William Bernstein on Inequality
Oct 6 2008

William Bernstein, author of A Splendid Exchange, talks with EconTalk host Russ Roberts about inequality. Bernstein is worried about it; Roberts is not. Bernstein argues that inequality is damaging to the health of low-status people and hurts the health of the economy. Roberts challenges Bernstein's empirical evidence. It's a lively conversation on the economics of status, productivity and the progressivity of taxes.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.


Jason Woertink
Oct 6 2008 at 9:00am

When it comes to inequality and health I think the causation might be reversed. It seems that people who are healthy have a greater opportunity for advancement. If you are healthy you can take fewer sick days, will generally be less tired and able to work longer and more efficiently. I would also support this claim in how fascinated we are by the exceptions, such as Lance Armstrong and Stephen Hawking. They are both very accomplished but the compelling personal story is how they did so much while having health issues, since normally we consider unhealthy people to be less productive.

Oct 6 2008 at 9:43am

To expand on Jason Woertink’s point, a correlation between health and economic success or status could mean three things:

1. status causes health
2. health causes status
3. something else causes both status and health (could be a hormone, intelligence, a particular combination of genes, etc.)

Bernstein likes 1, but I would like to have heard him defend against 2 and 3.

About inequality and crime: if you are very wealthy and your neighbor is not, your neighbor may be more likely to steal from you than if you were poor. But is that a reason to give your neighbor a bunch of your wealth? It feels a bit like a ransom payment.

Oct 6 2008 at 10:47am

I love this debate format.

Bernstein should read this study:

Ruhm (2000, 2005) finds that recessions improve adult health, arguably because individuals engage in healthier lifestyles during downturns—they exercise more, drink less, and smoke less, for example. These patterns probably reflect some combination of job stress and the increased opportunity cost of time during economic booms.22 Ruhm’s findings challenge the accepted wisdom that income exerts a strong protective effect on health, although his results only pertain to short term fluctuations in income rather than changes in permanent income. Another test for the accepted wisdom arises from a comparison of mortality trends in the United States and Britain over the past 50 years (Deaton and Paxson 2004). Trends in adult mortality were highly correlated in the two countries, even when their income paths diverged. Instead of income, the major driver of mortality decline appears to have been medical technology.

Perhaps Cubans cannot afford as much alcohol, cigarettes and automobiles all of which cause deaths.

Do professional athletes live longer on average than other people? I think not. Do they have a lower crime rate? I think not. Do they make lots of money and have very high prestige? You bet! But they are more often from poor backgrounds that other rich people.

Poor people often live in more dangerous areas. Why are they more dangerous primarily because poor people live there and poor people often have bad habits that also keep them from having more income.

A study in UK showed that I bad economic times violent crime falls and economic crime rises. They guess that fall in violent crime was due to people not being able to afford to drink as much.

Achieved level of schooling seems to have a much higher effect on life expectancy than income.

When you plot the homicide rate over time rather than by place you get a different picture. Homicide drops in the great depression and goes up in the mid 1960s. In the USA and Canada race sadly is so big a factor in homicide rates.

Note that the life expectancy of Native Americans in the USA is greater than the life expectancy of Native Americans in Canada. Aborigine males in Australia have a shockingly low life expectancy.

Another point is that North Dakotans live longer than Canadians.

I agree with the payroll tax being a bad tax. I believe tat we should drop the charade and welfarize SS. Everyone should get the same amount on there SS tax (and it should lower that the average current amount). The tax should be collected as part of the income tax on all income.

I could go on and on.

Oct 6 2008 at 11:28am

Just something I noticed in the highlights:
> Joel Slemrod, Taxing Ourselves, man with an axe to grind, strictly a facts man kind of guy.

I think it was said that he _didn’t_ have an axe to grind.

Oct 6 2008 at 11:40am

Thanks again for another great podcast. I was excited to see you have some one with “opposing” views on the issue of inequality.

Somehow this ended up being the most frustrating of all talks to date.

The end discussion culminating in a relative agreement that the current inequalities are a good thing and an emergent result of the economy and not policy driven left me in disbelief.

Massive inequality in the 20’s followed by a Great Depression, followed by massive policy changes in a more regulatory direction and a marked decrease in inequality with a superior period of economic growth. Argue against emergent properties as an explanation.

Now we are running the experiment one more time. We’ve seen massive tax cut since Reagan and massive increase in lobbying and decreases in regulatory oversight. Resulting inequality comes to pre-depression era level and on the very day it’s all collapsing AGAIN you guys say it’s an emergent property of the economy and a good thing and has nothing to do with policy.

The coup de grace being the claim that education is the way out. The data shows college graduates salaries declining and debt increasing. The affordable of college with Reagan era cut backs in student loan programs is adding to the inequality of both access and outcomes.

Lauren (Econlib Editor)
Oct 6 2008 at 1:08pm

Thanks, Daniel.

I fixed the reference to Slemrod in the Highlights.

I type those Highlights pretty much real time while listening to the podcasts the day before releasing them, and I probably make tons of mistakes. It’s great to know people actually read them closely enough to help me correct them!

Russ Roberts
Oct 6 2008 at 3:04pm


You mention the massive tax cuts we’ve had since Reagan. After correcting for inflation, government spending is much larger than it was in the 1980s. We have cut tax rates, but total taxes have risen. This is not the era of small government. We keep adding pages to the Federal Register. This is not the era of small government.

College enrollment is at or near an all-time high. So somehow, people are managing to get to college. And I’d like to see the data that shows that college salaries are falling.

Finally, the interventions by FDR into the economy did not end the Great Depression. I hope to have a podcast on that topic soon.

Oct 6 2008 at 4:41pm

To suggest that this is an emergent property of markets and NOT policy related is incredulous to me.

burger flipper
Oct 6 2008 at 5:09pm

Next time you have Hanson on maybe you can discuss status and health. I think he believes they are strongly correlated.

I much prefer this semi-adversarial format to the chummier shows, which tend to get tedious unless you have an expert like Kling explaining a topic.

You are obviously pretty partisan and dismissive (you called Bernstien’s first claim ludicrous _before_ hearing his rationale and evidence) but even so, while the show lacked a genuine dialog, it offered 2 distinct viewpoints that were each interesting to hear.

Russ Roberts
Oct 6 2008 at 6:14pm


Thanks for the data on inequality. A couple of thoughts.

First, by starting the vertical axis at .375, whoever put the chart together exaggerates the perceived changed. Had it started at zero, the changes would have looked much smaller.

Second, I don’t know why you find it so hard to believe it’s emergent. Do you really think that the enormous drop between the late 1920s and the early 1940s, say, was the result of a deliberate policy to make the economy more equal. Those were horrible years. The economy shrunk dramatically. Incomes fell. Yes, they were more equal. But it was because the economy was doing horribly and people suddenly couldn’t become very rich. That was a disaster. I don’t think anyone planned the Great Depression and the resulting reduction in inequality. It was an emergent phenomenon.

