Terrible.

On the bright side, I guess I couldn’t ask for a better example of the phenomenon I described in “Standards of Evidence” than this piece by Ezra Klein.

It’s terrible.

I have no idea whether inequality is the “defining challenge of our time”. That’s a meaningless trope. But Klein takes the phrase from a speech by President Obama and turns it into a question in order to knock inequality down a few pegs from the economic priority list. He does a very dishonest job of it.

Here’s the worst:

Economist Jared Bernstein has been worrying about inequality since way before worrying about inequality was cool. But in a careful paper released on the same day as Obama’s speech, Bernstein found that there wasn’t strong evidence for the idea that inequality is weakening demand — or for any of the other theories tying inequality to a weaker economy. There “is not enough concrete proof to lead objective observers to unequivocally conclude that inequality has held back growth,” Bernstein wrote.

That doesn’t mean inequality isn’t hurting growth. It just means it’s difficult to find firm proof of it. But if inequality really was the central challenge to growth, would proof really be so hard to come by?

Read Bernstein’s paper. Klein is misrepresenting Bernstein’s views. An intelligent reader would interpret Klein as saying that Bernstein looked for evidence, failed to find it, and concluded it just wasn’t there. In fact, Bernstein reviews the research and finds lots of suggestive connections between inequality and growth. The unfortunate bit that Klein quotes reflects a kind of handwringing on Bernstein’s part — no, the research is not incontrovertible, there are a lot of “moving parts”, the research is young. Bernstein offers a cautious invitation to take seriously evidence of connections between inequality and growth. Klein pulls the caution out of context and misuses it as an excuse to dismiss those connections.

[And "worrying about inequality since way before worrying about inequality was cool"? Excuse me? Way to conflate concern over an ongoing social catastrophe, and a genuine vocation on Bernstein's part, with the latest thing to go viral on Buzzworthy. Not all of us are paid by the click.]

There is no such thing as “the central challenge to growth”. Proof is impossible to come by with respect to all macroeconomic controversies. Klein vapidly handwrings that, “Growth simply isn’t producing enough jobs” without meaningfully addressing the question of how to achieve growth, or addressing the arguments that Bernstein carefully catalogs for why a broader distribution might be growth-supportive. When Klein writes “fixing [unemployment] is necessary, though not sufficient, to making real headway against inequality”, he is making an empirical assertion without evidence, and probably getting causality backwards. We might well move towards economic arrangements in which wages become less central to the income of the middle class, just as labor income is only one of multiple income sources for the wealthy. Broadening the distribution of income may well be prerequisite to full employment going forward, as jobs that cannot be automated or outsourced are largely in personal services, and mass employment in personal services requires a mass of customers with disposable income.

There is little tension between addressing inequality and pursuing the other goals Klein says we should focus on. Klein sets up a straw man when he argues

A world in which inequality is the top concern is a world in which raising taxes on the rich is perhaps the most important policy choice the government can make. A world in which growth and unemployment are top concerns are worlds in which very different policies — from stimulus spending to permitting more inflation — might be the top priorities.

One could make the world more equal just by burning everything down too! But no one advocates this. So obviously inequality doesn’t matter, right?

People concerned with inequality in fact argue not to tear down the rich but to raise up the rest — at the expense of the rich to the degree that is necessary, but not just because. We argue for policies like basic income, wage subsidies, and, yes, more inflation-tolerant macro policy and more fiscal stimulus where those policies help support the poor and middle. A focus on inequality sometimes does create wedges between us and other “progressives”. We might not be so excited, for example, by a fiscal policy that is “expansionary” by virtue of a deficit accounted for in large part by tax expenditures to the rich. We might celebrate less than a Democratic party that treats inflation in the price of real estate and financial assets as unambiguously good news.

A policy apparatus for which inequality is not a “top concern” might content itself with spurring demand by protecting and increasing the wealth of the politically-connected rich, on the theory that anyone’s misfortune hurts at the margin and providing support to the non-rich is politically impossible. But that’s, like, totally science fiction, right?

Update History:

  • 13-Dec-2013, 8:45 p.m. PST: Added context that the phrase “defining challenge of our time” comes from President Obama’s speech, and reworked that sentence. (Rereading, the beginning of the piece was incomprehensible to people who didn’t click through to Klein’s piece.)
 
 

61 Responses to “Terrible.”

  1. vbounded writes:

    If Mr. Waldman is concerned about inequality and standards of evidence, perchance he considers

    umich ford school: Globalization and Income Inequality

    and statistics by any number of economists and investment houses that produce distorted inequality charts by using contradictory inflation concepts for GDP and income, and ignoring non-wage income.

