David R. Henderson  

Response to David Cay Johnston

Some Replies to Me... Sympathy for the top quintile...

David Cay Johnston has replied, in three lengthy comments (here, here, and here), to my post and other commenters' comments. I want to reply to what he said that challenges my statement that he is confusing poverty and income inequality, because that is the issue I addressed in my post.

I'll quote from various parts of his response and then give my response.

Second, you write that I "confuse poverty and income inequality." No I don't and never have. Try reading these words, published last month:

"Inequality is not synonymous with poverty. Inequality is about the distribution of resources." http://bit.ly/15OXBj2

I was not claiming that he always confuses income inequality with poverty. I was claiming--and still claim--that he does so in the recent column at issue.
You wrote "if the income of the people at the bottom doubled and the income of the people at the top tripled, there would be less poverty--and more inequality. Johnston shows no awareness of these basic statistical facts."

I am intimately familiar with the math, statistics and the concept. While your math is correct, there is exactly zero evidence of rising incomes for the vast majority. That's your straw man.

I gave a simple hypothetical example to make the point that inequality could increase while poverty decreased. That is why the word "if" is in there. Johnston is right that I gave zero evidence of rising incomes for the vast majority. I didn't need to give such evidence to make my point.

Most of the rest of Johnston's comments reargue his case or claim (correctly) that I don't present evidence on what is causing the various phenomena he discusses. I never claimed to present such evidence and, as readers can see, my point was to point out that in this piece he confused income inequality with poverty. Here's a quote from his piece that I didn't quote in my earlier post:

Women look for mates who will be committed to them and their children and who will be able to provide for them. In a world where stable jobs at all levels become less common, where working class jobs are scarce and where the median wage has been stagnant for almost a generation, those in the market adapt.

Stable jobs being less common; scarce working class jobs; stagnant median wages. Those are all about poverty or low income or failure of income to rise. They are not about income inequality.

I will, though, mention one argument that Johnston makes that isn't about what I wrote about but that confuses the issue. He writes:

You cite zero evidence that poverty per se damages marriage, but if you can back that up that I would be interested in seeing the data so I can determine whether I should revise my understanding of the facts.

Of course I cite zero evidence for this claim. There's a good reason: I never made the claim. What I said was that Johnston "shows, at most, is that poverty and low income damage marriage." Moreover, my very next two sentences were to cast doubt on that claim. I wrote:
Even there, I'm skeptical because two people with low income who got married would, if they were both earning income, automatically create a higher-income family than either of them had. In other words, marriage is, and has been, a way to get out of poverty.

Comments and Sharing

CATEGORIES: Income Distribution

COMMENTS (23 to date)
Floccina writes:

I would bet that if you lower income and or wealth inequality by low income people more you will get less marriage among the poor. Income inequality was even higher in the 1920s but as far as I can tell marriage was more common among the poor. Not an easy stat to find. There is some related data here.

ted writes:
What I said was that Johnston "shows, at most, is that poverty and low income damage marriage."

I never got the impression that he shows that, at all.

He wants to show that inequality damages marriage ("inequality damaging X, where X can be anything" being a common Left trope), but clearly confuses inequality with poverty, and then doesn't actually show at all that poverty damages marriage.

He shows there's a correlation between poverty and bad marriages. And that's not so interesting.

I find it far more likely that it's poor human capital that causes both poverty AND damages marriage, as long as we're all allowed to produce assertions.

If anything, logic hits his theory in the face. Poor people who marry (and stay married) become less poor just because of that.

Floccina writes:

Also I think if inequality were causal, low income women would not be have children with low income men.

Thomas writes:

Hold it a moment. Marriage is not a way out of poverty: cohabitation is.

The fact that a married "household" has twice the income of two unmarried "households" is not "a way out of poverty", as such.

It is the ability to share housing and other fixed (or semi-fixed) costs by cohabitation, that offers the benefit.

If the two people marry, but live separately, no benefit (okay, there are tax benefits if one person isn't earning, but the earner is now poorer - for them, marriage is a path to poverty, not a path out).

Floccina writes:

Sorry I need to edit the post above:
I would bet that if you lower income and or wealth inequality by raising the income of poor women you will get even less marriage among the poor.
Income inequality was even higher in the 1920's but as far as I can tell marriage was more common among the poor. Not an easy stat to find. There is some related data here.

mickey writes:

Cohabitation involves sharing some costs but marriage might involve commitment in line with earning more income.

