Reynolds' Rap on Inequality

Recently, some have sought to attack the idea that inequality is on the rise in the U.S. A prominent recent example is this editorial by Alan Reynolds in the Wall Street Journal. Another more subtle inference that inequality is less of a problem than we've heard is this post at Free Exchange noting that the poor have more leisure time to watch TV than they used to:

Income inequality may be increasing, but income is not the only measure of welfare. Those at the lower end of the income spectrum have growing amounts of time on their hands. ... How do Americans spend their new free time? Overwhelmingly, staring at the idiot box.

At least the rise in income inequality is acknowledged.

It would be easy to rebut the idea that Reynolds and others are promoting that inequality has not been rising with arguments from economists from the left (e.g. see here for one among many). But perhaps it would have more impact if the proponents of the "no increase in inequality" idea heard it from members of their own team. Let's start with someone whose economic and conservative credentials cannot be questioned, Martin Feldstein:

There has no doubt been a relatively greater increase in higher incomes in recent years in the United States and in some other countries.

Next, Former Chairman of the CEA under Bush, Glenn Hubbard:

[W]e have an issue with emerging inequality in the country.

Fed Chair Ben Bernanke:

I agree with you, Congressman, that rising inequality is a concern in the American economy. ... [G]iven that we agree that inequality is a problem -- and I agree that it is trends in the economy that cause it ..., the question is: What do we do about it? What federal policies would it make sense -- if we all agree that inequality is increasing beyond what is healthy, what should we do about it?

Treasury Secretary Paulson:

But we still have challenges, and amid this country's strong economic expansion, many Americans simply aren't feeling the benefits. Many aren't seeing significant increases in their take-home pay. ...

Current Chairman of the CEA, Ed Lazear:

There is little doubt that there has been a 25-year trend of a growing gap, sometimes called income inequality, between the wages of the skilled and the unskilled. ... [T]hat trend shows no obvious signs of abating in the near future... [T]he general picture cannot be disputed. The difference between the earnings of individuals at the top and earnings of individuals at the bottom has grown.

So far, these are all conservatives connected in some way to the administration, but this could go on and on. Thus, when Alan Reynolds says:

I survey a wide range of official and academic statistics, finding no clear trend toward increased inequality after 1988 in the distribution of disposable income, consumption, wages or wealth.

I will just echo Lazear, Bernanke, and others and say the general picture cannot be disputed, rising inequality is a concern in the American economy.

The inequality results are derived from a wide variety of studies, not a single paper or a single data source. In fact, at least three different groups have estimated the drastic rise in top 1% share of income: Piketty-Saez, the CBO, and the IRS "consistent income". Thus, while Reynolds tries to pick at the minutiae in a particular study by Piketty and Saez, unsuccessfully in my opinion (e.g. he uses Census data in rebuttal, but there are well-known reasons why Census data don't show as much change in inequality, top-coding mainly), the inequality findings are robust across various approaches to estimating the size of the problem.

Update: Alan Reynolds, in comments, responds:

I suppose one might take comfort in the fact that many famous folk have been mislead by faulty statistics. I don't rely on anyone's opinions or beliefs to prove any stats in my college textbook; I show the data, explain it and provide URLs so the reader can check me.  Unless one is prepared to overlook several fatal flaws in the Piketty-Saez estimates (and others in the CBO estimates), there is no clear evidence of a sustained and significant increase in inequality since 1988 by any other measure.  I very carefully did not say there was no such evidence about 1981-87.  1981 was the low point for the top 5 percent's share because stocks, bonds and small business were all in terrible shape.  Indeed, if it makes sense to define equality as a falling share of income (and taxes!) reported by the top 1%, the top 1 percent's share has fallen in every recession since 1920. Unfortunately, recessions hurt the poor too.

Update: Follow-up post here.

Comments

[Lafayette]

Paulsen: "Many aren't seeing significant increases in their take-home pay. ..."

There is a way to enhance "take home pay". Meaning, there is a way to make it go farther.

When the exorbitant price of basic medical care, including medication, is reduced. When a company or a community builds a day-nursery, such that working mothers need not pay for private day-care. When parents need not pay for their children's university education that costs, in some areas, the equivalent of a small house or an apartment. (Or two, or three, depending upon the number of children to put through whatever higher-education that suits them not only for a job but life.)

That's just for starters. The list is actually much longer.

This axiomatic inclination in America to have such services provided by "free enterprise" simply means that they cost money - and that cost must come out of "take-home pay".

The money for infrastructural improvement of America, not only in terms of new schools, new hospitals and new means of transportation but in terms of social services is there.

The will to adopt them, however, is not.

[maria]

The idea that inequality is not rising hardly merits refutation because it is such a stupid lie. The Gini Index that is the classic measure for inequality used round the world has been rising in the US since 1969, steadily. It is based on Census information that is as good as any US information can be. Why you would even pay attention to this silly idea is difficult to understand, Mark.

[maria]

PS: the Gini Index is not a left/right issue. It is a factual statistic. There can be no conservative vs liberal Gini. There is only the Gini that is dictated by the facts. Left/right issues only arise in trying to explain the rise in the Gini Index.

[anne]

http://delong.typepad.com/sdj/2006/12/dont_believe_it.html

December 15, 2006

Two rules of reading the editorial page of the Wall Street Journal
By Brad DeLong

When you feel tempted to credit a surprising empirical claim found on the editorial page of the Wall Street Journal, your first step should be to lie down until that feeling goes away.

When you are tempted to believe that something on the editorial page of the Wall Street Journal brings new information to the party and sheds new light on the facts, don't.

One thing you can't learn from Reynolds's op-ed is that, back in their original paper that they wrote six years ago and published in 2003 http://elsa.berkeley.edu/~saez/pikettyqje.pdf, Thomas Piketty and Emmanuel Saez thoughtfully considered many of the claims made by Alan Reynolds....