Similarly, the slow steady increase in inequality in the post-1973 period is partly deceptive (increases in immigration and divorce that changed household composition) and partly the result of increased returns to education that encouraged people to get more schooling. And they did. No one planned the explosion in returns to education.

And trying to reverse those trends is quite hard to do. There are emergent forces that fight against those changes.

Oct 6 2008 at 7:34pm

Great podcast. I’d like to hear more of these debate-style shows: even though I agree with Russ 99% of the time, hearing him take on someone with different opinions helps me in debating opposing viewpoints myself.

Anyhow, I thought the suggestion that the higher average height in Sweden is due to greater socioeconomic equality was, to use Russ’s word, ludicrous. Why not show us a link between height and inequality HERE first?? (or anywhere!) I wish Russ had taken him to task more for slipping that one in.

Oct 6 2008 at 7:36pm

Sorry . . . Holland, not Sweden.

Ben Roy
Oct 6 2008 at 8:15pm

Unarguable statistic


1. While historically height may have been a very good indicator of prosperity (or, um… well funded nutritional programs), I find it very difficult to believe that it is relevant now. It is perfectly reasonable to expect that scarcity of available nutrition would limit the height of a population. In the current age we enjoy virtually limitless cheap food in developed countries (at least until recently). The claim that ample, yet imperfect nutrition is a major determinant in population height seems dubious, at best.

To take the argument ad absurdum, if everyone possessed perfect nutritional information, how tall would we be as a race? Seven foot? Eight foot? I’ve heard no persuasive biological argument to expect we’d be much (if any) taller than we are now.

2. Ever been to Western Michigan? I would love to see the comparison made not to caucasians in the United States (who are quite a diverse lot), but to the ethnically Dutch. In my experience, they are quite a bit taller than the general populous despite having immigrated generations ago. Genetics matters.

Jason Woertink
Oct 6 2008 at 9:43pm

I have to wonder, is in increase in inequality expected as a nation becomes more wealthy because it seems to me that a wealth distribution would follow a poisson or gamma distribution. Since the range of possible incomes has no upper bound but in general it is difficult for people to make less than zero in year then you imagine that this type of distribution is likely. If this is true it makes sense that we increase in inequality when there is economic growth and decreases during contractions of the economy.

Nathan Adams
Oct 6 2008 at 10:13pm

The comment by Tyler Cowen that “the free market functions like an amplifier”(http://www.marginalrevolution.com/marginalrevolution/2008/10/does-the-free-m.html) seems as appropriate to the inequality discussion as to the morality discussion.

Inequality is more of a threat to social stability to the extent that the people on top got there through government; and less to the extent that they got there through free exchange. Ironically, inequality would be less measurable in the more political society as many of the benefits of political power aren’t out in the open or monetary.

I agree with Russ that envy isn’t a dominant motivation for crime. A better explanation starts with lack of alternatives (i.e. legitimate employment) and the availability of outlawed activities (i.e. drug prohibition). To reduce crime, good public policy should seek to reduce barriers to legitimate employment and reduce the size of black markets.

Oct 6 2008 at 10:15pm


I love econ talk and having someone one with an opposing position was very interesting. I thought, however, that many of your counter arguments were a little weak. IMHO, it is more compelling to argue that [1] the effects of inequality, if they exist at all, are small compared to the secular rise in our standard of living. For example, during the past century life expectancy has risen from ~45 years to ~70 years. This is enormous compared to the small differences due to things like status. [2] Most comparative studies are susceptible to the fallacy of composition. It may be ok for Cuba to spend almost nothing on medical research, but we can’t all do it. [3] Poverty is clearly an important issue. But isn’t it likely to be much more efficient to promote private charity than to confiscate personal property and distribute it through a bloated government bureaucracy? My conjecture is that the dead weight losses associated with heavy taxation far outweigh any benefits, particularly compared with charity. I’d love to know if anyone has done any comparisons.

Finally, William consistently confused income, which can be taxed, with status (the dependent variable in the studies he mentions), which cannot.

[Comment edited: “Peter” Bernstein changed to “William” Bernstein.–Econlib Ed.]

Oct 6 2008 at 11:30pm

Arguments for less inequality are often arguments for less of one type of inequality.

It’s a mistake to think that an equal distribution of income ensures less inequality overall. A group where everyone has similar amounts of money can still find ways to stratify based on beauty, intelligence, skills, height, strength, or religion.

Harry, it might be hard to tax status, but it would be easy to tax the tall. A height tax, as Robin Hanson points out, is supported by the same well-accepted economic theories that support income taxes.

Oct 7 2008 at 2:47am

Here’s my paradox:

Research on inequality usually keeps track of percentiles. So let’s look at the following simple example. A society at the beginning consists of 10 individuals, 9 of which make 1 dollar and 1 who makes 10 dollars. Social scientists decide to keep track of the top 20%. So the top 20% makes an average of 5.5 dollars while the bottom 80% makes an average of 1 dollar. Now suppose that after 1 year there are now 8 people making 1 dollar and 2 people making 10 dollars. The top 20% now makes an average of 10 dollars. Dividing 4.5 by 5.5 this represents an 82% increase for the top quintile. The bottom 80% on the other hand sees a 0% increase in income. One would like to conclude that “inequality has risen”. But if you were given a choice to live in a society like the earlier one with 9 people making the same income of 1 dollar and one very rich person making 10 dollars, or live in the latter society where less people make 1 dollar and more people make 10 dollar, what would you choose? A simple calculus of probability tells me that the latter society might be more appealing to most people.
Actually the probability of being rich goes up from 10% to 20%, a 100% increase.

John P
Oct 7 2008 at 3:25am

Setting aside the potential unobserved variable of some form of intelligence…which might explain both ‘mandarin’ status and compounding healthy decisions over a lifetime…

Wouldn’t the assumption of status conferring longevity turn on the biological mechanism of *self* perception? The full story would contain the blowhard mandarin, who believes in his high status while others don’t. Anyone have data on psyche ward Napoleons?

Oct 7 2008 at 5:39am


Excellent podcast, thanks!

I think you did a good job of picking apart his arguments. The idea that national, provincial or state inequality harms people on an individual level seems silly to me. Why draw the line around a country? Why not the world, or a neighborhood, or maybe a county? Your guest seemed to pull causation out of a hat. I could see inequality making a difference at the neighborhood and workplace level of course, but he did not mention of people voluntarily organizing themselves into more egalitarian neighborhoods and workplaces. People like to live next to others of similar status.