Kevin Erdmann writes:

"I would bet that if you lower income and or wealth inequality by raising the income of poor women you will get even less marriage among the poor."

Not only are you right. It seems pretty clear to me that describes the last 40 years. The status and incomes of women have been raised relative to men. This means that earning ability is a more important status marker for women, correlating with marriage partner selection, and raising measured inequality at the household level. It also means low earning women who don't marry are less dependent on men, and the earning ability of available men is not as strong as it used to be, relative to their own.

This is great social progress. The problem is that, on the margin, newly independent women aren't going to be Paris Hilton. They will be women choosing marginally sustainable independent lives over dependent lives.

There are many complex and difficult questions here, all of which are missed by framing this as a conspiracy of rich vs. poor.

David Cay Johnston writes:

Mr. Henderson, your response lacks merit.

Again you demonstrate a habit of ignoring facts to justify your false assertions and distortions rather than acknowledging that you shot from the keyboard without thinking carefully about what you read.

So I am going walk you through your further errors in fact and logic in the hope that you will take off your blinders and recognize that you are wrong – completely wrong – and will correct the false record you have created, which is what honorable people do when they err.

Your case is that Johnston “is confusing poverty and income inequality, because that is the issue I addressed in my post.”

You make a begrudging acknowledgment, lamely writing “I was not claiming that he [Johnston] always confuses income inequality with poverty. I was claiming--and still claim--that he does so in the recent column at issue.”

Let me show you your error on your terms.

In support of your double down you quote my words, not in your original post, and then argue:

“Stable jobs being less common; scarce
working class jobs; stagnant median wages.
Those are all about poverty or low income
or failure of income to rise. They are not
about income inequality.

This is a textbook case of ignoring context. First, the problem of job instability exists at all income levels, not just among the working class, so your point is factually incomplete at best, but revealing about your problems with balance.

Further, the whole paragraph is a set up for the words your summary ignored: how “those in the market adapt.”

What precedes those words? A discussion of diverging trends in divorce and non-marital birth rates, the last detail of which is followed by my noting that the sharp rise in non-marital births by working class women in their 20s “provides a strong clue about how government rules that skew economic gains affect the marriage market.”

See that verb – skew. The phrase “skew economic gains” is not about poverty, but inequality. It is about divergence between groups – that is, inequality. The whole context is about inequality.

And what are they adapting to? My very next words hammer home the point that this is about adapting to increasing inequality:

(My words) For those on the bottom third of
the income ladder, divorce rates have risen
because “increasing disparities between men
and women have made both more likely to
give up on each other,” write Carbone and Cahn.

The words “increasing disparities” are about increasing inequality.

If one group becomes less well off that can be a story of poverty. But my column is clearly a story of divergence in behavior between groups. A widening gap shown by the diverging trend lines is, by definition, a story about inequality.

I am comparing the same groups to each other and showing how the gaps between them are growing. The word inequality is defined as “difference in degree.”

So again and again and again I compare socioeconomic groups and show they are diverging, that the difference in degree in marriage, divorce, non-marital birth rates and even time spent with infants is increasing over time. That is precisely the definition of inequality.

My column is clearly about growing differences in behavior between consistent groups.

Maybe this will help you see the light: the socioeconomic groups whose divorce and non-marital birth rates are rising and falling are separate groups who, over time, are becoming more separated. We have a word for that: inequality.

Your riposte continues to ignore that my whole column is about diverging trend lines and every point is couched in terms of that divergence.

Again, the groups with worsening divorce rates and more non-marital births are at all times the same socioeconomic groups. I repeat because you seem not to understand this central fact.

So I think there is someone here who is confused – you. And I have presented ample evidence that you got it wrong both times.

Diverging trend lines is not a story of poverty, it is a story of inequality.

My examples do make some references to changes within groups, but only because that is a concise way to give some easily understood meaning to the diverging trend lines.

Your argument also lacks balance. It is this lack of balance that puts the last nails in the coffin of your false writing.

I note that up the socioeconomic ladder there has been a shift from doctors marrying nurses to doctors marrying doctors, which further widens the gap.

Likewise, I write about “concentrating elite advantage,” a phrase that is clearly about inequality.

Based on your (faulty) reasoning the two paragraphs above confuse prosperity with inequality.