  2. stone writes:

    I think the other thing that is needed is to firmly steer the debate to wealth inequality not wage inequality.
    As you said in your last post, increases in wealth inequality increase far more than can be accounted for by looking at income. That is because the wealthy gather more wealth by a myriad of ways that generally avoid income and associated tax inefficiency.

    All the issues that Ezra Klein says should be our priorities have wealth inequality at their root IMO. The political force behind deflationary austerity is simply a symptom of the mountain of debt securities and the consideration that preserving the value of those claims needs to be the top priority -if that entails mass unemployment and waste -then so be it. Inequality wrecks the possibility of a free market economy effectively serving the wide population and it also empowers moves to cause the government to only serve the wealthiest.

  3. foosion writes:

    It is important to remember, as Bernstein’s sometime co-author Dean Baker frequently stresses, that inequality is not some natural result of the market that might be remedied by tax policy or the like. Rather, we have many deliberate government policies that foster inequality, such as trade policies that put lower wage workers in competition with foreign workers while shielding doctors, lawyers and other higher paid workers, intellectual property laws which transfer tremendous amounts to the best (e.g., through patent monopolies on drugs), too big to fail banking policies which transfer vast amounts to incredibly highly paid bankers, etc., etc.

  4. foosion writes:

    It is important to remember, as Bernstein’s sometime co-author Dean Baker frequently stresses, that inequality is not some natural result of the market that might be remedied by tax policy or the like. Rather, we have many deliberate government policies that foster inequality, such as trade policies that put lower wage workers in competition with foreign workers while shielding doctors, lawyers and other higher paid workers, intellectual property laws which transfer tremendous amounts to the best (e.g., through patent monopolies on drugs), too big to fail banking policies which transfer vast amounts to incredibly highly paid bankers, healthcare policy that has us spend twice as much as other countries (into the pockets of some of the best off at the expense of the rest), etc., etc.

  5. Cindy writes:

    Whoa…wait a minute…

    http://jaredbernsteinblog.com/racialethnic-income-gaps-vs-wealth-gaps/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JaredBernstein+%28Jared+Bernstein%29

    The incomes? Not far off…the wealth…far off.

    Is it my fault that one group chooses to spend their earnings while another group invests and saves?

  6. stone writes:

    Cindy@5, what has who’s fault it is got to do with whether it derails the economy?

    I think it is vital to make a separation between what the economy needs in order to prosper and some finger pointing blame game. Capitalism has the potential to be a fantastic way for all of us to provide for ourselves and the whole point of capitalism is to collect and amass wealth. That doesn’t mean that capitalism doesn’t also have a deep seated glitch in that the aggregation of wealth becomes the undoing of the whole system. We just need to face up to that, deal with it and try and keep things on track.

  7. Cindy writes:

    Stone @ 6…the reason it matters – just talking about me here…

    is that I feel as though I am subsidizing some folks, who have made/ are making poor choices, through my tax dollars.

    So often…”The aggregation of wealth” becomes the low-hanging fruit…

    As Margaret Thatcher famously said: You eventually run out of other-people’s money…

    I just don’t feel we are headed in the right direction here. It is becoming more financially productive to collect government funds, disability funds, extended unemployment (in was supposed to be an emergency measure), SNAP,….. than go out, find a job, and pay taxes.

    You say that capitalism has the potential to become a fantastic way for all of us. Then we need as many participants as possible…

  8. Pete writes:

    @ Cindy

    So a basic income then?

    Problem solved.

  9. D. C. Sessions writes:

    As long as we’re talking about politically impossible [1] approaches, why not shift from income taxation to wealth taxation? Intrinsically progressive, and it incents putting wealth to productive purposes rather than sheltering it from taxation.

    [1] At least for now. But may we could, like, at least discuss it?

  10. Tim writes:

    “It is becoming more financially productive to collect government funds, disability funds, extended unemployment (in was supposed to be an emergency measure), SNAP,….. than go out, find a job, and pay taxes.”

    You bet, “Cindy.”

  11. […] being described as “the defining challenge of our time”. This in turn infuriates others, with Steve Randy Waldman going medieval on […]

  12. mattski writes:

    **It is becoming more financially productive to collect government funds, disability funds, extended unemployment (in was supposed to be an emergency measure), SNAP,….. than go out, find a job, and pay taxes.**

    Yeah, what happened to the good old days when the working poor borrowed from the rich to sustain their consumption???

