Arnold Kling  

Life Among the Thetes

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Matt Yglesias writes,

stagnating real working-class wages are calculated by using a meaningless overall average rate of price inflation. Some things--college tuition, apartments in Manhattan, health care--have gotten more expensive much faster than average. This means that people who buy a below-average amount of those things are better off than the statistics show. A healthy person living in an unfashionable city with no student loans to pay off can get by on a fairly modest income. The flipside of the declining marriage rate is that fewer men are supporting families. To a certain puritanical frame of mind that views toil as a virtue in and of itself, this may seem unfortunate. But in many respects it's a natural outgrowth of progress.

Pointer from Reihan Salam. It seems that Matt is leaning closer to the view that we are moving in the direction of The Diamond Age. Recall my take:

we could be headed into an era of highly unequal economic classes. People at the bottom will have access to food, healthcare, and electronic entertainment, but the rich will live in an exclusive world of exotic homes and extravagant personal services. The most popular bands in the world will play house concerts for the rich, while everyone else can afford music downloads but no live music.

My guess is that when it comes to health care, there will be huge spending differentials by social class, but with very little difference in outcomes. Reliable cures will be affordable. Exotic treatments, futile desperation efforts, and lots of precautionary scanning, not so much.

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COMMENTS (13 to date)
kio writes:

One should not confuse real economic growth and technology progress. income distribution inequality (it also includes age dependent income inequality which is welcome by the society) not well percieved but a part of high incomes is used to produce new medicine, high-end technics and so on. This give a large part of technical progress which would not exist without personal inputs of rich people. This progress spills over and people get high quality products relatively cheap. It is a topic for an excitng study - does richness drive technical progress? US and Switzerlan might be good examples.

FredR writes:

"My guess is that when it comes to health care, there will be huge spending differentials by social class, but with very little difference in outcomes."

There should still be large differences in outcome even if the spending on health care itself doesn't do much, considering how much healthier upper class behavior seems to be.

James A. Donald writes:

Biotechnology is advancing rapidly, but medicine is regressing due to politics, at about the same rate as it is advancing due to science.

Back in the nineteenth century, it was discovered that type two diabetes, and much of the damage caused by both forms of diabetes, could be reversed by weight loss and what we would now call a ketogenic diet, a diet high in animal fat, moderate in protein, and with close to zero carbohydrates.

Theory was, blood sugar causes problems in diabetics, so they should be forced to derive their energy from ketones, rather than sugars.

Recently this was rediscovered - in mice, by scientists who show absolutely no indication of awareness that they are duplicating nineteenth century research on actual humans. But no one proposes to try the diet on humans because meat is politically incorrect, and grain is politically correct.

Instead, the discovery that diabetic kidney damage in mice can be reversed by a ketogenic diet is touted as an inspiration for finding drugs that can reverse it humans, not an inspiration that the nineteenth century method for reversing diabetic kidney damage in humans should be applied.

Thus political correctness is moving medicine backwards, at about the same rate as biotechnology is moving it forwards.

Steve Sailer writes:

The central issue is "affordable family formation." Ben Franklin had some thoughts on that in 1754 that are more sophisticated than 99% of the discussion of Charles Murray's book.

Jim Glass writes:

People glibly make the awfully big assumption that income inequality = welfare inequality (else why be so concerned about income inequality?) when it just ain't so.

Welfare is much better indicated by consumption expenditures -- here are the top-to-bottom quintile ratios for both via the 2010 BLS Consumer Expenditure Survey,

Expenditures: 4.4 to 1 ($92,870 to $20,953)
Income: 15.9 to 1 ($157,369 to $9,906)

As those numbers show, income inequality does not so very much translate into consumption inequality(.pdf) as people imagine. Nor is it increasing like income inequality. (Measured by cohort on a lifetime basis consumption is even less unequal than shown above. Year-to-year numbers always exaggerate inequality due to temporary short-term highs and lows).

When informed commentators go on and on about income inequality as a big societal ill, without making even a single mention of consumption inequality to provide a more accurate perspective on things -- even though they know full well that consumption is a much superior measure of welfare -- well, it's hard for me to believe there isn't more than a bit of disingenuousness in it all.

BTW, as to the income side of things, here is Robert Gordon (of CBO, NBER, the Boskin Commission, the popular textbook, etc.) on the subject...

"The rise in American inequality has been exaggerated both in magnitude and timing ... This paper shows that a conceptually consistent measure of this growth gap over 1979 to 2007 is only one-tenth of the conventional measure...."

George writes:
It seems that Matt is leaning closer to the view that we are moving in the direction of The Diamond Age.

I started reading that book because of your comments on it. I'm about half way through now, it's really good!

JupiterJazz writes:

As a healthy person living in an unfashionable city with no student loans to pay off I would like to point out that the one healthcare sector I find myself priced out of is access to dental care. Even the most trivial services are prohibitvly expensive on my $22,000 salary.

I'm a valet at a casino in Reno, NV if you're curious.

Hunter writes:

You can be a king or a street sweeper, but everybody dances with the Grim Reaper

chipotle writes:

Dr. Kling,

Maybe I'm alone in this, but I find your use of the terms "vickis" and "thetes" to be viscerally distasteful. It sounds as if you are talking about different species, not your fellow human beings. Marxist class analysis is not dissimilar.

quadrupole writes:


It's not like he's talking about Eloi and Morlocks (which had evolved to deeper species).

In fact, part of the point of Diamond Age is that the distinctions are cultural and not fundamental, as demonstrated by a thete being raised with vickie values and coming out more or less vickie.

MG writes:

We must be on blog post number millionth+ dealing with all things income inequality, and yet we do not seem to want to take a step back and at least agree on whether if we are to worry about anything, it should be consumption inequality. Jim Glass brings it up here, and nobody comments on it. (The picture does really change a lot when seen that way, and this is not just optics.) Also, Matt Yglesias' observations support the bias that inadequate inflatoin adjustments can have on the estimation of trends in consumption (or income) inequality. Not only does the CPI rate overstate low quintile consumption inflation BUT IT ALSO underatates the high quintile consumption inflation. This is an optical double whammy. Before we get into a tizzy about inequality, its causes, and trends, can we just agree on the metrics.

Glen Smith writes:


The best measurement of welfare is how much profit is made. In this case that would pretty much be income less expenditures. From Jim's basic numbers the top quintile profit is about 65K meaning he can save that and be able to meet his expenditure floor in about two years, spend that on luxuries (such as minimization of having to deal with the poor person) or invest that such that his income increases. The person at the bottom has a loss of about 10K meaning he either is or soon will be the rich person's slave, have to become a criminal or kill himself.

Yancey Ward writes:


Your interpretation assumes it is debt the lowest quintile is building up. You actually have to support that assertion.

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