A Nuance to the Inequality Debate

Paul Krugman, a New York Times economist and a Nobel prize winner, offers a very good advice when you are seeking data to support your viewpoint. When searching for supporting documentation or data that supports your belief or assertions, you need to be very wary of uncritically accepting the data. In fact, you may need to bend over backward when viewing data that supports your assertions. You need to be even more skeptical because your bias towards that belief could cloud your judgment. As an example, he says that he would very much like to believe reports and findings that say high inequality would ultimately lead to stifled growth, but he suspects that there is no real strong data to support it.

That makes a lot of sense: you want so badly for the findings to say you are right that you ignore other signals or you don’t probe deeply enough. I’m glad he is taking a cautious approach to the high inequality = low growth, rather than just accepting such findings. I hope that means that I can depend on him to look at the details more critically, deciphering the true meanings and finding the real connections.

We could have used that advice…

…when Bush et al was quoting the mushroom effect as reason for invading Iraq;

…when politicians cut taxes with the belief that such cuts will spur economic growth (so far the data says otherwise but they are still hoping);

…when politicians tout that austere measures will help improve the economy, especially during this kind of recession that we just endured (Europe signals that austerity measures do not work).

And so on and so forth.

So, with that caution in mind, last week there was an article announced that there was a nuance to the inequality debate. Instead of the usual article declaring Americans have been losing grounds for 30 years since the ’80s, this article said that there was a nuance. A researcher looked at a newly released set of (census?) data that follows groups of people over time. Apparently, this type of data was unavailable before and is now available (I’m not sure how or why), so this is the first time that any researcher has been able to dig into data about a group of people over a  period of time. The data indicated that instead of losing ground over the full 30 years, educated, elderly Americans actually lost ground only in the last 10 years. Throughout the ’80s and ’90s, educated Americans actually reaped gains as productivity increased. It was only during the 2000’s that elderly Americans started to slip back and lose those gains.

What happened during the 2000’s? Was it that free market fervor took rabid hold? Regulations was loosened too much? Government became more pro-business and thus businesses became emboldened to “play” nasty? Increased offshoring? Globalization? Who knows? Maybe the narrowing of the timeframe will lead to answers but it sure slightly changes the conversation.