Another think I should be mentioned is the US justice system. A public defender I have spoken with described it as “a machine to ruin the lives of poor people”. I’m not sure this is true everywhere, but I’m willing to bet our justice system produces much worse outcomes for the poor than the wealthy (especially in my area, where inmates are billed for jail time).

Barry Kelly
Oct 7 2008 at 7:51am


Thanks for a very humourous podcast!

William did a good job of showing up your biases and ignorance by letting you posit various weak counterarguments to his strong factually-based evidence.

It was made very clear that you had an agenda to protect that was *independent* of evidence, and that you make no attempt in general to refine your biases in a Bayesian fashion with respect to new evidence.

The point at about 25 minutes in, wherein you try to counter the correlation between crime, and inequality as measured by Gini coefficient, by pointing out your inability to see a mechanism for such a correlation, was particularly contemptible! As if ignorance were a tool with which one could knock down arguments!

All in all, a good show.

Keep it up!

Tibor R. Machan
Oct 7 2008 at 8:12am

The Futility of Egalitarianism [10/02/08]
The ancient Greek myth of Procrustes’ bed has it that the bed had the attribute of being exactly as long as anyone who lay down on it. Procrustes didn’t disclose to his guests his scheme that those who lay down on this extraordinary bed got manipulated so that if they were too short for the bed they had their legs chopped off and if too long, the legs got forcibly stretched. This, it appears, is where the expression “one size fits all” originated.
Egalitarianism is the political view whereby everyone must be subject to equal benefits and burdens, as a matter of public policy. Arguably the mess with the current loan defaults originated with this idea, namely, that all citizens, never mind their particular circumstances, must be treated as if they were the same, as if they could handle mortgages of the same size, purchase equally fancy homes, etc.
For egalitarianism to have a ghost of a chance it would have to be true that fundamentally, in their essence, all human beings are the same and only various accidents render them different. Public policy, in turn, is supposed to be aimed at erasing the differences, forcing us all into the same Procrustean bed.
One area where the idiocy of this doctrine shows up good and hard is in athletics. Mr. Michael Phelps, for example, won 8 gold swimming medals at the 2008 Olympics because he was very, very different from the rest of us, indeed even from other champion swimmers. Phelps is a giant, with huge hands and feet, and so his chances for winning the races for which he prepares are far better than anyone else’s. And he is of course just one example of such extraordinary talent. Roger Federer in tennis may be another, as used to be Pete Sampras and Bjorn Borg, among a few others in tennis, and thousands of other athletes throughout history.
It turns out that a recent study (published in the September 2nd issue of the Proceedings of the National Academy of Sciences) has shown that matters are even more anti-egalitarian in human affairs. The study identified a gene variant that actually significantly extends people’s lives. Those lacking the gene live shorter lives, those with it live longer ones (on average and apart from accidental deaths). And this is just the way it is–as the article reporting on this in Science News says, “Life’s just not fair.” But there are diehards who will refuse to accept this and insist on remaking us all to fit their dream-world of universal human equality. And from that stem a hole lot of difficulties in public affairs. The most important result is a government that takes it as its task to force people to conform to various models deemed to serve the futile egalitarian goal. Perhaps the most drastic examples of this result were Hitler’s Nazi Germany, Stalin’s Soviet Union and Mao’s Red China. In each the government assumed the role of coercing everyone–well, not actually everyone since the leaders were exempted–to fit certain models of proper humanity. We still see remnants of this while looking at those insane parades in North Korea which symbolize the total absence of human individuality!
Certainly in both systems individuality was banned. That means, of course, that individual liberty was also banned since when men and women have their right to liberty respected and protected, they embark on vastly different pursuits! Dissent in such systems is regarded a form of mental illness and dissidents are locked up for fear that they will infest the rest with crazy notions like personal distinctiveness, with the possibility of excellence as well as failure.
But it turns out that that’s just what the study of genetics helps us further to appreciate, namely, that we are by nature very different human beings. Yes, there is our humanity which is universal (excepting some truly crucial incapacities), but one central aspect of our humanity is that we are also very different from one another. This is so clearly evident from just observing our friends, family, neighbors, and the various historical periods that exhibit human variations that the egalitarian effort to deny its centrality and eradicate it should both be given up as hopeless, futile efforts.
There is much more to be explored about this issue, of course, but one thing seems indisputable: the unfortunately prominent egalitarian doctrine–especially in the academy and among public officials–has produced and continues to produce some devastating public policies, Draconian and less so. That should be enough to turn us away from it for good.

Russ Roberts
Oct 7 2008 at 9:02am

Barry Kelly,

Perhaps you and I have a different way of looking at statistical evidence along with a different level of faith in the reliability of statistical findings.

I haven’t read the crime study, but I know how easy it is to change an assumption here and there to get different results. I worry that the researchers may have omitted a variable or structured their model in a way that caused a spurious finding. I worry about these things because so many findings in the social sciences are sensitive to the assumptions that are made. Edward Leamer calls it faith-based econometrics.

In evaluating sophisticated statistical analyses, I find that logic is relevant. Does the logic of the claim pass the sniff test? Is it plausible that a person can feel low self-esteem based on the income of someone hundreds of miles away? It isn’t to me. But if you find that logic compelling, that’s fine. You have a better imagination than I do, and I’d be interested in hearing your argument for why you find it compelling.

Perhaps where we disagree is in your belief that a single study that confirms your imagination adds much to the logic of your claim over mine.

You might enjoy the podcast I did with Ian Ayres (see the Archives) where we discuss these issues.

By the way, If you check out the links we’ve posted for this podcast, you’ll find both the Academy Award study that William Bernstein referenced and a critique of that study I discovered after the podcast was taped, that argues that the original finding (that Academy Award winners live longer than runners-up) does not stand up to careful scrutiny. You will have to judge which finding is more reliable.

Oct 7 2008 at 9:22am

I do agree with Barry in that a mechanism for a correlation between inequality and crime is rather obvious. Crime obviously creates an underclass of people unable to find employment in the general workforce. I wouldn’t be surprised if it went the other way too, with low-income people being more likely to turn to crime, but the former mechanism is almost irrefutably obvious.

Oct 7 2008 at 12:47pm

I have a few reactions after hearing this podcast. Rather than speak loudly at my ipod as if it could hear me, I decided this would be a better outlet for my thoughts.

– Bernstein mentioned that the basis of our civilization is property rights. I wanted to ask him what he means by “property rights” in a society where one person can take another persons property to give to a third person.

– The question of morality was specifically avoided, but it is at the heart of the debate. It is more important than the question of outcomes. If we could increase both incomes and equality by doing something we all agree is morally reprehensible, should we do it? Our society was founded on the ideals of liberty and property rights. Our legislation should fit within those constraints first and consider outcomes second.

