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Paul Krugman, pussycat
The Conscience of a Liberal is um...not that polemic. It's not that shrill. There is an argument, to be sure, but the book has much more economic history than I had expected, and much more political history.
I've already blogged on The Great Compression; Krugman's more detailed account in the book does emphasize the role of war, wage and price controls, and very high rates of taxation. Normative questions aside, Krugman's positive analysis isn't as far from mine as I had been expecting from his blog post.
Some claims in the book are simply wrong: "...if there's a single reason blue-collar workers did so much better in the fifties than they had in the twenties, it was the rise of unions." (p.49) Of course it was instead greater capital investment per head and better technology; if Krugman means relative status he needs to say so. This conflation of relative and absolute magnitudes is a running problem throughout the first part of the book.
Most of all, today's world -- or even an extrapolated version thereof -- isn't nearly as like the Gilded Age as Krugman suggests. Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don't the economy is not at fault.
Krugman writes of "the vast right-wing conspiracy" repeatedly, and in these moments he verges on the shrill. But Bush receives virtually no attention; perhaps Krugman is simply sick of writing about the guy.
Conservatism rose in the 1980s in large part because the mid to late 1970s were such an economic mess and because American had lost so much relative status internationally. Krugman won't face up to that; instead he blames the Republican manipulation of "the race card," even though at the time racial tensions arguably were lower than ever before. Of course in a relatively close election any single factor can be called decisive but I found this discussion well below the standards of the political science literature, even the popular political science literature.
Krugman calls for single-payer health insurance, tax hikes, and raising the minimum wage. He doesn't come off as all that radical.
His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves, and that's all we hear on what's wrong with government. That's the part of the book I find hardest to swallow, but if you're asking "should I read this?" the answer is yes.
My prediction: For lack of red meat, this book won't sell nearly as well as Naomi Klein's latest. At my Borders, circa 4 p.m., they hadn't even unpacked it. "Yeah, we have that in the back somewhere, I haven't seen it yet." was what the guy said.
My question: Is Paul Krugman willing to come out and simply pronounce: "Margaret Thatcher turned the UK around and for the better"? If so, how does this square with his broader narrative? And if not, why not?
Addendum: Here is Ed Glaeser's review.
Posted by Tyler Cowen on October 10, 2007 at 07:33 AM in Books | Permalink
Comments
But it's relative status that makes us happy...
Posted by: at Oct 10, 2007 8:13:04 AM
"...if there's a single reason blue-collar workers did so much better in the fifties than they had in the twenties, it was the rise of unions." (p.49) Of course it was instead greater capital investment per head and better technology; if Krugman means relative status he needs to say so.
And let's not forget that nobody firebombed Detroit during WWII. The fact that most of the world's main industrial centers had been pretty much wiped out gave the U.S. a temporary edge over their main competition (Germany and Japan). It took until the late '60s for the rest of the world's industrial production to really catch up and that's when we started having problems.
Posted by: Ted Craig at Oct 10, 2007 8:34:44 AM
"It took until the late '60s for the rest of the world's industrial production to really catch up and that's when we started having problems."
If it is competition from other countries that is responsible for increasing income equality, why did the inequality not increase in Germany and Japan then or now. They must compete with each other as well as us.
Posted by: joan at Oct 10, 2007 8:43:28 AM
But it's relative status that makes us happy...
Anyone who believes that is going to feel a lot of misery throughout life. . .
Posted by: Matthew C. at Oct 10, 2007 8:44:40 AM
As far as I can tell the Government keeps getting bigger and more in the form that Democrats want it to be. It seems to me that Democrats win every battle just not in as big chunks as they would want.
Posted by: Floccina at Oct 10, 2007 8:56:23 AM
Tyler,
Why don't you have TrackBack anymore? I would like to see what others have to say about the book and your review, but will have to google search it. :~( Woe!
This may have came up a long time ago, but I just now noticed. If so can anyone point me to a link explaining the removal of TrackBack.
Posted by: Student at Oct 10, 2007 8:58:34 AM
Check out the Amazon page for Conscience of a Liberal that Tyler links to.
Krugman's book is being paired with Robert Reich's latest for a discount price.
If you read some of Krugman's popular work circa 1997 you'll see why this incredibly funny.
Well, you'll see why it's mildly amusing, anyways.
Posted by: Student at Oct 10, 2007 9:02:58 AM
Specifically its relative position in income that makes us happy. Basically, that's what I sit around thinking about. Right now I'm in 36 millionth place, but I'm looking to move into the high twenty millions within the decade (among present day people in the US of course. Only within country and contemporary comparisons matter when it comes to happiness). Oh, yeah, and I'm indifferent to my wife, friends, and family.