[evagrius]

The WSJ editorial was publicity for Reynold's book;

Reviews from Amazon;

The election season, once again, brought up the myth that Americans are worse off because inequality of income has been increasing in the United States. Myths are harmless in literature. But if Democrats, like Rep. Nancy Pelosi, start using it as evidence for raising taxes when the new Congress reconvenes, there is potential for real damage to the economy and to our living standards. Cato Institute senior fellow Alan Reynolds' new volume Income and Wealth assembles facts to explain and understand this myth, using figures from the Statistical Abstract of the United States. Reynolds also provides a clear guide to the countless academic studies on the subject.”–New York Post

Review
"Turn to any page of Income and Wealth and you will be blown away. You will find something important about income and wealth that you didn't know and would probably want to know. Once you read this book, you'll realize what stunning economic progress the average American family has made. You'll also realize that the main way to get wealthy is--are you ready?--to work." - David R. Henderson, Research Fellow, Hoover Institution, author of Making Great Decisions in Business and Life
"Economic literacy is an essential condition for our democracy to work. Only an educated public can make sense of the myriad of economic issues that characterize our public debate, ranging from the collapse of private pensions to the impact of outsourcing on our job markets. This series constitutes a significant step towards the achievement of this goal. Written by eminent professionals and experienced practitioners, each of its seven volumes renders complex issues easy to assimilate without sacrificing nuance or controversy. Aimed at the general public, the authors succeed in bringing to everyday life the substance of most important economic agents and forces." - Jose R. de la Torre Dean, Alvah H. Chapman Jr. Graduate School of Business Florida Interntional University

Book Description
Why some people are rich and others poor can be explained in a number of ways. Income and Wealth focuses on "who" gets "what" and "why." The who are those in the top, middle, and lower income groups. Why they are there is a function of a variety of factors, including education, employment, saving, investing, and taxation. What they get is cash income, leisure time, property, and other forms of wealth. This volume explains the dynamics of income generation, how it is measured, and how such dramatic disparities in distribution come about. Citing numerous cases of distortion in the popular press, and among academics, policymakers, and pundits, Reynolds exposes many popular myths concerning income and wealth, and presents a balanced perspective on this critical aspect of economics and social policy. The book first defines various characteristics of income, with an emphasis on the gap between the rich and the poor, and reviews several theories to explain the disparities. Subsequent chapters focus on such timely topics as the "vanishing" middle class and the sky-high salaries of CEOs, Hollywood stars, and athletes. The final chapters consider the implications of policies, such as the minimum wage, taxes, immigration, and trade quotas, and expand the discussion to consider international comparisons. Featuring graphs and charts, a glossary of key terms, and a listing of references and resources, Income and Wealth explains the intricate, and often controversial, effects of economic policies on individuals, families, and communities. Moreover, it demonstrates how the numbers can be manipulated by policymakers, pundits, journalists, and academics to promote various agendas, and shows readers how to recognize hyperbole and make better-informed decisions.

About the Author
ALAN REYNOLDS is a Senior Fellow at the Cato Institute and was formerly Director of Economic Research at the Hudson Institute. He served as Research Director with the National Commission on Tax Reform and Economic Growth, as advisor to the National Commission on the Cost of Higher Education, and as a member of the OMB transition team in 1981. His studies have been published by the Organization for Economic Cooperation and Development, the Joint Economic Committee, the Federal Reserve Banks of Atlanta and St. Louis, and the Australian Stock Exchange. Author of The Microsoft Antitrust Appeal (2001), he has written for numerous publications since 1971, including The Wall Street 4ournal, The New York Times, National Review, The New Republic, Fortune, and the Harvard Business Review. A former columnist with Forbes and Reason, his weekly column is now nationally syndicated.

The following review is from a reader;

Conventional wisdom tells us that: (1) the vast majority of US households have experienced no increase in real income for more than a quarter century; (2) real wages have been stagnant for that same period; (3) low-wage burger-flippers have replaced high-paid factory jobs; (4) only the top one percent or ten percent have benefited significantly from rising productivity or asset prices; and (5) the once-robust middle class has been shrinking.

Just about everybody treats those assertions as if they are facts. That includes politicians on both sides, talking-head partisans, economics correspondents, and columnists--many with undisguised or thinly-veiled political agendas. They are supposed to be the experts, and the masses (like me) have to trust them; after all, our busy lives permit us only a limited amount of time for paying attention to politicians and the press. When the experts are nearly unanimous, that's a good signal that the five conventional wisdom assertions have to be true . . . isn't it?

That brings us to the big surprise, which Alan Reynolds sums up clearly and concisely: "Not one of those statements is even remotely close to being true."

This book is one of the best debunkings of conventional wisdom I've come across in a decade. It is a step-by-step dismantling of conventional wisdom about income and wealth distribution. Alan Reynolds does it methodically, one point at a time--using direct quotes from people who make those assertions, clear logic explaining what's wrong or misleading about those assertions, and facts and figures from easily-checkable references to official, government-published sources (such as the Statistical Abstract of the United States, the Bureau of Economic Analysis, and the Bureau of Labor Statistics).

Why, then, do so many people seem to accept the false conventional wisdom without question? I have a guess: Each of us likes to think the person we heard it from must have done their homework; otherwise they wouldn't be talking like that. Let's face it, assumptions like that save us a lot of work. In this case, however, I now realize that, by trusting conventional wisdom, I was being too lazy--and I strongly suspect that most of our country's so-called "economics correspondents" are guilty of the same thing I was.

I am thankful that Alan Reynolds is one who actually did the homework on this subject, then wrote a book laying out his findings. His attitude is one we should all adopt: "I accept nothing as an article of faith. I want to hear the logic and see the evidence. And you should demand nothing less. In the absence of logic and evidence, you should not give a hoot about my opinion. Reality is not a matter of opinion."

And I'll steal one more passage from his book: "No matter what one thinks ought to be done about taxes, spending, unions, immigration, minimum wage laws, and so on, the first thing that needs to be done is to get the facts right. If that happens, there will still be plenty of room for lively debates about all sorts of public policies. And they will be *honest* debates."

This book will always be within an arm's reach of my workstation. I highly recommend it, especially to anyone thinking about writing on the subject of income or wealth "distribution" in the United States of America.

Get this book, and get ready for a big surprise.

[Jane Galt]

I'm sceptical about the book (I'll be taking it on vacation), but it doesn't strike me that quoting things said by famous economists years ago is a solid refutation of a book making *new* claims about inequality. One would hope that those same economists would be open to new evidence. And of course, one would hope the same thing on the left.

[evagrius]

I think the book is evidence in itself that income inequality does exist and is increasing.

Why all the hoopla from the WSJ if it isn't a concern of the top 1% that everyone "knows" how wealthy they are and how that wealth is increasing?

Perception can create reality. If it can be shown, through rigorous analysis, that your eyes are lying, then the case is proved. Your driving by McMansions cheek by jowl to ramshackle houses is merely an illusion.

[Lafayette]

>Pickety-Saez: "We use a gross income deŽnition including all income items reported on tax returns ..."

And, imagine the bit that is from foriegn investments comfortably nested in the Caymans.

I had seen a Pickety study that demomstrated that 80% of total income was garned by 20% of the population and have always used this 80/20 rule in debate, perhaps from some earlier work.

This study shows, in fact, that it is 10% of the population that obtains 41% of the income, as of 1998. I'll bet nonetheless that the study demonstrated the 80/20, but it is not reported in this particular piece of work. A shame it is not mentioned.

Also, Piketty performed the same study for French income. His results show that the top decile obtains about a third of total income, that is 10% less than in the US. How does this happen? Taxation, I suggest.