– Mr. Bernstein’s ex post descriptions of the effects of various jobs are nothing more than storytelling. I could make an argument on either side for any profession. As a former investment banker I can say with confidence that most bankers have very little autonomy, are completely beholden to their boss (the client), are not free to live their lives as they wish, and are far more like glorified salesmen than masters of the universe. The decision to be in any line of work is the result of a complex set of factors weighed by each individual and goes far beyond salary, education, and hours worked.

– Bernstein mentioned providing parks and nutritional programs for the poor. Would he be in favor of simply taking cash from the rich and giving it to the poor; letting them spend it as they wish to solve the inequality problem? Is this purely an income redistribution / inequality issue or does he aspire to something larger?

– Russ is right to question the statistics, however that is a weak position to put yourself in as the host (asking real-time questions about studies that your guest knows more about). Before discussing the results of a statistical analysis, the first question should be if the statistical tools are up to the task.

– The epidemiological effects of inequality are interesting, but should the goal of the federal government be increasing lifespan at the cost of liberty? If so, why stop with re-distributing wealth to fix that problem? For instance, we could easily eliminate 45,000 motor vehicle related deaths annually by outlawing cars.

Oct 7 2008 at 2:35pm

I agree with others that this was an entertaining podcast, and one that is very pertinent to the discussion of tax policy that is taking place in our presidential election. Here are some of my observations:

1. Russ was generally on point in knocking down the studies cited by Mr. Bernstein, and despite the respect I have for the work of Mr. Bernstein in economic history, he put forth a less than convincing effort in indicating a correlation between inequality and (a lack of) wellbeing/economic growth.

2. Nonetheless, Russ, despite his knack for picking apart most of the studies, did not come back with a study that showed a negative correlation or simply a low correlation between inequality and economic growth. I think others have pointed this out, so pardon me for pressing the issue. For example, Russ did mention a study that a graduated tax rate did not necessarily diminish income inequality. But does that study indicate that the system of taxation failed to reduce inequality, or the incompetence of our elected officials in spending that money, or both? So I’m not convinced by that anymore than I was by the studies put forth by Mr. Bernstein. Essentially I left this podcast feeling that Mr. Berstein was unconvincing, but not necessarily that we should be unconcerned with inequality.

3. Generally Russ and his guest put forth a compelling argument in terms of greater economic freedom contributing to economic growth. So let’s say that that is true. Let’s go further and say that we should have lower tax rates for each bracket, or even a flat tax. Is that change of tax policy in itself going to fuel economic growth? What roll does government spending play? Should we be spending more on lowering the cost of higher education and fostering a more qualified work force, or try to subsidize health care cost so as to allow people to divert their income toward other goals?

4. I am not qualified to put forth an argument for or against the impact of income inequality on economic growth. But I would like to hear more convincing arguments from people who are smarter and more qualified than I. So what does it strike people is the right mix of taxing/spending policy for increasing economic growth and wages of those in low income tax brackets? Can we even be successful if we try, and are the benefits of doing so outweighing the opportunity cost of time and money spent on other endeavours? I look forward to the responses. Thanks again and I look forward to the next podcast!

David Youngberg
Oct 7 2008 at 4:11pm

Frankly Russ, I’m surprised you don’t agree more that greater (perceived) inequality leads to more crime. When CEOs make a great deal of money, people become very angry about it and engage in organized theft (using taxes). It seems reasonable that the random individual who is upset about seeing rich people would engage in similar, less organized, crime. I’m not sure how much more common it is, but I think there’s a good story there.

I find the big weakness to the inequality argument is its policy recommendation. I can see how a few people making lots of money makes others upset/jealous (we hear about it all the time in politics, suggesting people like to hear about how evil wealthy people are). I can also see that such anger leads to stress and leads to unfortunate health effects. In other words, I can see how one person’s increasing wealth can externalize a cost onto another.

Since transaction costs are high, let’s set aside the Coase Theorem. Instead, who’s the least cost avoider? (Remove the wealth or remove the sadness and either way we have no problem so what’s cheaper to remove?) If we ask the rich to make less money, we would lose those the benefits that the person would contribute to society. If we ask the poor to take a breath and let it slide, we much likely lose much less for what we get. In other words the conclusion should not be redistribution but people dealing with it on their own terms. Bernstein should be telling people to pick up yoga, not pick pockets.

Alexander Pronozin
Oct 7 2008 at 4:52pm

Williams Bernstein says that crime rate is higher among poor people. In Russia where I live it may be not true as well as it may be not true elsewhere.

In most cases, though not always, rich people are involved in business. In Russia business people often have to commit one of two crimes: tax evasion, bribery or both of them. Why I used the phrase “have to” in respect of the criminal behavior? Because when you enter a competitive business where such behavior is common among your competitors you can not afford the luxury to secede from the herd even if you desperately wish to.

I think very often we can find correlation between social position of a person and competitiveness of the environment where he lives. Rich people live in highly competitive environment. Too many people want to step into their shoes. Therefore they have all incentives to cling to their high position by any means. We can compare this situation with professional sports where prohibited substances are often used by sportsmen. And they would have been used on a much broader scale had not they been prohibited. Is not it the same thing with business people who use corruption, fraud, cooking of books to keep the edge?

Perhaps Williams meant violent crime, which is obviously true in this context. But unfortunately violence is not the only manifestation of crime which appears in many other “respectable” forms. Very often, much more often than violent crimes, white collar crimes remain latent and not registered by official statistics. Exactly as steroids abuse – thousands use them, dozens are caught. So is the crime rate actually higher among poor people? I am not sure at all.

(Beg pardon for my English)

Oct 7 2008 at 6:01pm

I enjoyed the podcast, and I particularly liked the point on government spending, especially taxing the higher incomes and invest in urban parks so poorer children have a safe place to play outside and can exercise. If that were the case, and we follow that policy, would we not also impose limits on the poor regarding television and video game usage? Would we impose a policy that required idle time to be either reading or study time? We could build the parks, but what makes the children use the parks as opposed to the Xbox 360 or watch TV?

Tom VanAntwerp
Oct 8 2008 at 11:16am

As someone living in Denmark at present, I assure you that they have homeless people. I found one passed out in a pool of his own urine in front of the door to my apartment a few weeks ago. I promise, this country is no socialist wonderland.

Denmark has historically been very homogeneous in ethnicity. As of 2007, over 90% of people living in Denmark are ethnically Danish. Because everyone is, more or less, the same, general levels of crime and violence were lower. (Though with increasing immigration, especially from the Middle East, Denmark is beginning to have to face the existence of actual ethnic and cultural diversity.) There also exists a historical bias against societal inequality in the form of Janteloven, whereby people who seek success are treated with hostility for trying to act ‘better’ than their peers. For these ethnic and cultural reasons, it’s very easy for Denmark to be “equal”.

