False Dichotomy in the Income Inequality Debate

Josh Hendrickson:

...the most frequent solution to income inequality, and the one advocated by [Paul] Krugman in nearly every interview about his book, is higher taxes on those at the top of the income scale. While this may give the appearance of lessening inequality, in actuality it does very little. Essentially, it is equivalent to twisting the ankle of the fastest runner in the world in an attempt to make other runners faster. In no way does this make other runners faster.

...income inequality is a static measure of well-being. Looking at an individual's or group's share of income at a given point in time tells us very little. In fact, even looking at the trends in income inequality is futile. The fact that individual's rarely remain in the same income group throughout their lives suggests that looking that a group defined as "poor" or "middle class" or "rich" is irrelevant...income inequality is a poor measure of prosperity. In reality, economic growth and innovation will do more to help the poor and the middle class than any conceivable government policy.

Don't Oversimplify the "Cost" of War

James Pethokoukis:

The Democratic study on the "real costs" of the wars in Iraq ($1.3 trillion) and Afghanistan ($300 billion) from 2002 through 2008 will almost assuredly lead to a common perceptual pitfall. An explanation: Let's assume that the numbers on Iraq are more or less accurate. And let's stipulate for a moment that when you take into account "hidden costs" such as interest payments on new debt to pay for the war, the expense of long-term healthcare for our injured warriors, and the impact of higher oil prices, the total cost of Iraq is indeed twice what the White House has requested from Congress.

Should we then assume that by not waging the war, Uncle Sam would be a trillion dollars to the better? That would be a questionable assumption, a product of a sort of "static analysis" that assumes if you change one critical factor, all the rest stay pretty much the same.

But if we didn't go to war, then we probably would have kept up the containment policy.

... a containment policy would cost anywhere from $350 billion to $700 billon. Now when you further factor in that 1) a containment policy might also have led to a higher risk premium in the oil markets if Iraq was seen to be gaining in military power despite our efforts to box it in, and 2) money not borrowed and spent on Iraq might well have been spent on something else given the White House's free-spending ways...

Politics of Envy

Jonah Goldberg:

John Edwards leads an all-star cast of liberal politicians and intellectuals (Edwards is decidedly not the latter) who worship at the altar of Invidia, praying that she will exact penance from the undeserving half of our “two Americas.”

Like the “scientific socialism” that concealed envy behind a slide rule, today’s liberals invoke social science as justification for their covetousness. In one famous study, a majority of people said they would
rather make $50,000 if others earned $25,000 than earn $100,000 if others were making $200,000.

Such studies are deeply flawed. For starters, as Arthur Brooks notes in the current edition of City Journal, they don’t address the question of whether people would be happier in a world of total equality. Rather,
they ask whether people would be happier in a world of inequality so long as they could be richer than everybody else.

Kling: Human Behavior is More than Self-Interest

Arnold Kling:

Economics should be subsumed under the general study of human behavior, not the other way around....I have no sympathy for the economic imperialists who insist that every action must be explained in terms of the rational, self-interested calculator. Instead, I would start with the presumption that every action can be explained in terms of habits, customs, and the like. Making rational economic decisions is just one of many habits. Rational, economic behavior is like a hat. Sometimes we wear the hat, and sometimes we do not.

I also have no sympathy for behavioral economics. All it does is take the rational, individualistic model and extend it to include common biases and mistakes. It generally ignores the larger context of behavioral influences, particularly the social ones...Finally, I should emphasize that I have no sympathy with those who view self-interested economic calculation as a bad habit. On the contrary, I believe it is a very good habit, particularly when it is combined with other habits and ethics for commercial behavior.

A New New Deal to Rebuild the Middle Class?

Joel Kotkin and David Friedman propose a new New Deal to help the slowly shrinking (as they contend) middle-class:

Is there any way to restore the prospects of middle- and working-class Americans? A comprehensive program to rebuild the nation's highways and bridges, upgrade its ports, construct and expand its energy lifelines and enlarge its public transportation systems could generate hundreds of thousands of good-paying jobs. Admittedly, this back-to-basics strategy is not glamorous. But it has helped narrow economic inequality in the past by producing more balanced economic growth.

"Jobs Americans Won't Do?"

Rich Lowry applies his scalpel to one of the central talking points of the pro-illegal side--that only illegals will do some jobs:

"According to a new survey by the Pew Hispanic Center, illegals make up 24 percent of workers in agriculture, 17 percent in cleaning, 14 percent in construction, and 12 percent in food production. So 86 percent of construction workers, for instance, are either legal immigrants or Americans, despite the fact that this is one of the alleged categories of untouchable jobs.

Oddly, the people who warn that without millions of cheap, unskilled Mexican laborers, this country would face economic disaster are pro-business libertarians. They believe in the power of the market to handle anything — except a slightly tighter labor market for unskilled workers. But the free market would inevitably adjust, with higher wages or technological innovation.

Take agriculture. Phillip Martin, an economist at the University of California, Davis, has demolished the argument that a crackdown on illegals would ruin it, or be a hardship to consumers. Most farming — livestock, grains, etc. — doesn't heavily rely on hired workers. Only about 20 percent of the farm sector does, chiefly those areas involving fresh fruit and vegetables.

The average 'consumer unit' in the U.S. spends $7 a week on fresh fruit and vegetables, less than is spent on alcohol, according to Martin. On a $1 head of lettuce, the farm worker gets about 6 or 7 cents, roughly 1/15th of the retail price. Even a big run-up in the cost of labor can't hit the consumer very hard."