I have seen similar data for Germany which shows the breakdown at around 40/60, that is, 40% of the earners obtaining 60% of the income generated.

However you look at the data, it is evident that Europe is more equitable in earnings than the US, which should surprise no one.

"It seems unlikely, however, that changes in unionization or the minimum wage can explain the surge in very top wages. The marginal product of top executives in large corporations is notoriously difŽcult to estimate, and executive pay is probably determined to a signiŽcant extent by herd behavior."

'Probably determined ... by herd behavior'? That's understating the fact.

I suggest that it is "programmed excellence" in pay that cronys cross-sitting on BoD Compensation Committees determine for one another in order to maintain and increase the "going rate" for top management.

Which is legalized pilfering of shareholder equity value.

[anne]

http://delong.typepad.com/sdj/2006/12/dont_believe_it.html

December 15, 2006

Two rules of reading the editorial page of the Wall Street Journal
By Brad DeLong

When you feel tempted to credit a surprising empirical claim found on the editorial page of the Wall Street Journal, your first step should be to lie down until that feeling goes away.

When you are tempted to believe that something on the editorial page of the Wall Street Journal brings new information to the party and sheds new light on the facts, don't....

[Say what, Janie?]

[pgl]

Reynolds has been pushing the notion that consumption inequality is a better measure of inequality of permanent income. Over at Angrybear, I've been putting forward a different interpretation of the data on the modest rise in consumption inequality, which ties to the rise in wealth inequality.

[anne]

http://www.nytimes.com/2006/01/29/national/29rich.html?ex=1296190800&en=784822e4b0735ee5&ei=5090&partner=rssuserland&emc=rss

Again, 1% of households controlled 57.5% on corporate stock in 2003 which alone should tell us all we need to know about how concentrated wealth is and income must be.

[Lafayette, agreed completely.]

david cay johnston shares

[anne]

http://www.nytimes.com/2006/12/12/opinion/12tue2.html?ex=1323579600&en=f5dd4ceb951b887a&ei=5090&partner=rssuserland&emc=rss

December 12, 2006

Consumption Gap

Conservative economists often argue that wage stagnation and income inequality are not as big a threat to Americans' standard of living as they've been made out to be. In their view, how much one buys — rather than how much one makes — is a better measure of economic well-being.

In a recent article in The National Review, researchers at the American Enterprise Institute asserted just that, saying that when you look at how much the middle class is consuming, they're "even doing better than the upper crust."

Why make a fuss over other grim economic statistics if everyone manages to keep buying things?

Here's why. The assertion — that the middle class has out-consumed the "upper crust" during the Bush years — is false, the result of rosy assumptions that turned out to be wrong.

Researchers at two other think tanks, the Center on Budget and Policy Priorities and the Economic Policy Institute, reworked the figures, including newly available spending data for 2005. There is no dispute among the various researchers over the new findings. Over all, consumption is growing. But the growth is unbalanced, consistent with the wide disparity in wages and income that has characterized the Bush years.

Consumer spending by low-income households is way down since 2001. Over the same period, spending by high-income Americans has been robust, supported, in part, by generous tax cuts. In 2005, the top 20 percent of households made 39 percent of all consumer expenditures, the highest share since the government started keeping track in 1984....

[Ninjaplease]

Inequality on the rise?

Hah, next you'll be telling me that the upper 1% is less productive than the lower 99%. Clearly the rewards of productivity have been going to those who are "Most Productive" to society, right? If that wasn't true then why would we be using productivity as a measure of economic health? We assume that increasing productivity raises worker's wages, I mean, our assumptions couldn't be wrong, could they? So why question how the rewards system even works? Apparenly IT DOES work, it works very well for society's "Most Productive."

[Giant Step]

Mark,

Although your usual readership is indifferent, I would be much more satisfied by a careful rebuttal of each of Reynolds's points--there really aren't that many of them. Like Jane Galt, I am skeptical of Reynolds's argument but receptive.

Furthermore, this post plays right into the hands of those who criticize economics for lack of objectivity. Dichotomizing economists into "teams" as you do is counterproductive and hurts the legitimacy of the discipline.

[anne]

The trick that the tricksters use to show the poor are actually better off than the rich, is to show that the poor consume as much as or even more than the rich. So as an economist showed us on a Mark Thoma thread a few days ago, a rich person might spend $40,000 a year, while a poor person would spend $40,000 / 6.5 or $6154 a year, since the rich and the poor spend the same portions of income.

The example is of course absurd, since a person who simply spends $500 dollars a month on rent, say, with utilities thrown in would have $154 dollars to eat and clothe and travel for the year. So, the poor actually must spend more income relatively simply to survive.

Trick away, trickers.

[anne]

http://elsa.berkeley.edu/~saez/pikettyqje.pdf, Thomas Piketty and Emmanuel Saez

Bother to read Piketty and Saez for "objectivity," or Brad DeLong for a summary of Piketty and Saez and more "objectivity."

http://delong.typepad.com/sdj/2006/12/dont_believe_it.html

Jane Galt, by the way, is a propaganist's propaganist. Is that legitimate and objective enough, or to dicotomizing? Say what?

[spencer]

When I read something like this in the Wall Street Journal editorial page one of the things I do to see how seriously to take the "new findings" is fact check some of his statements.

Reynolds said about Census data:The top 5%'s share has been virtually flat since 1988, aside from a meaningless one-time jump in 1993 when, as the Economic Policy Institute noted, "a change in survey methodology led to a sharp rise in measured inequality."

So if you look at the data what do you find. The top 5% share was stable between 16% and 17% through 1980 but rose sharply in the 1980s to a peak of 18.9% in 1989.
As Reynolds points out there was a big jump in 1993, but
even if you remove that big jump in 1989 the top 5% share still increased from under 17% in 1980 to over 20% in 2001.

So what Reynolds would have you do is ignore the first two-thirds of the increase -- two percentage points --before 1988 and accept his description of the post 1989 increase of another full percentage point as virtually flat.

This looks to me like a typical Wall Street Journal editorial page parsing of the data and mischaracterization of what it says with the author safe in the knowledge that virtually no one will double check to see if the "virtually flat" characterization is accurate.

The census data shows that the top 5% share of income has either increased by a third -- actual data -- or by 20% -- removing the big 1993 jump --from 1980 to 2001. But Reynolds has written this increase up in such a way as to give the impression that the census data shows no increase.

So when you fact check an author who does this how, seriously should you take the rest of what he says?

[anne]

Objective enough?

http://www.nytimes.com/2006/01/29/national/29rich.html?ex=1296190800&en=784822e4b0735ee5&ei=5090&partner=rssuserland&emc=rss

January 29, 2006

Corporate Wealth Share Rises for Top-Income Americans
By DAVID CAY JOHNSTON

New government data indicate that the concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated in the first year that President Bush and Congress cut taxes on capital.

