Sunday, August 20, 2006

Samwick on Krugman

Dartmouth economics professor Andrew Samwick posts a blog entry discussing Paul Krugman's recent commentary on inequality. An excerpt:

What always puzzles me about Paul Krugman and his claims about inequality is why he doesn't seem to realize how silly he sounds when he refuses to acknowledge, and take some pride in the fact, that he is part of that top 1 percent. I find it hard to imagine that Paul Krugman's income in 2004 wasn't above $277,000, between his income from his university, his speaking engagements, his books, his columns, and his investments.

Now, does Paul Krugman think that he was just a tool of the "New Gilded Age" politicos? Does he owe his income gains to the people he despises, those nasty Republicans and that ridiculously centrist Clinton? I'd like to know. I suspect that if you asked him why his income grew to the point where he's in the top 1 percent, he would give some long answer, the shorter version of which is that he's "highly educated" and he's not lazy.

Paul is correct when he says that income inequality has been rising over the past three decades (although he overstates the stagnation for the middle class by relying on numbers that exclude fringe benefits--see this previous post). But I agree with Andrew that Paul is on shaky ground when trying to explain rising income inequality by politics (as opposed to technology, demography, and so on). Policy choices such as tax rates and minimum wages have not been the main causes of increasing inequality. At least that is the consensus, as I understand it, of the professional labor economists who study the issue.

Update: Brad DeLong agrees:
I can't see the mechanism by which changes in government policies bring about such huge swings in pre-tax income distribution.