  13. Steve Roth writes:

    @Cindy: Ya think there’s any legacy/inheritance effect at play there?

  14. donna writes:

    Some of us argue the rich would be even better off with less inequality, since the economy might grow faster.

    As to subsidizing others who made poor choices, well, yes, not everyone chose rich parents, Cindy, or even moderately well-off ones. Should kids suffer because mom has to work three minimum wage jobs trying to support them?

  15. stone writes:

    Cindy @7, just like Pete @8, I think the answer is to replace means tested benefits with a citizens’ dividend that gets paid out (irrespective of need) to everyone. I also think we need to replace our existing taxes with an asset tax so that wealth doesn’t passively gather more wealth and so that it needs to be put to good use in order to be maintained. Basically to make the financial system reflect the reality that every unused hour of machine or human time is permanently lost.

    I think it is important to remember that the ability of assets to gather more wealth depends on the state ensuring property rights are enforced. So it is only just that that service is paid for in proportion to the size of your gross asset holdings. Warren Buffet gains billions of dollars each year from his assets and all of that relies on the state maintaining order -not to mention infrastructure, an educated population etc.

  16. stone writes:

    Cindy @7, further to your point, I think means-tested benefits actually lead to economic exclusion of swathes of the population. Someone who has low and erratic earnings ends up having it all simply going to replacing the benefits that they would get if they never worked. On a personal level they simply get a lot of hassle and no more money. A citizens’ dividend would mean that all and any paid work actually fully counted. I think there would be a lot more micro-scale enterprise and self-employment created.

  17. Cindy writes:

    First this Gallop Poll about the pressing problems of our times…rich/ poor divide comes in at a whopping 2%. Clearly, we have a problem with how our government is operating. I might even argue that deregulation has enhanced income inequality…
    But, seriously, I have never posted before. I usually simply come here to read a much-loved site…so I don’t want to argue with anyone. Now I’m even sorry I posted…anything!

    http://www.gallup.com/poll/166244/americans-cite-gov-economy-healthcare-top-problems.aspx

    And – @ Steve – It isn’t always inherited money that makes for the disparity – Here is an article that “blames” the new 2%.

    http://www.nbcnews.com/business/whos-biggest-barrier-income-inequality-2-percent-2D11708457

    I’m just gunna move along now with my day.

    Love Interfluity…

  18. John E writes:

    Waldman has a lot of gall to accuse Ezra Klein of misinterpreting Jared Bernstein’s paper. He asserts that an intelligent reader (him?), “ finds lots of suggestive connections between inequality and growth.” Suggestive evidence is not concrete proof and contrary to Waldman’s assertion, that there was enough evidence for Bernstein to conclude that inequality is hurting growth of the economy, Bernstein concluded no such thing. Rather, his paper contains numerous and repeated qualifications. He finds evidence “elusive” and “circumstantial.” He says that predictions are “tricky.” He sites contradictions and mitigating circumstance. He finds data “suggestive.” He talks of theoretical models and hypothesis. Waldman seems not to notice that Bernstein is taking attempting to apply various models to the data set and is very far indeed from reaching any kind of conclusion.

    Steve Randy Waldman is guilty of the very misinterpretation of which he accuses Klein.

  19. D L writes:

    I would argue that history shows when wealth is confined to a few democracy is diminished. In fact Democracy is contingent on a “strong middle class”.

  20. Peter K. writes:

    Krugman: “Steve Randy Waldman going medieval on…” Hahaha so funny.

  21. stone writes:

    Cindy @17, I’m really sorry about that. If I’m to blame -I wasn’t meaning to be off-putting.

    I only meant to converse -not to be argumentative or anything but I guess I failed.

  22. Hi there! This is my first comment here so I just wanted to give a quick shout out and tell you I really enjoy reading through your posts. Can you suggest any other blogs/websites/forums that deal with the same topics? Thank you!

  23. […] let’s leave the direct rebutting aside for the moment. Waldman, Baker, Bernstein, and Krugman have already gone into it, so why be […]

  24. Peter K. writes:

    “There is little tension between addressing inequality and pursuing the other goals Klein says we should focus on. Klein sets up a straw man when he argues

    A world in which inequality is the top concern is a world in which raising taxes on the rich is perhaps the most important policy choice the government can make. A world in which growth and unemployment are top concerns are worlds in which very different policies — from stimulus spending to permitting more inflation — might be the top priorities.”