If you had thought this through you would have seen that it shows your statements that I confuse poverty and inequality have no basic in fact or logic, but are asymmetrical. That asymmetry further establishes your error.

Your posts are empty rhetoric, lacking in facts or reason as I have now shown you in precise detail using facts and reason.

Surely by now you can see how your statements that I confused poverty and inequality have zero basis in fact. But maybe not.

Dan writes:

It seems David Henderson is both right and wrong. He is right that the title is misleading and that there is nothing in the article about inequality causing higher divorce rates.

He is wrong in suggesting that the article states that divorce rate is related to poverty. The article in fact says the opposite.

I think it's the title that's causing confusion. Like income or wealth, there is growing inequality in marriage and divorce rates. We don't really know why. It is not wealth/income inequality causing higher inequality in marriage rates. The reverse could be true: that is, higher income/educated individuals marrying each other causing greater wealth/income inequality. But more likely it is a third factor that's driving both. For instance, changes in technology and globalization can increase income inequality, but also allows for greater mobility and communication making it easier for highly educated individuals to find like-minded partners.

iven the contents, I think the article is m

Colin Fraizer writes:

I tend to use the term "confuse" when one incorrectly but unintentionally equates two entities or concepts. That is, I use that term to indicate a mistake in knowledge or thinking.

I try to use the term "conflate" when one intentionally equates things aren't exactly equal. In my mind, it has the flavor or a deception.

Depending on the situation, one might take more offense at one term or the other.

I agree with Mr. Johnston that he has not *confused*
poverty and inequality. I believe he can correctly assign various data into those buckets.

However, I believe, for rhetorical purposes, he and many others *conflate* poverty and inequality. Inequality makes him (and many others) very unhappy. I would bet he acutely feels the sting of seeing friends take nicer vacations or leased jets or whatever.

Or, more charitably, he sympathizes deeply with the less-well-off who treat an occasional restaurant meal as an extravagant treat while his budget, perhaps, can absorb lunches out every day.

It is so deeply ingrained in some people's nature to measure their happiness against those around them, that they *cannot* believe it when someone like a David Henderson claims to be thrilled when he can dine out twice as often even if some others can eat steak at every meal.

LD Bottorff writes:

Mr. Erdmann,
As some investors look for undervalued investments, I look for undervalued insights. I find quite a few on econlog but this is one of the best:
There are many complex and difficult questions here, all of which are missed by framing this as a conspiracy of rich vs. poor.

RPLong writes:

Forgive me for being blunt, but finding that money problems cause marriage problems is not exactly ground-breaking economics. Marriage counselors have been saying this for decades.

robert writes:

Now, I understand.

David's analysis is a classic case of a hypothesis that has not been proven because you have not analyzed all of the data. David has used the data and anecdotes to support his hypothesis while potentially ignoring other data.

He has definitely proved correlation. I’m not sure about the causation.

I thought about discussing income inequality by comparing the incomes of Bill Clinton, Lloyd Blankfeld, Angelo Mozilo, and Charles Schwab by discussing who made the most money and who benefited from government welfare and who reduced costs to middle class by eliminating Wall Street boys club. I did find it interesting that many of your examples of government welfare reminded me more of Ayn Rand’s villains than Adam Smith. It wasn’t clear whether David would recommend less power and money for the government so that they could not provide welfare for the wealthy or whether he would recommend giving more money and power to the people that are already providing the welfare to the wealthy and hoping that if they have enough money and power they will solve the problem. I know Gruber has made a lot of money, but I’m not sure what his stance on income inequality is.

Does anyone know the correlation between the amount of money spent on programs to help the poor such as HeadStart and the rate of divorce? I read somewhere that lower income women were less likely to stay with and provide visitation rights to men who do not have steady employment since they do not provide the money to the family. If their both unemployed or working poor, why aren't they equal? Have the program changed people's values? What is the correlation between income inequality and the Great Society programs?

Does anyone know the correlation between the changes in cultural mores and beliefs and changes in marriage? Has the culture changed for the lower classes as opposed to higher classes?
I also thought about talking about working at my father’s factory in downtown Rochester and the large differences in cultural mores between different income groups. My father worked with the government to hire people who had been in prison, but it was difficult because they wouldn’t show up on time or wouldn’t show up consistently, which is hard when the parts need to be made and orders need to be filled.