Don't countries with low income inequality have relative positional rankings too? The may have more tightly bunched distributions, but they still have distributions. Why is it that absolute magnitude of differences matters, but absolute position doesn't? Anyway, maybe people want to play high stakes status games?
Posted by: josh at Oct 10, 2007 9:04:01 AM
He's a good writer but his policy recommendations leave something to be desired. Asia's recovered quite nicely without the neo-Keynesianism he was calling for in The Return Of Depression Economics. His critical thinking seems to switch off when it comes to his political views.
Posted by: Ali Choudhury at Oct 10, 2007 9:07:06 AM
"But it's relative status that makes us happy..." Is that relative position I.E. I am number 8 out of 10 in earning, or relative as in number 10 has just a little less than number 1. E.G. I can see that having a boss is worse than not having a boss but someone that I do not know getting more money than me is not as important to me. I do not care how much richer Bill Gates is than me but I would hate to work for an oppressive. Now if you gave me the choice, I would rather be a tenured college professors for say $40,000/year than a high paid programmer with an oppressive boss getting $100,000/year or for that matter a brain surgeon in a high pressure practice for $500,000/year.
Posted by: Floccina at Oct 10, 2007 9:09:58 AM
"Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don't the economy is not at fault."
Well yes, but so do relative standards of living. This is a very important issue but I feel that it's glossed over. I'd love to read a critique of the thesis I keep hearing that above a certain basic minimum level of income people don't get much happier.
Posted by: Finnsense at Oct 10, 2007 9:14:06 AM
If it is competition from other countries that is responsible for increasing income equality, why did the inequality not increase in Germany and Japan then or now. They must compete with each other as well as us.
Not really. They compete in the broad world but both remain fairly insular. They don't allow many imports of either goods or people.
Posted by: Ted Craig at Oct 10, 2007 9:22:44 AM
What a surprise, Tyler suggests reading the book!
Posted by: eric at Oct 10, 2007 9:40:14 AM
And let's not forget that nobody firebombed Detroit during WWII.
What? They didn't? Then why does it look like that?
Posted by: Josh at Oct 10, 2007 9:43:53 AM
"But it's relative status that makes us happy..."
"Anyone who believes that is going to feel a lot of misery throughout life. . ."
Not if they focus their attention on lower-status people.
Posted by: Keith at Oct 10, 2007 10:02:25 AM
The only problem with focusing on relative standards of living is that there is no government policy that can deal with the situation without harming absolute standards of living. At least a mostly free economy can do a good job of providing a desirable absolute standard of living to people who want it. Trying to make everyone happy or take pride in their place within the economic food chain is a difficult burden to place on the political process. Well actually it is a down right impossible burden to place on the political process and any politician who says they can help solve the problem is just buying votes. Lets face it, capitalism is a purely material process and quite a good one to boot. It does not care about your feelings or how you perceive your place in this world. It is only concerned with two things, can do or can not do. That is it.
Posted by: John Pertz at Oct 10, 2007 10:07:08 AM
Eric,
I had the same reaction. Why does Tyler recommend books that he thinks have sloppy/bad analysis? I'd rather not waste my time reading Krugman or Naomi Klein given the mediocre reviews and the bad arguments being made by the two. And yet Tyler recommends both! Someone explain.
Posted by: CT at Oct 10, 2007 10:16:55 AM
"Someone explain?"
Hanging around Carow Hall at GMU, where IQs are off the charts, Tyler tends to forget that most humans think and absorb knowledge at a rate about one one-hundredth of his. To him, reading the Krugman book is an hour of leisure.
Posted by: Daniel Klein at Oct 10, 2007 10:48:00 AM
"Absolute standards of living really do matter, and most Americans today live very fine lives, or if they don't the economy is not at fault."
Well, yes. But there are improvements that can be made in the economy, perhaps even at some cost to mean absolute SOL, to improve the lowest SOLs in the country (and bring up the median!). And that's a trade-off which many of us are willing to make, and the argument over what's worth trading is a political one on which disagreement is both legitimate and healthy.
Posted by: Dingbat at Oct 10, 2007 11:13:09 AM
Only within country and contemporary comparisons matter when it comes to happiness).
If this were true, then most immigration would be from rich countries to poor countries.
Posted by: mobile at Oct 10, 2007 11:21:19 AM
"The only problem with focusing on relative standards of living is that there is no government policy that can deal with the situation without harming absolute standards of living."
That's quite a claim. The wealthiest countries in the EU (barring Luxembourg and Ireland) are also the countries with the smallest gaps in standards of living. The US is richer but it's not yet clear what the reasons for this are. There are good reasons to suppose working hours (longer), the size of the market and labour flexibility have more to do with it than redistribution through high taxes.
And for what it's worth, we Nordics are happier than you Americans and it's not just because of our balmy weather.