    Promoting growth vs. reducing unemployment vs. reducing inequality. All of the above! I do think how policies effect inequality should be a central consideration given the way the political economy has shifted to right since the 1970s. For instance, while it might be politically easier to enact any old policy which promotes growth, it might lead to unsustainable asset bubbles and ultimately more inequality and slower growth after they pop. The Fed said it didn’t worry about bubbles because they argued proper counter-cyclical policies could quickly restore the status quo. That turned out not be the case so at Yellen’s recent hearings, she agreed that the Fed should be concerned with bubbles.

  25. Greg writes:

    Cindy

    Before you go think about one thing. The dynamic expressed in Thatchers statement, which really appeals to people on first blush, is that the govt needs other peoples money to do the things it wishes to do. Who’s money does Wal Mart need? GM? AT&T? None of those entities have a printing press, they are relying on other peoples spending to make the world go round too. You have saved other peoples money too. It wasn’t your own.

    Those programs you mentioned,they wouldn’t be necessary if living wages were paid. McDonalds and WalMart need the govt to subsidize their employees so they can pay their shareholders, and its not just them. The race to the bottom is rounding the back turn if we don’t reverse it. There is no way to have a middle class like we had in the 50s-80s without a govt policy aimed at it. There is no natural mechanism which encourages WalMart to pay their people more. They can never work hard enough. Busting collective bargaining and worshiping shareholders is our problem. You let owners do whatever they want…. and they will own. Someone needs to enforce some responsibilities of ownership

  26. […] being described as “the defining challenge of our time”. This in turn infuriates others, with Steve Randy Waldman going medieval on […]

  27. Cindy writes:

    Stone, there was nothing off-putting about your statements. I simply should have kept my mouth shut because I was not prepared to return to the site today to address any rebuttal…so I should not have chimed in to begin with. No need to apologize.

    Greg, I only hazarded to make a comment at all, because I had read the Gallop Poll results earlier today. They got me thinking….why is Obama describing income inequality as the “most important issue of our time” when the poll says quite another thing. The poll indicates that dissatisfaction with the government is the number one issue. Add to that – the economy in general, healthcare, unemployment, and the federal deficit and you have the top 78%.

    I seriously thought, well if Randy Waldman is discussing it, let me see what these folks have to say. Because, for me – personally – it appears on its face to be a divisive issue… One that is polarizing and one that the Democrats have chosen for us.

    What is the reason? Some would say: to deflect from Obamacare, to bring back the 47% meme that worked well in elections past, or simply to further the discussion on minimum wage and immigration – Democratic themes. For whatever reason, this is not what the Gallop poll identifies as the most important issue of the day.

    I am so sorry to have interrupted you all. And yes, I realize now that I spelled Interfluidity incorrectly…

    Love Interfluidity and Mr. Waldman.

  28. bmorejoe writes:

    Ezra Klein has been moving steadily towards social media hackery. The very methods of hype and false controversy that he ably criticized in earlier days are more and more the daily MO on the WB FB page. I think WaPo culture is taking its toll. Or maybe just the do-re-mi.

  29. Sanjai writes:

    Maybe Obama brought up inequality because he’s trying to lead and make an important issue more prominent in the national debate.

    I have a hard time thinking of another explanation.

    Also, looking at that income and savings data Cindy linked to, I see an income disparity that is not “not far off”. One bar is a full third lower than the other. And we wouldn’t expect the bars to be proportional, for various reasons. And I wonder via what government program Cindy thinks her wealth is being appropriated to all those poor minorities, and why she even that that was so relevant to the discussion of income inequality to begin with …

    But anyway. I agree with Interfluidity. I read a lot of Klein’s wonkblog and thing they often do good stuf, but the argument in that post on inequality was terrible. He’s basically saying inequality isn’t a “defining challenge” because unemployment is a bigger issue. That is arguably correct, but also completely meaningless and obtuse. Even if we believed the two weren’t linked in a mechanistic macro sense, it’s possible to have two defining challenges. To me it seems like employment is a major immediate crisis and inequality a major concern for the long term, and I see no reason why both can’t be regarded as having high importance.