Also, if you wanted to look at the health of Danes, I would like to point out what is probably a totally overlooked factor. (This may hold true in giant-filled Holland as well, but I don’t know.) Prices in Denmark are very high for all items. The VAT (for Americans, essentially a sales tax) is 25%, which is rather high by my own standards. Going to the grocery store, I find food is often twice or three times as expensive than it was back home in North Carolina. The healthiness of my diet has significantly improved since coming to Denmark, not because I’m suddenly more equal through government redistribution, but because I can’t afford the meals I used to eat. The average McDonald’s sandwich of a decent size can run between $8 and $12. I could get the same thing in the US for, at most, $4. I buy large amounts of fruits and vegetables–even ones I don’t particularly like–simply because it is affordable. I would argue that Americans aren’t unhealthy because they have no food, but because they are comparatively rich enough to afford whatever food they want, even if it is bad for their health.

Sam Wilson
Oct 8 2008 at 1:35pm

Dr. Roberts,

I would agree with many of the comments listed above in that this was probably the most entertaining podcasts in quite some time. The last one that grabbed my attention so firmly was Barro’s most recent contribution.

One thought that occurred to me early on in the discussion was the distinction between income inequality and wealth inequality. I waited the entire 56+ minutes of the podcast waiting for you to mention income mobility or discounted lifetime earnings, but nothing along those lines were mentioned. I think it might be a little disingenuous to compare income statistics between countries that have widely different income mobility. I also feel that discounted lifetime earnings help correct not only for misleading characteristics brought on by immigration, but for demographics as well. I agree with you that income inequality tends to be emergent from conditions of greater prosperity, but since those conditions that produce income inequality are quite competitive, the same people who were high earners ten years ago are not universally the same people who are high earners today.

As far as the policy debate, I believe I have a plan that would help reduce the worst aspects of wealth inequality within a framework consistent with the principles championed by Hayek, Friedman, Schwartz, and others of that ilk. However, that plan is not entirely germane to this discussion, so I’ll save the details for the next time you have a podcast on health economics.

Thanks again for the great discussion. I look forward to next week’s podcast.

Salaam Yitbarek
Oct 8 2008 at 11:15pm

As David Youngberg writes above, envy exists and is partly manifested in redistributive government policy, such as progressive taxation.

But there are good enough reasons for progressive (to some extent or another) taxation. There’s no need to use envy as a reason for more (unwarranted) redistribution!

Okay, assume people are envious and get ill because of inequality. Do we want to sacrifice general welfare for envy’s sake? Or do we want to get people to stop being envious? Yoga is right on!

Greg Stewart
Oct 8 2008 at 11:25pm

At the risk of being cliche I would suspect that both health and status, at least in the case of public servants and the poor, are related to attitudes.

I am a pubic servant who works extensively with poor people. Althought this is only anecdotal I have noticed that, despite inherent intelligence and education, if a person does not accept responsibility and learn from their failures they continue to make them and as a result have poor outcomes in general.

In the public sphere I have consistently witnessed co-workers derail by a single set back. They tend to blame the “system” and sabotoage themselves by reacting with hostility to ideas meant to improve their situation. This group is the stereotypical public servant, existing soley to retire. Alternatively, those who own their problems tend to feel empowered and exhibit the traits that Mr. Bernstien feels are soley do to status, things which basically equate to self-determination. This class tends to excell, and disproportionately promote. They are also the group which, again based upon my anecdotal observations, tends to retire and go onto other engaging activities as opposed to adopting a retire and wait to die mentallity.

I have also observed similar traits among the poor. There is a lack of individual empowerment. Despite its inequality there America still has one of, if not the most, accessible system of higher education in the world. I mentor youth on a voluntary basis in a low income school district and am amazed by how few student choose to exploit their opportunities.
If our (meaning affluent, main stream, caucasian European centric) version of status had any relivance the vast majority of the “poor”, they would seek to take advantage of these opportunities. Instead they find “status” in alternative areas, and this is irrespective of race.

This leads into the my final arguement against Mr. Bernstien’s opinion that status can be used in anyway to equate to equality in health outcomes. The “poor” tend to emphasis visible indicators of success, ie owning an Escalade but living in project. This is “status” in their eyes. As a group, they do not view success or status as Mr. Bernstein proposes. If status really impacted these lifespan, and not some other variable, it would be impossible to discern because of vastly different interpretations of what “status” is.

G Stew

Trevor Comeau
Oct 9 2008 at 11:08am

I am from Nova Scotia (1973 til 1998) and there is a definite equality in the province as a whole. The lower-middle class are probably 99% of the population.
The people in general is not as concerned as most places in the US with what everyone else has.

It’s been a have-not province for so long that people accept that they have to work very hard (Fishing, Farming, Shipping, Oil&Gas) to make it from day to day. You treat people like more of an extended family where people don’t expect re-imbursement for being nice to each other. It’s just a way of life.

My personal belief is that the crime rates are so much lower because crime is not as profitable and not seen as a way to solve the problems you may have.

I now live in the city of Ottawa and know most of my neighbours. Another woman from Halifax organized a “deck-party” where you spend the day moving from house to house with 50-60 people to meet everyone, eat and have some drinks. Next is the block ‘Christmas part’……

Oh and not everyone is on welfare.

Heather Watts
Oct 9 2008 at 6:35pm

Fascinating conversation!

I recommend this recent documentary from National Geographic:


A study of baboons finds an animal’s stress level is dependent on its hierarchical status.

Oct 9 2008 at 6:37pm

I too subscribe to the opinion your arguments were weak, Russ. Too may “I don’t believe but I can’t prove it” comments. Apart from not sounding very convincing this was not fair to Mr. Bernstein. His book seems to be solidly researched. Next time please consider not so much proving your opposition to the arguments of your guest – if you have no sound data to back it up – but just underscore debatable points.

On the other hand, presidential debate (-; type of podcast is a nice break from the usual more educational ones. Thank you!

(Btw, this suggestion assumes that majority of you listeners are like me – 100% attendance rate and 99% knowledge of your position on econ issues. If your listeners are more of a casual bunch then repeating your take on economics and liberty makes a lot of sense, of course.)

Orlin Bowman
Oct 9 2008 at 7:19pm

Thanks for the thought provoking podcast. I enjoyed it while working this afternoon.

Oct 9 2008 at 9:39pm

China’s life expectancy has risen dramatically in the past 20 years (http://www.china-profile.com/data/fig_pop_1a.htm), as has inequality. Sort of argues against Bernsetein’s thesis. Or maybe Bernstein was arguing that “holding income inequality constant” life expectancy is lower with higher inequality. Anyone who’s been to China lately knows few Chinese want to turn the clock back.

