Arnold Kling  

Who is Rich?

Backwardation... Bush on Trial...

David R. Henderson and Charley Hooper argue that most of us are rich.

Except for the few hundred thousand who are homeless, the Americans whom the U.S. government defines as poor live exceptionally rich lives. In most ways, their lives are better than those of kings and queens just 200 years ago. Consider the quality and quantity of our food, clothing, refrigerators, televisions, washing machines, stereo systems, and automobiles. King Louis XIV of France had a greenhouse so he could eat oranges. The poor in this country can eat an orange every day, regardless of season. King Edward III of England could summon the royal musicians to play music. The poor in this country have a wide variety of music at their command, 24 hours a day, played note-perfect every time. Edward III lived in a dark, smelly, cold castle. Even the worst houses in this country are more comfortable and have electric lights, too. Care to live without showers and flush toilets? The kings of England and France had to. Next time you see a Shakespeare play in which kings and princes cavort, remember that royalty in Shakespeare's day had rotten teeth, terrible breath, and body odor that would make you keel over.

John Rawls made a splash by arguing that we should imagine ourselves being born as the worst-off person in society. What Henderson and Hooper are saying is that of all human beings ever born, even the poorest Americans are in the top one percent.

For Discussion. Looking at the comparisons across countries and across time, evaluate the impact on the standard of living of income redistribution vs. economic growth.

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The author at Rishon Rishon in a related article titled Who is rich? writes:
    The EconLog has a post called, “Who is rich?” which quotes from David R. Henderson and Charley Hooper as follows: Except for the few hundred thousand who are homeless, the Americans whom the U.S. government defines as poor live exceptionall... [Tracked on May 20, 2004 11:16 AM]
The author at Optimization Prime in a related article titled A One Sided Approach to History writes:
    Via Arnold Kling, David Henderson and Charley Hooper at TCS claim that the "Top One Percent Includes You". The authors point out how well off even the poorest in America are relative to other countries, and, more importantly, relative to... [Tracked on May 20, 2004 1:17 PM]
The author at Advisory Opinion in a related article titled You're Rich writes:
    In fact, you almost certainly are one of the wealthiest one percent of humans to have ever lived: The poor in the United States . . . live on up to $23.50 a day. Except for the few hundred thousand [Tracked on May 20, 2004 1:43 PM]
The author at The Big Picture in a related article titled What is wealth? writes:
    Arnold Kling discusses the concept of Wealth. Arnold is an interesting and thoughtful economist who usually provides intriguing food for thought. Such is not the case today. Arnold unfortunately cites David R. Henderson and Charley Hooper, who argue th... [Tracked on May 22, 2004 7:24 AM]
COMMENTS (5 to date)
Lawrance George Lux writes:

I have always thought the style and type of economic organization was dependent on the largesse of the economy and its level of technological development. Under this scenario: At basic level is fuedalism or Warlordism, with banditry between functional fiefdoms. Then come the development of Market towns and the Caravan traders, who continue to pay the Warlords for safe passage (tariffs). The comes Freebooter capitalism--based on aristocracy concepts held over from the prior development. The needs of the Economy brings a defined Labor class--starting with the Guilds, and finishing with Labor unions. Socialism is a response to the rape of Freebooter capitalism. Socialism, though, is found restrictive with continued development; it brings on a neo-conservative movement. The neo-conservatives will themsleves lose to a neo-socialist movement, because of their search for only Profits and support of Corporatism at an extreme cost to individual liberty and Consumer satisfaction. Neo-socialism has its own limitations, though, and will be an actual impediment to mass Individual aggregation of economic assets.

I have always believed every Economy must pass through these shelfs, and personal beliefs and/or Government policies has little to do with the final outcome. lgl

David Benoff writes:

Economic sociologists have convincingly shown that once a minimum level of prosperity is reached (i.e. nutritious diet, basic housing, access to education and health care), subsequent increases in material wealth contribute very little to people's self-reported happiness. Of course "standard of living" is an ideologically freighted term in that it implies that quality of life can be assessed in terms of material possessions.

In affluent societies like the U.S., income is largely a "positional good". A high income is valued less for what it buys, than for the fact that it makes you "better". Note also Americans' preference for expenditures that have a high signaling quotient -- overconsumption of goods like autos and housing, underconsumption of leisure and travel.

David Thomson writes:

“John Rawls made a splash by arguing that we should imagine ourselves being born as the worst-off person in society.”

The well meaning John Rawls did enormous damage. Determinism underpinned his essential philosophy. Rawls had a difficult time dealing with the harsh fact that sometimes a person is responsible for their own troubles. We are often not merely victims of circumstances. Sometimes an individual is unexpectedly run over by a vehicle that jumped the sidewalk. Alas, there are also times when people get drunk and walk in front of a fast moving truck. Should we treat the virtuous and the non-virtuous alike? The late Harvard professor had no real answer for this dilemma.

Mcwop writes:

First problem is in using income to define who is rich.

Take the following three scenarios:

Married Couple 1
One earner
$100,000 / year salary
Hours worked per week: 40

Married Couple 2
Both work and each earns $50,000 / year
$100,000 / year salary
Hours worked per week: 40 each (80 combined)

Married Couple 3
Both work and each earns $125,000 / year
$250,000 / year salary
Hours worked per week: 60 each (120 combined)

No matter how you slice these income situations are very different. For exapmle, Married couple 3 have a high (Kerry definition of rich) income, but the least amount of free time.

Let's look at one more example of a small business owner who makes widgets. He is self employed and for the past 20 years has earned $50,000 per year. In year 21 the he has a great year from a big widget purchaser, and earns $300,000. After that year he goes back to earning $50,000 per year. Is this guy really rich?

Barry Ritholtz writes:

This disingenous argument receives a full fisking at the link above.

I must say, when I first read the excerpt, I initially suspected these authors had suffered some kind of a blunt force trauma to the head . . . In their dementia, their lack of mental accuity led to make rather pedantic and foolish arguments.

Then I went to read the full piece -- it is at TechCentral Station, where the full glory of the author's intents are revealed: Its a diatribe against presidential candidate John Kerry's plan to rollback the tax cuts for the top 1%.

So in addition to being a poor piece of tortured logistical reasoning, it is also a bunch of partisan hackery.

Arnold Kling: you can do much better than citing intellectual deitrus such as this . . .

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