  30. Greg writes:

    Cindy

    I would suggest that why those other things you listed are at the top of most important issues list has to do with the gross inequality in our society. Dissatisfaction with govt has much to do with a govt that only works FOR big corporations and not little people. Healthcare is obvious. If you don’t have an income of 80,000 or employer funded HI you are likely underinsured and if you do get sick even with insurance you might lose your entire savings unless its into 8 figures. Unemployment is directly related to the inequality. As businesses work for their shareholders and not their employees they look at employees as a cost to be cut to preserve stock prices. The deficit? The average citizen has no clue what the deficit really represents and why cutting it (for the sake of cutting it) is a terrible idea. So I think the inequality IS the worst problem of our time. But I see the inequality as a result not a cause. Its the result of the last 3 decades of policy and unless that policy is changed it will get worse.

  31. Cinders writes:

    Cindy:

    With respect, your first two posts include a number of elements that tend to trigger a ‘troll warning’ and then a hostile response in certain communities. Your follow-ons appear to reflect an honest inquiry, not a deliberate provocation, and so I am led to believe the ‘warning signs’ in your first post were accidental. Of course, judging sincere intent is part of the difficulty of communication over a narrow channel and across discursive communities.

    I offer the following in the sense of ‘how to avoid an unproductive flame war’, and not as an attack on what I take to be your genuine concerns.

    For example:

    “Is it my fault that one group chooses to spend their earnings while another group invests and saves?”

    The rhetorical move here is to shift from a macro-economic discussion to a highly personal account. This shift eliminates the possibility of the kind of discussion the author wishes to engage with: it may be that reasoning from your behavior does not or cannot recapture the issues at hand. For example, an individual’s choices regarding breaking or following the law does not clearly provide a basis to account for the process of law-making, or the nature and history of laws, despite obviously being connected to them.

    Perhaps this is where some unwittingly provocative language enters. The introduction of personal blame as the criterion is a common tactic in ‘umbrage-taking’, a form of trollish rhetoric that involves fishing for an insult in order to take exception to the argument, where no such thing is intended. If this is not what you meant, then perhaps the fault lies with an unfortunate choice of wording?

    “As Margaret Thatcher famously said: You eventually run out of other-people’s money…”

    A major difficulty arises here. A great part of what is meant when ‘the last three decades’ are invoked in these discussions are the policies of Thatcher and Reagan, under which inequality has exploded. Quoting Thatcher in this register tends to be unproductive, as her intent and legacy have nothing to do with reducing inequality. On a first read, this type of Thatcher quote in a discussion of this nature appears to be a deliberate form of missing-the-point. From your later responses, this doesn’t seem to be what you intended.

    If your inquiries here are not trolling, and I believe they are not, then perhaps phrasing your interventions as questions rather than statements could help? People in these sorts of discussions love showing off and explaining things, and hate having to deal with what appears to be bad-faith repetition of talking points. Often, the difference in response will have less to do with substance and more to do with phrasing.

  32. Dan Kervick writes:

    Not every social problem is a macroeconomic problem, or one that can even be expressed in macroeconomic terms. And even problems that can be addressed in macroeconomic terms don’t all have macroeconomic solutions: solutions that can be achieved by taking actions that can be characterized in macroeconomic terms alone. For example, for a given particular society, the problem of general economic stagnation in that society might be solvable only by a very specific kind of investment on one specific technology or asset, not simply by the application of more “spending” or even “investment” tout court, or by some general manipulation of interest rates. And there are other social problems that have a pronounced economic dimension, but other dimensions as well, and can only be addressed by significant changes in laws and institutions, sometimes even moral institutions. These are areas of life and phenomena to which macroeconomics is for the most part blind.

    Suppose we discovered that the kind of society capable of producing the greatest aggregate quantity of sustainable growth was a society in which 95% of the output of the society went to 5% of the population, while the other 95% of the society labored as servants of the 5%, and divided among themselves the remaining 5% of output. How many people would want to live in such a society, or would think it was producing a world of which dignified human beings could be proud?

    Macroeconomics is a useful abstract framework for conceptualizing and debating an important range of human social phenomena. But it achieves this utility by filtering from view a vast field of vital details on which most of what makes life worth living and loving depends. The debate about equality and the aspiration toward equality moves in many fruitful directions at once, and in many places pierces through the austere, reductive screen of macroeconomic aggregates to a teeming and colorful realm of human value and conflict that macroeconomics can’t capture with its aloof and sterilized categories.

    Brad DeLong has recently been saying a lot about “the conversation we should be having” as he tries to steer the burgeoning and multidimensional debate about equality into the channels that he personally finds fruitful or appropriate. But with due respect, I don’t think Brad DeLong is in any privileged position to determine the contours of the conversation we should be having. There are more things in Heaven and Earth than are dreamt of in macroeconomics.