Posted by: Finnsense at Oct 10, 2007 11:37:41 AM
Heres a paper by Michelacci and Pijoan-Mas that puts income inequality down to more opportunity in America.
...we argue that workers view working hours as an investment as well as a source of current income. By working longer hours, they acquire greater skills, get promoted more frequently or switch to better jobs. The greater the expected career gains, the greater the incentive to work longer hours. ...Europeans and Americans...face different incentives during their working lives.
And what explains the different incentives? It's--Paul Krugman, call your office--our old friend, income inequality:
Individuals work longer hours when wage inequality is higher. ...for the U.S. and in...Germany, there is evidence that individuals work longer hours in occupations with larger wage inequality.
But, income inequality has increased little in Germany in the last 35 years. Not so, the U.S.
The fraction of prime age male workers working very long hours has increased substantially in the US. ...this is a side effect of the higher inter-temporal return to hours worked caused by the increase in wage inequality.
Posted by: Patrick R. Sullivan at Oct 10, 2007 11:53:04 AM
"But it's relative status that makes us happy..."
Well, yes, there's a lot of research backing that up. The key to happiness appears to be good genes, good health, and being in the top 10% relative to the people you hang out with, in that order.
If absolute wealth meant anything to happiness, one wonders how anyone living before, say, 1800 could ever have been happy.
John
Posted by: John at Oct 10, 2007 12:16:25 PM
Finnsense- odd that you'd say nordics are happier than those in the US when, according to the WHO, all scandinavian countries have higher suicide rates for men AND women than the US
http://www.who.int/mental_health/prevention/suicide/suiciderates/en/
Posted by: cbisquit at Oct 10, 2007 12:16:32 PM
I don't understand why a book as silly as this and with all the errors you pointed out is worth reading.
Posted by: Alex at Oct 10, 2007 12:38:41 PM
"Finnsense- odd that you'd say nordics are happier than those in the US when, according to the WHO, all scandinavian countries have higher suicide rates for men AND women than the US"
I do wonder that people always bring this up. It's such awful reasoning to suppose that the tiny fraction of the population that kill themselves are representative of the general state of happiness of the population as a whole. Suicide is one way to deal with unhappiness and where there is no social taboo against doing it or where people are not afraid of death because secular, it's obviously more common.
It's even worse because the suicide rate among Finns (which was double that in Sweden despite identical GDP! - explain that.) has dropped 40% in the last 15 years and is now at a level comparable with France and Austria.
Posted by: Finnsense at Oct 10, 2007 12:40:05 PM
We compete for sexual partners on a relative basis.
Posted by: Jon at Oct 10, 2007 12:41:21 PM
Dr. Cowen,
I am currently reading (listening) the book. I'm into chapter 2. Being a vague "Econ 101" sorta guy, I took caution and pause with his claim that understanding all these developments he discusses as part of argument are little more subtle and real than
"economics 101 would lead one to believe".
Do you agree? Being that Krugman is an economist, I am so far a little puzzled by his lack of economic reasoning in making his arguments. He's relying an awful lot on "numbers" and statistics of his choosing to assert causation. And inequality is THE central theme so far....almost as if that issue lies at the heart of everything and can be explained therefrom.
Indeed, economists and pundits of his ilk rely heavily on the correlations of Post-War America's better equality and the New Deal. Though the connections seem appealing, the empiricist in me has a hard time seeing the sound causal connection.
I wish this issue could get the definitive explanation it deserves so we could move on. There's an awful lot of misunderstanding on this matter and I think the guys at GMU should really endeavor to explain it and end this murky discussion.
Like Heyne's analogy so beautifully illustrates in The Economic Way of Thinking, we wouldn't hold a lighter under a thermostat to warm up a room because we know how these things work. In a way, I take this a step further and say that we wouldn't explain outside weather by extrapolating info from the behavior of a thermostat. The info isn't reliable because the reasoning would be shoddy.
This, I feel, is what plagues a lot of what I read. Though I feel Krugman is being sincere, I do wonder if he is betraying his inner economist by relying on statistical anecdotes to push a leftist agenda.
His claim that new economic research is showing real proof behind his assertions is the heart of this matter and needs real attention.
I wish you and others would take up this task and either agree with it or refute it.
Posted by: John at Oct 10, 2007 12:57:50 PM
Doesn't union success lead to employers to substitute capital for labor, thus bringing about "greater capital investment per head and better technology"?
Posted by: mike at Oct 10, 2007 1:02:44 PM
"Finnsense- odd that you'd say nordics are happier than those in the US when, according to the WHO, all scandinavian countries have higher suicide rates for men AND women than the US"
He meant for the ones that are left. :^)
Posted by: Bernard Guerrero at Oct 10, 2007 1:05:02 PM
You write:
"His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves"
You understand the reason for this argument, don't you? It is to dodge the inability of the left to justify its redistribution proposition on its own merits.
