Mankiw to the Rescue (of the 1%)

Apparently, when Greg Mankiw isn’t smugly referencing his own textbook on his blog, where criticism comments are banned, he finds time to write papers on the most important political issues of our time. In his most recent offering, he is defending the poor old 1%, who are just so upset with the various criticisms directed at them by the plebs that they simply can’t take it anymore. If we are not careful they will stop creating wealth and we’ll all be doomed.

OK, enough snark for now. What Mankiw has done is written a paper literally titled ‘Defending the One Percent’, where he takes a pot shot at the Occupy Wall Street movement, and everyone else who – unjustifiably, it seems – directs their anger at the wealthiest people in society. Mankiw uses a Cold Hard Dose of Economic Logic to show us lefties how the real world works.

Typically, Mankiw starts with a quasi-perfectly competitive story about income distribution:

Imagine a society with perfect economic equality. Perhaps out of sheer coincidence, the supply and demand for different types of labor happen to produce an equilibrium in which everyone earns exactly the same income. As a result, no one worries about the gap between the rich and poor….

…[t]hen, one day, this egalitarian utopia is disturbed by an entrepreneur with an idea for a new product…everyone in society wants to buy it…The new product makes the entrepreneur much richer than everyone else.

Let’s for now ignore that we’ve gone from the impossible world of perfect competition into a Schumpeterian/Randian vision of dynamic entrepreneurs, two worlds which are surely fundamentally incompatible. Let’s even ignore the fact that, far from originating in the minds of heroic entrepreneurs, an overwhelming number of innovations come from, or have their roots in, public funding, including the iPhone Mankiw references.

The main problem is that, contrary to Mankiw’s claim that:

…this thought experiment captures, in an extreme and stylized way, what has happened to US society over the past several decades.

This is nothing like what has happened, and is not at all what OWS and those like them are complaining about. The majority of the 1% are “managers, executives, and people who work in finance”, while the rest is composed of a mixture of people who are by no means Randian superheroes: for example, there are twice as many ‘not working or deceased’ (read: living off daddy’s wealth) as there are in “arts, media, sports” (celebrities) – the latter could, I suppose, be said to contribute something worthwhile, and have some talent.

Mankiw goes on to admit that it would indeed be a problem if the picture painted by the facts were true:

On the other hand, some of what occurs in financial firms does smack of rent seeking: when a high-frequency trader figures out a way to respond to news a fraction of a second faster than his competitor, his vast personal reward may well exceed the social value of what he is producing.

But here he completely ignores whether or not this is actually what’s happening, instead focusing on what really matters:

For example, if domestic firms are enriching themselves at the expense of consumers through quotas on imports (as is the case with some agribusinesses).

It’s the bloody farm subsidies! Evidently OWS should take their protests to Iowa, the morons. Alternatively, Mankiw would have done well to reference the fraud, publicly funded bailouts and general corruption that got the 1% where they are today.

The American Dream

Mankiw now repeats some standard blatherings about The Land Of Opportunity And All That. He notes that income persistence may be partly genetic: that is, the 1% are just a superior breed and we really shouldn’t worry too much. He references a paper that studies adopted children, and sums it up:

Indeed, Sacerdote estimates (in his Table 5) that while 33 percent of the variance of family income is explained by genetic heritability, only 11 percent is explained by the family environment. The remaining 56 percent includes environmental factors unrelated to family.

I’ll ignore the question of whether it is ‘unfair’ or ‘lucky’ to inherit good genes, various problems with IQ and so forth (for those interested, Ben Bernanke spoke about this eloquently in a recent speech). For the real issue here is that leaving the majority of the data unexplained and then throwing your hands up in the air is no conclusion at all.

Mankiw has deliberately narrowed his focus of social immobility to the effects of the family, but this is not necessarily the problem: it is that those who are poor will be born in bad neighbourhoods; will go to worse schools; will not move in the right circles; will not inherit money. It takes some real obfuscation to deny that social mobility is low in the US, where one’s income bracket is undoubtedly largely determined by that of one’s parents. Does Mankiw know, for example, that being born rich but not going to college is 2.5x more likely to make you rich later in life than if you are born poor but go to college?