In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.

In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars.

For every group below the top 1 percent, shares of corporate wealth have declined since 1991. These declines ranged from 12.7 percent for those on the 96th to 99th rungs on the income ladder to 57 percent for the poorest fifth of Americans, who made less than $16,300 and together owned 0.6 percent of corporate wealth in 2003, down from 1.4 percent in 1991....

[Ninjaplease]

Again, you're focusing on the wrong sort of details--Increases in productivity must always lead to increases in wages--it's an "Economic Law." Because of this "Fact," the only plausible explanation is that the top 1% of people are the "Most Productive" and hence have earned their wages.

It's a simple equation really and a law.

[ken melvin]

Maybe if we look the other way it will go away. Worked when we were children, didn't it?

[Lafayette]

"Increases in productivity must always lead to increases in wages--it's an "Economic Law.""

Where does this come from?

When capital investment in automated processes enhances productivity with no addition in manpower expense, and often a reduction in workforce, total wages either stagnate or decline as people take on lower paying jobs.

[evagrius]

I was also intrigued by the study on "leisure". It's quite fascinating.

Interesting is how "leisure" is defined. It's basically anything that is not "work".

This is quite a definition. It certainly is different from a more classical definition given by Josef Pieper in his "Leisure-The Basis of Culture".

For some philosophic reflections on this;

http://www.pc.maricopa.edu/ss/phi101/I/IA_Leisure_Basis.htm

[maria]

Ninjaplease, don't to anything to ruin my idea that you are being ironic. Either you are ironic or terribly stupid. I would prefer to think of you as ironic.

[Bruce Webb]

Narratives. They peddle them, we gobble them down.

"Income inequality". Certainly it is a fact, while people around these parts can squabble about definitions you really can't get around the numbers. After a concerted 25 year effort to cut taxes on the rich the proximate effect, i.e. the rich getting richer, manifested itself as expected, the resultant effect, i.e. greater income gains all around just didn't. The rising tide did not in fact raise all boats, and trickle down ended up being suspiciously warm and yellow. Well this has been obvious for years, the difference is that in the last few months it has become an accepted narrative. Whatever your stance the issue is on the table, it has hit the daily papers and the weekly news magazines. And the result is predictable: the Economic Right is starting to squeal. After ignoring this for the last couple of decades they are now having to engage, and they don't like it.

And of course a similar struggle is breaking out about Iraq. Pretty much the same group of people have been thrown back on the defensive. When was the last time you heard a war defender trot out the "they are not reporting on all the schools being built" theme. Or put forward some constitutional development that would allow Iraq to "turn the corner".

Well there is another narrative mumbling its way below the surface. Whatever your opinion about tax cuts and their effect on income equality, which can be visualized as who gets what slice of the pie, at a minimum there is a consensus that there should be some pie growing happening. Personally I don't trust the productivity numbers, but that is just me. For those that do the official numbers show American growth flatlining, people are flirting with a zero percent number for Q4. Just as the Right was demanding a year ago that the progress in Iraqi school building was being ignored, they were protesting that the amazing success of the economy was being ignored. To which I would respond "What success?" I am looking at a BEA news release that reports that Q3 real GDP grew at a 2.2% rate. That represents the miracle of tax cuts? Like I said I am skeptical of the whole data series but the people who are pushing the Economic Right agenda are stuck with them. These are their numbers after all, no one else is in control of the agencies that produce them.

It is gratifying that at long last the American people are being exposed to a discussion about income inequality, which is to say distribution of the pie slices. It would be even more gratifying to have a discussion about productivity, which is to say the size of the pie. And the official numbers show that the pie is growing at a rate below historical trend.

For most of the twentieth century America had a proven solution to income inequality. It was called progressive taxation. The Economic Right proposed that whatever its merits at equalizing outcomes progressive taxation suppressed potential growth through disincentives on investment and that cutting top rates would result in increased growth (which magically would redistribute down the income ladder). Supply side promised more pie and bigger pie slices for everyone. Well it is clear that most of us did not get a bigger slice, what is becoming clear is that, according to official numbers the pie is growing slower than historic trend.

Tax cuts don't work. At least if you trust the productivity numbers now being reported. It will be interesting if that subsurface narrative pops to the top. "Where is the pie?"

[Lafayette]

In French, leisure has a connotation of contentement or self-satisfaction. It is not simply time free from work.

[ninjaplease]

"Ninjaplease, don't to anything to ruin my idea that you are being ironic. Either you are ironic or terribly stupid. I would prefer to think of you as ironic."

Last night I was working late and thought I was the last one in the building. As I was leaving, the company I work for's CEO was leaving as well (he's been staying in a hotel for six months and needed internet access.) He asked to buy me a beer as a sign of appreciation for me working late on my project (which suffered from extreme scope creep and rigid deadlines.)

I took him up on the offer and got a 3 hour education on what Globalization really means, what it means to be a transnational, a 43 year old CEO, and I received a new definition for "productivity" "localization" "strategic sourcing" "Low Cost Country."

"You know, you really just need to forget about flags."

"We are employed to increase and reward shareholder value."

It was really eye opening to say the least to learn how certain people think and how they see the world.

The company I work for is a very large transnational with factories and offices everywhere but Antarctica.

I now no longer believe in the stupidity of those at the top. Everything is done deliberately, not out of incompetence. No one who gets to be CEO is stupid. That was an epiphany for me. Everything has changed.

[donna]

Because after working two jobs to make rent, well, you don't have much energy to use your "Free time" for much else besides watching the idiot box... not to mention it's the only thing in the house to entertain the kids with, since you can't afford anything other than a cheap TV.

God, I hate these people who think being poor is such a picnic or something.

[Lafayette]

Perhaps Europe has a solution.

Sixty percent of European tax revenues comes from a value-added consumption tax. The rest is income tax and property taxation.

A value-added federal tax was never liked in the US, since it was considered "regressive". That is, it proportionately was felt more by the poor and middle-class than the rich.

However, by maintaining a progressive income tax that really bites at the higher levels of income, then the "fairness" issue can be neutralized, at least somewhat. In fact, the only taxation that will dissuade corporations from compensation at stratospheric levels is confiscatory taxation - i.e. marginal rates at above 90%

The value-added tax is cheap to collect and its "through-put" in terms of revenue is significantly higher than income tax. That is revenue taxation requires more manpower to collect than a value-added consumption tax.

Not only, but most states have a sales-tax, so the collection mechanism is already in place. The value-added tax is only slightly more complicated a sales tax. It produces revenues that are far more regular than income tax. And, the states, if refunded a part of the value-added tax, would be relieved of the cost of collection - which amounts to a net benefit for the states.

