kf's ignorant longshot Oscar pick.

A mostly political Weblog.
March 5 2006 5:19 AM

kf's Loony Oscar Longshot

Plus--New York Times in ruins!

Oscar Bump Builds into Heartland Tsunami! Brokeback Mountain  out of top 10 on Academy Awards weekend. 11:45 A.M.

Paul Krugman's column of 2/27  [$] argues that what's happening is not

that the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization are pulling away from the 80 percent who don't have these skills.

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Rather, Krugman says, a tiny, tiny minority (he talks about the top one percent or the top hundredth of a percent) is getting extremely rich--which he declares, in a double-hedged sentence:

may have as much to do with power relations as it does with market forces. [Emph. added]

That's indeed an anti-CW position, as Krugman notes--the established consensus being the "80-20" skills-centric view of rising economic inequality. It's also a highly convenient position for Krugman, since it lets him claim that somehow, through unspecified changes in "power relations," we can stop this tiny minority of "oligarchs" from continuing to get rich.

But just because it's convenient doesn't mean it's wrong! And just because the very rich got very richer during the Clinton years--not just in the Bush and Reagan years--doesn't make it wrong either. But here are some initial, top-of-head questions:

1. What if the top tenth of a percent didn't exist? Wouldn't it look, in the rest of society, as if the relatively skilled two or three deciles at the top were pulling away from everyone else--in other words, the 80/20 consensus would be true? Krugman seems to be saying that the top 20% didn't really get that much richer at all. He cites a study showing that between 1972 and 2001 "the wage and salary income of Americans at the 90th percentile of the income distribution rose only 34 percent."  But I bet if you looked at overall wealth--including stock and real estate investments, 401 (k)s, etc.--you'd discover the top 20% doing a lot better than that, and a lot better than the bottom 80%.

2. Why do we care about income inequality? Because we care about social equailty, I've argued. We're Americans--we don't mind people getting rich. We do mind richer people lording it over less rich people, or even thinking they're better than less rich people.  And if that's what you care about, what happens to a tiny minority at the top--CEOs, baseball players, Bill Gates and Steve Rattner--may not matter as much as what happens in the vast affluence of the top 20%. There's a limit to how many people the top tenth of a percent can boss around, after all. But if the top 20% of Americans suddenly get enough relative wealth to wall themselves off from everyone else, or to start hiring maids and butlers and other servants (after decades when the number of houses with servants declined), that could in itself be a big and unwelcome shift in the tone of everyday life.

3. How exactly is Krugman going to stop the very rich from getting richer, anyway? Controlling CEO pay would be a start. It seems obvious that top corporate pay is out of control. But there's Charles Murray's argument to contend with: "[W]hen a percentage point of market share is worth hundreds of millions of dollars, the people who can help you get that extra percentage point will command very large salaries."

Controlling CEO pay is only a start, anyway. Inequality is increasing, after all, even within the broad, non-CEO ranks of people with college degrees, or law degrees--because within the post-graduate professions, the superstars with more uncredentializable talent are pulling ahead at the expense of the pack. That's certainly what's happened in journalism--look at what Tom Friedman makes. How do you stop the stars from making lots of money in a mass society when people want to hear the stars?  (As Krugman argued, in another context: "You may think I was overpaid, but the market--not Enron--set those pay rates.") .

And lots of people get rich out of sheer luck--they're the Mark Cubans and Maria Cantwells who find themselves holding the right asset at the right time. Can you stop such people from getting lucky without throwing a big monkey wrench into the free market? I doubt it. Nor is it clear we actually want a society in which luck isn't rewarded, but talent is. That would mean that any remaining inequalities were deserved--something that would be arguably much worse for social equality.

Maybe Krugman's addressed these issues in venues I haven't visited. If so, please let me know. For now, I'm sticking with the conclusion Krugman himself seemed to reach in the early editions of his book The Age of Diminished Expectations--that there isn't much we can do, in practice, to stop either the top 20% or the top 1% from getting richer if that's the direction in which the underlying economy's moving. The better strategy, I still think, is to focus on preventing this money inequality from translating into social inequality. 1:07 A.M. link

On Beyond Yeti: Did they say computers (enabling the cheap generation of new designs) and globalization were changing the auto industry? Here's the Tata Cliffrider, Inovo Lirica, Mazel Identity, Koenigsegg CCX, Loremo LS, and of course the Castagna Imperial Landaulet--all your old, familiar favorites--on one page. ... It's still not quite as easy to start a new car line as to start a blog--but it seems to be getting close. ... 7:12 P.M.

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