He finishes the topic with this gem:

My view here is shaped by personal experience. I was raised in a middle-class family; neither of my parents were college graduates. My own children are being raised by parents with both more money and more education. Yet I do not see my children as having significantly better opportunities than I had at their age.

Well, that’s the matter settled then, folks. Mankiw doesn’t really feel like social immobility is a problem, based on some vague observations about his own life. This is after he previously castigated Joseph Stiglitz’ book for relying on anecdotes, by the way.

Mankiw then gives the verdict, based on his conclusions that neither rent-seeking nor social immobility are a major problem:

If the growing incomes of the rich are to be a focus of public policy, it must be because income inequality is a problem in and of itself.

Let’s forget how wrong Mankiw is about everything, and assume income inequality is a result of ‘natural’ forces of whatever he wants us to believe. If Mankiw is driven by the evidence, this sentence alone should make him want to reduce inequality: the authors of The Spirit Level showed that income inequality is associated with a wide range of social ills (if you tell me they confused correlation with causation then I’ll assume you have’t read the book). These observations hold true no matter how countries gain their equality: for example, in Scandinavian countries the equality is achieved through progressive taxation, whereas in Japan pre-tax income is already quite equal and progressive taxation is not as necessary. Equality is beneficial for people in every income bracket, across a wide range of societies.

As if that wasn’t enough…

Mankiw now takes us to neoclassical fairy-land, introducing us to a model whose assumptions essentially assume its conclusions. In this model:

redistribution is hard to accomplish, because the government is assumed to be unable to observe productivity W; instead, it observes only income WL, the product of productivity and effort. If it redistributes income too much, high productivity individuals will start to act as if they are low productivity individuals.

In other words: we assume the rich are productive and the poor aren’t, and that redistribution will make the rich less productive. We then conclude that redistribution could be risky because it would mean society produces less! It’s not really worth going into the specifics here, because the best bit of this section is that Mankiw then pokes a couple of holes in the model – with the goal of finding reasons to doubt the efficacy of redistribution – before concluding that:

I believe there are good reasons to doubt this model from the get-go.

Me too. Let’s forget about it.

Mankiw then chronicles the various problems with comparing the level of satisfaction different people with different tastes get from having more income, and implies that because of this we can’t really know whether or not to ‘redistribute’ money:

as of now, there is no scientific way to establish whether the marginal dollar consumed by one person produces more or less utility than the marginal dollar consumed by a neighbor.

Well, yes: utility is imaginary, we all know that. But really this isn’t the point. All people want is enough to have a decent standard of living, healthcare, education and so forth. Really, the idea that we need to do some sort of Benthamite calculation of society-wide pleasure is a construct of Mankiw’s; something only an economist could infer from looking at OWS.

Mankiw’s final word

Mankiw now sums up – yes, we’re almost there:

It is, I believe, hard to square the rhetoric of the left with the economist’s standard framework.

Yes, it is. But then, if you bothered listening to your political opponents beyond a few placards and caricatures, you’d learn that the left – and the general public – have many reasons to doubt this framework. Perfectly competitive models that don’t even have banks in them are hardly relevant when we are discussing animosity towards the finance industry and the clear impact it has had on real people.

Mankiw finishes with three points: number one is that the left argue the current tax system is regressive. This is something I have not heard before and it seems largely irrelevant – the real question is whether it is progressive enough. The second point is a restatement, with scant evidence, that the 1% aren’t the 1% because of rent-seeking, something I rebutted above. He offers some stylised facts about shareholders and CEOs which are really besides the point when we are talking about the entire finance industry.

The third and final point is based on the idea that the wealthy benefit from being in society, so should pay their fair share. Mankiw’s ‘rebuttal’ to this point is essentially to assert incredulously that the top already pay enough for some reason:

As I pointed out earlier, the average person in the top 1 percent pays more than a quarter of income in federal taxes, and about a third if state and local taxes are included. Why isn’t that enough to compensate for the value of government infrastructure?

