« The Glass Ceiling | Main | Quote of the Day »

December 06, 2006

Leftoid Economics

So Paul Krugman goes on TV and gets snarled at by the Fox News guy, Cavuto. So far, so fun. Now, there's a little wriggle room in what's actually being alleged. I tend to think that Krugman's right in that there has been a widening of income inequality in the US. Part of that is because there actually has been, part of it because of the slightly odd way that US poverty statistics are compiled (they still tend to use pre tax pre benefit numbers).

However, Krugman uses 'dramatically worse' which is a much stronger statement and one which isn't really quite something I agree with (it all depends upon your own definition of 'dramatic' of course).

As Angry Bear points out (as have many others):

...consumption inequality grows less than proportionally as income inequality grows, while wealth inequality grows more than proportionally.

Now I assume that the argument over inequality is really about how much people have, yes? So it's consumption inequality, if anything, that we should be worrying about.

But by far the best thing is this over at Think Progress.

Actually, Krugman is completely right: things are dramatically worse now than 10 or 20 years ago. Here’s a chart from the Economic Policy Institute that tracks the ratio of the wealthiest 1 percent of Americans to median income in the United States, a standard measure of income inequality:

So, in attacking a Fox News guy Judd makes a schoolboy howler. He doesn't even get the name of the chart right, which is The ratio of the wealthiest 1% to median wealth in the United States.

Repeat after me. Wealth is a stock, income a flow.

Leftoid economics, don'tcha just love it?

December 6, 2006 in Economics | Permalink


TrackBack URL for this entry:

Listed below are links to weblogs that reference Leftoid Economics:


It's very strange in a piece that exposes Fox New's right-wing hack as talking nonsense and Krugman as being correct you see this as to do with 'leftoid' economics.

On the wealth v income inequality, I expect it is quite rare for the two to move in opposite directions.

Tim adds: No, it was the blog post that was the example of economic illiteracy. Sigh.

Posted by: Matthew | Dec 6, 2006 12:45:50 PM

I know that, but given there's an equal (worse, I think, as it is plain wrong, whereas the blog post is just a different manifestation of the same argument) example of 'rightoid' economics, it seems and odd title'. Why not 'Economics madness from all ends of the politcal spectrum'?

Posted by: Matthew | Dec 6, 2006 1:34:15 PM

Thanks for the mention but notice something - even though Judd of Think Progress (one of my favorite blogs) mixed up wealth inequality v. income inequality, income inequality has increased.

Posted by: pgl | Dec 6, 2006 9:15:53 PM

If you are desperate to bust Krugman for something (I know the feeling), this is suspect:

KRUGMAN: Yeah, actually, it is dramatically worse now than it was 10 years, 20 years ago. All of the measures of inequalities have just gone off the charts.

As of 1998, that was only true for charts that went back to 1930 - the US had yet to reclaim the levels of inequality of the Gilded Age from 1910-1929 (per Saez / Piketty.

That data has been updated to 2004 but I can't get it to load.

Posted by: Tom Maguire | Dec 6, 2006 9:44:52 PM

If only Cavuto had replied:

"10, 20 years ago, yes. But not 70 or 80 years ago, Professor Krugman"

Posted by: Matthew | Dec 6, 2006 10:06:40 PM

Tim - you may wish to check out my latest on this topic at Angrybear. And please check the links to my earlier post on consumption inequality measures as you might find out why I think you are not quite right in what you asserted.

Posted by: pgl | Dec 6, 2006 11:03:49 PM

Tom MaGuire takes the very long-term view. I bet Paul Krugman would agree that these today are not as bad as they were in 1910. Unbelievable!

Posted by: pgl | Dec 6, 2006 11:06:33 PM

Look, we had this discussion about five years ago. Evidence is in, and we are seeing the return of pre-WWII inequality levels, globally. Heard anything about trickle-down effect lately? I'm in the gaining side so this is not a personal problem, but this is something that left unchecked will blow in our face. As Krugman put it, and made me spill my morning coffee, from memory: "If GM workers are told to cut down on their benefits due to foreign competition, they are entirely justified to ask why we do not cut down on competition?"

This isn't even about left/right anymore. There are basicly four positions on this: The pollyanna one, no there is no rise in inequality. The wishful thinking one, inequality has risen but it is actually good, manageable, etc. The realistic one, we do something about it or toss away either democracy or the free market, and we'd rather keep both. And the scary one, one more reason to do away with the free market.

Heck, if you asked the guy with mortage and credit loans so big he can only barely pay interest on those, he'd probably vote for some inflation. Which is one way to solve the problem.

Posted by: teme | Dec 7, 2006 9:53:37 PM