Disucussion for September 8 session - click "Edit" to add your notes/questions, then "Save":

Questions from Tom

• Scott & Leonhardt repeatedly refer to the current economic system as a "meritocracy". What do they mean by that? Are they suggesting that the most deserving people are the most successful?

• Scott & Leonhardt make two claims that seem at first to be in conflict: first, that there is less class mobility now than a generation or two ago; and second, that fewer of the truly wealthy now inherited that wealth than in the past. How can this apparent paradox be explained?

• In European societies, class is distinct from (though correlated with) wealth: it's possible to be a poor aristocrat or a wealthy person of low class. Does that distinction exist in the US, or are class and wealth two different names for the same thing here?

• When Democrats talk about the widening gaps in wealth and income between the haves and the have-nots, Republicans accuse them of promoting "class warfare". Krugman calls his talk "The New Class War in America". Is he talking about the same thing as the Republicans who use almost the same term?
  • Comment from Todd: Slight clarification: I believe it was the panel on which Krugman spoke that went by that name, rather than Krugman's talk specifically.

• Piketty and Saez's graphs vary considerably in what they are sampling. Figure 1 is income share of the top 10% in the US. Figure 2 is income share and composition of the top .01%. Figure 3 is income share of the top .1% in different countries. And Figure 4 is wealth share of the top 1% in different countries. Why does the segment examined vary by a factor of 100 between Figure 2 and Figure 4, and why the switch from income share to wealth share in Figure 4? The prose in the paper didn't make it clear to me how the authors decided whether to look at 1%, .1%, or .01% and how they decided whether to look at income or wealth.
  • One important thing to understand about this paper is that it was written for the American Economic Association Papers and Proceedings special issue of the American Economic Review. It was a conference paper, and papers published in that issue are very limited in how long they can be. I think the authors chose these particular graphs as illustrative of a wider data set at various cutpoints for both income and wealth among top recipients, and that we can expect a longer, probably book-length study with more detail to make the arguments more rigorous. That's the charitable interpretation. The skeptical one is that they are cherry-picking the data, but these are very respected researchers, so I kind of doubt that's the case. Also, their conclusions are not that strong, so it doesn't seem that they are trying to build a case that is stronger than the data will allow. - Todd

• Krivo and Kaufman's article is quite technical. In particular, it employs some statistical methods I don't really understand. If there's time, I would appreciate it if Todd could walk us through the key points of this article.

Questions from Todd

• Janny Scott and David Leonhardt's "Shadowy Lines That Still Divide":

• "One surprising finding about mobility is that it is not higher in the United States than in Britain or France." - Why is this surprising and what accounts for it? How does this relate to universities?

• Do these quotes show contradictions in the u.s. populace?
  • "The idea of fixed class positions, on the other hand, rubs many the wrong way. Americans have never been comfortable with the notion of a pecking order based on anything other than talent and hard work."
  • "...most (in the U.S.) say they oppose government's taxing the assets a person leaves at death."

• Paul Krugman's "A Few Notes on Income Inequality":

• "{Between 1979 and 2003, the} income share of the top 0.25 percent {in the U.S.} went from 4.9 to 10.5, accounting for a bit more than half the total gain {in incomes nationwide}." - What does this tell us in light of the rest of today's readings and the video?

• "One of the truly strange features about discussions of inequality is the way people shy away from talking about the extent to which the gains from rising inequality have gone to a tiny, wealthy elite." - Scott and Leonhartd manifest this tendency, as do many others. What accounts for it?

• Paul Krugman, video from "The New Class War in America":

• How does Krugman characterize the difference between his youth and the contemporary period in the U.S.?

• Thomas Piketty and Emmanuel Saez, "The Evolution of Top Incomes: A Historical and International Perspective":

• One view of the gradual rise of income concentration in the U.S. over the last 30 years (Figure 1A) is that it represents a return to normality, which had been temporarily disrupted by the need to respond to the great depression and World War II. Is there a problem with this interpretation? Does it leave out anything interesting?

• "..change in the tax structure", according to Piketty and Saez (p. 6) and also Krugman in his video from "The New Class War in America"), is responsible for the biggest fraction of long-term trends in income concentration. Take a look at the pdf file: "A Brief History of Marginal Income Tax Rates". What do you think might account for the dramatic drop in taxes on high incomes in the U.S. since the 1960s?

• Much of the increased concentration of income in the U.S. at the top of the distribution has come from growth in salaries, e.g. CEO salaries, which have grown dramatically. What explanations do Piketty and Saez favor?

• Lauren J. Krivo and Robert L. Kaufman, "Housing and Wealth Inequality: Racial-Ethnic Differences in Home Equity in the United States":

• Krivo and Kaufman state that black-white wealth inequality is "considerably greater than racial income inequality" (p. 587) - Why is this important?

• What does racial inequality reveal about inequality generally in the U.S.?

• News Release: "Institute to Study Social Issues Related to Governance and Poverty":

• David Grusky is quoted as saying, "If poverty and inequality were treated in the past as mere moral problems, now they are appreciated as problems with more profound consequences and threats for the world community than those of simple moral discomfit." - What does this statement mean? Is it that the funds for a center could not be raised if people of means did not feel threatened/impacted or that the consquences would not otherwise be "profound"?

Question by Dave:

• In their article "Shadowy Lines Still Divide", Scott and Leonhardt claim that "more Americans than 20 years ago believe it possible to start out poor, work hard and become rich. They say hard work and a good education are more important to getting ahead than connections or a wealthy background." Although this is not directly the authors speaking, what agenda do you think they have in stating this? Why do you think this notion exists/persists? It seems to me that a good education oftentimes is a product of such 'connections' or 'background' they speak of. For instance, Stanford draws heavily from Palo Alto High School, but rarely admits from neighboring communities such as EPA. What can we as students, the privileged, and the community do to change this?