Well, there are a few reasons we may want to tax the wealthy more: if their incomes are acquired unjustly; if inequality has pernicious effects; if the money is needed to reduce the deficit. All of these things are true based on the evidence I and others have presented. Ethically speaking, we might even make the stronger point that no income distribution is neutral in terms of policy, and taxation is really just one prong among a wealth of government-backed institutions that affect how incomes and wealth are distributed. Hence, the moral question of ‘redistribution‘ becomes something of a moot point, and Mankiw’s implicit notion of ‘just deserts’ is revealed to be spurious.

Mankiw and those who agree with him need to learn that the animosity toward the 1% does not rest on interpersonal utility comparisons, envy or whatever else. It is an expression of the dissatisfaction and outrage ordinary people feel when those at the top not only commit crimes but seem to flaunt their lawlessness; when they suck vast sums of public money out of the government, only to tell those in need that there’s not enough left for them; when they create massive, global economic problems through their incompetence/arrogance/selfishness; and when they have the political and economic power to make sure that nothing is done to remedy the situation they have created. It is a problem economists like Mankiw, with their largely irrelevant models, are ill equipped to solve and may even be blind to. Unfortunately for them, everyone else can see the problem clear as day, and will hopefully view out-of-touch articles like Mankiw’s as the snake oil that they are.

Update: the paper is chock full of gems, and naturally many other rebuttals have sprung up, covering areas I did not:

A write for The Economist takes issue with Mankiw’s Randian superhero story, and highlights his absurd ‘progressive taxation = compulsory organ donation’ analogy.

Tomas Hirst focuses on Mankiw’s ‘education education education’ argument, and finds it wanting.

Matt Bruenig gives Mankiw a lesson in political philosophy, exposing his implicit ‘just deserts’ hypothesis’

Commenter Magpie notes the reality of wealth and power, showing how selective Mankiw was with his list of ‘entrepreneurs’.

Commenter Luis Enrique says Mankiw is ‘embarrassing the economics profession’, offering some examples of economists who are not shills.

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  1. #1 by jurisdebtor on June 15, 2013 - 5:34 pm

    “My own reading of the evidence is that most of the very wealthy get that way by making substantial economic contributions, not by gaming the system or taking advantage of some market failure or the political process. Take the example of pay for chief executive officers. Without doubt, CEOs are paid handsomely, and their pay has grown over time relative to that of the average worker. Commentators on this phenomenon sometimes suggest that this high pay reflects the failure of corporate boards of directors to do their job. Rather than representing shareholders, the argument goes, boards are too cozy with the CEOs and pay them more than they are worth to their organizations. Yet this argument fails to 18 explain the behavior of closely-held corporations. A private equity group with a controlling interest in a firm does not face the alleged principal-agent problem between shareholders and boards, and yet these closely-held firms also pay their CEOs handsomely. Indeed, Kaplan (2012) reports that over the past three decades, executive pay in closely-held firms has outpaced that in public companies. Conqvist and Fahlenbrach (2012) find that when public companies go private, the CEOs tend to get paid more rather than less in both base salaries and bonuses. In light of these facts, the most natural explanation of high CEO pay is that the value of a good CEO is extraordinarily high (a conclusion that, incidentally, is consistent with the model of CEO pay proposed by Gabaix and Landier, 2008). ”

    The most natural explanation? Greg’s view of the world from his office appears to be a little distorted.

    • #2 by Unlearningecon on June 15, 2013 - 6:04 pm

      That passage begs the obvious question: what if the private equity group is also cozy with the CEO?

      I also recall research showing that the greater the number of shareholders, the higher CEO pay, so maybe that’s what’s going on. In any case, such a narrow set of facts can hardly be said to disprove the hypothesis that the majority of the 1% are ‘rent-seekers’.

