Feed Me!

I've updated the blog to MT 3.1 and installed MT-Blacklist to rid myself of comment and trackback spam. It seems to be working. Good.

Also, you'll notice that I'm trying out Google ads. They're over there on the right. You'll notice that Google has yet to really parse what this blog is about. Dianetics!? But I certainly won't mind if you click on an ad or two when you come visit, which gives me a few cents. I could conceivably make up to $2.00 a month!

You may have also noticed that I've freshened up the Amazon book ads over on the left. If you're interested in reading what I'm reading, click through, buy a book!

That is all.

  • Musa

    hmmm….confusing argument. I thought B.E was talking about income inequality, which is a measure of income distribution between workers, while you delivery your supposed smackdown with a chart showing compensation for all workers, which I imagine includes those rich CEOs. I’m not entirely sure what she said, too bad you didn’t address it..

  • nicole

    Unless you think CEOs are unionized, maybe you should take a closer look at that graph.

    • Musa

      I’m not sure if they are included in the graph at all, but if they were, they would probably constitute the non-union line on that graph.

  • What do you think is the reason for that gap between compensation and productivity? Is it probably just the increase in benefit compensation (health insurance and all that?)

  • nicole

    I’m not sure why that should be the case, since benefit compensation is included in total compensation. Personally, not knowing enough specifics to do anything but speculate, I would guess it is a correction for the recent period where compensation grew faster than productivity. There are a couple cycles where the lines swap in the graph. If compensation was growing too fast a few years back, it may just have slowed while productivity catches up.

  • kevin

    great video

  • muirgeo

    I think what she was saying was this:

    http://tinyurl.com/59bjzk

  • muirgeo

    The strange fantasy world of the income-inequality denialists
    Posted by Justin Fox

    http://time-blog.com/curious_capitalist/2008/06/the_strange_fantasy_world_of_t.html

  • Muirgeo, Nope. She’s obviously talking about the compensation and welfare of of average workers. And she’s wrong about it.

    I don’t deny rising income inequality. I deny the relevance of it as a proxy for inequality in welfare, and I deny the relevance of an increasingly skewed distribution in the absence of evidence that its underlying causes are objectionable.

    The explanation of the Piketty and Saez chart is largely some combination of changes in the structure of capital markets, superstar markets, and executive salaries. No one knows the proportion of these factors. I think there’s probably something fishy going on in executive compensation, but the effect of that on the national distribution couldn’t be less morally relevant. It’s the effect on stockholders that matters.

    Maybe someday we’ll talk about consumption-equality denialists when we get better at qualitative measurement.

  • Renato Drumond

    For some light about the top decile, see Figure 1 and Figure 2 from this work:

    http://elsa.berkeley.edu/~saez/saez-UStopincomes-2006prel.pdf

  • muirgeo

    “I deny the relevance of an increasingly skewed distribution in the absence of evidence that its underlying causes are objectionable.” WW

    The underlying causes are people with money and power writing laws to make themselves more powerful and wealthy. In the process they buy off our democracy, stifle true competition and steal from the tax payer. I find that very objectionable. But people of supposed strong libertarian beliefs seem quite ready to deny both growing income inequality and that such events happen in our government. Or, I’m guessing, some must assume that “free market” includes being successful at raiding the public treasury. Anyone who is wealthy must have earned it. I simply don’t believe it because I’ve seen people from Enron get wealthy manipulating my states electricity market, then I’ve seen financial wizardry work it’s magic in the housing finance sector and now I think speculators are making a killing pushing oil papers in dark places while people starve round the world and loose their homes here in America.

    I read , but don’t have the reference, that Wall Street in the 70’s accounted for 10% of all corporate profits and now its about 40%. My guess is there are a lot of paper pushers pulling out huge hunks of the productivity pie with out helping to bake it.

  • jen

    “I don’t deny rising income inequality. I deny the relevance of it as a proxy for inequality in welfare.”

    So you’d have no problem with a more redistributive system, then, right? If income has no meaningful relationship with welfare, then giving up some income to others should be no burden at all for those at the top…

    • Tom

      Jen,

      So, how is my income rising at a faster rate than yours making you worse off?

