very excessive originally of the interval however have been hit sharply by the Nice Despair, the New Deal, and World Conflict II shocks. These shocks have had everlasting results. Following a decline within the Seventies, prime wealth shares recovered within the early Eighties, however they’re nonetheless a lot decrease in 2000 than within the early many years of the century. A lot of the adjustments we doc are concentrated among the many very prime wealth holders with a lot smaller actions for teams beneath the highest 0.1 %. In step with the Survey of Client Funds outcomes, prime wealth
shares estimated from Property Tax Returns show no vital improve since 1995. Proof from the Forbes 400 richest Individuals means that solely the tremendous–wealthy have skilled vital positive factors relative to the typical over the past decade. Our outcomes are in keeping with the decreased significance of capital incomes on the prime of the earnings distribution documented by Piketty and Saez
(2003), and recommend that the rentier class of the early century isn’t but reconstituted. The paper proposes a number of tentative explanations to account for the information.

Piketty and Saez’s information pattern ends in 2000, earlier than the final increase. What will we glean from more moderen information? From Arthur Kennickell, “Ponds and Streams: Wealth and Income in the U.S., 1989 to 2007,” Finance and Economics Discussion Series paper No. 2009-13: 

A lot dialogue treats the working definitions of wealth and earnings as in the event that they had been self-evident, however definitional selections could make substantial variations within the total image. To supply a transparent foundation on which to look at household wealth and earnings their interrelationship, this paper begins with a primary dialogue of a variety of doable measures of these ideas. Utilizing the measures developed, the paper examines the distributions of wealth and earnings and their joint properties utilizing information from the 1989–2007 waves of the Survey of Client Funds (SCF). Amongst
different issues, the info present a sophisticated sample of shifts within the wealth distribution, with clear positive factors throughout the broad center and on the prime. For earnings, there’s a extra easy image of rising inequality. Over this era, wealth as a fraction of earnings moved up throughout each the distributions of wealth and earnings. Nonetheless, their joint copula distributions (a kind of distribution with uniform margins) don’t present noticeable adjustments over this time. The constant sample is that very excessive wealth and earnings and really low wealth and earnings go collectively, however in between these poles, the connection is pretty diffuse. The paper additionally presents info on the composition of wealth and earnings over the 18-year interval; the final patterns of holdings throughout the distributions didn’t
change markedly, however there have been some necessary shifts. For wealth, debt elevated as a share of belongings throughout the wealth distribution, the share of principal residences rose primarily beneath the median of internet value, the share of taxdeferred retirement accounts rose and the share of different monetary belongings declined. For earnings, the clearest change was a common decline within the relative significance of capital earnings aside from that from companies.

For completeness’s sake, I reprise this graph of earnings accruing to the highest 1% and 5%, calculated in a fashion comparable over the interval 1913-2008:

Determine 2: Pretax earnings shares (together with realized capital positive factors) accruing to prime 5% of households (blue line) and to prime 1% (purple line). Supply: up to date model of Piketty and Saez (2007).

Along with that put up, I appear to recall discussing a CBO assessment on the topic of income inequality, written in regards to the minimum wage and inequality, had a visitor put up on the topic, and on monetary policy’s impact, recounted Dr. Yellen’s views, contrasted a democratic vs. plutocratic CPI, offered some info on the BEA’s distributional national accounts, how inequality drives down interest rates, amongst others. In different phrases, I discover it offensive that JohnH characterizes this weblog’s protection with out truly studying its contents.

Recall, this is similar JohnH who thought that the US government did not report information on median real earnings, who thought real wages rose during Cameron, can not determine what’s a file high natural gas price, and thinks one year lagged inflation is a good proxy measure for long term expected inflation.

In any case, I’m compelled to conclude that this gentleman is illiterate.