Oct 10 2008 at 2:38pm

My previous post should have read, “holding income constant” instead of “holding income inequality constant.” The point is that China has gone from poverty for all to poverty but reduced poverty for many, wealth for many and great wealth for a few. While rural poverty remains, famine–of which older adults still have living memories–is unlikely to make a comeback. Yet life expectancy is up. Isn’t this an example of the counter-example Bernstein can’t find anywhere, that is, increased inequality coupled with increased life-expectancy?

Jeff Henderson
Oct 12 2008 at 2:27am

Russ, I’m curious.

Are you an Austrian in methodology?

In this podcast you certainly sound as if you are, with your great skepticism of statistics. The Austrian school takes economics to be an a priori science (rightfully so, I think), and therefore statistics cannot disprove an economic theorem.

Of course, that does not mean it is not a worthwhile enterprise to see where those wielding such statistics have gone wrong.

Ray G
Oct 12 2008 at 11:47pm

As I listened, I’m of course making my own comments, and how it all comes down to personal choice.

The differences between many of the data sets that Bernstein cites – and what no one wants to mention usually – is the difference of personal choices.

The more free a society, the more severe are the consequences of poor personal choices.

Where equality is “forced” on a population, there are people that are poor despite their own best efforts. The more free society however will see those same people lift themselves out of the poorest tiers.

Who is left in those poorer tiers of a free society are the bad-choice makers – these are the same people that tend to have higher crime rates, higher divorce rates, more underage pregnancy, etc.

So it is that Mr. Bernstein and others like him point to inequality causing crime, etc.

Every bad idea on the Left seems to stem from an inability to see an issue past the initial surface of the matter.

Then at the end, Prof. Roberts nicely sums it all up to personal choice, without my non-PC detail. That’s why everybody loves Prof. Roberts, he’s such a nice guy.

John Mininger
Oct 13 2008 at 12:09pm

Both Dr. Bernstein and Dr. Roberts agreed during the interview to leave the moral question out of the discussion. And I agree, playing the moral card is generally a way to simply end the discussion.
My problem is, when discussing forced social equality, it’s impossible for me to think about this without a component of morality. We’re talking about extracting by threat of force, the property of one group, the presumed “haves”. And turning that property over to another group, the presumed “have not’s”.
I see it a little like discussing the subject of eugenics. One could argue that eugenics was based on sound science, and just wasn’t really ever given a chance. (I am NOT personally saying that by the way.)
My point is: Whether it’s forced redistribution of property or forced eugenics, I just can’t put aside the moral issue.

Alex J.
Oct 14 2008 at 1:06pm

I am astonished that Prof. Roberts accepted Dr. Bernstein’s claim that Cuba had a high degree of equality. There may not be much inequality amongst the first 99% of the income distribution, but consider the difference between Raoul Castro and the median Cuban. The power and status distance is vastly greater than that between Bill Gates and the median American. The poorest risk their lives to escape Cuba. They risk their lives to enter the United States.

Some Guy
Oct 14 2008 at 1:34pm


Add another vote in favor of the semi-debate format. What’s also interesting is that this is the format you generally choose for your books.

Especially like the topics where traditional economics meets evolutionary biology, well-being research and behavioral economics (such as this podcast and those with Gregg Easterbrook & Richard Thaler). In these areas especially, an intelligent and assertive devil’s advocate really improves the listener’s understanding of the topic.

Oct 18 2008 at 7:11pm

Re height in Sweden/Holland:

In biology class I learned that people in colder regions tend to be taller than in warmer regions. This has to do with energy efficiency: a shorter person has a greater surface in relation to their body volume, therefore they will lose head more quickly. I would have to check if “Holland” is, on average, colder than the US. Excluding perhaps Alaska, I’d guess it is.

Holland, btw, is not a country.

Oct 18 2008 at 9:41pm

Russ, I often think when listening to your podcast that you must indeed lead a very secluded life up in the proverbial Ivory Tower. This was illustrated by your response to Bernstein saying that Somalia should be among the richest countries in the world because they have no taxes – following from the fact that they have no government: “Lucky them.” I can only hope that you were trying to convey sarcasm (it did not work).

Another incidence I would like to point out is the discussion regarding the demand for celebrity tv etc. I think that you completely disregard the findings of other scientific disciplines, such as biology, psychology and sociology (particularly sociology!) that look more closely at the true motivations of human behaviour and interactions. To me, it is nothing but plausible that people should demand such shows because hierarchy is important to us. We want to know where we stand in the pecking order. Also, just because there is demand for such shows, that does not mean they do us “good”. As far as I’m aware, there is plenty of demand for drugs of all sorts that do quite a bit of harm.

My guess would also be that you have never been rock bottom poor, and – as you admit – lack the imagination to empathize with someone whose choices are severely constrained by the circumstances of their birth. Maybe it is a “cultural thing”, but certainly to a person growing up in England the pressures and contraints of the class system are quite obvious and very real indeed. Saying that you cannot imagine that these pressures have in themselves a detrimental effect on health is, in your own words, ludicrous.

I am happy for you that you do not envy your neighbour for having a nicer car. However, that is hardly comparable with someone working three jobs and barely able to make ends meet seeing the indulgences of the rich (or even the middle classes). Again, you demonstrate your lack of what is commonly called “social imagination”.

Summarizing my theoretical position: I do subscribe to the opinion that inequality is an outcome of the market system. It is, in fact, the driving force behind and the purpose of markets, and quite apparent when looking that the left side of equilibrium. I do not believe that this creation of inequality is bad or immoral in itself. However, there is a tendency to regard any ceteris paribus creation of inequality through one particular market outside the broader context of society and history in which it emerges. People start from different places, with different sets of skills and opportunities. I therefore have to agree wholeheartedly with Bernstein when he implies that tax money would be more wisely spent on equalizing opportunities rather than income.

There is nothing wrong with competition, rewards for excellence and achievement, or resulting inequality, as long it is ensured that people are given the opportunity to take part in the race. In my opinion, the state need do no more and no less than that.

Oct 22 2008 at 12:41pm


Yet another line of research confounded by not controlling for IQ, and inferring causation from correlation.

The correlation between health and prestige is due to the fact that they are both caused by IQ differences, not income inequality. Control for IQ and the correlation will drop dramatically.

Linda Gottfredson published an article in JPSP about this a few years ago. Here’s a link:

The differences between countries can probably also be partly explained by differences in IQ variance between countries.

Anyway, it’s naive to think that eliminating income inequality would eliminate pecking orders. Children in school develop very strong pecking orders, as do monkeys. Pecking orders exist in communes, and among “equals” in the military. People in jail have strong pecking orders. It’s just human nature.

Oct 22 2008 at 1:21pm

Does anyone else find it slightly ironic that people are making a “moral” argument that human jealousy and envy should be indulged by equalizing incomes? When did envy become a virtue instead of a deadly sin?

It seems to me that undue concern over material wealth is the problem, not income inequality.

