Tuesday, January 21, 2014

Scott Sumner on Imagining Equality

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From the article:

Nonetheless, if we use consumption data then the change in inequality is much less clear. Some studies show increased consumption inequality, some don't.  FWIW, in my view the consumption gap between the middle class and rich has widened over my lifetime, and the consumption gap between the middle class and poor has narrowed. Since I care much more about poverty than the middle class/rich gap, I'm not particularly dismayed by the changes we've seen in recent decades.
Some liberals claim it's about political power, which correlates with income more than consumption. I doubt it.  Public policy is less pro-rich than when Reagan was president (for instance MTRs on the rich have risen sharply since 1987), and yet income is much less equal than when Reagan was President.  I see no evidence that income inequality correlates with more political power for the rich, as compared to consumption inequality.  (That's not to deny that the rich have more political power, they do.)

Source: Scott Sumner, “Imagine There's No Economic Inequality,” econlog.com, January 20, 2014

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