Posted by: mark t at Oct 10, 2007 1:15:28 PM
"The only problem with focusing on relative standards of living is that there is no government policy that can deal with the situation without harming absolute standards of living."
That's quite a claim. The wealthiest countries in the EU (barring Luxembourg and Ireland) are also the countries with the smallest gaps in standards of living.
Yet Western Europe's standard of living has dropped for 30 years versus the U.S., to the point that the Swedish would be America's poorest demographic group. Could it be that the wealthiest European nations are also homogenous? Italy, for instance, has a large difference between north and south.
Why is it that libertarianism doesn't exist in places where it has no financial support?
Why doesn't liberalism exist where it doesn't have government support? Organizations from PBS to Planned Parenthood and ACORN receive lots of federal money. To say nothing of the Ford, Rockefeller, MacArthur, Soros foundations, among others. How is the latter different from GMU?
Posted by: 8 at Oct 10, 2007 1:18:15 PM
Let's cut to the chase, here. Rich, poor, left, right, everybody is interested in some self-redistribution, and the state always makes a convenient vehicle. Don't tax you, don't tax me, tax that fellow behind the tree, etc, etc.
Posted by: Bernard Guerrero at Oct 10, 2007 1:18:31 PM
One can recommend a book that displays faulty reasoning for the very reason that it is a good example of faulty reasoning- something you might want people to learn to recognize.
Though Josh has already beat me to it in a manner of speaking, the firebombing of Detroit was put off until the 60s.
Posted by: Yancey Ward at Oct 10, 2007 1:57:59 PM
But it's relative status that makes us happy"
Yes ,if you are full of envy and resentment
Posted by: jean at Oct 10, 2007 2:34:18 PM
Krugman in 1996
http://www.slate.com/id/1915/
snip
Imagine that a mad scientist went back to 1950 and offered to transport the median family to the wondrous world of the 1990s, and to place them at, say, the 25th percentile level[of income]. The 25th percentile of 1996 is a clear material improvement over the median of 1950. Would they accept his offer? Almost surely not–because in 1950 they were middle class, while in 1996 they would be poor, even if they lived better in material terms. People don’t just care about their absolute material level–they care about their level compared with others’.
I know quite a few academics who have nice houses, two cars, and enviable working conditions, yet are disappointed and bitter men–because they have never received an offer from Harvard and will probably not get a Nobel Prize. They live very well in material terms, but they judge themselves relative to their reference group, and so they feel deprived. And on the other hand, it is an open secret that the chief payoff from being really rich is, as Tom Wolfe once put it, the pleasure of “seeing ’em jump.” Privilege is not merely a means to other ends, it is an end in itself.
My fellow Slate columnist Robert Wright would undoubtedly emphasize that our concern over status exists for good evolutionary reasons. In the ancestral environment a man would be likely to have more offspring if he got his pick of the most fertile-seeming women. That, in turn, would depend on his status, not his absolute standard of living. So males with a predisposition to status-seeking left more offspring than those without, and the end result is Bill G-g-g-–I mean, Ronald Perelman.
Is my license as a practicing economist about to be revoked? Aren’t we supposed to believe in Economic Man? And doesn’t admitting that people care about fuzzy things like status undermine the whole economic method? Not really: Homo economicus is not a central pillar of my faith–he is merely a working assumption, albeit one that is extremely useful in many circumstances.
But admitting that people’s happiness depends on their relative economic level as well as their absolute economic resources has some subversive implications. For example: Many conservatives have seized on the Boskin report as a club with which to beat all those liberals who have been whining about declining incomes and increasing poverty in America. It was all, they insist, a statistical hoax. But you could very well make the opposite argument. America in the 1950s was a middle-class society in a way that America in the 1990s is not. That is, it had a much flatter income distribution, so that people had much more sense of sharing a common national lifestyle. And people in that relatively equal America felt good about their lives, even though by modern standards, they were poor–poorer, if Boskin is correct, than we previously thought. Doesn’t this mean, then, that having a more or less equal distribution of income makes for a happier society, even if it does not raise anyone’s material standard of living? That is, you can use the fact that people did not feel poor in the 1950s as an argument for a more radical egalitarianism than even most leftists would be willing to espouse.
You could even argue that American society in the 1990s is an engine that maximizes consumption yet minimizes satisfaction. In a society with a very flat distribution of income and status, nobody feels left out. In a society with rigid ranks, people do not expect to rise above their station and therefore do not feel that they have failed if they do not rise. (Aristocrats are not part of the peasants’ reference group.) Modern America, however, is a hugely unequal society in which anyone can achieve awesome success, but not many actually do. The result is that many–perhaps even most–people feel that they have failed to make the cut, no matter how comfortable their lives. (In a land where anyone can become president, anyone who doesn’t become president is a failure.) My European friends always marvel at how hard Americans work, even those who already have plenty of money. Why don’t we take more time to enjoy what we have? The answer, of course, is that we work so hard because we are determined to get ahead–an effort that (for Americans as a society) is doomed to failure, because competition for status is a zero-sum game. We can’t all “get ahead.” No matter how fast we all run, someone must be behind.