      • #3 by jurisdebtor on June 15, 2013 - 6:46 pm

        “In any case, such a narrow set of facts can hardly be said to disprove the hypothesis that the majority of the 1% are ‘rent-seekers’”

        That’s pretty much what I was thinking the first time I went through the paper. But you really nail the issue of GM not addressing how the financial sector is filled with rent-seekers. ‘Financial product innovation’ is a phrase I could go the rest of my life without seeing. There’s really no ‘innovation’, as in creating a car that gets 100 mpg, a longer lasting light bulb, etc.

  2. #4 by only1humean on June 15, 2013 - 6:03 pm

    This just confirms my suspicions that those on the right just use whatever shit they can to confirm their own prejudices, this is an excellent critique but I bet it would never get him to change his mind, although at lest Mankiw is in some sense Keynesian which can’t really be said about others on the right.

    • #5 by Ramanan on June 15, 2013 - 6:30 pm

      “Mankiw is in some sense Keynesian” …

      Nooo. In fact he has called Keynes himself the defunct economist – if you remember Keynes famous quote “… slaves of a defunct economist.”


      Mankiw: although traditionalists are often called ‘new Keynesians,’ this label is a misnomer. They could just as easily be called ‘new monetarists.’

      • #6 by Unlearningecon on June 15, 2013 - 6:45 pm

        Don’t forget the classic “‘If new Keynesian economics is not a true representation of Keynes’ views, then so much the worse for Keynes.”

        Can’t find the source.

      • #7 by Ramanan on June 15, 2013 - 7:50 pm

        Oh here:

        Page 3 (page 5 in pdf) under Dubious Keynesian proposition #1.

    • #8 by Unlearningecon on June 15, 2013 - 6:46 pm

      Honestly, it’s a recurring theme in Mankiw’s paper and in places like the ASI, or Scott Sumner’s blog: they take one data point, or stylised fact, and use it to make out the left are just wrong, they’ve been falsified, that’s it. Seems more like wishful thinking than science.

      • #9 by jurisdebtor on June 15, 2013 - 6:48 pm

        You mean Sumner’s recent infatuation with the weekly initial unemployment claims as proof that monetary stimulus can offset fiscal austerity? Never mind the decline in the LFPR, or the employment-population rate, those are too inconvenient to address.

      • #10 by Unlearningecon on June 16, 2013 - 8:59 pm

        Glad somebody else noticed this. Honestly I find the man’s economics infuriating.

  3. #11 by only1humean on June 15, 2013 - 7:02 pm

    As I often read your posts I had a feeling that you would object to that. There is a post by Mankiw where he disagrees with Robert Lucas on the problem of unemployment where Lucas sees it as structural and Mankiw thinks it is a lack of demand issue,I also think it is wrong to lump Sargeant and Lucas With Friedman as the former seem to deny the effectiveness of monetary policy. When Mankiw writes that Macro research of the last 30 years has had little impact doesn’t he suggest that the Keynesian stuff is what guides ‘real world policy.’ The post you link to where mankiw discusses the ZLB is also a Keynesian concept. Furthermore he is also the editor of these two volumes:

    Mankiw is wrong on a lot of things but he is in some sense Keynesian. Also wouldn’t new monetarism imply a commitment to the ineffectiveness of fiscal policy? It’s possible then that New Keynesian/ new monetarism is closer to old Keynesianism than to old monetarism.

    Although if New Keynesianism states that problems revolve around ‘sticky prices’ and if prices/ wages that would be cured if they adjusted to find equilibrium- as opposed to ‘low animal spirits’ this also seems to ignore a chapter in the GT is it 16 or 17? where Keynes points out that wage adjustment might make problems worse – then yes I guess it is closer to ‘New monetarism’

    • #12 by Unlearningecon on June 16, 2013 - 9:07 pm

      I agree that Mankiw is, in some sense, a Keynesian, as, at least in abstract, he endorses a role for demand management. Unfortunately his conservative priors cause him to endorse eg Republicans over Democracts, and oppose actual stimulus bills.

      ‘Market Monetarism’ is not really New Monetarism: New Monetarism predates it, and is more based on restraint. New Monetarist models are quite mainstream, whereas Market Monetarists don’t really rely on formal models past MV=PY and are actually quite critical of mainstream macro.

