The debate about inequality, especially the growing gap between the top one percent and everyone else, has gone mainstream—as we can see by the debate between Robert Solow and Greg Mankiw in the pages of the Journal of Economic Perspectives.
First up was Mankiw, in an article I characterized last summer as throwing “everything against the wall in the hope that at least something will stick.” Then, Solow challenges Mankiw on every major facet of his argument, from the role of finance and the political influence of the one percent to economic rents, intergenerational mobility, and the idea of “just deserts.”
who could be against allowing people their “just deserts?” But there is that matter of what is “just.” Most serious ethical thinkers distinguish between deservingness and happenstance. Deservingness has to be rigorously earned. You do not “deserve” that part of your income that comes from your parents’ wealth or connections or, for that matter, their DNA. You may be born just plain gorgeous or smart or tall, and those characteristics add to the market value of your marginal product, but not to your just deserts. It may be impractical to separate effort from happenstance numerically, but that is no reason to confound them, especially when you are thinking about taxation and redistribution. That is why we may want to temper the wind to the shorn lamb, and let it blow on the sable coat.
Finally, Mankiw has the temerity to refer to Solow’s letter as “scattershot” and then to repeat his original arguments—even the silliest ones, such as the idea that tall people earn higher wages (why? because there’s “a positive correlation between height and cognitive skills”).
My own view, for what it’s worth, is that Solow is wrong about one thing: the one percent are not particularly good at defending themselves (as we can see with the recent examples of Sam Zell, Kevin O’Leary, and Tom Perkins). That’s why, as in the classic Three-Card Monte hustle, they have to have a shill. Which is why they need Harvard’s Mankiw, to attempt to defend them. The problem is, as Solow shows, the “cheerful blandness” of Mankiw’s attempt does not succeed in covering over the “occasional unstated premises, dubious assumptions, and omitted facts.”