Thursday, August 2, 2012

Tyler Cowen on Paul Krugman

"Paul Krugman is a great economist. But of all the people in my RSS feed, in terms of his quality and skill as a reader, he is not in the top 90 percent."

That's how Tyler Cowen concludes a reply to Krugman in their debate on income mobility.

(Here's Cowen's original post with 7 interesting points on income mobility, including speculation about why it's higher in Europe than in the US, and here's Krugman's response suggesting that Cowen's post is "anti-American.")

One of Cowen's co-bloggers, Alex Tabarrok, also defends Cowen. He gives three elegant hypotheticals which lead him to conclude that "economic mobility measures are overrated. What we should care about is growth." Whether or not you're not predisposed to agree with that view, I recommend clicking the link and considering Tabarrok's hypos.

Relatedly, here's a column by Thomas Sowell on income mobility. Excerpt:

All sorts of statements are made in politics and in the media as if that top 1 percent is an enduring class of people, rather than an ever-changing collection of individuals who have a spike in their income in a particular year for one reason or another. Turnover in other income brackets is also substantial.

There is nothing mysterious about this. Most people start out at the bottom, in entry-level jobs, and their incomes rise over time as they acquire more skills and experience.

Politicians and media talking heads love to refer to people who are in the bottom 20 percent in income in a given year as “the poor.” But, following the same individuals for 10 or 15 years usually shows the great majority of those individuals moving into higher income brackets.

The number who reach the top 20 percent greatly exceeds the number still stuck in the bottom 20 percent over the years. But such mundane facts cannot compete for attention with the moral melodramas conjured up by politicians and the media when they discuss “the rich” and “the poor.”

There are people who are genuinely rich and genuinely poor, in the sense of having very high or very low incomes for most, if not all, of their lives. But “the rich” and “the poor” in this sense are unlikely to add up to even 10 percent of the population.
For more of this, I recommend the chapter on income in Sowell's book Economic Facts and Fallacies.

2 comments:

Patrick said...

The NYT had an article a few months back about this. It reported studies that show about 58% of those born in the lowest quintile move up over their lives. That seems reasonably mobile to me, although I remain convinced that the relative position is less important than the absolute position, i.e. "How good are those at the bottom doing?" If the condition of that group improves, then their position relative to others matters less. Plus, when someone moves from that quintile, another necessarily takes his/her place.

Interestingly, the Times reported that 8% of those starting at the bottom make it to the top. I find that pretty good, although the Times reported it as a fact that makes the US look bad. LINK

John Althouse Cohen said...

I remain convinced that the relative position is less important than the absolute position, i.e. "How good are those at the bottom doing?" If the condition of that group improves, then their position relative to others matters less. Plus, when someone moves from that quintile, another necessarily takes his/her place.

Yes, I very much agree with you on this. That's along the lines of Tabarrok's post.