  33. stone writes:

    Dab Kervick, what you are saying @32 seems to me interconnected with what Cindy was saying @7. The reality that macroeconomics is trying to grasp is inextricably intertwined with politics.

  34. […] Steven Randy Waldman reviews Klein’s article: “It is terrible“. […]

  35. […] being described as “the defining challenge of our time”. This in turn infuriates others, with Steve Randy Waldman going medieval on […]

  36. Matthew writes:

    I think the bigger issue is Klein’s outsized emphasis on growth. Lack of growth is really only a problem in the presence of inequality. For the rich, a spell of unemployment goes on the resume as something like “went to college”–they can afford to find a way to occupy their time with something expensive if not productive. Only for the poor, each bout of unemployment has life-long consequences.

  37. Bill Ellis writes:

    @ Cindy

    Don’t you feel as though you subsidizing rentiers too?
    Truth is we have a system of competitive rent seeking. Actually that is what every system we have ever had in our entire “capital H” history has boiled down too. As much a libertarian may lament it, their utopian ideals can’t change human nature.

    Libertarians will tell you they disapprove of elite rent-seeking as much as they do the rent-seeking of the common person, but it seem to always be the rent-seeking of the poor that calls them to action, while the rent-seeking of the elite is largely ignored.

    I like to say, if you want to attack rent-seeking, first go after the rent-seeking of the elite, then get back to us. Then you would have a moral leg to stand on when you ask the poor to give up their benefits.
    But the thing is you will never be able to stop the elite from making the government their instrument. So it is unfair to ask the common person to not try to make it theirs as well.

    Historically It is ridiculously easy to stop the common person from rent-seeking, and it always results in gross inequity in both wealth and —more importantly– power.

  38. Empathy for Ezra

    Oy, about Ezra.

    I think someone has to come out and directly say it, even if it is just little old me.

    Ezra, is under great pressure not to look too un-”Balanced”, or too un-”Centrist”. He can’t just always say what he thinks is true in a very clear, direct, precise, un-vague way, like Paul Krugman does, and like people who don’t have much to lose from it, like myself, do.

    Ezra’s huge right now, with a giant, largely mainstream audience. If he pretty much always sounds too left, even if he’s just being completely truthful, this can lose him a lot of his giant audience, and influence, and he could end up doing a lot less good in the world. For Kurgman’s niche, and with Krugman’s awesome credentials, it’s for the grearter good that he’s crystal clear in saying the truth. With Ezra’s situation, not at all so much.

    The truth may have a strong liberal bias, but people who aren’t well wonk educated (i.e. just about everybody; we don’t live in a freshwater model), don’t know that anywhere near to its true extent.

    If Ezra tells the truth too much, in a crystal clear, direct way, he starts sounding to many people like a liberal commentator, rather than just an objective expert, or wonk. So, periodically, he has to throw something out that goes against what liberals are saying. And regularly he has to throw in some obfuscation, some softening, to make things less truthful, or even outright misleading.

    He’s just forced to for the greater good, just like good politicians are forced to do this sometimes for the greater good, so they can win the elections and get the political capital necessary to do big good things, or at least a lot better than otherwise.

    So Ezra has to periodically do this to keep strong influence, and a strong position at a paper that is ruled by the religion of “Centrism”.

    There was a good example earlier this week. Krugman wrote, “Ezra Klein is puzzled (or at least says he is; I suspect he understands it perfectly)” If you read the particulars, and follow these things closely, of course Ezra wasn’t puzzled. He shows such intelligence and deep knowledge, and he’s “puzzled” about Republicans obviously lying and misleading their asses off? Of course, he understands that, but he can’t just directly, clearly, and precisely say that truth, or he’ll look too partisan and shrill – even though he’s just saying the truth that has tons of evidence if you’re one of the few people versed in it. So, he instead says, “I’m puzzled”.

    It’s just the way of the world; sometimes you have to obfuscate and mislead for the greater good. But those who are in a position to call it, where it’s for the greater good that they do so, should.

  39. […] since policies that produce tight labor markets will reduce unemployment and lower inequality. Steve Randy Waldman argues that, in fact, there’s plenty of evidence that inequality hinders growth, and we […]

  40. stone writes:

    Richard H Serlin@38. The motivation you describe might have been a forgivable reason for Ezra to have avoided the subject altogether on his Washington Post blog. After all, we don’t expect Chris Dillow to use his Investors Chronicle platform to go on about many of the issues that he confines to his “stumbling and mumbling” blog.
    However it seems to me a totally different level for Ezra to actually wade right in and start throwing punches as an apologist for inequality as he did. It doesn’t need to get personal but if the arguments he put forward in the post are shoddy, the shoddiness needs to be proclaimed as such IMO.