If one follows this line of thought one might well be led to some extremely radical ideas about economic policy, ideas that are completely at odds with all current orthodoxies. But I won’t try to come to grips with such ideas in this column. Frankly, I don’t have the time. I have to get back to my research–otherwise, somebody else might get that Nobel.
Posted by: hdg at Oct 10, 2007 2:35:35 PM
http://www.ft.com/cms/s/0/f3b25e38-1390-11dc-9866-000b5df10621.html
Posted by: jean at Oct 10, 2007 2:46:11 PM
"Margaret Thatcher turned the UK around and for the better"? I'll say that. AND I never worked for Enron.
Posted by: dearieme at Oct 10, 2007 2:50:38 PM
hdg,
Yes, if one accepts Krugman's line of reasoning, then one could reasonably propose that all incomes should be equal. Of course Krugman did not want to come to grips with that idea- it has already been found to be a disaster whereever it has been tried, but to be fair, the Soviet citizens only knew they were destitute because of the existence of the Western Alliance.
Posted by: Yancey Ward at Oct 10, 2007 2:59:01 PM
Why is it that libertarianism doesn't exist in places where it has no financial support?
What fat cats are funding libertarian propagandists on Usenet? They're all over the place apparently.
Posted by: TGGP at Oct 10, 2007 3:22:36 PM
"Yet Western Europe's standard of living has dropped for 30 years versus the U.S., to the point that the Swedish would be America's poorest demographic group. Could it be that the wealthiest European nations are also homogenous? Italy, for instance, has a large difference between north and south."
The answer is that it's very complex. A number of factors explain each country's wealth. However, your basic point is wrong. Finland is quite homogenous but Sweden, for example, has a roughly similar number of foreign-born residents as the US and they are largely refugees, who are more difficult to assimilate. I would also point out that Sweden wouldn't be the US's poorest demographic group. I think you mean it would be one of the poorest states. That's true but yet it would be one of the happiest states too, with the longest holidays, best materity and paternity leave, least poverty (relative or absolute) and the list goes on.
Also, Southern Italy is not poorer because of race but because of trust.
Regardless, my only point was that the link between absolute wealth and inequality is not clear.
Posted by: Finnsense at Oct 10, 2007 3:48:03 PM
"Yet Western Europe's standard of living has dropped for 30 years versus the U.S., to the point that the Swedish would be America's poorest demographic group. Could it be that the wealthiest European nations are also homogenous? Italy, for instance, has a large difference between north and south."
The answer is that it's very complex. A number of factors explain each country's wealth. However, your basic point is wrong. Finland is quite homogenous but Sweden, for example, has a roughly similar number of foreign-born residents as the US and they are largely refugees, who are more difficult to assimilate. I would also point out that Sweden wouldn't be the US's poorest demographic group. I think you mean it would be one of the poorest states. That's true but yet it would be one of the happiest states too, with the longest holidays, best materity and paternity leave, least poverty (relative or absolute) and the list goes on.
Also, Southern Italy is not poorer because of race but because of trust.
Regardless, my only point was that the link between absolute wealth and inequality is not clear.
Posted by: Finnsense at Oct 10, 2007 3:48:17 PM
I haven't read the book and therefore can't contest most of Glaeser's points (and wouldn't be qualified to if they were about economics), except to note that he gets the title of the book badly and repeatedly wrong .
Posted by: washerdreyer at Oct 10, 2007 3:57:58 PM
americans have always been strivers, trying to get ahead, make it big, etc. (which you'd expect from a nation of immigrants). to put it all down to current economic conditions is silly, lots of this may be culture (the US isn't the only place that people work really hard). you're also ignoring the fact that americans may work harder because they get to keep more of what they make, and can buy many better and different things for the same nickel than those in other countries (ever checked out the types of stereos available in spain or their prices?).
this is not to say that many americans wouldn't be happier as much poorer (e.g.) brazilians, with a greater sense of community, dancing til dawn (to indulge in stereotyping). but that doesn't mean you can force americans to be something they aren't just by redistributing income so no one gets ahead. and how far do we go? how much do we redistribute? how much do we beggar our offspring (in terms of destroying growth) so people feel better about their station in life.
why isn't the really obvious answer that people should get over themselves, realize how blessed they are, and not worry about what the jones make? isn't the stereotype of gen X or gen Y that they're not strivers? that they're wiser than the boomers in this regard?
put another way, even though religion in the US has been fairly well demonstrated to make people happier, live longer, etc., no one's suggesting we foster more religion to increase happiness (we could have a churchgoers tax credit or somesuch). so why suggest that people should be protected from their striving? get into false conscience/conciousness, that way lies madness.