Another point is that the whole rising income inequality argument is a red-herring. The rise is due to the top 1% or so reaching new heights, yet people who worry about income inequality don’t care about differences within the top 10%. The moral force of their arguments relates to people living in poverty, not people who can only afford a 6,000 square foot house instead of a 10,000 square foot house.

Obviously what matters is the proportion of people living in poverty, not income differences among the rich. On that front poverty rates have gone down or stayed the same in the U.S., and the standard of living among those in poverty has gone up dramatically.

Oct 27 2008 at 10:29pm

It seems that inequality is a trendy topic, but little has been done to actually understand the consequences of “forced” equality. “forced” being used in the sense that government has been given permission from the general will to dictate this policy. How would this play out? it seems that as a country we have funded unending policies to help the poor up, it would seem that the only option would bring those on the top down.

I think from Machiavelli to Marx until today, the issue of social inequality has been a ruse to keep from having to confront the larger issue.

Dan H
Oct 30 2008 at 1:07pm

I’d like to see another podcast on a topic related to inequality: social mobility. Perhaps you could get Bradley R. Schiller on the show to explain further and defend his recent article in Policy Review entitled “The Futility of Class Warfare.”

My opinion is that income inequality is a red herring… what really counts is that people have an equal opportunity to succeed (or fail). Who among us is mad because the founders of Google, for example, have created such a valuable service and have been very richly rewarded?

I’m new to EconTalk, but I love the format and the content.

Zach Foreman
Nov 1 2008 at 4:02am

1. Status inequality is NOT the same as income inequality, which is NOT the same as wealth inequality. Conflating the first two is in my mind, the main flaw in Bernstein’s argument. In the USSR, there may have been more income equality, but there was certainly a great deal of status inequality. Even the Whitehall study itself undermines his argument. Controlling for income, high-status mandarins lived longer than low-status workers. Thus, it is not income-inequality per se that is the problem. Therefore, progressive taxation is not the solution.
2. It is difficult to compare the US to any other country, since it is so racially and culturally diverse. There are lower levels of trust between racial and cultural groups and thus higher crime.
3. Why is income inequality increasing. I think it is obvious. The low end of income is always the same: zero. As the median and top level increases, so does the inequality.

Paul Downs
Nov 8 2008 at 8:01am

Russ: when making points about the origins of wealth you invariably point to successful entrepreneurs, in this case Sergey Brin, who start from little or no wealth. Not to discount their achievements, but what percentage of the wealth held by the upper class (let’s confine ourselves to America) is inherited? I’ll grant you and all the other posters who commented on the virtues of hard work and good personal choices that they are important. But why then don’t you advocate a 100% estate tax? That would surely encourage the children of the wealthy to work even harder, make better personal decisions, and generate more wealth to trickle down to the rest of us, and could fund reduction of other onerous taxes on business and individuals. It wouldn’t be much of a burden on the wealthy, they only have to pay up after death. It may be a modest proposal, but really: why not?

Paul Downs

Nov 9 2008 at 10:45pm

I did enjoy both the content and the style of the podcast, which is direct and maybe confrontational without being impolite. I wish dissenting interlocutors everywhere used more the word “ludicrous”. I am told by former PhD students at U Chicago Econ that this is the debate form at their seminars, and I like it.

Regarding the subject matter: I felt that all the statistical evidence presented by Bernstein was unconvincing, with the possible exception of Daly et al. which I have to read carefully. In the same vein of research I recommend “The Status Syndrome: How Social Standing Affects Our Health and Longevity” by M. Marmot. However, I am very skeptical that cardinal inequality (i.e., not ranking) is a cause of reduced longevity. Barry Kelly’s remarks about Russ’ preconceptions are unfair. Russ’ prior put correctly low probability on the existence of a causal relationship between inequality and health. The “evidence” allows for very little bayesian updating.

For the sake of argument however, I want to concede the point that it is. My question is whether this is consequential. Bernstein frames the argument in a utilitarian framework, where the objective is to maximize the total number of years lived. These are strong assumptions far more important than the statistical linkage between inequality and health. The issue is not an empirical one. As Amartya Sen noted, we are not debating between inequality and equality, but between different forms of equality. Bernstein favors some form of equality of outcome; libertarians of various stripes favor procedural equality. Most economists shy away from this subject, but I hope Russ keeps covering it. Hosting Amartya Sen, Herve Moulin, John Roemer but also Austrians like Walter Block or Mario Rizzo and utilitarian philosophers like Peter Singer would help would be just unbelievable.