  • Javier

    Will, this study might be interesting to you–it is especially interesting because it uses a discontinuity design (more sound than your usual regressions):

    http://ideas.repec.org/a/tpr/qjecon/v119y2004i4p1383-1441.html

  • Let me offer a qualitative argument on why higher productivity could eventually lead to serious income inequality: Any given industry will shed workers if productivity increases faster than demand can increase. The remaining workers will be better compensated and will likely have a wider range of compensations, since measurable differences in each worker’s productivity are more valuable if there are fewer workers.

    When a wave of productivity increases has swept through an industry, you’re then left with two groups: 1) a group of previously skilled workers who are newly unskilled (and who need retraining) and 2) a group of workers whose average skill level is higher than before.

    Now repeat this process a few times.

    So here’s my unsupportable intuitive leap: If all industries cull workers through successive waves of productivity increases, I think your income distribution stops looking like a normal distribution and starts looking more and more like a power-law distribution. One piece of evidence that would support this hypothesis is if you were to find that the right-hand tail of the curve (the highest decile, say) had a power-law superposed on it.

    Since the mode of a power-law distribution is always the lowest-valued sample, this wouldn’t bode well for a sustainable society. At the very least, we’d have to ensure that minimum living standards were pretty good. Even then, human nature being what it is, I’m pretty sure that you would have all the necessary elements for a real class war.

  • Radicalmoderate-
    The heart of your qualitative argument:

    Any given industry will shed workers if productivity increases faster than demand can increase.

    sounds like a description of human history. 99% of us used to spend all of our time providing food. That became more efficient, so some of the people previously providing food found new jobs. Now, only a few percent of the country can provide more food than we could ever use. Over most of the same period we managed to provide for each others’ minimum standards of living privately through charity, without weighing down or distorting our commercial interaction. Why would instead using government redistribution and regulation which a) crowds out public charity b) distorts labor markets and c) slows growth, be a better way to address the core issue; namely moving the people no longer needed in an efficiency gaining sector to other sectors? It seems as though policies which encourage growth of existing markets, encourage entry into new markets, and promote labor market flexibility are all more conductive to the ultimate goal, finding a productive position for the displaced workers.

    As a side not, I find the focus of Ehrenreich and her ilk on our country alone pretty sickening. The people who are now having to readjust, if they didn’t loose their job to a robot, lost it to a foreigner who is almost certainly many orders of magnitude poorer than they are. I don’t shed a tear for the American textile worker who probably had a relatively strong education given to him when I buy my t-shirts from a kid in east Asia who used to have to dig through garbage piles for a living.

    • The difference between now and the rest of human history is that the number of ways you can make a decent living with unskilled labor is shrinking dramatically, partly to offshoring, but also to automation. So the real gap is not so much between the rich and the poor as it is the skilled and the unskilled, or even between the less-skilled and the more-skilled. That’s going to produce a radically different income distribution worldwide.

      I don’t have a prescription for how to fix this, or even an opinion about whether it’s desirable to try to fix it. I certainly didn’t mean to imply that I thought redistribution was a good idea. I merely point out that the income gap may be a harbinger of something truly different, and something worth thinking about.

  • muirgeo

    “Proposed solution: more regulations! Brilliant!

    If these nefarious businessmen are so good at using the levers of government against you, it might be time to reconsider your plan of using the levers of government against them. You’re playing a losing man’s game, and shouldn’t be surprised that you inevitably end up as victim.”

    No my proposed solution is more democracy and better regulation.

    But lets say we follow your advice to decrease regulation. How do we get there? Please be specific. Who should I vote for? I think you are wrong because history shows us that unregulated markets are a roller-coster ride of ineffeciency, boom and bust econiomies of corruption and ultimatly result in concentrations of wealth and power that bring us back to the reasons we fought a revolution for a republic and the reasons so many of our founding fathers recognized the dangers of wealth inequity/ accumulations of vast wealth.

    • No my proposed solution is more democracy and better regulation.

      Right, and as I just said, and you responded to with this comment, you have been losing the democracy game and the regulations have been protecting the powerful against competition from the weak. Asking for more of the same is… progress?

      But lets say we follow your advice to decrease regulation. How do we get there? Please be specific. Who should I vote for?

