Disappearing inequality

Posted: 28 June 2013 in Uncategorized
Tags: , , , , , ,

andre-kertesz-acto-de-desaparicion-1955

What might mainstream economists (sponsored by the American Enterprise Institute) do to perform a disappearing act on the unequal distribution of income in the United States?

Well, they might perform a sleight of hand not unlike what Bruce D. Meyer and James X. Sullivan have been doing for poverty.

First, they might change the definition of income (from flows of value to consumption plus change in net worth). Second, they might change the data set (from the Internal Revenue Service to the Current Population Survey). Third, they might change the base (from tax units to size-adjusted households), what counts as income (to include taxes, transfers, health insurance, and capital gains), and how capital gains are calculated (from taxable realized capital gains to a yearly accrual measure, i.e., the increase or decrease in the value of capital assets in each year regardless of whether that asset was sold for a taxable realized gain). Finally, they might change the relevant time period (looking at the period from 1989 to 2007 instead of starting with 1979).

Well, that’s exactly the disappearing act Philip Armour, Richard V. Burkhauser, Jeff Larrimore [pdf] attempt in their latest paper. What they find, once they make all those changes, is that not only did inequality not increase in the decades preceding the Second Great Depression; it actually decreased during that period.

Here are the figures Thomas B. Edsall uses to illustrate what happens when we go from the standard account (of the Congressional Budget Office) to the Armour et al. version:

26edsall-charts-slide-OO2A-tmagArticle 26edsall-charts-slide-XDFJ-tmagArticle

And voilà, as if by magic, inequality in the United States has been disappeared!

Comments
  1. […] includes the recent work I’ve discussed before (e.g., here and here) as well as the older work, by Christian Broda, Ephraim Leibtag, and David E. Weinstein [pdf], […]

  2. […] world.” Yes, as I have documented from the very beginning on this blog (e.g., here, here, and here), there are plenty of mainstream economists who have attempted to prove that inequality isn’t […]

  3. […] world.” Yes, as I have documented from the very beginning on this blog (e.g., here, here, and here), there are plenty of mainstream economists who have attempted to prove that inequality isn’t […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s