What has been the effect of immigration on income inequality and divorce rates? Latin’s are becoming a larger proportion of society due to the influx of immigrants as well as potentially higher birth rates. What are their divorce rates? When you compare people in income ranges are you sure you are not comparing apples and monkeys?

Could the causation be the other way? I have family members who are at the lower end of the income spectrum, and they have relationship problems which cause problems at work.

I do agree with him that rules that suppress take home wages and discourage job creation will erode family values by not providing people with meaning jobs. The wealthy care more about the environment, which adds costs to running a business outside of just keeping the environment clean so this could also be a factor. For example, when my Dad’s business went bankrupt after the financial crisis he wasn’t able to sell the building because he lost his environment paperwork, and it took the government about a year to find it. The building could not be used during that time.

My question would be how does one reconcile having a larger administrative state when that state could be run by the John Corzines of the world?

I guess part of the answer could be that the world is more like Kurt Vonnegut’s Player Piano where we need more infrastructure spending.

Robert writes:

I want to apologize. I meant to say apples and oranges. I was thinking about what one of the managers says at work: comparing apples and orrenatanges, which I can't spell and always relates to people not data. The way it came out is bothering me, and I want to say something before someone else does.

Roger McKinney writes:

Data don't speak because they can't. Someone has to interpret them.

People who claim inequality hurts marriage have cause and effect backwards. Poor people are poor, with a few exceptions, because they lack vital character traits, such as discipline, that would empower them to get out of poverty. The same character traits for economic success are needed for marriage success as well.

Inequality has never been about helping the poor. Preachers of inequality care nothing for the poor. They are envious and merely want to punish successful people.

Robert writes:

I want to apologize. I meant to say apples and oranges. I was thinking about what one of the managers says at work: comparing apples and orrenatanges, which I can't spell and always relates to people not data. The way it came out is bothering me, and I want to say something before someone else does.

Brandon Berg writes:

Mr. Johnston:
See the chart in today's post by Scott Sumner. Incomes for the vast majority have been rising.

For decades, workers in wealthy economies were privileged against competition from workers in poor economies, with the consequence being that the former saw rapid income gains while the latter were condemned to deep, deep poverty, far worse than the fairly well-off state we call "poverty" in the US.

Globalization has eroded this privilege, and incomes are converging. Fortunately, this convergence has occurred overwhelmingly through increases in wages in developing countries rather than through falling wages in first-world nations.

This erosion of privilege, not the rising incomes of the top American earners, is the cause of wage stagnation in the US. It's really hard for me to take these conspiracy theories about the top 1% "rigging the game" seriously when there's an obvious supply-and-demand explanation that fits the available data much better.

Also, I don't see why it's Professor Henderson's responsibility to do the research necessary to determine that you have, at some point, acknowledged the difference between income inequality and poverty. His point was that the specific piece he was criticizing was conflating the two incorrectly.

Brandon Berg writes:

Following up on my last comment, in a sense the problem the American lower through middle-middle classes face today is not inequality, but rather equality: On a more equal playing field than semi-skilled and unskilled American workers faced in the mid 20th century (e.g., they now have to compete with workers from poorer countries), they're unable to maintain the rate of wage growth they experienced under more unequal conditions.

If you care about human welfare in general, rather than privileging the welfare of unskilled and semi-skilled American workers, this is clearly a great thing, mitigated only slightly by stagnation (not actual declines) in wages for the global upper-middle class.

ted writes:

Reading David Cay Johnston's reply, I think that David Henderson has been way too charitable.

I realize now that Mr Johnston doesn't confuse inequality with poverty. He confuses inequality altogether, in such a large sense (as far as I can tell, he believes it to mean "non-identity" [≠]) as to make what he writes nearly nonsensical, but defensible. We cannot really tell what he means when he uses words randomly, so his begrudging, bitter criticism is well deserved.

Most people, including, I believe, David Henderson, talk about "inequality", meaning the differences in income, or perhaps wealth, or perhaps consumption, between various social tiers, and the implied alleged increase of said inequality.

mike davis writes:

Can we cut through the snark and get to what's really worth talking about here?

Mr. Johnston tells us in his original column and in his comments, “Not only is most of the increase (in non-marital birth rates) among white working-class women, it is also among women in their 20s.” We should, of course, acknowledge this both as a fact and as a matter of serious concern—single parenting is hard on the parents and the kids.