Posted by: dj superflat at Oct 10, 2007 4:00:00 PM
I recall that in PJ O'Rourke's book Eat the Rich he mentions a story in which some Swede confronted Milton Friedman with the fact that in Sweden there is almost no poverty. Friedman supposedly responded that among Americans of Swedish descent there is also almost no poverty (I read somewhere it is around 5%).
I wonder if this holds also for happiness.
Posted by: Colin at Oct 10, 2007 4:17:14 PM
Here is Ernst Fehr's utility function on inequality aversion:
http://www.iew.unizh.ch/wp/iewwp004.pdf
Posted by: curious at Oct 10, 2007 4:54:07 PM
The argument about relative vs. absolute status is misleading because there is no such thing as absolute status. When Tyler says "absolute status" he means relative status, but compared to people living in the past rather than people living in the present.
Posted by: tom s. at Oct 10, 2007 5:44:48 PM
My 3:57 comment is no longer operative, the crack team of editors at the New York Sun took down the version of the review which called the book "Conscience of a Conservative" four times. I of course saved it.
Posted by: washerdreyer at Oct 10, 2007 6:37:38 PM
His theory of government failure is that wealthy right-wingers hijack the state to redistribute wealth to themselves
Why, exactly, would that be surprising, or even controversial?
That's the *norm* with governments throughout history, isn't it?
When the right-wingers are in the saddle, they're the ones best placed to do the hijacking. I think the emphasis is on "wealthy."
Republicans in power, as opposed to Republicans on campaign, are not in favor of the free market. They are in favor of steering government largesse to their contributors, friends, and families.
This is not to say that Democrats don't do the same thing; but the wealthy are more likely to be Republican, and the Republicans since 1981 have been better poised to do the hijacking.
Posted by: Anderson at Oct 10, 2007 6:50:09 PM
"instead he blames the Republican manipulation of "the race card," even though at the time racial tensions arguably were lower than ever before."
What?! Obviously, both of these things can be true (GOP played race card, even though tensions were lower). It was certainly not a time lacking in racial tensions, which "arguably" has yet to come to America (see recent book by Thomas, Clarence). Where did you live in that time period? When do you think white flight took place?
Posted by: bob at Oct 10, 2007 7:23:02 PM
I don't really understand your comment "Conservatism rose in the 1980s in large part because the mid to late 1970s were such an economic mess and because American had lost so much relative status internationally." American conservatism has been around as long as the country has, and re-emerged in the 1980s largely because of Reagan's election - itself the result of 1) inept monetary management under Miller and especially Burns (Nixon's appointee), 2) the backlash against increasingly relaxed social attitudes and particularly integration.
As a relatively liberal economist, I can only say that I find both parties fairly unappealing, but every time the Democrats do something stupid the Republicans do something so egregiously greedy, intolerant, jingoistic, or inhumane that they send me back into the arms of their less openly unattractive opponents.
Posted by: DCBob at Oct 10, 2007 8:00:58 PM
I always find it useful, when discussing relative economic positions, to ask "relative to whom"? A society that emphasizes being richer than your neighbor will be a lot different than a society that emphasizes being richer than you were 10 years ago.
Posted by: Chris Andersen at Oct 10, 2007 8:02:49 PM
Most people believe they are too smart too fall into the relative status trap or climb onto the hedonic treadmill.
But...Guess what.....
Even the vast majority of those who understand the research and psychology on this subject fall into the traps anyway.
Posted by: Pshrink at Oct 10, 2007 8:48:10 PM
"The argument about relative vs. absolute status is misleading because there is no such thing as absolute status. When Tyler says "absolute status" he means relative status, but compared to people living in the past rather than people living in the present."
lol pretty funny, I was just going to say the same thing but in futuristic form.
Imagine a world far in the future, or create an economic model, much like The Culture in Iain Banks books where everyone has essentially every material thing they could want, but where there is one really poor person, Tyler Cowen, who has a standard of living comparable to his current standard of living where he has article about him in cool NY mags and eats tasty food, and can listen to music on his iPod while driving around. By Tyler's standards, they are only just hugely wealthy, and he poor, and he should have no reason to be unhappy at all, as his absolute standard of living is pretty high.
Posted by: at Oct 10, 2007 9:25:45 PM
“Being that Krugman is an economist, I am so far a little puzzled by his lack of economic reasoning in making his arguments. He's relying an awful lot on "numbers" and statistics of his choosing to assert causation.”
“…the empiricist in me has a hard time seeing the sound causal connection.”
Oh, the irony.
