Arnold Kling

Krugman on Inequality

Arnold Kling, Great Questions of Economics
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Is the increase in inequality as adverse for the lower and middle income groups as Paul Krugman claims? To view the actual data, go here (and scroll down to the second table, which adjusts income for inflation). The Census Bureau reports, you decide.

Krugman pre-emptively delegitimizes any who would view the data as something other than alarming.

The concerted effort to deny that inequality is increasing is itself a symptom of the growing influence of our emerging plutocracy...politically motivated smoke screens...the ideas that were taken up by business schools, that led to nice speaking and consulting fees...

In other words, anyone who would dispute Krugman must have been influenced by the malefactors of great wealth. Only the great Paul Krugman remains incorruptible and honest.

In my view, it is difficult to dispute that the rich are getting richer. However, it is equally difficult to dispute that the poor are getting richer. For example, W. Michael Cox and Richard Alm in Myths of Rich and Poor have pointed out that in spite of the rise in inequality a poor household in the 1990's was more likely than an average household in the 1970's to have a washing machine, clothes dryer, dishwasher, refrigerator, stove, color television, personal computer, or telephone.

Cox and Alm see the improvement in the lives of the poor as a sign that the glass of economic growth is half full. Krugman sees the even-larger increases in incomes of the rich as a sign that the glass is half empty. I see the case for treating income inequality as a national crisis as being almost entirely empty.

Discussion Question. The Census Bureau data show that on an inflation-adjusted basis, households in the middle quintile of the income distribution today have the income level that the quintile above them enjoyed 30 years ago. How does this help make Krugman's case that we are losing the middle class?

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