Reducing income tax on the rich was inane. Obviating inheritance taxation was hallucinatory. Both were main platform elements of the right in the US. (Which should surprise no one.)

[Movie Guy]

ninjaplease,

I am confident that you received a friendly, heavy dose of the "message" as many of us have. Stormy and I were discussing this point less than an hour ago.

Of course, we were discussing the problems with the lack of WTO/other international organizations oversight and enforcement for international labor and environmental standards which, in effect, represent sanctioned white-collar crimes in far too many instances. So much for accountability.

There is no question that given the right trade policies and markets, domestic and international, transnational corporations will roll to cheaper sources of goods and services production all over the planet. Once there, the transnationals only have to abide by the local rules as pertain to everything. Just don't violate those and everything is cool.

Just wait until we do Africa on a large scale.

The transnationals' Kool-Aid is flowing from the water fountains, the board rooms, the televisions. It's everywhere from retail to econ blogland.

The transnationals' Kool-Aid is powerful enough to keep the transnationals' impact on U.S. income inequality from making the short list if any list at all in key economists' presentations and discussions. All of which is ridiculous. Yet note the follow on discussions. That's powerful Kool-Aid.

Yes, everything is done deliberately.

Here we are...

[cm]

ninjaplease: But then neither stupidity nor (in)competence are one-dimensional phenomena.

[Alan Reynolds]

I suppose one might take comfort in the fact that many famous folk have been mislead by faulty statistics. I don't rely on anyone's opinions or beliefs to prove any stats in my college textbook; I show the data, explain it and provide URLs so the reader can check me. Unless one is prepared to overlook several fatal flaws in the Piketty-Saez estimates (and others in the CBO estimates), there is no clear evidence of a sustained and signficant increase in inequality since 1988 by any other measure. I very carefully did not say there was no such evidence about 1981-87. 1981 was the low point for the top 5 percent's share because stocks, bonds and small business were all in terrible shape. Indeed, if it makes sense to define equality as a falling share of income (and taxes!) reported by the top 1%, the top 1 percent's share has fallen in every recession since 1920. Unfortunately, recessions hurt the poor too.

[Alan Reynolds]

Re: The comment above that "1% of households controlled 57.5% on corporate stock in 2003 which alone should tell us all we need to know about how concentrated wealth is and income must be." That is another deplorable statistic culled from indivdiual income tax returns. Unlike the 1970s, ordinary Americans can now keep most of their stock ownership out of view of the IRS for decades (or forever with Roth plans)thanks to 401(k), IRA and 529 plans. The top 1% can't participate in many of these plans and can't shelter more than a tiny fraction in the others. As a result, the top 1% accounts for a rising share of the dividends and capital gains that show up on tax returns.

To conclude from my tax returns that I must not have a lot of corporate stock in my 401(k), 403(b), IRA and my grandkids 529s would be quite foolish. Yet that is exactly what the cited article concluded.

[Bruce Webb]

CEO pay.

Is that also a mirage?

[anne]

Ah, I understand, only the poor have access to tax sheltered retirement plans. Imagine my surprise; note, I must let our attorney know immediately. What is useful, however, is knowing that stock accumulated outside of tax sheltering is as good as stock that is tax sheltered and at times better. Long term holdings are simply not taxed on increases in value till they are sold and they may never be sold with careful portfolio management.

[anonymous]

Mr. Reynolds:

You probably will not get a fair hearing from the commentors here

[anne]

http://www.townhall.com/columnists/AlanReynolds/2006/11/30/populist_pap

November 30, 2006

Alan Reynolds

Like the old "Populist Manifesto," the new AFL-CIO group is focused on bringing down those who become rich from business or investing (as opposed to those who become rich as trial lawyers, actors or movie producers)....

[anne]

"Mr. Reynolds:

You probably will not get a fair hearing from the commentors here."

Not among union workers, trial lawyers, actors and producers, this guy sure as heck will not get a hearing, especially not a fair hearing. Duh.

[Movie Guy]

Those not having access to the WSJ via subscription will find a summary of Alan Reynolds' article, 'THE TOP 1 PERCENT. . . OF WHAT?', here:

http://www.ncpa.org/sub/dpd/index.php?page=article&Article_ID=13967

[evagrius]

"Unfortunately, recessions hurt the poor too."

Yes, they certainly do, don't they?

[evagrius]

Thanks anne;

"The politically correct yet factually incorrect claim that the top 1 percent earns 16 percent of personal income appears to fill a psychological rather than logical need. Some economists seem ready and willing to supply whatever is demanded. And there is an endless political demand for those able to fabricate problems for which higher taxes are, of course, the preferred solution. In Washington higher taxes are always the solution; only the problems change, notes Reynolds."

Yes. It's a psychological problem, probably envy or something similar.
And yes, it's a "fabricated" problem, of course.

I suppose the increase in Food Stamps recipients over the last six years is also fabricated and stems from the recipients' "psychological" problems.

[calmo]

Assuming it is the author and not an imposter, we should atleast acknowledge his courage/courtesy in defending his thesis that the disparity in income distribution is receding from its peak in 1988...thanks to a careful, objective analysis of the CBO data that does not overlook any fatal flaws such as those in the Piketty-Saez estimates. [And maria should you confuse this with irony, I will summon every satire dog in my kennel to set you straight.]
So Alan just has bare bone facts that are not contested by whatever some spencer dude opinionated facts state: "I don't rely on anyone's opinions or beliefs to prove any stats in my college textbook; I show the data, explain it and provide URLs so the reader can check me."
The data is self-showing and self-explaining and self-denouncing of contrary opinions. (And that is why it's a college textbook people: spencer is too old for college.)
Actually I don't get as far as spencer or Alan: my anecdotal experience collides too grievously with the official AR finding that income distribution is improving. [How many flashlights with the best Kryptonite bulbs would it take to persuade me that it is not mid-night?] (Ok, so it's dark. But is it getting darker or lighter? How many candles burning bright for that one?)
Sadly, I'm just not college material. [My self-knowledge knows no bounds.](And if you must know, I do have a way with dogs, I do.) Some things are more visible than others --take for instance those Lear jets compared to those immigrant workers.
Alan, would you say those illegal aliens are a testament to this improvement in income distribution ...or totally disconnected from this argument?

[wcw]

Mr. Reynolds won't get a "fair hearing" because his argument is wrong. This is a question of fact, not opinion. Anyone who can look at even back-of-the-envelope data like my chart of the census data and make the kind of arguments he doesn't deserve the kindness of a point-by-point rebuttal. Cf http://www.bignose.org/blog/index.php?/archives/102-The-decline-of-the-middle-class.html

That he has had it here is indeed, not fair. It is more than fair. It is bending over backwards to show intellectual consideration to someone who is asserting, repeatedly, loudly and with great satisfaction, that the sky is green. Times like these I wish economists were more like physicists. They do not suffer fools so gladly.

