A Different Mr. Negative
By Arnold Kling
I hate to be Mr. Negative today, but I’m less than fully convinced that we are anywhere near embarking on a path that places the welfare of the middle class at the forefront of economic decisions.
One version of Mr. Negative is “We know exactly what sort of social engineering would produce a larger, richer middle class, but the Big Bad Meanies won’t let us.”
Instead, my version of Mr. Negative is, “We have many hypotheses about the causes of relative and absolute poverty, but we have few certainties. We are even less certain about what sort of social engineering, if any, would address these causes.”
Tyler Cowen, sounding uncharacteristically self-assured, writes,
I see two big and very real problems: slow income growth for many income classes and a problem with excessively high returns to finance at the very top…If we could fix these problems, that would mean a smaller financial sector, less moral hazard, better allocation of capital, and for most/all income classes rates of income growth comparable to the 1948-1972 period, chop it up as you wish. Imagine that everyone’s income went up three percent a year, every year, and every generation was about twice as rich as the parents.
I would say that this is true with only p = .15 or less. My recent narrative I would give a probability closer to .4. Charles Murray’s analysis I might assign a similar probability (next week, his book will come out, so I can actually read it. At that point, p might move.)
I admit that my views on this have not changed much since Nick and I wrote this article. The only additional point I would make is that if you lift your perspective from the U.S. to the world, then what you see is a middle class that is increasing in size and wealth. Factor-price equalization may not be good for some Americans, but it is great for many Indians, Brazilians, etc.
I do agree with Tyler that this topic does not have to be as ideologically loaded as some people want to make it.