Mr. Johnston then goes on to tell us that “This provides a strong clue about how government rules that skew economic gains affect the marriage market.” This is good news! It’s hard to change the culture—meaning religion, arts, media, etc.—but easier to change government rules. So by all means let’s worry a bit less about whether we should say this is a problem of poverty or a problem of inequality and instead dig into the gritty details of government policy. I am, for example, not at all convinced that higher marginal tax rates, a Piketty-like tax on global wealth or limitations on CEO pay would have much of an impact on non-marital birth rates. My priors about the efficacy of things like Head Start are less established. But, hey, what do I know about non-marital birth rates among working-class women? Put it out there and I’ll try really, really hard to keep an open mind.

[minor html error fixed: end-code for italics revised from duplicated start code. --Econlib Ed.]

Todd M Kuipers writes:

Having now read both Johnston's article and comments, I'm inclined to agree with Henderson's intended point. The relationship between high divorce, et al, and inequality doesn't matter much, but its relationship with poverty does. It doesn't matter if Johnston insists otherwise, but inequality only matters if envy and retribution is the focus. Concentrating on poverty, and its causes are much more fruitful discussions. Concentrating on inequality at the expense of poverty suggests an agenda that is more normative than positive.

Oddly this article posits something like Piketty's thesis that benefits are destined to accrue to a particular group in perpetuity because they have a level of control beyond the people in bottom brackets - ignoring income mobility, and unforeseen innovation.

David Cay Johnston writes:

David Cay Johnston (davidcay@me.com) here…

Colin Frazier, no I do not envy anyone his or her wealth. It’s not in my nature. Some people in my social circle own their own jets – good for them.

But the personal use of jets by executives in ways that gouge shareholders and taxpayers under the guise of a 1985 law that on its face only reduces paperwork for people who drive a company car (see my book FREE LUNCH at pages 58-70) is another matter.

I favor more wealth creation and wider ownership of assets and less reliance on debt. On the side I also co-founded (now retired) a successful business.

Wealth should be earned in the competitive market place, not from suppressing markets as Adam Smith warned because that destroys the benefits of competition.

I expose wealth that comes from stealth mechanisms that take from the many to give to the few. I would hope that people who go to a site about economic liberty would take an interest in such matters, but after 20 years, a best-selling trilogy and many hundreds of articles in The New York Times and elsewhere, hundreds of lectures and innumerable television and radio appearances as well as teaching graduate students on the side I have yet to see much interest from those who say they want economic liberty.

Do you know that many companies turn a profit off their taxes and some even refer in internal documents with the words “profit center” refer to corporate tax departments? Do you think anyone should be able to profit from taxes? This is no secret to the top tax lawyers in America and is thoroughly documented if you want to learn about how it is done, especially the role of five words in the 1986 Tax Reform Act that no one noticed at the time.

How about the 2004 regulation under which the pipeline industry forces you to pay its grossed up corporate income tax (54% not 35%) and then keeps the money because since 1987 it has been exempt from this levy?

Or the massive and commonplace violations of the legal doctrine of “just and reasonable” that is intended to protect customers from Aunt Martha to ExxonMobil from the damage done by monopoly rents?

What of the nearly 3,000 corporations, many of them foreign-owned, that get to keep the state income taxes they withhold from paychecks, the workers unaware because the laws were crafted to keep it secret? What o you think about being taxed by your boss – and why would it be kept hidden from you if it is good public policy?

Then there are the thousands of retail outlets – Home Depot, Lowes, Cabela’s, entire shipping centers – that keep the sales taxes they collect, damaging competitors not so favored. Often this is accompanied by the use of eminent domain for private gain.

Should we give at least $1.4 billion of taxpayer cash to the hereditary sheikh who rules Abu Dhabi? And what of the absolute prohibition on such gifts in the New York constitution, approved four times by 2-to-1 votes going back to the 1840s? Many other states have similar flat bans that are flouted.

How about the rise of violent youth gangs caused by the roughly $1 billion annual subsidy to the burglar alarm monitoring industry that I first documented in 1987 and have revisited several times since? That causality is well documented -- and logical -- once you know the facts.

I don’t know about you, but much as I hate paying taxes I really hate paying taxes for this kind of stuff. But maybe you think its grand or do not care.

Unlike you I do not presume to know the motives of people I have never met nor even asked about the motivations. But you have no basis for attributing foul motives to me, as you did in your comment.