    I also don’t think the approach you describe can serve “a greater good” because this issue IMO is the foundation of a successful economy and society. He chose the wrong subject to compromise on, if that is what he did.

  41. Ohhhhkay.

    First, I’ll note that my standards for commenting are much lower than my standards for posting. Commenting, I consider informal conversation for learning, and that’s valuable; it should be somewhere. For posting, I really do a lot of checking, double checking, and thinking, and only post if I’m pretty sure it’s worthwhile. That’s a good strategy especially if you don’t have a big name, and often even if you do.

    So here, I commented on this specific post before I read most of it. Having now read it all, I think it’s mostly not Ezra’s strong incentives to not look too liberal and un-”centrist”. It looks like it’s mostly two other things:

    1) The problem of time pressure and constant tough deadlines, or daily expectation of stuff. I think Ezra probably went through the Bernstein quickly article and had a lot of misunderstanding and poor understanding. And the same for this post in general.

    2) Ezra is not an economist. He doesn’t even have a bachelor’s degree in economics, let alone a PhD. True, he’s surely done a lot of independent study. But with how pressed he is with other things, there are going to be holes, and there are big ones here.

    There seems to be some genuine concern that if liberals get too focused on inequality, they’ll use up too much political capital on trying to get tax increases on the rich. And he talked about this in another post, how making tax increases on the rich such a high priority makes that the big thing you ask for in negotiations, instead of things like perhaps Medicare bargaining, the ability of Medicare to say no to procedures not at all worth the price, patent reform, and other things that may be a lot more attainable than even a small increase in taxes on the rich, but would have a much greater impact on growth and helping the non-rich.

  42. […] since policies that produce tight labor markets will reduce unemployment and lower inequality. Steve Randy Waldman argues that, in fact, there’s plenty of evidence that inequality hinders growth, and we […]

  43. Another very good example, you could do a huge amount for the non-rich with very strong finance regulation, including stopping the predators that suck the poor dry with payday loans, subprime mortgages, leasing a laptop for $150/month that costs $400 to buy used,… And as much as Republicans hate finance regulation, they may accept it under great pressure, and in return for other things. But if you need even one Republican vote for increasing taxes even $1 on the rich, there’s no chance, no matter what’s at stake, no matter what they get in return.

  44. […] Steven Randy Waldman reviews Klein’s article: “It is terrible“. […]

  45. […] “Growth, innovation and rising economic prosperity during the 20th century,” is the outcome of expanding credit and self-extinguished resources. A highly regarded economic thinker swings and misses: […]

  46. gv writes:

    I’ve read worse recently
    Dwelling on inequality is promoting envy. I hope you’re not a Christian.
    http://www.bloomberg.com/news/2013-12-15/why-is-pope-francis-promoting-sin-.html

  47. stone writes:

    gv@46, that Lant Pritchett link you give does hit upon a core issue IMO. People rightly recognize envy as being a very corrosive and unconstructive emotion and that leads to this whole issue getting swept under the carpet leaving it to become ever more extreme.

    I think a lot of confusion arises because wealth has several facets. It can be increased real productive capacity -much like the example that Lant Pritchett gives in the case of the invention of the Google search engine. But another facet is a claim over other peoples potential labour (or use of their machines etc). Productive capacity can increase and increase; it is not a zero-sum game. Control over how other peoples time is spent is a zero-sum game. In that sense wealth is relative financial power divided up amongst us in a zero-sum game. If a billionaire doesn’t dissave, then that is potential income and employment that the rest of the economy has to forgo. People and machines have to sit idle on the sidelines at the discretion of that decision to not dissave.

  48. winstongator writes:

    When thinking about inequality, I always go back to the story of Joseph, Pharaoh, and the famine. Pharaoh hoarded by profiting when times were good. When the famine came, only Pharaoh had stores – savings. Pharaoh used his food savings to acquire more material wealth. I say that Pharaoh did merely share the savings, because it specifically refers to selling.

    So we have a crisis, and Pharaoh, the rich, getting richer, while the starving poor give up what limited material possessions (or trading people for grain) they have. Times of crisis are significantly better for those best off, as they have the savings to ride out the storm, and there are numerous opportunities for profit.

