Back To Stiglitz

Being that it is Labor Day, I thought we'd jump back to my analysis of Joseph Stiglitz's book, The Price of Inequality. And, before I get to the next section (Chapter 3), I want to detail the four myths (per Stiglitz) that are perpetuated by the Right regarding inequality. These are pretty important to look at before we continue.

First, the Right argues that when inequality is examined, it is done so in a snapshot sort of way. If one looks at lifetime inequality, then it's not so bad. People start off poor and then they get rich. In fact, the opposite is becoming increasingly true. Chances are if you are born poor, you are going to stay that way the rest of your life. Lifetime inequality is, in fact, very large and it's almost as large as it is in each moment of time.

Second, the Right says that our poor must not have it that bad because they have Flat Screen TVs and X Box. That may have been a measure of wealth in 1980 when those items weren't made cheaply in China and sold at Costco but it's certainly not a measure by today's standards. As at National Academy of Sciences panel pointed out, one can't ignore relative deprivation. Rural India, for example, has enormous poverty but they have access to television and cel phones. How would selling a TV or cel phone provide for long term needs like food, access to decent health care and education? The value of these things aren't really that great in today's world.

Third, the Right likes to pick nits about statistics. They say that inflation may be overestimated and growth in income underestimated. Yet Americans are working longer hours and sometimes two or three jobs just to make ends meet. These jobs aren't very secure either. Details like this aren't really measured in quantitative analyses and that's why those studies must be juxtaposed with qualitative work. Clearly, the problem is growing worse as we saw in the latest Census report in 2010: poverty went up from 15.2 percent to 16 percent.

Finally, (and this is what is going to tie into my post about Chapter 3), the Right insist that it is moral for society to be unequal, even at ever increasing levels. Doing anything would "kill the golden goose," as Stiglitz puts it. This argument has two sides and both are wrong. The first is that if we tax the higher rate folks they will lose their incentive to work and tax revenue will drop. As Greg Mankiw (one of Mitt Rommney's main economic advisers), the Laffer Curve proved to be inaccurate. The second part of this argument states that helping the poor will only lead to more and increasing poverty. They too will not be properly incentivized. The poor have only themselves to blame, right? Why should they take away the "hard earned money" of the wealthy?

We aren't going to get anywhere with addressing these issue of inequality until we dispense with these four myths. They are not rooted in fact nor are they rooted in evidence. Moreover, they are detrimental to solving the problem of lessening inequality, the result of which (as Stiglitz notes) will create a more dynamic economy.