  4. #13 by Magpie on June 16, 2013 - 12:19 am

    Prof. Mankiw selected his list of entrepreneurs extremely carefully (J.K. Rowling, Steven Spielberg and Steve Jobs): all of them very well-known and liked among the unwashed (well, Jobs perhaps not so well-liked among the Chinese Foxconn workers/slaves). Very clever choices, if you ask me.

    But, truth be told, Mankiw’s popular mega-rich didn’t have to risk that much.

    Mankiw could have chosen other, more heroic entrepreneurs; businesspeople more in the Randian spirit: people who literally risk their lives (or at least their freedom) daily while providing consumers things they want.

    So, to right the wrong inflicted by Mankiw’s forgetfulness on these entrepreneurs, I give you an alternative list:

    Joaquín Guzmán Loera, for example: “Cocaine King”. Forbes. 3/12/2009.

    Pablo Escobar Gaviria (KIA); closer to home, Arnold Rothstein (KIA) or many others from organized crime in the U.S.A. and overseas. Check their connections with wealthy politicians, judges, cops and more “legitimate” businesspeople.

    And what about Bernie Madoff? Okay, he wasn’t KIA, only deprived of his liberty, after offering voluntary transactions where wealthy people (including apparently even Spielberg) would invest in his Ponzi scheme. Based on Mankiw’s argument, one must conclude his imprisonment is unjust: the “transaction is a voluntary exchange, so it must make both the buyer and the seller better off”.

    As Mankiw chose only gazillionaires, is understandable he did not include Jonas Salk (one of the polio vaccine developers), who never patented it (according to Forbes, he forfeited a USD 7 billion fortune, because “you can’t patent the Sun”); Albert Einstein, or a host of others.

    Or, even closer to home, voluntaries, professionals working pro bono, mums and dads who cook, look after the kids/sick, teach, clean, wash, iron, maw the lawn, fix stuff at home without being paid a single cent for that:

    “October 10, 2000
    “Embargoed: 11:30 AM (AEST)
    “Unpaid work $261 billion – ABS finding
    “The value of unpaid work – 91 per cent of it is unpaid household work – was about $261 billion in 1997, equivalent to about 48 per cent of Australia’s gross domestic product (GDP), according to figures released today by the Australian Bureau of Statistics (ABS)”.


    Out of curiosity: did Prof. Mankiw get his degrees as giveaways with a McHappy Meal?

    • #14 by Unlearningecon on June 16, 2013 - 3:43 pm

      Great comment. Half tempted to add it at the bottom as an update.

    • #15 by Eric L on June 16, 2013 - 4:25 pm

      Or what about the many engineers and designers working for Apple who actually invented the iPhone? They were rewarded with a solid upper middle class income, but since Apple was already a large company no innovators became 1%-ers as a result of the iPhone.

      Mark Zuckerberg would have made a better choice for Randian super-CEO. At least he came up with the idea for Facebook. But mainly the whole idea of billionaire innovators from whom all good ideas flow is a myth shared by people who have never worked at an innovative company.

      • #16 by Unlearningecon on June 16, 2013 - 9:08 pm

        Funny thing about Facebook is that it can only really make money from advertising. In that sense it’s quite a parasitic company.

      • #17 by Magpie on June 17, 2013 - 12:35 pm

        Knock yourself (I myself was thinking of copying it and making a post of it!)

      • #18 by Eric L on June 18, 2013 - 6:37 am

        How you create value and how you make money tend to be very different things for web companies.

      • #19 by Unlearningecon on June 18, 2013 - 1:03 pm

        Yeah, I didn’t articulate what I was trying to say well. Ultimately the need to make money is a draining force on society: if Facebook didn’t have advertisement, enough food, houses and whatever would be produced for everyone who works for them. So really capitalism isn’t that kind to real innovators like Zuckerberg.