    Would you blame the people of Egypt for not forseeing the famine and being in need? Was Joseph properly compensated for his channeling of God’s wisdom? When Joseph’s name was forgotten to Pharaoh, what happened to his family?

    The key problem underlying this issue is that the returns to capital have grown while the returns on labor have shrunk. Capital gains are essentially a claim on the produce of another man’s labor. Labor needs to return to its prior share of total output, and the potentially comes at a diminished return for capital.

  49. winstongator writes:

    If half of the income (including capital gains) of the top 1% were retained by the 99% of households, this would return us to 1940-1982 levels graph. Crunching the numbers it would add $16k to each household’s income – adding roughly 25-33%. Would taking household income from $48k to $64k solve all problems? No. However, marginal dollars make a huge difference because people are already ‘getting by’ now, extra could go towards savings and investment.

  50. stone writes:

    winstongator@48, the Pharaoh seems wonderful by modern standards. He did save something real (grain) when it was in surplus and did sell it when it was needed. Today saving would be in financial claims that accumulate disconnected from any ability to honor them.

  51. […] Messing With My Next iPhone Dear Pres. Obama: Dissent isn’t Possible in a Surveillance State Terrible. Abbas: Don’t boycott Israel. Infuriating activists, PA president tells reporters in South Africa […]

  52. “An intelligent reader would interpret Klein as saying that Bernstein looked for evidence, failed to find it, and concluded it just wasn’t there.”

    I’m sure you must have meant that an intelligent reader would NOT interpret Klein as saying this.

    Other than that, Bravo! Magnificent! As always.

  53. Oops, I meant an intelligent reader would not interpret Bernstein as saying this.

  54. gv writes:

    Stone@47, moral/religious musings and economic analysis should remain seperated. There’s no lesson to be learned from that article.
    Envy is an omnipresent characteristic of humans and has no specific relationship with income inequality. The author takes extreme examples to make his point which is wrong. I’m sure some lesser gods envy Page, Gates, and others too and its not about money but about power and success. Envy has too many faces.

  55. stone writes:

    gv@54, ” moral/religious musings and economic analysis should remain seperated”

    The problem is though that economics is about people, -what people do and what people want. I worry that ignoring human frailties and desires actually renders the whole exercise nonsense. Economics is sort of like engineering with the structure being created being human interactions -people working for other people and handing things over to one another. If we loose sight of that then we are adrift and failing to get to grips with reality. Economics then stops being a rigorous and relevant field of study and becomes a parlour game.

    To me a great example of an economist setting out an aim in clear human terms is this 1943 quote from Michal Kalecki,

    ” What the masses now ask for is not the mitigation of slumps but their total abolition. Nor should the resulting fuller utilization of resources be applied to unwanted public investment merely in order to provide work. The government spending programme should be devoted to public investment only to the extent to which such investment is actually needed. The rest of government spending necessary to maintain full employment should be used to subsidize consumption (through family allowances, old-age pensions, reduction in indirect taxation, and subsidizing necessities). Opponents of such government spending say that the government will then have nothing to show for their money. The reply is that the counterpart of this spending will be the higher standard of living of the masses. Is not this the purpose of all economic activity?”
    http://mrzine.monthlyreview.org/2010/kalecki220510.html

  56. stone writes:

    Further to my @55,

    Civil engineers do also have competing aims for different stakeholders. A river dam may change hydroelectric supply, flood risk, water security and wildlife. Honest civil engineers will clearly and explicitly set out how all of those things will be impacted by a certain type of dam. I think economics needs to be like that.
    You can say that economics is about studying what is happening rather than proscribing policy. But then the analogy is like civil engineers pronouncing on why bridges have fallen down and dams have burst. Economics does inform and influence policy.

  57. […] economist, says there isn’t clever justification substantiating this theory. But as Steven Randy Waldman says, Mr Klein gives a rather lopsided display of a paper. Mr Bernstein indeed finds it utterly […]

  58. […] week, I objected unquietly to what I thought and still think was a very poor column by Ezra Klein. However, Klein has followed […]

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  60. […] ton of responses to these posts (See Krugman here, Matt Bruenig here and here, Steve Randy Waldman here, and Dean Baker here), so I won’t be responding directly to them. Instead, I thought I would […]

  61. […] ton of responses to these posts (See Krugman here, Matt Bruenig here and here, Steve Randy Waldman here, and Dean Baker here), so I won’t be responding directly to them. Instead, I thought I would […]