[Movie Guy]

wcw,

Your chart appears to track the stock market runup beginning in from the early 1990s forward. I would have expected that the top fifth would have done better than the middle 60% on most stock moves during this period.

Did the middle 60%, either arriving late to the game or betting poorly (or thereafter) take that bad of a beating in the stock market?

Did the corporate salaries take off that early on?

Any thoughts on this?

[wcw]

Next time, click through -- the chart is a link. The only discontinuity in the census data is in 1993. A second click will get you to the footnotes. The applicable #23 is the one you want. Income limits increased, giving a truer picture of the share of the top quintile than in previous, censored data.

Nice try, but you might have questioned your hypothesis when there was only one discontinuity in forty years of data, including several bear and bull markets.

[maria]

Between Reynolds and DeLong I would take Delong by a "long" shot. Reynolds went to UCLA and then to Cal State Sacramento where he "studied" economics. I assumed he had gotten a BA from UCLA, but now wonder if maybe he flunked out and had to go to Sacramento instead, where he didn't get a degree either. Even if he did get a degree at UCLA, to go to Cal State Sacramento, a school described as "less selective" (meaning almost anyone can be admitted) says a lot about his abilities. For someone so bereft of credentials it is odd that his CVs (the ones I have seen) list no degrees at all. I suspect he is a fraud who shills for right wing "institutes" and things like the Wall Street Journal. I don't believe experts who have no credentials re their "expertise." In things where I am not an expert I require some credentials from those I will believe.

[Bruce Webb]

Maria in the California system you have the University of California with 10 or 11 campuses (Berkeley, UCLA, Davis, Irvine, Santa Barbara, Santa Cruz, San Diego, San Francisco (Medicine), Hastings (Law), and now Merced (I may have missed one) which offer post-graduate degrees and then you have the California State University system which has maybe 20 or so campuses including Cal State Sacramento which are largely limited to four year degrees (there may be some Masters programs here or there).

If Reynolds last point of study was Cal St Sacramento then you can bet he doesn't have any kind of graduate degree. And while Brad DeLong doesn't need any boost from me his path from Harvard undergrad to Full Professor at UC Berkeley was pretty stunningly quick, particularly since he spent a stint at the Treasury Department under Clinton.
http://www.j-bradford-delong.net/Career/resume.html

[JamesG]

"Reducing income tax on the rich was insane"

I'd like to agree with that but I remember Margaret Thatcher (cough, spit) making the top rate of income tax 40%. Much to everyone's amazement (hers too) the income from tax receipts massively increased. Apparently the super rich just weren't bothering to cheat anymore and many were returning to the UK from abroad. Basic logic doesn't always apply in economics.

[Alan Reynolds]

Regarding the queston above: "Your chart appears to track the stock market runup beginning in from the early 1990s forward. I would have expected that the top fifth would have done better than the middle 60% on most stock moves during this period. . . .Did the corporate salaries take off that early on?"
CEO pay at the largest 100-500 firms is mainly from stock -- as much as 78% in the narrow Piketty-Saez sample. A graph in my chapter on CEO pay shows that compensation of the S&P 500 CEOs rose and fell in lock step with the S&P 500 index in 1996-2003. This appears as a rise in the top percentile share in the Piketty-Saez data partly because executives switched from being paid in ways taxed as capital gains (which they exclude) to "nonqualified" options taxed as salary. There were some 10 million people, not just execs, with stock options at the peak of the boom. But options can't be exercised for 3-10 years and certainly aren't income during the year they are exercised.

[Bruce Webb]

"I'd like to agree with that but I remember Margaret Thatcher (cough, spit) making the top rate of income tax 40%"

Deal.

Put it back to 40% and apply it to capital income as well. Then we can talk.

If 40% is the right number to maximize receipts then I am all for it. But the argument of the supply siders is that you can reduce that percentage and still increase receipts. And that is the rub. Let's try a 40% top rate for the next five or six years and see what happens.

[wcw]

I wouldn't discount anyone's intellect because he went to Sac State. A friend has an engineering degree there. There is at least one listed company (very small, but still) whose main product exists in part because of him.

Mr. Reynolds, alas, would appear to do that fine institution a disservice as an alumnus. Here, for example, he could have engaged the smooth, forty-year uptrend in the top-quintile data. Instead he talks about CEO pay that "rose and fell" with the market.

It is charming, however, to see another example that Galbraith's dictum on the modern conservative continues to hold.

[anne]

WCW, what is the Galbraith dictim on modern conservatives?

[Bruce Webb]

I meant no insult to the California State University system. You can get a very fine education from any one of them, and if you excel you can get into any top level graduate program anywhere. I am sure we can find graduates from Cal State San Diego that managed to hit the academic high road. But they don't offer PhD programs. That is a feature and not a bug. California has (or had) a finely calibrated system of feeding high school graduates into higher education and nobody was totally left out. Really good students got admission into the University of California system right out of the box. Pretty good students got admission in the California State University system out of the box and were given a chance to move up to the UC system as Junior transfers. So-so students got admission to quality Community Colleges and after two years got a chance to move up to the California State system.

But the fact remains that getting a top degree from a public university in California means moving up to U of C.

(UC Riverside! Damn it. I knew I was missing one. Now those Highlanders will never let me rest. On the other hand 'Highlanders' is kind of weak. "Roll on you Bears")

[wcw]

Sure. My point, I think, is not only that Sac State is a fine place to study but that if you are talented and motivated, you can turn your education there into something really useful. It's a pity that Mr. Reynolds appears not to have done more than turn himself into a useful idiot.

In re Galbraith, cf http://www.google.com/search?&q=Galbraith+"the+modern+conservative"

[Lafayette]

"Apparently the super rich just weren't bothering to cheat anymore and many were returning to the UK from abroad. Basic logic doesn't always apply in economics."

The income tax in the UK is a smaller percentage of the total compared to that collected by the Value-Added-Tax (VAT). Any taxation of the rich is simply to assure that they bear a fair burden, since a VAT falls more heavily on lower incomes rather than higher incomes. So, reducing taxation on the rich was, yes, decidedly unfair.

The English are leaving the UK is very large numbers, following their wealth elsewhere. Those replacing them are mostly immigrants at the lower income levels. There are many reasons for this net immigration, mostly quality of life. The Brits are mostly sun-seekers.

I will nonetheless credit Thatcher with taming the idiot-left in Britain, meaning the unions, which had rendered British industry unworkable. Thankfully, Britain saw the futility of defending heavy industry and, instead, was wise to focus on the services industries – particularly finance.