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Podcast Episode Highlights
0:36Intro. Inequality: Bernstein concerned, Roberts not. Do we fully understand the costs of inequality? Parable of the pie: if someone's slice gets relatively smaller it shouldn't matter if the piece is bigger than before because the pie is bigger. Not the way people work. Mencken quote: A wealthy man is one whose salary is bigger than his wife's sister's husband. People care about their relative place. Roots in evolutionary history: you place in the pecking order determined food you got and whether you reproduce. Alpha males get to mate. Hard to know if those were the good old days. Echoes of this in modern social data and medical data. Epidemiological data. Status matters when it comes to health. Michael Marmot, Whitehall Study: street where British civil service centers upon. Fairly good health care and health habits. People at the top of the heap lived far longer even adjusting for income than those at the next level down; etc. Purely a matter of status. Academy Award winners live four years longer on average than runner's up. Epidemiological transition: look at nations' mortality rates. Below a level of about $5000 per capita, the shorter people's lifespans. Above that level, income no longer matters. What matters is inequality. After lifespan in Cuba is only a year less than in the United States. Inequality levels there much lower.
7:28Russ: Ludicrous. Let's look at the problems with that kind of statistical analysis. Maybe there's more going on. Whitehall Study: The higher you were in the pecking order, holding income and health care access constant, the people with higher status live longer. What is the amount? Six months? five years? Easier to measure mortality rate. Mandarins--people on the top--just slightly more than half the mortality rate than people at the bottom. Is there a hidden variable causing both high status and low mortality? Academy Awards: for many people, you have to be a runner up a few times before you win. Peter O'Toole keeps being a runner up, quite old, could still live long enough to get one. If you are a runner up early in your career and died young, you may just not have lived long enough to enter the pool of winners. Cuban argument: how do they live relative to Cuban Americans who emigrated here? People risk their lives to live shorter lives in America. Suppose life spans are greater in Cuba and facts aren't being jiggered. There don't seem to be high mortality rates among young Cubans. People are impressed by the fact that people have higher standard of living in United States. Fundamentals. In these epidemiological studies that look at mortality: is there any attempt to describe what the biological mechanism would be? If Academy Award winners had shorter life spans we'd explain it by their getting distracted by other things with their high status. Easy to tell ex post stories. People who are under great socio-economic stress have higher levels of adrenalin, cortisol, higher blood pressures, higher levels of markers for cardiovascular disease. [Taping Sept. 25, 2008] Three weeks ago when there was a Wall Street and people had higher incomes, didn't they have off the charts medical stress? No, their status is high, their levels of well-being are higher and their markers are relatively lower. Self-determination: People are satisfied by autonomy, connectedness, and competence. Russ: connectedness to students; lots of competence, fair amount of autonomy as an academic. Level of well-being is pretty high, probably have low levels of markers. Investment managers similar. Selectivity bias. Example: Go to an academic conference; everybody still wants to talk to the 75-year old Nobel Prize winner. Department chairmen works in other direction. Being stroked, loved, and adored. Acting and politics.
20:55Sociological and criminological data. If you look at social and economic determinants of crime, income has a lot to do with it, but inequality has a much stronger effect. True that poor people have higher crime rates? throughout history? Yes. Multivariate analyses: if you plot among 50 U.S. States and Canadian provinces a Gini-coefficient--simple one-dimensional measure of inequality: Gini coefficient of 0 means that everybody has the same income. U.S. Gini ratio is around .47; most European countries closer to .3; Bolivia, Botswana, as high as .7. Plot Gini ratio vs. the homicide rate is almost a straight line. Suicide rate? Haven't controlled adequately for income. Canadian provinces: the poorest Canadian provinces have the greatest redistribution, least inequality, and lowest crime. Perception problem. People have trouble knowing where they are in the income distribution. People can give you their income before tax but often not after tax; not good at knowing the value of their benefits; no idea of percentile placement; no idea how it's changed in the last 5 or 10 years. Do know relative to brother and sister, close family members. Piketty-Saez data. Their data are based on IRS, government tax data. Criticism is that that's not what the Census data show. If you want to know how much people make what they put on their 1040 is better than just asking them what they make for a Census form. Not just that they can see others living in McMansions in the wealthy part of town, but also having to ask boss to go to the bathroom or getting fired for showing up late. People seem to enjoy looking at those mansions--TV shows--so maybe it's not more stressful. Studies have nothing to do with a person's daily life and work environment. Interesting hypothesis but those results are state-wide or province-wide data. Any data that suggests inequality is not important? Epidemiologists who do and believe these studies may have an axe to grind.
31:37Macroeconomic data. Jack Kemp, 1996: if we have a flat tax our rate of economic growth will double. Make tax fairer and it will increase incentives, productivity, etc. Interesting hypothesis. Moral and practical grounds. Can wear people down on the data but they fall back on moral grounds. There are people who are homeless. Problem with moral arguments is you can't argue with them. Broad facts: Sweden, Norway, Denmark, Germany ought to be the poorest places on earth according to that idea. Cross-national data makes you suspicious. Look at the U.S.: for years top marginal rate of over 90%; Reagan cut tax rate and economic growth falls. Since 1948, economic growth under Republican administrations was 1% lower than under Democratic administrations. Data sensitive to a couple of data points. Suggesting Republicans--low taxes, less progressivity--vs. Democrats--higher taxes, more progressivity, more redistribution: suggesting the latter associated with higher economic growth; inequality costs us economic growth. Could argue opposite. Security of property rights and rule of law is basis. Property rights enforcement costs increase dramatically. Large security industry, gated communities, more people in jail, etc., that result from inequality offsets the incentive effect.
37:57Book: Uneasy Case for Progressive Taxation, Blum and Kalven: moral and practical case for progressive taxation. Impact of tax policy on income and consumption. Short book, a plus. Progressive tax may not do much to reduce inequality; and flat tax may not do much to increase it. Argument: If we put a tax on doctors and lawyers, on argument that their services are overcompensated, or not fair, or that they are so much better off relative to others. Because of market forces, it raises their pre-tax incomes. Not dollar-for-dollar, but limited success in achieving final goal. Can be in favor on moral or even symbolic grounds, but impact on material status is really quite low at current levels--what modern democratic states have done. May not be able to radically affect the distribution of income but you can offset the disadvantages: more parks, nutritional and health support programs. Unarguable statistic: height measurements. Average Dutch male now 5 cm taller than American Caucasian male; Dutch female 6 cm taller; simply direct effect of funding. If we tax the rich we can make the lives of the poor better confounds absolute levels with inequality issues. Increasing amounts of aid to the poor--educational quality, parks, nutrition--has to have a bang for the buck above and beyond their increase in absolute well-being. Stronger argument: closing of the gap in their well-being will improve. Changing tax policy, flat tax: hours worked among males is fairly inelastic to the tax rate; incentive effect; but also income effect in the opposite direction, poor have to work more hours. Females a little responsive, but males aren't. Measured data consistent with that; but looking at a point in time. At the turn of the 20th century, 1900s, poor worked longer hours than rich; but that has reversed. Problems with finding, true at a point in time, is lifetime hours. High school people work intensely but may retire earlier. Joel Slemrod, Taxing Ourselves, not a man with an axe to grind, strictly a facts kind of guy. Taxing high income folks and providing services for low income folks, dramatically in the United States. Market forces work against that. Right now in the United States, Barro podcast, bottom 50% of the income distribution contributes about 3-4-5% of the tax collections of the Federal government. Misleading: doesn't include payroll taxes. Problem is that most people think of their payroll taxes, like a user fee, earn them Social Security; encourage people to demand more government spending. Significant portion of people pay no income taxes. Encourages people at the low end to demand more government services. Payroll tax is highly progressive and growing. Can't ignore the payroll tax.
48:39Why have the inequalities increased so dramatically? No one really knows. current financial turmoil and end of Wall Street. Piketty data, interpretation: income distribution of the United States mostly emergent, buffeted by millions of people, though affected by Congress. Rising levels of inequality are not the effect of conspiracy or public policy. One factor: increasing returns to education. Internet information world relative to 25 or 40 years ago. Years ago a few economists like Paul Samuelson or Milton Friedman could make money on the side. Now dozens of economists can do so by blogging, speaking, writing for myriad of publications. Technology has enhanced the returns to having a scarce skill. Increases inequality. Sergei Brin another example; didn't hurt anybody, made people better off. In times when entrepreneurial opportunity is greatest you see a lot of fortunes made, mostly good, why is it viewed as some kind of a bad thing? Wealth is not a pizza, O'Rourke. Wrong way to think about it. If you are unhappy with your status and you go to college you are going to go ahead relative to those who don't. Doesn't mean everybody gets ahead or is capable of going to college. Increase in inequality is not due to some vast right-wing conspiracy; it has to do with a skill premium. The O-ring theory of the skill premium. One task with 95% accuracy: having 100% accuracy doesn't matter with putting potatoes into the ground; might matter with more modern technology. O-ring, Challenger explosion, not conspiracy, technological failure. Negative effects of inequality needs attention.