Thursday, August 16, 2012

Why is Cochrane so excited about this inequality study?


It's called "The Mismeasure of Inequality", but it doesn't live up to it's name, nor does it live up to John Cochrane's hype.

It seems to just recycle a few points about inequality that we already know and that do not invalidate the way that others measure it. Namely:

1. The distribution of consumption is more equal than the distribution of income
2. Income gains are different from welfare gains
3. Higher income people get better benefits so if you choose to exclude that portion of compensation the income distribution looks more equal, and
4. Europe generally has more progressive benefits and less progressive taxes so if you look just at the tax burden the U.S. looks like it is very progressive

The other day we were talking about the general public's understanding of the minimum wage, but let's get back to the economists' bubble on this.

Didn't we already know all of this?

Why is John Cochrane so excited about this study?

Let me know when Emmanuel Saez actually teaches us something new about inequality, like what the most recent data says. It seems to me we know all of this already.


  1. Aren't disposable income comparisons kind of intellectually dishonest since it ignores consumption substitution (i.e. health and education) by higher tax governments?

    Also, I think it's Krugman that always points out that comparing relative federal taxes alone is also intellectually dishonest.

  2. Brother John refuses to acknowledge that a government that forces its subjects to use a counterfeiters money At penelty of death is the basis of our institutional, endowment, retirement system.
    He wouldn't put this on his site.

  3. This comment has been removed by the author.

    1. He is excited because now all the lefty bloggers will have to hide their heads under their shady carpets and pretend this was all always very obvious.

      That Greece and other pathetically failing countries reduced inequality the most is a significant data point never told on a loudspeaker to the OWS crowd. But then no one told them the poor are the fattest here, live in bigger houses than the average (average!! not poor? Whoa!) European and 31% of the below poverty line *?* drive two cars.

      And now they also want lower inequality. Well there is a price to it and the least liberal leaning beta Economists can do is tell them what it could be. In a nice politically correct up way maybe.

      *politically corrected*

  4. A totally uneducated suspicion, but I wonder if Cochrane hasn't been reading more and more conservative blogs. This line---

    "'Lastly, we will address assertions that the rich are not paying their “fair share” of taxes.' 'Address' should be 'destroy', but they're being careful."

    ---in particular sounded to me like something I saw at Red State or Powerline back when I still had the constitution to read them. (Google indicates the former employs "demolish" more often than "destroy," but six of one....)

    In any event, it seems pretty obvious that Cochrane is just delighted to read something that agrees with everything he believed when he woke up this morning, so the precise cause is perhaps not significant.

    (Also, it's "its," not "it's.")

  5. Maybe because "inequality" is avocated by Socialist parties (in Europe) or by Liberals (like Krugman, but worse Stiglitz) as a good argument for more tax, spend & regulate policies?

    It doesn't take a genius why he repeats this arguments which I doubt the average reader of NYT consider or even knows.


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