  5. #20 by dpapagiannopoulos on June 16, 2013 - 8:54 am

    Them rightists would agree with us leftists that waste of human talent is bad! Right?
    If I were 40 yrs younger I would seriously consider a research on IQ scores of 5, 15, and 25 year olds across post-codes and social strata. My hypothesis being that as we move to the older groups the distributions become more skewed.

    • #21 by Unlearningecon on June 16, 2013 - 2:33 pm

      I asked on twitter and got this reply:

      “IQ tests have assumed normality. The tests change with development, not the distribution.”

  6. #22 by QP on June 16, 2013 - 2:15 pm

    Mankiw too easily dismisses rent-seeking. inequality is all about rent-seeking (conscious or not) and the victory of capital over labour.

    • #23 by Unlearningecon on June 16, 2013 - 2:30 pm

      It is well known that median incomes have roughly stagnated while the top’s share has gone up, which strongly suggests that the top are extracting it from the bottom. Mankiw and others would like to explain this via ‘skills/capital-biased technological change, but I have yet to see substantive evidence for this, while a myriad of evidence exists to support the rent seeking hypothesis.

  7. #24 by Boatwright on June 16, 2013 - 3:14 pm

    Science vs Religion:

    John Calvin at Geneva in the 16th Century, and brought to America in the 17th by the Puritans, believed that only the “elect”, those chosen by God, would prosper during life and would also go to heaven. The fact that some were rich and others poor was simply evidence of divine worthiness.

    I see no real difference between the self-referential scholasticism of Prof. Manikiw and these religious assertions. To present this sort of non-sense as social science is laughable.

    • #25 by Unlearningecon on June 16, 2013 - 9:09 pm

      Oh, sure. I routinely ask those who peddle the ‘wealth creator’ rhetoric to substitute phrases like ‘divine right’ instead of what they say. It’s incredibly revealing.

    • #26 by Roman P. on June 16, 2013 - 10:11 pm

      One could say that social sciences and politics are only an endless recycling of old ideas. The smart ideas have already been expressed, and now it is a turn of third-rate copies. Bloggers bastardizing pundits bastardizing twentieth century ideologists bastardizing some decrepit philosophers etc.
      “Nothing changes” (c) Douglas P.

  8. #27 by originalsandwichman on June 16, 2013 - 9:56 pm

    You left out the funniest part about wealth redistribution being equivalent to compulsory organ donation.

    • #28 by Unlearningecon on June 16, 2013 - 11:30 pm

      There are so many gems it was hard to pick them out. I thought I’d stick to mostly fact-based bashing, though; I’m sure many will take the piss sufficiently.

  9. #29 by Arkadi on June 16, 2013 - 10:01 pm

    “[t]hen, one day, this egalitarian utopia is disturbed by an entrepreneur with an idea for a new product”

    Apart from the first 20 on the billionaire’s list, it consists of people whose genius has brought forth such novel innovations as sugar, metal, gas, oil… Appropriation of natural resources has a larger role to play in inequality than entrepreneurship and its about time economists wrapped their heads around that.

    • #30 by Unlearningecon on June 16, 2013 - 11:45 pm

      Don’t forget the bombings and conquest used to acquire them in the first place!

  10. #31 by Luis Enrique on June 17, 2013 - 1:46 pm

    yes Mankiw is embarrassing the economics profession with this. We do not live in a world where some people get to consume 1000 apples whilst others 1, because those people produce 1000 apples whilst others produce 2.

    In their place I’d defend standard economics models that are based around heterogeneous productivity, which are useful for addressing certain questions, within limits. But to address inequality in the broader sense, including the 1%, you need a model with luck, rent seeking etc.

    A smarter response from Daron Acemoglu (long excerpt, sorry):

    ” The default position of economists is that inequality reflects the unequal human capital or productive capabilities of different workers. If you start with that premise – that what people earn is commensurate with their contribution to their employer, and also perhaps to society – then greater inequality tells you something about how people’s productivities have evolved over time. This is by no means what every economist believes, but it’s a common view. Economists have cut their teeth on inequality by looking at things like the increase in the college premium over the last 30 years in the US and other economies, as well as the increase in the gap between relatively high earners – the 90th percentile of income distribution – versus the bottom 10th percentile. We’ve seen a big increase in inequality, measured in various ways, and this reflects the fact that the top people, the more educated, high earners have become more skilled. Technology has favoured them, globalisation has favoured them, and inequality has increased for that reason.