[Ray G]

The comments seemed to have veered off but they are interesting nonetheless, but let me just slide something unconnected into the mess.

Who cares about consensus of opinion? Reynolds belongs to Cato, not the GOP, and citing the opinions of men who are beholden to politicians - directly or indirectly - is not accurate or meaningful.

Yeah for Mr. Reynolds in resisting the need to be "loved" by consensus.

Slavery was once approved by the consensus as well, even sanctioned by the Supreme Court.

[evagrius]

"Who cares about consensus of opinion? Reynolds belongs to Cato, not the GOP, and citing the opinions of men who are beholden to politicians - directly or indirectly - is not accurate or meaningful."

Who finances the Cato Institute?

Who finances the opinions of the "men" you mention without name? Are they employed at public institutions? If so, they are paid, not by politicians but by taxpayers. If they are employed by private institutions, then they are paid by those institutions. In either case, they are not beholden to politicians.

As for slavery, it was approved by concensus, true, but that concensus changed since it became clear that slavery was unjust and immoral. That clarity began with the rise of Christianity . Christianity's influence gradually overcame slavery in the Roman empire, replaced by feudalism and serfhood and that gradually abandoned. It was quite a long process, full of starts, stops, half-steps, retrogressions and progression but it can be seen as a process of unfolding the full implications of what Christianity believes about human beings and their inherent dignity as images of God.

It not clear that income inequality is just or moral. In fact, it's quite clear that it isn't. This has been recognized, again, from the earliest period of Christianity, indeed from its Source.

[a]

I think the comments about credentials - AR "only" went to Cal State whatever, while Brian De Long is a full professor at UC Berkeley - extremely off-putting and make me want to give AR more of a hearing. With that said, the bias I will take to the table is that he's in cloudcuckooland.

[Alan Reynolds]

West Coast Whiner whines that “Reynolds went to UCLA and then to Cal State Sacramento where he ‘studied’ economics. I assumed he had gotten a BA from UCLA, but now wonder if maybe he flunked out and had to go to Sacramento instead . . . a school described as "less selective" (meaning almost anyone can be admitted) says a lot about his abilities.

There’s a whiff of elitism in such comments. I was self-supporting at age 18, living on top of an animal hospital in L.A. while attending UCLA and bathing dogs for lunch money. I was married at 22 and a father at 24. We moved to Sacramento because we couldn’t afford housing in L.A., so that left few schooling choices. I was working at J.C. Penney 48-54 hours a week while pursuing an M.A. at Sac State at night from 1966 to 1970. My grade average was 3.4, but I was a couple of classes short when I left because I began writing in 1971 and was recruited with Milton Friedman's help as the economics editor of National Review.

We don’t all have parents who can pay for college, much less grad school. But I did not stop studying in 1970 and never will. Either my logic and evidence is correct, or it is not.

On that neglected topic, Jared Bernstein of EPI (PhD in social welfare, Columbia U.) had the last word on Brad DeLong’s blog: “We can take it from all this dredging up of old material that Prof DeLong is unable to refute Reynolds' article.”

[anne]

http://delong.typepad.com/sdj/2006/12/intellectual_ga.html

"We can take it from all this dredging up of old material that Prof DeLong is unable to refute Reynolds' article."

Actually, this comment is not by Jared Bernstein but by "A."

[anne]

http://delong.typepad.com/sdj/2006/12/intellectual_ga.html

Jared Bernstein:

The problem with Reynold's critique is that he latches on to a few correct points about the limitations of the IRS SOI data, then he:

--ignores the work others have done to correct these problems;

--way overstates the bias from these problems;

--ignores other data that do not suffer from these problems;

--having ignored all the inconvenient evidence to the contrary, misleading concludes there's no inequality problem.

He's not nuts. Some changes in inequality as measured by the IRS SOI data (the main source for Pik&Saez) are induced by income shifting due to tax changes. But while that can explain a spike in one year to the next, it doesn't explain longer trends in income concentration found in that and every other data set we have.

Also, analysts at IRS have worked hard to try to deal with some of these shortcomings. Take a look at this paper--the figures and tables clearly show an increase in inequality since 1988 income measures that correct for some of the inconsistencies.

http://www.irs.gov/pub/irs-soi/06asapetska.pdf

I won't belabor the CBO points others have made, other than to say that these data go the furthest towards addresses all the concerns raised by Reynolds. Sorry if these tables don't align correctly--I just pasted them in from excel.

They show real household income changes, since 1988. 2000 was an economic peak and the year before the bursting financial bubble took a big bite out of high incomes (large capital losses), so you see more inequality if you stop there. But I've include the latest CBO year too--02-03--to show that the old pattern is returning.

Pretax 1988-2000 1988-2003 2002-03
Bottom fifth 15.6% 9.6% -1.3%
Mid fifth 11.2% 7.5% -0.4%
Top fifth 35.3% 19.0% 2.3%
Top 1% 68.4% 25.1% 5.9%

Posttax 1988-2000 1988-2003 2002-03
Bottom fifth 17.7% 13.7% -1.4%
Mid fifth 12.9% 13.1% 0.7%
Top fifth 30.9% 20.0% 3.9%
Top 1% 60.4% 22.1% 8.2%

Source: CBO

You simply can't write about this stuff in good faith and leave all this information out, unless you're trying to push an agenda that's dependent on misleading.

BTW, a very interesting LA Times/Bloomberg poll came up with a fascinating number this week: 74. That’s the percent of respondents who believe the income gap is a serious problem (36 percent think it’s somewhat serious; 38 percent think it’s very serious).

It’s also a very big number. With polling data, once you hit this range, you’re into a rarefied level of agreement.

Given that this is a new question, there’s no way to make historical comparisons, as in “74 percent, up from a much lower percentage.” So I don't want to make too much out of it. But presumably, these respondents are not reacting to nuances in data sets.

They're calling it like they see it.

[Movie Guy]

Yes, Alan Reynolds has attributed a couple of posts to the wrong comment posters.

His mistake appears to be based on the manner in which comment posts are recorded, with the line break appearring below each post followed by the poster name. There is, as we know, no line break separately the comment posters' names and times of posting from the next post.

He will catch on if he keeps posting here.

[Movie Guy]

The attacks on Alan Reynolds have proven to be a mixture of fact and fiction, a fair portion of which have thus far targeted personal background matters and older public communications from Reynolds. Many of the attacks have had little to do with a careful review of the text and data cited in his recent op-ed piece in the Wall Street Journal. Perhaps some of the posters and readers didn't read the op-ed. We have posters on this blog who have said that they don't read the WSJ. Some are rather defiant about the WSJ. Whatever.