BTW, since my first investigative piece at age 18 my work has stopped -- not just exposed but stopped -- many hundreds of billions of dollars of abuse of taxpayers through laws and rules that flowed from what I brought to light. Joint Committee on Taxation papers estimate $256 billion just for my stories on two subjects – gift taxes and the Bermuda mailbox.

RPLong, you totally misunderstand what the column was about, perhaps because you did not read it. There have always been poor married couples, but they did not have rising divorce rates before inequality began increasing in America.

Roger McKinney, many people are poor for reasons that have nothing to do with your assumptions. Infectious disease, drunk drivers, industrial accidents and innumerable other factors are at work. How about 100 percent disabled veterans, like my father, a World War II vet who worked as hard as he could until he could not, but never made the money he would have but for serving his country so you could be free today?

How about people not born with a lot of brains? Does that mean they “lack vital character skills?”

Or those who have a hard time getting hired because they were born ugly. Spend several days, as I have, interviewing people who are chronically out of work despite having earned good grades in school and you will get a much different picture. How about being disabled from events you did not set in motion, having bad skin or a facial scar through no fault of your own or even a heroic act?

Yes many people are poor because they make bad choices. Maybe we would save a lot of tax dollars if we worked on turning them from tax-eaters into taxpayers.

If you had grown up in a household where work never got your parents or earlier generations anywhere, nor did it seem to benefit anyone around you, maybe you would not value education they way I and many others do. Maybe you should ask yourself the reasons pathological behaviors are so much more common here than in other modern countries. But in any event what are you doing to solve these problems?

You also missed the entire point. Of course marriage is harder when you lack enough money. That was NOT the point as I have tried really hard to get Mr. Henderson and others here to see. Blinders seem to be the norm for some people here.

The issue is diverging trend lines. People were poor in the 1950s and 1960s, but they did not break up at rates anywhere near the rates we now see. College educated women were less likely to wed; now they are more. Try focusing on the actual issues at and, not on what you imagine about the moral inferiority of poor people “with a few exceptions.”

Brandon Berg, none of my work is based on conspiracy theories – and I say this as someone who has literally exposed conspiracies, but not financial ones. (For example, see my work revealing the LAPD chief’s assigning officers to sleep with women to gather political information, to instigate a riot and foment other crimes, including urging violence against police, which prompted those present to tell the people they did not know were police spies to sit down and shut up.)

I agree with you that globalization is reducing US incomes for most people and have written about this many times.

But that does not in any way negate the idea that the game is being rigged, as I have written for years by showing specific and significant examples of that because I spend hours each day digging through dry government regulatory and other records show rigging. That the game is rigged does not mean conspiracy, it means people who buy access to lawmakers and regulators and others get to shape the rules, as we saw with the cromnibus where Citigroup literally wrote key provisions.

The third book in my trilogy, The Fine Print, has 276 pages of material on how big companies shield themselves from the rigors of competition.

My chapter on the garbage industry details how my affluent neighbors and I beat the garage cartel (pages 128 to 141). There’s also a chapter on how a law intended to increase competition among railroads instead produced duopolies and secret contracts that enable price gouging so serious that it has the same effect, to cite a specific example, as a 10 percent increase in property taxes in Lafayette, La.

As for incomes, details matter. My readers know that from 2000 to 2012 the number of jobs paying $2 million or more in 2012 dollars fell by 5 percent and average pay fell more than 4 percent. Not exactly the narrative you pick up from casually reading the news.

In 2013 average W-2 pay was down for 59 of the 60 categories reported by government. The only category where they rose was jobs paying $50 million or more but the number of such jobs fell sharply. At the same time 77% of all the wage increases in that period went to the 7 percent of workers making $100,000 to $400,000.

On the other hand, those making under $20,000 saw a real rise in wages because President GWBush and a majority of House Republicans voted to raise the minimum wage three times. Clawback those increases, totaling $2.10 and hour, and the bottom 38 percent of American workers would have seen their pay decline in real terms.

Oh, and ownership of assets narrowed significantly, too, decreasing 39 percent by one measure and 18 percent by another, my analysis of tax data shows.

As for your postscript, indeed many millions of semi-skilled and unskilled Americans workers lost their jobs, which benefitted the poor in China. In terms of economic liberty (discussed in my books) government basically forced this on workers who did not vote for it, did not understand it and almost certainly would favor their own economic well-being over that of Chinese peasants.

Mike Davis, you might ponder something you do not mention – the extent to which government rules depress wages.