    So if a CEO is earning $5 million a year, that’s because he deserves that $5 million?

    That’s why I put emphasis on the 90th versus the 10th percentile, because once you get to that very high level, the story becomes a little harder to swallow…. a lot of the labour economics literature has focused on things like, do people with college degrees earn more than high school graduates? Do postgraduates earn more? What has happened to earnings inequality among lawyers or doctors or among production workers?

    What do non-economists think, in your view?

    My caricature of a layman’s view is that inequality is an indication of something that is failing in society. If a group of people used to earn twice as much as another group of people, and then, over 20 years, that ratio increases to four, that’s something that is concerning and might indicate a failure of social policy. My own view is a mixture of the two. If you’re looking at the average college graduate versus the average high school graduate, or the 90th versus the 10th percentile, then the things economists have emphasised – technology, globalisation, offshoring and outsourcing, changes in the supply of skills, et cetera – have played a major role and probably tell the bulk of the story. But if you want to understand the top inequality, why the top 0.1% – even more than what the 1% Occupy Wall Streeters are talking about – have been earning such huge amounts, then really you have to think about the social policy aspects of it and the politics of it. There is perhaps some sort of failure in how our system is working.”

    for my money, Acemoglu is too mealy mouthed here, he could say more strongly that what we’re seeing is an economic structure in which people who manage to secure places at the top are able to extract far far more out of the system than they put in. Nonetheless, I think he’s right about “things economists have emphasised” have “played a major role” within the 99% but for the 1% you need a different model.

    by the way, I would like to respond to your previous post .. but don’t have time right now.

  11. #34 by Luis Enrique on June 17, 2013 - 1:47 pm

    2? 1

  12. #35 by phil on June 19, 2013 - 5:52 pm

    Greg Mankiw is actually part of the top 1%. By that I mean he has the income and wealth to qualify as part of the 1%.

  13. #36 by fledermaus on June 20, 2013 - 4:00 pm

    “My view here is shaped by personal experience. I was raised in a middle-class family; neither of my parents were college graduates.”

    Even then he doesn’t see it. According to one of the attached articles his parents pulled him out of public school and sent him to a nice private school where he excelled. Does he believe that two married people without college degrees would be able to make enough to do the same today? Likely, he just doesn’t care

    • #37 by liberalrob on June 20, 2013 - 4:51 pm

      fledermaus @36 hits the nail on the head. Member of the 1% defends the 1%. Shocking.

      • #38 by liberalrob on June 20, 2013 - 4:52 pm

        Excuse me, that should have been phil @35. Oops.

    • #39 by Unlearningecon on June 24, 2013 - 4:00 pm

      Just when you think it couldn’t be any worse…it is. Mankiw is either an outright liar or he has a severe case of amnesia.

  14. #40 by mere mortal on June 20, 2013 - 7:27 pm

    Just deserts.

    Not “just desserts”, which could be the name of a company that only makes sweets.

  15. #41 by Geolibertarian on July 11, 2013 - 3:26 pm

    “…this thought experiment captures, in an extreme and stylized way, what has happened to US society over the past several decades.”

    Don’t economists study any history AT ALL?

    Apparently, the US was a perfectly egalitarian society and inequalities only appeared because some geniuses invented shit that everyone liked it!

    It’s not like slavery, millions of subsidies and land grants to corporations, protectionism, the patent system, police force breaking up strikes, a central bank that focuses on keeping a “natural rate of unemployment”, two World Wars, Reaganomics/Neoliberalism and then bank bailouts *ever* influenced social relations and income distribution! The rich are only rich because they invent the shit you like! (Nevermind the fact that don’t invent shit, they only own the Capital to produce what the engineers they hire invent, and those guys don’t get any credit at all).


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