Tsk Mr. Thaler, Tsk

The question comes down to whether we want a society in which the rich take an ever-increasing share of the pie, or prefer to return to conditions that allow all classes to anticipate an increasing standard of living.

They\’re not mutually exclusive Professor Thaler.

The rich could be getting an expanding share of an expanding pie: as long as the pie expands faster than the share of the rich then everyone gets better off together.

17 thoughts on “Tsk Mr. Thaler, Tsk”

  1. “The question comes down to whether we want a society in which the rich take an ever-increasing share of the pie”

    Well yes, we do.

    Because we want more people to become “rich”.

    (The current definition of “rich” in terms of “high rate tax payer” includes junior doctors and police sergeants, so we are all getting richer aren’t we ?)

  2. So Much For Subtlety

    john malpas – “Sounds good but it still means the rich get a yacht and I get a bicycle. That is reality.”

    And yet it is better than no bicycle at all. Or indeed any food. Ask the North Koreans.

  3. “Sounds good but it still means the rich get a yacht and I get a bicycle.
    That is reality.”

    If you want a yacht, go and work for one. It’s not difficult. Plenty of yachts for less than £20K.

    Instead, you could sit on your arse and whine about how unfair it all is and vote for some socialist imbecile to nationalize the yachts. You won’t get one then either, but at least you’ll feel better that you stopped everyone else having them too.

  4. Congrats on your pedantry–it’s true that what you describe *could* be happening. However, it’s also true that we *could* all be dancing with the unicorns in a socialist / libertarian (delete as appropriate) paradise.

    Unfortunately, neither of those two things are actually happening. The pie is expanding (has been, at least), but only the rich are getting any of the benefits.

    Tim adds: But that last ain’t true.The poor have been getting richer, the meddile class have been getting richer….

  5. Tim adds: But that last ain’t true.The poor have been getting richer, the meddile class have been getting richer….

    If you meant ‘the meddling class’, you are absolutely on the ball. You’re not wrong if you meant ‘middle class’ either …

  6. “The pie is expanding (has been, at least), but only the rich are getting any of the benefits.”

    http://www.statistics.gov.uk/cci/nugget.asp?id=285

    Looks like median wages are, uh, rising. Sounds to me like the slice of pie that people get is getting bigger.

    The cumulative effect of these rises, median real wages are about a fifth higher over the last ten years. The evils of capitalism, eh?

  7. Tim,

    On the contrary, it *is* true. The rich have gotten richer, and everyone else’s wages have been flat. See also: Pikkety & Saez

    Kay Tie,

    Why don’t you argue honestly and post data from the country to which Thaler was referring (the US)? Oh, right–I get it.

    Tim adds: But even in the US everyone else’s wages haven’t been flat. They’ve not risen as fast as those at the very top (the top 1%, 0.1%) this is true, but they have been rising.

  8. Two questions then: Can you post your data?

    And what do you think of these graphs?

    http://www.cbpp.org/images/2010.08.25-f2.jpg

    http://en.wikipedia.org/wiki/File:United_States_Income_Distribution_1967-2003.svg

    http://en.wikipedia.org/wiki/File:Gdp_versus_household_income.png

    Tim adds: Your first piccy shows changes in the distribution of incomes. It does not show changes in real incomes. The second shows (I think, the graph’s not labelled very well) real incomes by decile. In that the incomes of all deciles have, in real terms, been rising. Which is rather my point. The third shows us median household income: unfortunately Census does not adjust for shrinking household sizes, so it underestimates the way in which individual incomes have been rising.

    Just to remind you of what my claim is: the rich have been getting richer than everyone else. They have been taking an increasing part of the economic pie. But that economic pie has still been increasing fast enough that the real incmoes of everyone else have been rising too.

    Your first two links make that point for me very well.

  9. The first graph shows the relative gains or gains or losses (i.e. relative to the 1979 trend).

    The send graph shows real incomes, which have mostly been totally flat for decades for the lower half of the income distribution, bar a slight dip upwards towards the end of the 90s, all of which has been given back in the last decade. And income growth for all except the very rich has been basically flat for the whole of this decade.

    The third graph shows that the median household income has been flat for the last decade (actually falling slightly). Do you really think that household size has shrunk substantially during that time? It seems incredible to me, so perhaps you could post some suppporting data?

    Tim adds:

    http://economix.blogs.nytimes.com/2009/09/10/reader-response-falling-incomes/

    Add in health care costs (which are indeed part of total household compensation) and yes, really, incomes have been rising.

  10. BTW, Kenworthy’s graph is even easier to read–it is quite clear that for the bottom 80% of the income distribution, for the past 30 years, real income growth has been negligible or non-existent.

  11. Good link:

    “Erik is correct that the average household is smaller now than it was a decade ago. It’s fallen about 3 percent, to 2.6 people per household, according to Census data I pulled from Haver Select. Median household income has fallen about 2 percent since 1998. So, after adjusting for household size, median income is up marginally over the last 10 years.

    “But that’s not the full story. Median household income has fallen almost 5 percent over the last nine years. So we’ve now gone nine years without the population-adjusted household income having risen. That, too, is the longest stretch on record. In fact, households were shrinking more quickly in the 1960s, ’70s and ’80s than they are now — and incomes were growing. So the modest decline in household size is not the main cause of the recent income stagnation.”

  12. And one last thing: notice that you’ve already conceded Thaler’s premise, that real incomes are stagnant–you’re just arguing about why it’s happened. I’ll leave it to Leonhardt to sum up:

    “household incomes have failed to rise over the last decade because economic growth has been slow, inequality has increased and health costs have risen.”

    Tim adds: But health costs are part of household incomes…

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