Posted by: hubris at Oct 10, 2007 10:34:08 PM
hubris,
sorry if my words lead you to believe something that sounds ironic. I was talking to Tyler. As he's reading the book, he would know what I mean.
when I say numbers and stats, I mean that Krugman uses such information to make anecdotes that don't really speak to what he's trying to assert.
Maybe you should read the book instead of coming after me about awkward wording that you can exploit to make a point that only exists in your head.
Posted by: John at Oct 10, 2007 11:45:06 PM
People are actually migrating towards more economic and social freedom.
I have no doubt that I could live like a king on what I make in a country like Vietnam or Belarus.
Two problems exist though, my job and the institutions that support it don't exist in those countries and if they did the government would take any economic surplus I gain for myself if I could work there. Not to mention nasty problems I'd have with kidnapping and robbery. The fact of the matter is I would rather be in the top 1% but since I'm going to be in the bottom 70% no matter where I go I'd rather live in a place where the bottom 70% has food.
Posted by: Roland at Oct 11, 2007 1:47:19 AM
But it's relative status that makes us happy...
For Krugman is this the reason why we should favour equality over growth? If so, it's easy to point to flaws in the argument.
Take the following as a model. Success within a society allows access to some quality of social approval. This is associated with special treatment and perhaps more favourable reproductive success. Such a model has the plausibility of evolutionary logic. If the most wealthy are the most likely to successfully breed, then it is only normal we should develop desires to become more successful within a society, to feel fulfilled near the top of it and less satisfied near the bottom. This model would explain why Krugman's 1950's family might not want to move into the lowest quartile of a population.
But this doesn't make an argument for reducing income inequality to maximise happiness. Given that societal approval and the most desirable sexual partners are a limited resource within the population a way will always need to be found to allocate these resources. Even if we prevent income discrimination completely we can't all be esteemed in the population. If for example all incomes were forced to the same level, there would still evolve some other mechanism of descrimination, whereby certain groups would be held in more esteem and others in lower esteem. Under this model, lower income distribution may bring no improvement in overall happiness but just a lowering of growth potential.
Another factor in the model could be that happiness depends on comparative access to all the products available in the society. If this were the major factor then indeed it could make a case for favoring equality over growth. However, I don't find this explanation so convincing given the lack of an evolutionary logic and its just not jibing with my personal experience. Also in this sense, growth overall has I think brought significant equalities. Although income disparities may remain numerically large access to what might be considered basic goods has broadened rapidly accross the population. In terms of what is available to rich and poor, as growth proceeds, even at unchanged income distribution, differences are reduced.
Plus we have what are undeniably material improvements with growth. Krugman's 1950's family might well have been happy to move if one of them was in need of a medical treatment which had only become available in the future.
Posted by: Simon at Oct 11, 2007 2:16:53 AM
Several commenters have hitched onto the "beautiful women" argument to explain relative-status striving, and the essential fallacy of trying to achieve social equality (that is, the societal top 10% will always get the top 10% of eligible mates).
It seems clear, [said the commenter, putting on his "Tyrone" (Tyryan?) cap] that Krugman is essentially arguing for a national beautiful-women creation program, so that all women are above average ("Operation Miss Lake Woebegone").
Perhaps this explains the strong Democratic support for genetic engineering research. They want to clone supermodels for social engineering purposes!
Already married,
Posted by: Ryan Cousineau at Oct 11, 2007 4:50:56 AM
"At my Borders, circa 4 p.m., they hadn't even unpacked it." -- blogged on Oct 10.
Maybe that has something to do with the fact that it doesn't officially go on sale until Oct 15.
Posted by: A student of economics at Oct 11, 2007 8:58:27 AM
Tyler Cowen writes: "the part of the book I find hardest to swallow... [Krugman's narrative that] wealthy right-wingers hijack the state to redistribute wealth to themselves."
But wait, I thought that that was one of the favorite and best (as in often accurate) right-wing narratives: that the growth of government that supposedly claims to be to help the poor, the farmers or the middle class should be opposed going to subsidize the upper middle class and wealthy special interests (e.g. agroindustry in agriculture in the US) or protected industry in the developing world.
If you abandon that narrative then where are you left? That strong organized economic interests do not try to take hold of the apparatus of government in their favor!?
Posted by: jonathan at Oct 11, 2007 9:44:06 AM
"Some claims in the book are simply wrong: "...if there's a single reason blue-collar workers did so much better in the fifties than they had in the twenties, it was the rise of unions." (p.49) Of course it was instead greater capital investment per head and better technology; if Krugman means relative status he needs to say so."
So if Krugman's claim is about relative status, is it correct?
And with the greater per capita capital investment and better technology today, are blue-collar workers doing "so much better" today they did in the fifties?
Posted by: Drake at Oct 11, 2007 12:19:48 PM
My brother-in-law was born in Mexico. I have a hard time understanding his and his family's attitude about his wife's (my sister in law's) station in life.