      Don’t vote for anyone. Voting is how we got into this mess in the first place. I don’t know how you get there from here, but it certainly isn’t going to be by voting for the same politicians over and over again.

      I think you are wrong because history shows us that unregulated markets are a roller-coster ride of ineffeciency, boom and bust econiomies of corruption and ultimatly result in concentrations of wealth and power

      But isn’t this exactly what we see in the heavily regulated markets of today? Where are these unregulated markets you speak of?

  • muirgeo

    Jen,

    “So, how is my income rising at a faster rate than yours making you worse off?
    reply record video comment ”

    Said the landlord to the tenant. Said the weapons contractor to the politician. Said the oil man to the army grunt. Said the Wall Street financier to the public works laborer. Said the sweat shop owner to the 10 year old laborer. Said Paris Hilton to the special education teacher. Said the Master to his slave. Said the Lord to his serf….Said King George to the Colonist.

  • Cool Cal

    It seems to me that the last true market solution to the problem of wasteful corporate CEO compensations (the junk bond revolution of the 80’s) was undeniably successful, yet subsequently afflicted with so much opprobrium – in fact the same kind reserved for the iniquities it sought to correct – that today it confounds me as to what keeps a company like GM from being bought up, broken down, and sold off, other than arbitrary moral strictures.

  • John V

    will et al

    remember what I said about Muirgeo in a previous post:

    Muirgeo talks out of both sides of its mouth. It likes to criticize libertarians for supporting things that they do in fact oppose and opposing things that they do in fact support. It also likes to conflate corporatism and free markets when criticizing free markets and separating them when trying to offer a hollow and hypocritical word of support for free markets.

    In short, it is a duplicitous character that is not to be taken seriously.

    Seriously, don’t waste your time with it. It enjoys using libertarian-sounding critiques to attack libertarians for things they do not support and they libertarians, themselves, criticize while wanting more of what causes the things it criticizes. It has no lack of imagination. Sadly, it uses this imagination to tie logic into knots and then blame you for the false reality its twisted logic created.

  • John V

    Insofar as extravagant CEO is a “problem”, it’s not a public policy problem and it’s definitely not a problem for those who are not involved….meaning pretty much everyone. It’s a problem for the boardroom, not the public forum.

    I really don’t see how people can have the hubris to claim that THIS is an issue for government to deal with…let alone deal with in any constructive way that will not have adverse consequences on business practices with new incentive or behavioral problems.

    Perhaps the government should put out its own fires that already burning before trying to start new ones.

  • I thought this post was simply excellent, and wanted to thank you for it.

  • James Chalmers

    Am I correct that 2000-05 real compensation rose at an annual rate averaging 1.1 percent?
    How does this performance compare with earlier periods and with other economies?
    How was this growth distributed by quintile?

  • muirgeo

    “I really don’t see how people can have the hubris to claim that THIS is an issue for government to deal with…let alone deal with in any constructive way that will not have adverse consequences on business practices…”

    This would make senase if it weren’t for the fact of lobbyist throwing all sorts of money at politicians to get favorably policy. The government by it’s policies effects the issue of income distribution.

    You claimed above that I , …”It likes to criticize libertarians for supporting things that they do in fact oppose,..” Your statement above clearly indicates one of 2 things either you have no problem with people using money to get money from the politicians and the public treasury OR that you don’t think such a thing happens. Well or a third thing could be that you believe such lobbying has little to do with income inequality.

    So I can only connclude you are an irrational denialist or your actions and beliefs don’t square with Libertarian principles in all cases.

    • <blockquote<This would make senase if it weren't for the fact of lobbyist throwing all sorts of money at politicians to get favorably policy. The government by it's policies effects the issue of income distribution.

      If the problem you see is lobbyists paying off politicians to get their favored policies enacted, then perhaps the proper solution is to decrease the size and scope of democracy and government regulations, not increase them.

      • John V

        It doesn’t get this part. Muirgeo will gladly give government more power while believing the increase snooping around DC (like hungry bears on a food laden back porch) is a separate. It will never understand the irrationality in what it says.

