Ezra Klein argues that inequality is not, as President Obama says, “the defining challenge of our time”. Instead, unemployment should be the focus. To Klein, inequality is “easy to worry about” and it can be used to mobilize political allies, but he cites economist Jared Bernstein and argues that there isn’t enough evidence that inequality is hurting the overall economy:
Bernstein found that there wasn’t strong evidence for the idea that inequality is weakening demand — or for any of the other theories tying inequality to a weaker economy. There “is not enough concrete proof to lead objective observers to unequivocally conclude that inequality has held back growth," Bernstein wrote.
Paul Krugman disagrees, saying that “the reasons to focus on inequality are overwhelmingly convincing”. First, rising inequality is a bigger factor in falling middle-class incomes than slow economic growth. Second, Krugman argues that “there is a reasonable case for assigning at least partial blame for the economic crisis to rising inequality”. Third, inequality enabled a political consensus “in favor of deregulation and financialization”. Finally, Krugman argues that it is precisely because inequality’s causes are “mysterious” that it demands our attention.
Lawrence Mishel characterizes the debate as a “question of where the burden of proof lies in the inequality debate”. The question shouldn’t be if inequality hinders growth, but whether inequality increases growth. “And there is no reliable evidence that more inequality leads to more growth”.
Jared Bernstein takes a middle road of sorts: “Demand-side policies that that significantly lower unemployment will also reduce inequality... So we don’t have to choose whether to fight weak demand or high inequality. Fight the former and you’ll help reduce the latter”. Dean Baker echoes Bernstein’s false choice argument.
Steve Randy Waldman is incensed: he says Klein is “misrepresenting” Bernstein’s research. What Klein quotes is, “a kind of handwringing on Bernstein’s part”, which he pulls “out of context”. Not only that, Waldman says, Klein is “probably getting causality backwards... Broadening the distribution of income may well be prerequisite to full employment going forward”. And as far as pining for a world more focused on growth and employment than inequality, we’re already there, says Waldman.
The Economist points to the political-economy consequences of this issue: “If we don't find ways of redistributing national income that don't hurt growth, we're going to end up with ways of redistributing national income that do.”
Klein, in a long post responding to critics, makes a number of detailed points. Broadly, he writes, “I don't have many policy disagreements with the folks focusing on inequality. But politics is about prioritization, and what politicians end up doing is in part driven by what problems their political coalitions are most worried about”. And that, Klein still thinks, should be jobs. -- Ben Walsh
On to today’s links:
Politicking
How the Death Star e-petition to the White House led to policy change - On The Media
Wonks
Larry Summers: Why we're facing secular stagnation - Reuters Opinion
People complicated - Mark Buchanan
Ugh
Former BofA homeowner aid contractor: “Everyone knew that we weren’t helping people" - Bloomberg
The Fed
If QE is "heroin", what is "methadone" and how do we avoid "side effects"? - Sober Look
Another FOMC meeting, another chance for the Fed to think about tapering, and probably decide not to - Tim Duy
Some people think the Fed will taper, some don't - WSJ
Long Reads
Judge Rakoff's essay on why no high-level execs have been prosecuted since the crisis - NY Review of Books
New Normal
What the top US multinationals are doing with their cash now: mostly just buying back stock - WaPo
Must Read
The for-profit college that intentionally placed grads in temp jobs to game its job placement stats - Chris Kirkham
Growth Industries
Create a fake baby, save 20% on Amazon - Matt Yglesias
Listicles
Is Counterparties a feminist? - The New Inquiry
Fascinating
Why do programmers start counting at zero? - Mike Hoye
Strangely Existential
World loses faith in metal - Bloomberg
Equals
The horrifying state of wearable tech for women, or, the tweeting bra - Charlotte Lytton
Cosmic
"The solar system around us is rife with instability" - Nautilus
Great Minds
"Nietzsche's my favorite. He's just insane": Mike Tyson's reading list - WSJ
Questions to Which the Answer Is No One Knows
Why do Americans write the month before the day? - The Guardian
Follow Counterparties on Twitter. And, of course, there are many more links at Counterparties.
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