Todd M Kuipers, to write, “inequality only matters if envy and retribution is the focus” is absurd. Envy and retribution are not part of my work.

I suggest you think about this more deeply. If all incomes are rising inequalitymay well not matter and may be a good, but what if incomes rise at the top because the pockets of people down people are being mined? And hwat if much of that mining was anti-productive, destroying the wealth of others and the economy overall while benefitting the miners?

Imagine a society in which no one’s income rises except mine for the rest of your life. That would be a Pareto improvement since no one else is worse off.

Now imagine that the reason I got 100% of the gains was not the market, but because of a host of subtle regulatory rules you have never heard about. No matter how diligent you are, how careful you are investing, how smart you are these rules keep you in place while I enjoy all of the gains. (See trusts, France, 18th Century)

Now ponder that in the context of the smattering of real world examples I cite above (and which are fully developed in my body of work) that does this, just not in such absurdly extreme fashion. The real figures are these: from 2009 to 2012 a third of all reported gross income increases went to 16,000 households and almost 95 percent went to 1 percent. This was not a Pareto improvement because the bottom 90 percent saw their incomes fall 15.7 percent. I have shown that much of this can be traced directly to government rules few people – understandably -- know about.

Envy and retribution may well be the response if such trends continue. I worry that it will be the response, which is why I work so hard to alert people to the damage being done by these stealth mechanisms that drain the wallets of the many for no purpose but to benefit the rent-seeking few.

In my public lectures I sometimes end on this note:

If we do not work to ensure competitive markets and rules that promote and reward all who play by the rules, work hard, spend less than they make and whose prudence is rewarded we know from history what will happen. The result I never want is for students descended from those of us here today to sit down in a future high school history class and open a textbook to a chapter beginning with these words:

The United States of America was…

Todd M Kuipers writes:

In direct response to Johnston - through your second long comment and resume (impressive) - I think I understand your point.

You list above (in my words): corruption through secrecy, corruption though obfuscation, legislated redirection of funds, theft regardless of legality, legislated monopoly, societally sanctioned discrimination, eminent domain, taxpayer money given as gifts to foreigners, uneven distribution of competencies across populations, uneven distribution of obvious opportunity, legislated removal of opportunity, and possibly others implied by statements above.

You bring it them all under one umbrella and label it inequality.

I see the real damage these do is to promote poverty and keep people less well off. Inequality matters, I'd guess, if you're discussing the intent of people using these specific tools keep people poor. When discussing and tackling pervasive theft and poverty, it seems very odd to complain of inequality.

You could collapse my list to four things:
- removal of wealth by state interference
- removal of opportunity by state interference
- removal of wealth by other organizations
- removal of opportunity by societal norms

The first two exist because of functional incentives provided to lawmakers and enforcers by the control of the state. This could be tackled to a degree by altering societal views corruption of its government, and electing a more moral group to reduce corruption. It would not remove the problem of crap laws being passed, either with good intent or bad, as lawmakers are highly unlikely to preview the follow-on problems of the legislation they pass. (I could imagine a situation where a $1.4 billion transfer to Abu Dhabi was seen to be necessary to help Americans.)

My view is that the third and fourth exist because of human flaw - i.e. there are bad people out there, and good people who do bad things. In the case of non-legislated discrimination, working to expose the discrimination (praise and shame can often work well) and helping individuals gain the opportunities they lost because of it, seem like an effective path.

Discussing these issues as inequality likely plays well with a significant demographic in the US, and might help further discussion on the issues. But, it's a little like labelling the outcome of a Formula One race an inequality problem, instead of showing and understanding where capabilities of the driver and car come from (legitimate or illegitimate means?), and whether there was theft and bribery needed to win.

It may be that the definition of the word inequality has truly changed for many Americans. If you define inequality as something like, "the situation where wealth and opportunity have been removed through use of power and illegitimate means," as opposed to the previously, commonly accepted, "difference in size, degree, circumstances, etc.; lack of equality," it might help explain its use. I'd think that just labelling it theft would be clearer, but maybe theft isn't strong enough to convey the collection of problems.

I don't think there are many reading this blog who would disagree with your statement, "If we do not work to ensure competitive markets and rules that promote and reward all who play by the rules, work hard, spend less than they make and whose prudence is rewarded we know from history what will happen." Theft of assets and opportunity certainly break the rules of a competitive market.

Johnston, please let me know where I'm off base.

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