    • John V

      Your explanation still doesn’t address the point I made. You and countless others have a habit of going after things you don’t like with vague appeals to government action….regardless of whether government action can fix it to your liking or how exactly it could even go about doing it.

      Mentioning lobbyists and government “failure” as a reason for CEO pay is simply a vague appeal to something you neither seem understand or are able to describe.

      You are fixated on lobbyists and favored legislation….yet you never ever wonder if the very system of a large influence government is the problem as it places itself as a priced possession between interest groups fighting back and forth in a tug of war for favoritism. You simply ignore this dynamic.

  • muirgeo

    Actually I thought about the funny “race war” video and I actually agree we SHOULD substitute Class for race. Then it makes sense. That’s me down there yelling for Class War… come on Bill…Class war…

    What purpose for democracy except to level the playing field in a war against classism?

    Without class war you end up with communism or autocracy or serfdom all of which holds the most precious of resource, human ingenuity, down… stifling innovation, freedom and even economic growth.

    So as long as the “upper classes” want to use money and power and the government to gain more the lower classes by all means have every right as well to take it back. Using government as well. Ultimately it’s survival of the fittest waged in a social environment.

    Libertarianism continues to be irrelevant as it is just not practical and has never and still is not an existing order found in any society.

    So absolutely… come on Bill… CLASS WAR!!…… LETS GO!!!…. OOPS there goes one… I’ll get him…..awe I couldn’t get em.. .he was in a beamer…. CLASS WAR!!! Lets GO!!

    Oh and the video link doesn’t seem to work but you can still find it on YouTube.

    • What purpose for democracy except to level the playing field in a war against classism?

      Um, the major purpose of democracy in modern times is and has been to unlevel the playing field, as you yourself have repeatedly pointed out in this thread. So why do you think you can take the same weapon that has historically increased inequality and use it to do the opposite?

      You sound sort of like an obsessive gambler, who thinks that if he plays just a few more rounds, he’ll make back all his losses, despite his continual losing streak. But he just digs his hole deeper and deeper. Double or nothing! Double or nothing!

      • John V

        Yes.

        It simply doesn’t get it. It’s amazing how many times it has been presented this hard nugget…both here and elsewhere and is still totally incapable of making any type of argument….good or bad…in response.

  • muirgeo

    James wrote,

    “Am I correct that 2000-05 real compensation rose at an annual rate averaging 1.1 percent?
    How does this performance compare with earlier periods and with other economies?

    No it’s only true if you include the wages of the top most percent of earners.

    http://angrybear.blogspot.com/uploaded_images/li-753190.bmp

    And compared to prior times the trend has been worse under Bush.

    Graph from Angry Bear;

    http://angrybear.blogspot.com/2005/07/labor-compensation-as-share-of.html

    Also;

    http://delong.typepad.com/sdj/2005/07/wages_and_salar.html

    http://angrybear.blogspot.com/uploaded_images/li-753190.bmp

  • muirgeo

    http://www.swivel.com/graphs/show/28573352

    If all 10 of these guys died tomorrow the economy wouldn’t miss a beat. But if the 350,000 median income earners who make as much combined died all at once I suspect our economy would take a significant blow and many of us might notice significant disputations in our daily lives. CLASS WAR!!… LETS GO!!

  • Richard Yates

    Will:

    I love your statistics! I love your graphs!

    But… I’ve got one for you… Ten guys are standing around at a bar. Their average income is $40K/year. In comes Bill Gates. Now they are high-fiving each other because their average income has jumped up to $50M/year.

    Statistics! Graphs!, But what do they prove?

    Will Wilkinson, you remind me of those Medieval philosophers who argued about the number of teeth in a horses mouth but refused to go out and actually count the teeth in the mouth of a horse outside on the street. Sure, your statistical averages are right, but only a fool thinks that averages tell the whole story. Just like the scholars of the Middle Ages thought truth was discovered purely by discourse and examining their ancient texts. None of them felt the need to test truth. Somehow you feel no need to scratch beneath the surface of your statistics.

    People are screaming that they are hurting. Historically high foreclosures are happening. But average income in the US is up, so all is well with the world. We can trust the reported aggregate income, but we can’t trust the blood in the streets. Reality is in our theories and our books and not in the mouth of any damn horse!