What I find interesting is the length to which some posters have gone in their attempts to discredit Alan Reynolds. Take, for example, this supposed fact posted on two of the three income inequality main posts on Economist's View which supposedly challenge Alan Reynolds' latest op-ed piece:

anne - Dec 18, 2006 11:31:03 AM- EV - Follow-Up on Inequality II, Dec 17, 2006:

Countered by Herderman:

http://economistsview.typepad.com/economistsview/2006/12/followup_on_rey.html

Alan Reynolds:

"The Census data are the key source for assessing how most Americans are doing. However, they do a poor job of tracking incomes at the very top, for two reasons. First, because Census data are based on a limited sample, not the whole population, they're unreliable in tracking the income of small groups – and the really rich are a small group, who just happen to bulk large in the economy. Second, the questionnaire is "top-coded": if the individual interviewed has earnings higher than $999,999, those earnings are recorded simply as $999,999. Since a lot of income growth in the last few decades has taken place among people with multimillion-dollar incomes, the Census data miss an important part of the story."

anne - Dec 18, 2006 11:27:59 AM - Follow-Up on Inequality, Dec 16, 2006

http://economistsview.typepad.com/economistsview/2006/12/followup_on_inc.html#c26689382

"Second, the questionnaire is “top-coded”: if the individual interviewed has earnings higher than $999,999, those earnings are recorded simply as $999,999. Since a lot of income growth in the last few decades has taken place among people with multimillion-dollar incomes, the Census data miss an important part of the story. In particular, what you won’t learn from Census data is the extent to which rising inequality is a story, not about the top 20 or even the top five percent of the population, but about the top one and the top 0.1 percent."

Whoever wrote this [Alan Reynolds] is absolutely wrong on how the Census handles topcoding information. If you are working with aggregate data such as the total amount of income above the topcoded amount, then the Census does report the aggregate amount as accurately as they can.
The Census questionaire is NOT topcoded and neither is the data in the CPS. Topcoding is a construct for confidentiality but does not lessen the aggregate amount of reported income.

- Herderman

Alan Reynolds did not write the above words quoted and attributed by anne to Alan Reynolds.

Paul Krugman wrote the words challenged by comment poster Herderman that anne is attempting to further discredit Alan Reynolds with in her two supposed "factual" posts.

Paul wrote those words in his NYTimes Money Talks piece titled 'On Tracking Inequality. Here's the link: On Tracking Inequality, by Paul Krugman, Money Talks, NYTimes

Mark Thoma cited the Krugman piece in this September main post: EV - Krugman: On Tracking Inequality, September 19, 2006

Mark Thoma again cited the Krugman piece, referring to the September main post, in the second of his three new income inequality main posts, EV - Follow-Up on Inequality, December 16, 2006, which challenges Alan Reynolds, saying:

"Much of his rebuttal uses Census data. But there is a problem here: (Mark refers to his September 19, 2006 main post which includes an excerpt from Paul Krugman original NYTimes Money Talks piece, On Tracking Inequality and he pulls part of the Krugman text forward.)

Let's review the original NYTimes Money Talks text excerpt, accompanied by Mark's polite lead in from September 19, 2006:

Mark Thoma: "Paul Krugman tries to clear up some confusion over measuring inequality, and institutes a new practice - posting links to the data sources in his columns. He hopes other commentators will do the same thing and save us all a lot of time chasing down sources behind arguments:"

On Tracking Inequality, by Paul Krugman, Money Talks: "Now that rising income inequality has become a big political issue, people are throwing around a lot of numbers. Some of these numbers are reliable, other aren’t. But how are readers to tell the difference?"

"Well, one thing that might help is knowing where the standard sources are."

"The first point of call is data from the Census. Census numbers are based on the Current Population Survey, a questionnaire filled out by a sample of Americans, then extrapolated to the nation as a whole. For historical comparisons, go to Historical Income Tables."

"Data there are gathered under several categories: households (people living together), families (they have to be related), and individuals. (Formal definitions) As of now, only the household data have been updated to 2005, which is why I recently turned to Table H-13 – Educational Attainment of Householder – to show that most Americans with a college education have lost ground in recent years."

"The Census data are the key source for assessing how most Americans are doing. However, they do a poor job of tracking incomes at the very top, for two reasons. First, because Census data are based on a limited sample, not the whole population, they’re unreliable in tracking the income of small groups – and the really rich are a small group, who just happen to bulk large in the economy. Second, the questionnaire is “top-coded”: if the individual interviewed has earnings higher than $999,999, those earnings are recorded simply as $999,999. Since a lot of income growth in the last few decades has taken place among people with multimillion-dollar incomes, the Census data miss an important part of the story. In particular, what you won’t learn from Census data is the extent to which rising inequality is a story, not about the top 20 or even the top five percent of the population, but about the top one and the top 0.1 percent."

"Fortunately, there’s another source of information: income tax returns, which aren’t top-coded. Tax return data are especially useful if you want to look at long-term trends going back before 1947, which is when the Current Population Survey data begin; high-income Americans have been paying income taxes since 1913. The I.R.S. does its own analyses of these data, and the Congressional Budget Office produces reports based on a merge of Census and I.R.S. data, but the most convenient and comprehensive analyses come from Thomas Piketty, at the Ecole Normal Superior in Paris, and Emmanuel Saez at UC Berkeley. Their latest data set is at Prof. Saez’s Berkeley home page (Excel file.)"

"There are other sources, too – which I’ll explain when I use them. You see, I’ve decided to institute a new policy. On inequality, and in fact on many matters economic, it’s all too common to have numbers – some from unknown sources – flying in all directions. The issues are hard enough without clarity about where numbers come from. So from now on I’m going to post sources for the numbers in each column on TimesSelect, with links where possible (it usually is.) Basically, this is the same thing I do when filing my columns; I always provide sources and links to my copy editors. But now I guess my explanations will have to be grammatical! Anyway, I hope that other economic commentators will follow the same practice, which is easy in this Internet age, and will save all of us a lot of confusion."

So, no, Alan Reynolds is not the target of comment poster Herderman as stated by anne not once but twice for effect on two separate main post threads.

Paul Krugman is the individual that Herderman is challenging, regardless of what anne may state.

In truth, anne is attacking Paul Krugman and Mark Thoma (for citing this portion of Krugman's work) but laying the blame and error on Alan Reynolds.

No, Phoebe Moses (Annie Oakley of western fame) wouldn't have missed, but EV's anne certainly did...by a country mile. Or...a New York neo-liberal mile.

So much for credibility in the ongoing argument over the details of Alan Reynolds' WSJ op-ed piece.

[Barbara]

Really to find the http://freewebtown.com/kacjwsiq/potugal-vestido.html in Google. I can give the additional information.