INEQUALITY - COMMENTS BY JOE BROPHY
When I was a student at the Sloan School, MIT for senior executives in 1988, we were lectured to by many as many economists, four of whom were nobel laureates. Paul Samuelson was one [used his text book in high school], and Solow was another of the economists, but i believe at the time, it was only rumored that Solow would receive the award. Do I remember what he said: No!
Thomas Piketty's book, Capital...., has quickly sold out rocketing the young frenchman to rock star fame. The book is heavy duty small print and contains loads of graphs like the Bell Curve by Murray and Hernstein. Both books induce comatosis.
Notwithstanding all the hype, the book is just a pile of data, sorely needed. It needs to be scrubbed to stand the test of scrutiny as to what is really means or what it does or does not prove. [Also lots of errors have been discovered by the Financial Times.] I love numbers and graphs and I love the book. It is a move closer to BIG DATA.
At first glance, Capital..... tells the same story as the Bell Curve; and Warren Buffett's Ovarian Lottery: poverty, low pay, low achieverment, underemployment, poor education, out-of-wedlock, secular drug use, inadequate housing, outmoded school systems, ill health, single households, higher crime: are all corellated and reinforcing. For me, both books answer the question: why are the rich getting richer faster than......: better education and accumulated knowledge. [editorial note: a new study shows that the poor are getting richer faster, but not as fast as the rich are getting richer; more on this later.]
Capital in the Twenty-First Century by Thomas Piketty, translated by Arthur Goldhammer (Belknap Press)
Income Inequality is a big political issue at the moment, gnawing at the compassionate sensitivities of the liberal mindset; fueling fodder for the class warfare pols and poverty pimps like Al Sharpton; as well as firing up the left wing commie types. Even the 'i told you so conservative are delerious.'
If you can find a copy of the book, good luck, or go to the library. Better still, read the reviews on the book. I have about six reviews on my blog. Solow and Krugman's reviews are excellent even though I am sure they have not read the book yet.
Solow, in his review has the following to say:
A rational and effective policy for dealing with it—if there is to be one [take notice of his qualification]—will have to rest on an understanding of the causes of increasing inequality. The discussion so far has turned up a number of causal factors: the erosion of the real minimum wage; the decay of labor unions and collective bargaining; globalization and intensified competition from low-wage workers in poor countries; technological changes and shifts in demand that eliminate mid-level jobs and leave the labor market polarized between the highly educated and skilled at the top and the mass of poorly educated and unskilled at the bottom.
What surprises me? Solow misses a critical causal factor: the aging baby-boom population. I will write something on this later. But Baby Boomers can't retire because their incomes drop by two-thirds. So they keep working, and are the most knowledgeable, and most senior or workers, and earn a disproporionate share of the income stream. Meanwhile, less educated people are let go; do not have much to contribute in an information economy.
The other point that Solow misses: one of his casual factors: intensified competition from low-wage workers in poor countries. The Global Trends Report 2030 that i was asked to teach at Dartmouth in 2012 shows that between 2 and 3 billion workers will move out of poverty in the next 17 years. [Certainly this trumps income equality.] More on this issue later.
The Bell Curve: Intelligence and Class Structure in American Life is a 1994 book by American psychologist Richard J. Herrnstein (who died before the book was released) and American political scientist Charles Murray. Its central argument is that human intelligence is substantially influenced by both inherited and environmental factors and is a better predictor of many personal dynamics, including financial income, job performance, chance of unwanted pregnancy, and involvement in crime than are an individual's parental socioeconomic status, or education level. The book also argues that those with high intelligence, the "cognitive elite", are becoming separated from those of average and below-average intelligence, and that this is a dangerous social trend with the United States moving toward a more divided society similar to that in Latin America.
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