Share of Income Gains by Quintile - Great Depression til Now

I call b.s. In economics, the extremes are strongly self-reinforcing. I would be really surprised if in a given year more people left the top 0.05% (in net worth) than stayed there. I'd even be surprised if the ratio were less than 5 to 1.

>All the extra stuff we have.

It's NOT that stuff though. That stuff is cheap.

It's rent, food, childcare, healthcare, and education. These are not luxuries. Cellphones cost nothing compared to these real costs, which can't be reduced by a "low impact" life.

I'm sorry, but there seems to be an omitted first step in the entire comment thread of critiques -- from all comments coming from all political angles: examining the underlying data.

The NYT graphic tells a terribly compelling story that supports a particular political point of view. That tickles my bullshit sensor, and tells me it is time to question the underlying data and assumptions.

Frankly, this graphic makes me hear the sound of ideological axes grinding. That makes me want to question assumptions, data gathering, and data analysis. This is all thanks to Prof. Eyrich and his Stats and Econometrics classes way back when. (w00t Claremont McKenna College.)

I am not saying the graphic is wrong or it is right in the conclusions it suggests. I just find it telling that the discussion thread jumps straight to an Itchy and Scratchy Show level of discourse, without questioning the underlying data.

Where is HN's passion for analytic rigor? Or does A/B testing and statistical analysis apply to websites but not economics?

Since this is Hacker News, and there are a lot of really smart, numbers-oriented people here, I just thought I'd provide a link to a dataset that looks at income distributions within the US from 1913 to 2008:

http://www.econ.berkeley.edu/~saez/

Under "Income and Wealth Inequality" on that page, click the link titled "(Longer updated version published in A.B. Atkinson and T. Piketty eds., Oxford University Press, 2007)".

It is an excel file that contains a metric ton of tables, charts, and figures. If you have a few moments and want a deeper understanding of the issue, that excel file is the best place to go.

(Edit: I just wanted to note one thing. My favorite graph from the excel file is figure 1B, where you can see that we are basically returning to where we were prior to World War II. It makes you wonder what was so different about the post-war period that resulted in this shift. Personally, I wonder if the sudden subsidization of education for returning veterans had anything to do with it, but I have no data on this right now, so...)

As far as my own thoughts on the issue go, I agree with pg. For a boring, academic take on it, there is a wonderfully dry 1980s paper by Rosen outlining the superstar theory:

http://www.ppge.ufrgs.br/giacomo/arquivos/ecop72/rosen-1981....

Basically, thanks to technology and globalization the rewards to individuals that have the highest levels of abilities have been magnified. Their "reach" has increased relative to those below them, and their rewards have increased in line with this.

While interest in this seems to be popping up all over the place due to the current economic catastrophe in progress, the idea that communications infrastructure improvements lead to income inequality is an old one.

Here is Alfred Marshall (founder of neoclassical economics) in 1890 (revision from 1920):

http://www.econlib.org/library/Marshall/marP54.html#VI.XII.4...

As for myself, I have no idea about whether this is a good thing or a bad thing (or whether anything could/should be done about the growing inequality). However, it is happening now, on a grand scale, so I think that it is important for everyone to have some context on the issue.

>The economic growth since 1978 was, for the most part, produced by the efforts of 10% of the population

I don't see how that could be true. productivity gains have been experienced across all levels of the income scale so surely that growth is attributable to more than just the top 10%. Just because that's where the most income growth has been doesn't mean that that is where the growth has been produced, its just where it has been captured.

I think you are right in questioning what drives the inequality. I do believe that some people are more productive and thus deserve additional income and wealth. But i am not so sure that the amount of additional income that the very wealthy earn is actually proportional to their intrinsic productivity. The issue is that capital tends to create more capital because you can 'put it to work' so the wealthy tend to become wealthier. So the rich will naturally become richer because they have access to greater growth opportunities (though investing for instance they can capture growth produced by other companies).

Capitalism fundamentally favors people with excess capital. This is what makes it very effective and efficient because it encourages risk and investment. however it doesn't necessarily produce a fair system because the owners of capital have many means to capture and retain the returns of investment.

For example if in the proverbial pin factory innovations were made that allowed workers to be more efficient (say by specializing different aspects of the production of the pins) then all of a sudden the factory is more productive relative to the labor invested. Now the question is who should capture the gains of that productivity. Should it be the factory owner because he/she put up the initial investment, the factory workers because they are now more productive, the person who came up with the innovation? It's not really clear but i think most people would agree that they all deserve some share of the additional profits. The shift over the last 40 years has been that mostly its going to the owner (the capital investor) and the innovator and not the worker. It's tough to determine exactly how the profits should be divided fairly, because fairness is so complicated in this instance. This is one of the major benefits of labor unions because they provide a way for the workers to share in the additional wealth that they are helping to create. Now obviously not all occupations should have unions and not all unions are effective, but this is the problem to which they are the solution, but you have to admit that its a problem first.