Armando (not his real name) and his Mexican family seem overwhelmed by the prospect of ever being able to achieve our standard of living. He can't imagine supporting his wife in "the style to which she has become accustomed." He sees us as being "rich." His mother works only sporadically and urges Armando to apply for and accept welfare, food stamps, Medi-Cal, etc.
My husband and I, my mother and father-in-law, and my other sister in law, live in homes we own (with mortgages) - standard three bedroom, two bath homes (heck two of them are mobile homes!).
This American environment seems to make Armando miserable. He seems capable of working only at minimum wage jobs (so does my sister in law, for that matter). Yet his family's conditions are 100 times better than the adobe huts and dirt floors they had in Mexico. He seems to be in a perpetual state of despair about this.
I wonder how I can understand his hopelessness about achieving things in the US. It doesn't seem that difficult to me to succeed, but maybe growing up here skewed my outlook. I grew up sometimes poor, sometimes homeless, but never saw myself as "down and out." I always believed we could overcome whatever conditions we were in.
Can anyone relate to Armando's view of life, or explain it?
Posted by: ExZonie at Oct 11, 2007 3:11:31 PM
OK, so unions didn't contribute to the relative or absolute wealth of blue collar workers in the fifties. I'm sure that if all that investment paid off, as it did, and no unions existed, the market, management and the corporations would have lavished a fair share on the employees who did the grunt work. Right.
Posted by: at Oct 11, 2007 7:41:36 PM
In the early 1970 I made the minimum wage. Today I make about twice the minimum wage.
With the exception of the availability of high tech gadgets and potential access to high tech medical care I am less well off in real terms than I was at that time.
By well off I mean that I could afford to buy a home then and it would be ludicrous for me to even try now. I could afford to buy a new car then with saved money, now I need a long term loan. I was able to pay for college from earnings then, that would be a laughable hope now. Then full coverage health insurance was a matter of a half days work, I don't think I have to mention the price of health insurance now.
I frequently read people use the phrase 'better off in real terms today'. I see little indication that those "real terms" relate to real people living in a real world.
Income inequality in real terms removes real money from the real economy that would otherwise have been put to real use by real people working real jobs.
Posted by: Buzzcook at Oct 11, 2007 9:59:37 PM
I think Krugman's a great guy and should be admired for going against the grain of the economic establishment. Although I think he is weak on "Political Science". I guess with my useless Polisci degree, I at least saw this conservative skewing of the political/economic pie to being most of the pie going towards a select oligarchic few for a lot longer than Krugman did. I think it goes back to the Nixon era, where the conservative movement became dominant and the lowering of taxes and increasing of costs upon the lesser incomed has been going on for a long time...with most people paying higher taxes and fixed payments for 'fixed costs' for health and auto insurance, fees, etc while the economic elite are paying less of a percentage of income for fixed costs. This growing income inequality is hidden by the vast, cheap array of consumer items coming from foreign cheap labor...but hardly comforting the majority of people seeing shelter costs, transportation, or other "fixed costs" going through the roof.
Economic insecurity is almost as high now as the Great Depression...and that is the essence of the War of Terror being focused upon the so-called "Middle Class" of the USA. Krugman gets it right in finally seeing that it was political conditions caused by conservatives of Both Political Parties...(i.e. Clinton's and Carter included) that have caused a "Great Unravelling". Indeed I am an example: "free agent", utterly economically insecure, a 'contract' worker w/o health insurance even with a college degree. I am the future that conservatives wish upon the American people. All I have to show for it is a high honors student son and a few good friends and relatively good health..but only a few K in the bank and social security as my only pension. And that's well into middle age. I guess I am even above average as latest stats show that most Americans have zero savings and no pension.
So Krugman's analysis of the falling middle class being due to the lack of Labor Unions is most likely correct. But he misses on the why and how that corrupted labor unions were done in by their own mismanagement and divisions. They were doomed to fail as the 'craft union' model was institutionally self destructive and anti Political. Labor and Management was very much in bed together esp. during the Vietnam war period in opposing "elitist" student demonstrations of "peaceniks". Remember the "Hardhat's" supporting the Vietnam war? and then later Reagan Democrats? Labor was just as at fault in the destruction of a once great working middle class as calculating CEOs. Why did the Europe do better in this regard? For one they bought into a 'one big union' model of organization incorporating Political partisanship with economic aspirations. In the US, we separated the two...thus many people who are on the margins of economic security (insecure) will vote for conservatives as they have no idea which party is in their interests....as neither of our two major ones Is in the interests of the vast "lowering" middle class.
Posted by: datadave at Nov 9, 2007 10:55:51 PM
Posted by: 鑽石 at Apr 2, 2008 10:32:00 PM
